Mediate: Do not drag your feet – A warning from the Court of Appeal

Lord Justice Jackson recently delivered a clear message to parties who play for time when agreeing to mediate.

‘In a case where mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by dragging its feet for no good reason that will merit a costs sanction’ [Thakkar -v- Patel [2017] EWCA Civ 117]. 

Jackson’s judgment extends the message sent by the Court of Appeal in PGF II SA v OMFS [2013] EWCA Civ 1288 where the Court of Appeal gave an unequivocal endorsement to the view given in the ADR Handbook that,

“Silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable. That is so even if a refusal to mediate might have been reasonable if the receiving party had engaged with the request in a meaningful way”.

This ruling is another reminder the courts expect litigants to be proactive and engage constructively with one another during proceedings and to properly explore the potential to mediate a dispute.

It can often be a few months between the parties formally agreeing to mediate and actually getting to the table. This ruling is designed to make litigants think twice about using logistical “difficulties” cynically as a delaying tactic.

What it means:

Avoiding mediation is no longer an option. Parties cannot refuse to mediate, ignore requests to mediate, or pay lip service to an agreement to do so. If they do, cost penalties are likely to be imposed.

PBC director, Gary Pettit, is an appointment-taking licensed insolvency practitioner with over 26 years of experience.  During his career he has never lost an action where court intervention has been required.  As a mediator accredited by the Centre of Effective Dispute Resolution (“CEDR”) Gary draws on his successful litigation record when aiding parties negotiate a settlement.

Should you be involved in an insolvency-related dispute where mediation has been (or is being) considered then we at PBC fail to see how the only known mediator who is also a current appointment-taking insolvency practitioner cannot be the right person for you.

For more information, see here or call Gary on 01604 212150.

Charity Walk announced to raise money for Ronald McDonald House

 

PBC are pleased to announce the latest fundraiser for Ronald McDonald Houses.

PBC chose Ronald McDonald House back in September 2016 as a result of the support they have offered to the family of PBC’s Operations Director, Kym Carvell. Unfortunately, Billie-Marie has had to return to hospital and therefore her parents have returned to the house at Alder Hey.

Therefore, Kym and Jamie have set themselves a challenge to raise funds for Ronald McDonald House.  Their challenge is to walk from London Euston station to Northampton over the course of four consecutive days from 4-7 July.  The approximate 80 mile distance will see them average about 20 miles a day.

To donate, please visit their JustGiving page or contact Lisa on 01604 212150 if you would prefer to pay via other means.

For information about Ronald McDonald House visit http://www.rmhc.org.uk/

Be pro-active or accept your fate?

Apart from the obvious frustration, what steps do you take upon receiving the news one of your customers has gone into an insolvency process?  You may have retention of title on stock, it may be a debt write off that is business-threatening to you.

 

For 30 years The Insolvency Act 1986 has been the basis for all insolvencies in England and Wales, subject to various amendments through statute or legal interpretations. However, 6 April 2017 saw the most fundamental change in legislation with The Insolvency (England & Wales) Rules 2016 (“The Rules”) coming into force.

 

Most of the Rules are a consolidation of provisions that were considered to be similar for each insolvency type within The Insolvency Rules 1986.  Other changes are an attempt to “modernise”, such as the ability to communicate through electronic means or, simply via a website.  Other changes are more fundamental on a practical level.

 

From hereon there will no longer be any physical creditor meetings, unless a requisite majority of creditors demand one. Instead we have electronic voting, virtual meetings, resolutions by correspondence and a process known as “Deemed consent”.  The deemed consent procedure could mean notices are sent to creditors on one day and 7 days later a liquidator is appointed with creditors getting only a few days’ warning.  So, what if you believe the conduct of directors has been questionable?  Physical meetings have been a forum for posing relevant questions so, if you believe there is good cause for challenging the directors you must provide a written request for a physical meeting in a very short space of time.  The burden to act quickly really does fall squarely upon your shoulders!  Further information can be found here.

 

The Rules also place the onus upon creditors to monitor for progress reports.  In the past an insolvency practitioner would send notice stating the progress report can be accessed on a specific website, providing you with the file name and password.  That has ceased and it is now up to the creditor to monitor when the reports will be available.  In theory, that is fine but a liquidator has two months after each anniversary to submit a progress report.  What is the creditor supposed to do?  Check every day until it is there?

 

For me, the Rules impose a burden on advisors, credit controllers and the financial institutions to be more aware, act instantly or roll over and let the process take its course. Personally, I am concerned the Government have gone too far and reforms to The Rules will occur but, until that time, creditors need to be proactive.

