Friday, 28 May 2010

Peerage and MP Ledger: The Right Honourable John Richard Charles Lambart French, the 3rd Earl of Ypres - soldier and bankrupt

The Right Honourable John Richard Charles Lambart French, the 3rd Earl of Ypres (1921-1988) appears in the Peerage and MP Ledger on one page, but for two incidences of indebtedness. The third Earl served as a Captain in the King's Royal Rifle Corps during World War Two. Lord Ypres had three daughters but no sons and on his death in 1988 his titles became extinct. The Earldom was created for his grandfather, Field Marshal John Denton Pinkstone French, 1st Earl of Ypres KP, GCB, OM, GCVO, KCMG, ADC, PC (pictured). The 3rd Earl's entry (at page 44) notes:
"Petition no 289 of 1969

Ypres, The Right Honourable John Richard Charles Lambart Franch, the Earl of

"of 38 South Audley Street, London, W1 occupation unknow."

Date of Issue of Bankruptcy Notice: 10th February 1969 no 444 of 1969
Date of Filing of Petition: 3rd April 1969
Act of Bankruptcy Alleged: Non compliance before 13 March 1969 with a bankruptcy notice
Date of Receiving Order or Dismissal
Petition dismissed by order dated 29th July 1969.

Petition No 157 of 1970
John Richard Charles Lambart French Rt Hon The Earl of Ypres

Date of issue of Bankruptcy Notice: 17th November 1969 no 106 of 1969
Date of filing petition: 6th February 1970
Act of Bankruptcy alleged: Non-compliance before 7th January 1970 with a Bankruptcy Notice.
Date of Receiving Order: 5th May 1970

Date of Adjudication: 30th June 1970 as follows "John Richard Charles Lambart French, Rt Hon the Earl of Ypres of no fixed adress negotiatior and company director lately of 4 Ennismore Gardens, London SW7 formerly of 38 South Audley Street, London W1 previously of Hawthorn Farm, Stow Bedon, Attleborough, norfolk described in the receiving order as occupation unknown.

Notice sent to the Speaker of the House of Lords and the Clerk of the Crown in Chancery: 14th October 1977."

Thursday, 27 May 2010

Peerage and MP Ledger: Edward Fitzgerald, His Grace the 7th Duke of Leinster - peer, soldier, Wallis Simpson's lover, bankrupt and suicide

Edward Fitzgerald, His Grace the 7th Duke of Leinster (1892- 1976 - pictured) appears in the Peerage and MP Ledger on a number of occasions. The 7th Duke of Leinster, the holder of a ducal seat regarded by the Lord Falconer as equivalent to Irish royalty (being the highest ranking peerage in Ireland as the premier Dukedom in the peerage of Ireland), was born on 6 May 1892. From that date until 1922 he was known as Lord Edward Fitzgerald. He was the son of Gerald FitzGerald, 5th Duke of Leinster and Lady Hermione Wilhelmina Duncombe. He was educated at Eton College. The Duke fought in World War I as a Lieutenant on the 8th Services Battalion, West Riding Regiment and later the Irish Guards. He also fought in the Second World War between 1939 and 1942. The Duke married four times and it has also be suggested that he conducted an affair with Wallis Simpson, later the Duchess of Windsor. The 7th Duke died on 8 March 1976 aged 83. He committed suicide by an overdose of nembutal.

The 4 February 1922 was an important date for Edward as it was on that date that he became:
  • the 4th Baron Kildare of Kildare;
  • the 12th Baron Offaly;
  • the 7th Marquess of Kildare,
  • the 7th Duke of Leinster;
  • the 7th Earl of Offaly;
  • the 26th Earl of Kildare;
  • the 7th Viscount Leinster of Taplow.
The Duke's financial problems lay perhaps in his compulsive gambling. As one commentator has observed, "He squandered a substantial inheritance and became known as the bedsit Duke." The Duke's entries in the ledger state:
"Leinster, Edward Fitzgerald Duke of,

