Wednesday, 4 November 2009

My introductory post

I am delighted to be able to assist John with this blog. I will try and post some weekly thoughts that give readers a rough idea as to the types of case that we handle and how the field of insolvency law really develops in practice. I will also add comment, where necessary, with regard to some of the general cases of interest.

Insolvency cases do not always start off as insolvency cases - for example, the 4Eng case that John blogs about today started off its life as a case in fraudulent misrepresentation and this stage of the case is the latest twist in the attempt by the innocent parties to get their money back. We have followed the 4Eng case in a case we are running at the moment, because the initial judgment was very favourable to the innocent parties and is one of the few cases out there that stands for the proposition that parties can seek their own time costs as damages against a defendant and that damages for loss of a chance were recoverable in an action for deceit. In that case, the innocent parties attempted to sort out the mess themselves, so avoiding expensive external consultants, but were later able to seek the costs of the exercise from the defendants (they charged themselves out on a notional hourly rate).

Anyway, back to insolvency. In London, we run cases for the office holder (administrator, trustee in bankruptcy, liquidator) and act in certain cases for individuals who are being pursued by those self same office holders. We have recently committed a bankrupt for contempt of court for selling assets in Spain and so we have worked with our office in Spain. What you soon appreciate about insolvency law is the inherent international nature of the discipline. Very often, the assets and the individual are in different countries. There are fascinating debates to be had about the debtor's centre of main interests, but that is for another day.

One of the things you may think is that office holders do not use their powers to great effect with regard to challenging preferences and transactions at an undervalue. You must think again, but the reason that there are not vast numbers of reported cases out there is because so many of these cases settle. The reality is that the office holder can present the evidence quickly and forcefully and, for reasons John blogs about below regarding the required mental state, very often the case is quickly over. Directors are often not in a position to challenge the case, and it is not uncommon for those directors to be facing company director disqualification proceedings as well. Discretion is often the better part of valour.

A word about costs. Office holders are now turning more and more to third party litigation funders to bring their claims against former directors. The lack of money in an estate was often the reason for such claims never being pursued, but there is a growing market of funders who will fund an action if they see the money at the end of the tunnel. There is no doubt that the armoury of the office holder is as great now as it has ever been.

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