 

Should you require any further assistance on The Rules, or any other insolvency-related issue then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation.  Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.

PBC continue to support business

What is your most valuable business asset? I hope most readers will respond along the lines of,

“Our employees, of course.”

Last year the directors of PBC Business Recovery & Insolvency were delighted to support the Northamptonshire SME Business Awards. In fact, we were so pleased with it that we agreed to support the awards for 2017.  So, what does that have to do with the opening question?  Well, if you acknowledge your staff are your most valuable asset what are you doing to enhance the skill and efficiency of that asset?

The training and development of your staff can be one of the most astute investments a business can make. The more they learn, the more efficient they become and the more efficient they become the more competitive you will be in your field of trade.  Certainly, that has been our experience at PBC where I am not shy in claiming we have a team that is envied by our competition.  Meeting their training needs has brought success and, in turn, the staff have developed into a team that means they support one another in the challenges faced, with the result being PBC meet the expectations of advisors who refer clients to them.

So, why not demonstrate to the business world of Northamptonshire that you also push the training and development of your team.  Enter the 2017 awards and get the promotion you deserve.  You can read about the awards and obtain your application on http://www.northamptonshireawards.co.uk/.

How creditors will make insolvency decisions after 6 April 2017

Insolvency practitioners are well versed to creditors’ meetings as the way in which creditors make decisions about a company or individual who is insolvent and how the process is managed. However, from 6 April 2017 the profession and creditors will have to get used to a completely new way of operating as a result of the one of the major changes made by The Insolvency (England & Wales) Rules 2016.

Creditors will still be the decision makers in the insolvency process but physical creditors’ meetings are now not the main method at which decisions will be taken by creditors.

There are now four ‘decision procedures’ specifically defined by the rules, namely:

  • virtual meeting,
  • correspondence,
  • electronic voting; and
  • physical meetings. Physical meetings may only be used in exceptional circumstances.

 

In addition, deemed consent can be used to obtain a decision from creditors but it is not a ‘decision procedure’.  This distinction is critical as only decision procedures can be used for the approval of remuneration

Virtual meeting

 A virtual meeting is one where creditors are not invited or allowed to be at a physical location but may participate by way of telephone or video conferencing.

Electronic Voting

Electronic voting is an electronic system whereby creditors may vote without having to attend a physical location to do so by the decision date. Systems like Survey Monkey or similar would best fit this process.

Correspondence

When seeking a decision by correspondence, creditors will be sent various proposed resolutions and will then complete and return the voting form by the decision date.

Physical meeting

A physical creditors’ meeting may only be called if the “10 10 10” rule is met. After notice of a decision making process has been sent to creditors, a physical meeting can be requestiioned if either of the following conditions is met:

  • 10% of the value of creditors request a meeting
  • 10% of the total number of creditors request a meeting
  • 10 individual creditors request a meeting.

 

These physical meetings will operate in much the same way as used to do.

Deemed consent

Alternatively, an office holder may send creditors a notice of resolutions by deemed consent. Creditors are deemed to have consented to a decision or resolution after notice of the decision or resolution is sent to creditors and fewer than 10% in value have objected to it. If objections are not received by the decision date creditors will be deemed to have consented to the decision or resolution.

Obviously it will take a while for creditors to become accustomed to these new processes and therefore PBC will gladly assist anybody in explaining the new processes.

PBC announce payment in full to creditors in a bankruptcy.

PBC are pleased to report a distribution in full plus statutory interest to unsecured creditors in a bankruptcy.

 

The only asset in the bankruptcy was the debtor’s 50% share in the dwelling property, where his ex-partner resided. His ex-partner expressed an interest in purchasing the estates half share.  However, due to personal circumstances she was not in a position to make a market value offer and solicitors were instructed in respect of selling the property.  After protracted negotiation, coupled with an order of the court a sale of the property was completed on 1 December 2016.

 

The bankrupt’s half share of equity was received, creditor claims were agreed and they have received payment in full plus statutory interest. The additional benefit has been the balance of funds being returned to the bankrupt.

 

Gary Pettit of PBC said, “The outcome of this bankruptcy demonstrates the benefit of good negotiation skills, coupled with commercial thinking. It would also be remiss not to recognise the professional work undertaken by Katie Summers of summers nigh law for assisting me in achieving this great result.

PBC announce successful completion of CVA

The most common reasons why businesses fail

PBC are pleased to report a dividend has been declared on a company voluntary arrangement (“CVA”) which was successfully implemented.