Bankruptcy Notice Issued: 7 June 1922
Petition filed: 1 July 1922
Receiving Order Made: 19 Dec 1922
Adjudication made 16 Jan 1923
Order of Discharge and terms (if any):
Certificate of misfortune:
Notification sent to speak of House of Lords and to clerk of the Crown in Chancery, sec 106(1): 31 Jan 1923
Acko: 1/2/1923."
The second entry notes (at page 21):
"Edward Fitzgerald, Duke of Leinster
Petition filed 12th Dec 1931
OR: 19/3/34
The Judge dismissed..."
The third entry notes (at page 32):
"Fitzgerald, Edward, Duke of Leinster
of 82 Portland Place London W

Petition filed 11/12/1934
Receiving Order 26/5/36
Adjudication 17/7/1936

Notification sent to the Speaker of the House of Lords and to the Clerk of the Crown in Chancery (sec 106(1) 17th July 1936

Discharged as from the 1st May 1964 by order of the Court dated 30th April 1964."
Picture Credit:

Wednesday, 26 May 2010

Insolvency Service - legal action and consultation deadline - Improving the transparency of, and confidence in, pre-packaged sales in administration

Whilst the Insolvency Service (IS - pictured) contemplate an action brought by a disgruntled Cafe owner, they have also recently reminded us that a consultation deadline approaches fast. The "Improving the transparency of, and confidence in, pre-packaged sales in administration" consultation was issued on 31st March 2010. As the IS note, "The development of an effective and efficient policy will be greatly influenced by the quality and quantity of responses. We would welcome your views on whether new measures are needed to strengthen transparency and confidence in the process by which pre-packaged sales are undertaken, and on the form those measures should take." The consultation exercise is ongoing and open to responses until 24th June 2010. The questions are:

  • Question 1: Do you believe that the current framework governing the operation of pre-pack sales in administration provides a sufficient level of confidence that pre-packs are only being used in appropriate circumstances and with an appropriate degree of transparency?
  • Question 2: If not, what are your main concerns with the way pre-packs are currently executed?
  • Question 3: Do you believe that pre-packs are presently subject to abuse? If so, how? Please indicate whether you believe it is the actions of directors, insolvency practitioners, secured lenders or any other parties that are contributing to any perceived or actual abuse and to what extent you believe this is a problem.
  • Question 4: Some of the following options would require a distinction to be drawn between pre-packs and ‘conventional’ administrations. What do you think should be included in a statutory definition as to what constitutes a pre-pack transaction?
  • Question 5: Do you believe that the new pre-appointment cost recovery mechanism will have a significant effect on transparency and confidence?
  • Question 6: Do you believe that by giving statutory force to the SIP 16 disclosure requirements creditors would be given better information about the reasons and justification for the pre-pack?
  • Question 7: Do you believe that such a requirement will increase costs and reduce the returns available to (a) secured creditors, and (b) unsecured creditors? If possible, please provide an estimate of the impact on each.
  • Question 8: Do you believe that it would be appropriate for details of the pre-pack to be filed at Companies House? If not, why not?
  • Question 9: Do you believe that it would be appropriate for a statutory offence to be created in circumstances where the pre-pack disclosure requirements are not adequately met?
  • Question 10: Do you believe that confidence in pre-packs would be improved by requiring companies whose business and assets had been sold through a pre-pack to exit administration via compulsory liquidation? What would be the possible costs and benefits?
  • Question 11: Do you believe that an insolvency practitioner providing advice to a company on the potential for a pre-pack has an inherent conflict of interest when accepting a formal appointment as administrator with a view to subsequently executing a pre-pack sale?
  • Question 12: If so, do you believe that such a conflict extends to circumstances where the insolvency practitioner has had an ongoing prior relationship with the company in the context of undertaking review work for a secured lender?
  • Question 13: Do you believe that a requirement for a different insolvency practitioner to accept appointment as administrator would improve confidence that pre-packs are only used in appropriate circumstances?
  • Question 14: Do you believe the requirement to use two separate insolvency practitioners would increase costs and delay therefore reducing the returns available to (a) secured creditors, and (b) unsecured creditors? If so, please provide an estimate of the impact on each.
  • Question 15: Do you believe the requirement to use two separate insolvency practitioners would reduce the number of business sales effected through a pre-pack sale? If so, please provide an estimation of the impact.
  • Question 16: Is it desirable that unsecured creditors, who may not stand to receive any dividend from the proceedings, be given an opportunity to influence the proposed pre-pack sale where the business is being purchased by a connected party? If so, why?
  • Question 17: Should approval for such a sale initially be sought from unsecured creditors with a recourse to the court, or from the court in the first instance? If you believe unsecured creditors should be given the opportunity to approve in the first instance, what percentage in value of their claims should be required for approval to be obtained?
  • Question 18: Would the prior approval of the court or creditors for the proposed sale improve confidence that pre-packs are only used in appropriate circumstances?
  • Question 19: Do you believe the requirement to obtain court or creditor approval would increase costs and delay therefore reducing the returns available to (a) secured creditors, and (b) unsecured creditors? If so, please provide an estimate of the impact on each.
  • Question 20: Do you believe the requirement to obtain court or creditor approval would reduce the number of business sales effected through a pre-pack sale? If so, please provide an estimation of the impact.
  • Question 21: Do you believe that any provision requiring the prior approval of the court or creditors for business sales to connected parties should be extended to apply to such sales out of all formal insolvency procedures (i.e. not restricted solely to administration)? If so, why?
  • Question 22: Do you believe that a requirement to obtain court or creditor approval for a pre-pack business sale to a connected party should be combined with the attachment of personal liability to directors and connected parties who purchase a business without obtaining the requisite approval?
  • Question 23: Do you believe that it would be appropriate for pre-pack business sales to connected parties executed without the requisite approval to be rendered void?
  • Question 24: To what extent do you believe that pre-packs provide a positive contribution to the wider economy by allowing economically viable parts of insolvent companies to continue trading? How would you quantify such a contribution? Please provide any evidence you may have to support your comments.
  • Question 25: To what extent do you believe that pre-packs create market distortions by allowing companies to ‘dump debts’ and continue trading to the detriment of competitors? How would you quantify this? Please provide any evidence you may have to support your comments.
  • Question 26: To what extent do you believe that pre-packs create job losses ‘upstream’ by allowing companies to ‘dump debts’ and continue trading to the detriment of suppliers who then experience knock-on financial difficulties? How would you quantify this? Please provide any evidence you may have to support your comments.
  • Question 27: To what extent do you believe that any economic value preserved by a pre-pack sale (e.g. employees, customers, suppliers) would otherwise transfer to alternative ventures (e.g. competitors) if a pre-pack sale was not undertaken? Please provide any evidence you may have to support your comments.
  • Question 28: Do you believe that any of the options identified would have a significant impact on the behaviour of secured lenders? If so, what do you think this is likely to be? If possible, please provide an estimation of the impact.
  • Question 29: Which of the five proposed options would be your preferred solution(s), and why?
  • Question 30: Are there any alternative measures that you believe ought to be considered?
  • Question 31: Please provide an indication (if not obvious) as to the nature of your involvement in, or exposure to, pre-pack transactions and the approximate incidence of that involvement or exposure if relevant.

Responses should be sent to Insolvency Practitioner Policy Section of the Insolvency Service, either by email to or by post to The Insolvency Service, Zone B, 3rd Floor, 21 Bloomsbury Street, London, WC1B 3QW.

Picture Credit: Insolvency Service

Tuesday, 25 May 2010

'On Carey Street' - the source of the term and some building history

To be "On Carey Street" in the common parlance of London town is to be in a problematic position. You could of course just be on your way to New Square or Chancery Lane, but more likely than not you could also be a bankrupt. Where does this term come from? Carey Street will be familiar to modern users of the bankruptcy courts in the Thomas More building as the road runs along the back facade of the Royal Courts of Justice. Before the Thomas More Building was constructed in the 1960s the bankruptcy jurisdiction had maintained a presence on the road since 1892.

Pictured to the right are the 'new' Bankruptcy Courts as unveiled in 1892. The "handsome building" was approached from the Strand by St Clement's Gardens standing midway between Lincoln's Inn and the Royal Courts of Justice. The building was a huge structure running the whole length of the North side of the Royal Courts of Justice. The building housed the bankruptcy division of the High Courts of Justice, the "head-quarters o the bankruptcy administration in England." A contemporary commentator goes on:
"There are three entrances - the one on the west, near Clement's Inn; the central doorway, overlooking the garden, and the unimposing entrance in Carey Street. On entering the building by one of these portals, the visitor finds himself in a very long and broad corridor, which is crowded daily with learned expounders of our bankruptcy laws and their clerks and is constantly the scene of bustling activity."
The building replaced the old Bankruptcy Court that was established in Lincoln's Inn Fields. The 1892 structure was itself eventually replaced by the Thomas More building. This was necessary as the 1892 building received extensive damage during the Second World War II. For those who now frequent the Thomas More Building on a regular basis, the decision to build anew, as opposed to repair, must be a source of sincere regret.

Ed Davey MP - new Minister in charge of the Insolvency Service

Mr Ed Davey MP (pictured right engaging in his favourite hobby on the PS3 singstar game), the Liberal Democrat MP for Kingston and Surbiton is the new Minister of State with responsibility for the Insolvency Service. I had previously contended that Mr Mark Prisk MP had the honour, but now the biographies have gone up we have clarification. Hat tip to Jonathan! Ed read PPE at Jesus College, Oxford, before going on to read for an MSc in Economics at Birkbeck, University of London. This news reaches the blog just as we hear the Middle Classes have been hit hardest by the recession.

Kingston Law School falls within Mr Zac Goldsmith MP's Richmond Park and North Kingston constituency, but Ed is still welcome to come over and take part in some seminars!

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Monday, 24 May 2010

Distributive Justice, Family Home Rights and the HRA

Under the Bankruptcy Act 1914 Courts could exercise their discretion to prevent trustees from evicting insolvents or selling their family homes for substantial periods (“bankruptcy equity”). The Cork Report recommended that Courts should continue to exercise the equitable jurisdiction in order to protect innocent family members. The Insolvency Act 1986 allows the bankrupt and his family to stay in the family home for 12 months after which they may be evicted unless there are “exceptional circumstances.” It is arguable that the grace period would give the family ample time to make suitable alternative arrangements especially where they have lived in the family home for a very long time. Nonetheless, the discretion given to Courts to extend the grace period reflects the anticipated problems with the procedural justice model governing insolvency and the need for distributive justice in certain circumstances. This is reinforced by the fact that it is generally unclear what constitutes the “exceptional circumstances.” In Re Citro (Bankrupts) [1991] Ch. 142 C.A., it was held that the “distress” of an evicted family was not “exceptional.” However, the wife’s illness (Judd v Brown [1997] BPIR 470) and the need to look after a senior terminally-ill spouse (Re Bremner [1999] BPIR 185) have been held to be exceptional circumstances. Equally, in Claughton v Charalamabous [1998] BPIR 558, the sale of the family home was postponed until such a date when the disabled and frail wife vacated or passed on.