When first approached, Gary Pettit was asked how to place the company into liquidation. However, following advice the directors restructured the business with PBC’s guidance and proposed a CVA to its creditors, which was approved without modifications in January 2013.  The CVA included on the sale of a freehold property and moving operations was restructured into one site from three, together with monthly contributions from future trade.

Preferential creditors were paid in full and unsecured creditors have received two distributions overall amounting to just over £79,000.

Gary Pettit said, “This case proves CVAs can help save businesses and preserve jobs. It is really gratifying when you can turn a doom and gloom perception (of directors) into a turnaround situation like this one.”

PBC announce successful conclusion of administration

PBC are pleased to announce the successful completion of the administration of Rowellian Football Social Club which included payment in full to its secured creditor, unsecured creditors (plus statutory interest) and a payment to its members.

This has been a highly complex and unusual administration from the outset, including setting a legal precedent. By way of background, the Club was a long-standing trading entity that primarily operated a social club and traded as ‘Rothwell Town Football Club’.  Whilst trading was satisfactory over its lifetime, in its latter years the Club saw a decline in business with significant losses being suffered.  Efforts to sell the Club were unsuccessful for various reasons.

Ultimately, solicitors were instructed to place the Club into administration. However, before the administration application could be filed the legal entity of the Club needed to be established.  To this end, the High Court concluded the Club’s constitution failed to meet the criteria of any recognised legal “Person” in the United Kingdom.  Despite this and after 3 separate hearings Leeds High Court laid down directions whereby the Club’s members voted to amend the constitution to be described as a partnership.  Immediate steps were then taken to place the Club into partnership administration with Gary Pettit and Alan Price being appointed Joint Administrators on 17 October 2011.

Upon appointment, the administrators made enquiries about the possibility of planning being granted to re-develop the ground and were told, in principal, this was likely. Following a short marketing plan two offers were received culminating in a sale at £1.39 million.  An application for planning was submitted.  Negotiations over the sale of the land and exchange of contracts were protracted, the exchange eventually took place in early 2014, at the same time the application for planning was submitted.

Whilst this was going on it became clear there were likely to be surplus funds available after the payment of the creditors and costs of the administration. The administrators had the unusual task of working out what to do with the surplus funds.  The Club’s constitution prohibited members enjoying any profit (or windfall).  There were no “shareholders” as such and the Club was dormant.  In the end, court directions were sought where the administrators suggested, notwithstanding the constitution, the surplus ought to be paid to the members.

The other issue was the exit route from administration. In normal circumstances an administration must be completed within one year unless creditors vote to extend or the court grants the relevant extension.  This is normally for a maximum period of eighteen months.  However, in order to avoid the inherent costs of liquidation and to enhance dividends payable, the administrators applied to court and sought additional extensions past the 18 months statutory deadline.  In total the administration lasted 5 years.

Full planning was finally granted in late 2014. However, the original purchasers decided they could not proceed with the sale and this meant further negotiations with a new purchaser, including an assignment of the contract and amendments to the planning permission including the council’s insistence the secured creditor be subject to the planning consent.  It also included complex communications with regards to the vacation of a communications mast from the site.  The sale eventually completed in March 2016.

Gary Pettit said “The hard work and commitment by all parties on this highly complex and very unusual administration has resulted in its secured creditor being paid £259,935 and unsecured creditors being paid in full together with statutory interest. I have also received claims from 100 members who have each been paid a dividend of £795.52, a nice return on a £5 annual membership fee”.

PBC announce large dividend from complex liquidation

Gary Pettit, the liquidator of Alexander – Bale Facilities Management Ltd, is pleased to announce the payment of an unexpected dividend following extensive investigations into the company’s affairs.

The company was placed into compulsory liquidation on 21 November 2011 and R Neil Marshman was appointed liquidator on 6 July 2012. Following his retirement from the practice he was replaced as office holder by Gary Pettit on 22 May 2014.

After substantive investigations into the company’s affairs, the former liquidator successfully obtained judgment against the directors to be jointly and severally liable for £1,208,585 as a result of the various payments made out by the company in the period leading up to its winding up.

Following the appointment of Mr Pettit, a freezing order was obtained and following further detailed enquiries a number of bank accounts and properties were identified resulting in significant realisations.

I am now pleased to report payment of a dividend of 34.17 pence in the pound to unsecured creditors. Creditors’ claims totalling £993,827.96 were admitted and the dividends paid totalled some £339,614.

Gary said, “It is always pleasing to see investigations bear fruit and lead to significant returns to creditors. On the face of it there were no assets available and creditors had resigned to writing off their debt.  This liquidation demonstrates the value of insolvency practitioners when the evidence is available.”