One may therefore advance that after the one year period, the Court may still exercise an equitable jurisdiction to protect the innocent family member where the latter is gravely ill or house-bound. This no doubt reflects the recommendation by Cork Committee. Nonetheless, where the Court holds that it would be socially unjust to protect the family members and disregard the interests of the creditors in the circumstances, the aggrieved family member may actually feel injustice due to the fact that although the outcome may be deemed to be fair the process by which the Court made the decision was not fair. In other words, the aggrieved family member that would be evicted after the 12 months period may argue that his human rights (family home rights) were unfairly disregarded. This means that the Court may not sacrifice procedural justice on the altar of distributive justice despite the unfairness of the outcome. Nonetheless, it is very much uncertain whether the application by a trustee (acting on behalf of the creditors) for an order for sale under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 may be subjugated by the invocation of home rights under the Human Rights Act 1998 (HRA) after the 12 months period and where there are no exceptional circumstances. Given that the rights of the creditors do not constitute the pressing social needs or national security concerns that may legitimately constrain rights enshrined in the HRA, it is difficult to argue that the Court may exercise its equitable jurisdiction to disregard family home rights despite the fairness of the outcome. It is true that the grace period of 12 months is unreasonably short in many cases, however, giving regard to the hierarchy of rules in all cases would ironically result in the consistent neglect of creditors in a process that is aimed at paying debt owed to them.

Friday, 21 May 2010

Insolvency Event: 'The Poulson Affair: Corruption and the role of Bankruptcy Law Public Examinations in the early 1970s' IALS - 21 May 2010.

I am giving a paper this evening at the IALS as part of my wider research into the influences on practitioners who sat on the Cork Committee. The paper I am delivering tonight looks at the Poulson Affair. I am also looking at the series of Willie Stern (Wilstar) cases and how these influenced the practitioners who worked on them and how this influence in turn affected the drafting of the Cork Report and its recommendations. This Wilstar treatment will be reserved for another occasion. Mr Desmond Simpson of RC Moorhouse & Co, the solicitor who acted for Poulson's Trustee in Bankruptcy, observed in a letter to The Times (February 16 1976) in the context of the Poulson bankruptcy and the Ropergate liquidation that, "each and every one of these proceedings was a significant signpost to reform in law and conduct both in insolvency and far beyond." A recent Radio Four documentary on T Dan Smith has touched on the affair.

Asked whether the Cork report recommendations should accepted the chairman, Sir Kenneth Cork, observed, "They will be stark staring bonkers if they do not put the measures through..." (The Times, June 10, 1982 at page 15). As we now know some of the measures did not make it onto the statute book. I will of course not comment on the mental state of the Board of Trade at the time!

I will hopefully see you tonight at the following event:

"The Institute of Advanced Legal Studies and the Institute of Historical Research, School of Advanced Study, University of London, and the London Legal History Seminar are pleased to announce


Kingston University

'The Poulson Affair: Corruption and the role of Bankruptcy Law Public Examinations in the early 1970s'

on Friday 21 May 2010,


Venue: Institute of Advanced Legal Studies, 17 Russell Square, London WC1B 5DR

If you wish to attend please RSVP to Belinda Crothers, Email:



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A Surprise from Sussex: INSOL book collections from the Academic meetings

I am grateful to Dr Paul Omar for a recent package that has wound its way up to me from the University of Sussex. The package contained three INSOL Europe Academic Forum publications. The mini-monograph collections (co-edited by Dr Omar and Professor Bob Wessels of Leiden Law School) contain conference papers from various events held between 2008 and 2009. The books contain a very interesting and informative range of pieces from a wide spectrum of practitioner and academic commentators. The three books are entitled:
  • Insolvency Law in the United Kingdom: The Cork Report at 30 Years.
  • Crossing (Dutch) Borders in Insolvency.
  • The Intersection of Insolvency and Company Laws.
They are an essential purchase for all who are interested in our subject.

Thursday, 20 May 2010

Bankruptcy PhD scholarships advertised at the University of Surrey Law School

The Law School at the University of Surrey have advertised two full-time PhD Scholarships in, inter alia, bankruptcy law in theory and practice. I presume any successful candidate will be working under the supervision of Professor Alison Clarke. This is a very exciting development which is very good news for the scholastic development of the personal side of the subject. It will be interesting to see what areas the successful candidates investigate.

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Which Minister has responsibility for the Insolvency Service?

It is still not entirely clear from the Department for Business, Innovation and Skills (BIS) website which minister has responsibility for the Insolvency Service (IS). When the Lord Mandelson was in charge of BIS Mr Ian Lucas MP had responsibility for the IS. Now that they have been booted out by the electorate we now need to know who has replaced Mr Lucas. Who then is Dr Vince Cable MP's deputy with responsibility for insolvency issues? As far as I can work out the relevant minister appears to be Mr Mark Prisk MP (pictured), the Minister of State for Business and Enterprise. Prior to becoming and MP Mr Prisk was a chartered surveyor who ran his own £3 million firm. He attended the University of Reading. As a Quins fan it is deeply disappointing to note that he is a member of Saracens RFC.

I am sure the new biographies will go up soon on the BIS website so that we can be sure. Who ever it is, it will be interesting to see how they influence the policy direction of the IS.

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Collectivised creditor relief or Continuing Creditor Harassment

Insolvency procedures are, generally speaking, supposed to provide a collectivised debt relief mechanism which preclude creditor harassment activity. That is, creditors harassing the debtor! A recent press release from the Association of Business Recovery Professionals (R3 - pictured) is therefore a bit worrying. The press is entitled "A third of those in formal insolvency procedures are harassed by creditors." It notes:
"Figures released by R3, the insolvency trade body, reveal that 31% of those in statutory insolvency procedures are still being contacted by those they owe money to. This is made up of 44% of those who have filed for bankruptcy and 25% of those in an IVA.
“It is astounding that individuals continue to be hounded by creditors despite coming under the protection of statutory insolvency procedures,” commented Steven Law, R3 President. “The decision to file for bankruptcy is a difficult one that, once taken, is meant to stop the endless contact from creditors. That such a large proportion of bankrupts are not afforded the peace of mind they are entitled to is of grave concern.” Interestingly, the research shows that a similarly high proportion (44%) of people in an informal insolvency procedure known as a Debt Management Plan (DMP) continue to be chased by their creditors.
Law continued: “The fact that the same percentage of bankrupts and people in a DMP are hassled by their creditors suggests that no matter what procedure a person is in, they can still be contacted. Either creditors need to ensure their records are up to date or they need to play by the rules.” R3 is also calling for a ‘single gateway’ procedure into personal insolvency to stop the ‘insolvency journey’ whereby debtors start off in one procedure only to discover they were poorly advised and better suited to another. R3’s research highlights that almost a third of those who are currently undergoing bankruptcy were in a DMP before becoming bankrupt. “We believe an assured moratorium from the Court for up to 28 days would provide a breathing space for debtors to consider every option, and enjoy a respite from creditor pressure. During that period they would be obliged to seek professional advice before making a decision.” “The range of debt solutions both regulated and unregulated is deeply confusing for an individual in potentially the most stressful period of their life. They should be applauded for taking action to bring resolution to their finances and make a fresh start, not pressured by their creditors once they have acted to deal with their affairs,” concluded Steven Law."
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Wednesday, 19 May 2010

The Insolvency Service is getting an IT upgrade - consequences for OR communications

There is an interesting story in Accountancy Age (AA) which is reporting that the Insolvency Service is to receive an IT upgrade. As a consequence the Official Receiver will be off line for a fairly substantial period. The Insolvency Service have provided extensive guidance on how users can cope with this brief and necessary closure. Pictured to the right is one of their current terminals (allegedly). This demonstrates just how necessary an upgrade is!!

The AA story notes:
"...From 2 July to 12 July the Insolvency Service will be updating its insolvency case management systems which it hopes will deliver "significant efficiency savings".The IT upgrade, called Enabling the Future, is estimated to cost £82m on completion. However, the body hopes the benefits will total more than £122m according to the Service's corporate plan for 2010 – 2011. During this period the Insolvency Service will be unable to receive formsonline; make payments on insolvent estates including dividend payments to creditors; no Debt Relief Orders can be submitted; and there could be reduced services available from the enquiries team due to the lack of access to documents.The London Gazette will also be affected. During this period no information regarding cases can be sent to the publication with the Gazette expected to include additional cases in its next issue."
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Tuesday, 18 May 2010

Insolvency in the regions - a tale of two areas

Two local newspaper stories on insolvency usage highlight the different experience of debt relief across the country. Bankruptcies have fallen in Kent according to one news story, whilst the picture in Wigan is more bleak. The Kent story carries an interesting Insolvency Practitioner (IP) observation. The story notes that:
"Chris Nutting, director of personal insolvency at KPMG said: "While these figures show an apparent decrease in the number of people filing for their own petition in bankruptcy the numbers do not reflect the true picture.

"A new procedure called a Debt Relief Order (DRO) was introduced in April, 2009, which allows consumers with debts of less than £15,000, and minimal assets or surplus income, to write off their debts without entering into a full blown bankruptcy.

"Our research shows that a percentage of these people would have previously used bankruptcy to resolve their financial problems.

"Adding the number of DROs for the three months ended March 31, 2010, to the number of debtor's petitions reveals that 21,992 people took action themselves to resolve their financial problems by seeking out a formal insolvency procedure.

"Comparing this to the same quarter last year it can be seen that there has been an overall increase of 31 per cent."

The Wigan Today story also carries an interesting IP quote on the drivers of usage. The story notes:
"Gill Wrigley, a Director at RSM Tenon Recovery in the North West, said: “The rise in the number of bankruptcy petitions in Wigan goes against the national trend but will come as no surprise to the many people affected by the downturn.

“Nationally, personal insolvencies have reached record levels and are expected to continue to rise, particularly as the effects of the recession continue to impact on peoples’ finances for some time after it has officially come to an end.

“The debt lag from Christmas, and consumer debt built up over a generation are to blame for these figures.

“For Wigan, that could mean that we see a total just under 2,000 personal insolvencies over the whole of 2010.

“Although the glass has started to look half full for the economy, it’s very much been drained of every drop when it comes to individuals’ personal finances.

“Months of job losses and decreased earnings has taken its toll on the public’s purse strings. We are likely to continue to see record numbers of people look to insolvency into 2011.”

Some interesting insight here from two IPs on the drivers of personal insolvency.

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Monday, 17 May 2010

Cashless Counsel, Bankrupt Barristers, and other Potless Practitioners - equality of relief?

Destitute Dukes, impecunious Earls and broke MPs have been mentioned on this blog before. But what about other members of society? Have any other sectors or professions been affected by debt to any significant degree?For example, how many lawyers have found themselves going to Carey Street? There have been historic examples, including the father of modern insolvency law, but what about in more recent times?

The Lawyer carried a story in 1995 that highlighted the case of a Sussex based barrister who was made bankrupt in 1995. Mr John Mannion was called by the Middle Temple in 1987. He holds and LLB and LLM. Despite his bankruptcy he continued to practise as a barrister at Westgate Chambers in Lewes, East Sussex. He specialised in crime and road traffic law. As the Lawyer noted, "Under the Bar Council's code of conduct no automatic practise ban is imposed on barristers who have been declared bankrupt." His bankruptcy petition was filed by Her Majesty's Customs and Excise. Mr Registrar James heard the case. A Mr John Dennis Mannion continues to practice from Assize Court Chambers in Bristol.

Another Lawyer story appeared in the same year which featured a purportedly bankrupt barrister from the South West. Mr Nigel Heal Askham was a tenant at South Western Chambers in Taunton. He was called in February 1973 by the Inner Temple. He holds an LLB. Mr Askham was declared bankrupt by Mr Registrar Pimm on 4 April 1995. Apparently the order was going to be annulled according to the Lawyer story. I have found no evidence of this to date. The Inland Revenue filed the bankruptcy petition. Mr Askham specialised in criminal, family and personal injury work. He now practices from Octagon Chambers in Taunton in the same areas.

Things go a little differently on foreign shores. At least one bankrupt QC in Australia has been struck off. In England and Wales solicitors are also not immune from this fate, financial embarrassment being much more damaging for that side of the profession as striking off will occur automatically. The rationale for this being that a bankrupt solicitor should not be in charge of third party client account funds. Accountants suffer a similar fate in England and Wales. Is it sustainable that barristers should be exempt from disqualification to practice if they have gone into an insolvency procedure? From the current policy perspective the answer must of course be that barristers should not be disqualified from continuing to practice. The justification is not that they do not hold client account monies but that the nature and function of bankruptcy is to provide relief, but not to write the debtor off for ever. The two cases of Mr Askham and Mr Mannion highlight that bankruptcy can provide a rehabilitative, fresh start mechanism which allows all sections of society, whatever their profession (in part) a second chance. Perhaps MPs, solicitors and accountants should be provided with a similar relief mechanism.

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More Problems at Pompey - "we owe you X, sorry, in fact you owe us X"

Pompey's recent FA cup final defeat at the hands of Chelsea may be tempered by the news that they are in fact £4 million better off that previously thought. This news comes to us from a fascinating piece in the Guardian entitled, "Good News for Prortsmouth...Guardian finds missing £4 million." The article highlights how a KPMG report was misread by the current administrator, Mr. Andrew Andronikou (pictured) of messrs UHY Hacker Young. The public nature of this rather large mistake, if it is in fact correct, is rather embarassing for the insolvency practitioner (IP). It cannot fill the creditors with much confidence. As the Guardian point out this is not the first instance of ineptitude. They note, "Andronikou's past record as an insolvency practitioner has not been without controversy. In December 2008 he was found by the high court to have "failed to meet the standard to be expected of a reasonably competent insolvency practitioner" during an insolvency process." For my discussion of Mr Andronikou's contact with the courts see here.

Has the appropriate standard expected of the IP been missed again? Or, in Andronikou's defence, is this something that might be expected in the hurly burly environment of a high pressurised, highly public £138 million administration?

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Friday, 14 May 2010

The Ministry of Justice publish new statistics on insolvency usage in English and Welsh courts for the first quarter 2010

The Right Honourable Mr Kenneth Clarke QC MP's (pictured) department (The Ministry of Justice) have published some interesting new statistics on insolvency court usage for the first quarter of 2010, i.e. the number of bankruptcy and winding up petitions issued in the High Court and County courts in England and Wales. This is of course different to the statistics for adjudication in those courts, i.e. the number of bankruptcy and winding up orders made. See here for Insolvency Service statistics on this second interesting set of figures.

In outline the Ministry of Justice figures show that in the first quarter of 2010 the following number of petitions were issued:

  • "2,777 company winding up petitions for dissolving a company that cannot pay its debts, made either by a shareholder, director, or creditor – a decrease of 20% on the same quarter of 2009 and an increase of 4% on the previous quarter.
  • 4,329 individual bankruptcy petitions made by creditors (the person to whom the debt is owed) – a decrease of 5% on the same quarter of 2009 and a 4% increase on the previous quarter.
  • 16,348 individual bankruptcy petitions made by debtors (the person who owes the debt) – a decrease of 3% on the same quarter of 2009 and a 20% increase on the previous quarter."

The Ministry of Justice also mull on some recent changes to insolvency law that may have affected the figures. They note:

"Increase in fees

Fees relating to The Official Receiver’s Deposit towards the costs of administering insolvency cases increased on 6th April 2010;

for debtors’ bankruptcy petitions from £360 to £450,

creditors’ bankruptcy petitions from £430 to £600,

and company winding up petitions from £715 to £1,000.

This created an incentive for companies and individuals to present petitions to the courts before 6th April and may therefore have resulted in the increase number of petitions being made in Q1 of 2010 compared to recent quarters.

Introduction of Debt Relief Orders

Debt Relief Orders (DROs) were introduced on 6 April 2009 through the Tribunals, Courts and Enforcement Act 2007. DROs provide debt relief, subject to some restrictions, and are suitable for people domiciled in England and Wales who do not own their own home, have little surplus income (no more than £50 a month), assets (other than possibly a car) not exceeding £300, and less than £15,000 of debt. As DROs offer an alternative route into personal insolvency, they are likely to have had a downward impact on the number of bankruptcies."

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