Alternative Dispute Resolution – The cost of disagreement

 

How many readers can remember the Monty Python sketch where a client wants an argument?  The provider says that will cost £10.  The client pays the fee only for the provider to say that will cost £10 please.  Enraged, the client says he had just paid only for the provider to deny receipt and so the debate goes on.

While that sketch is highly amusing the cost of a real dispute can be far from funny.  Some key points with litigation include:

Actual cost

In a recent mediation, the Claimant was seeking damages of £200,000.  When I asked the Claimant’s solicitor about the costs to date, together with the potential adverse costs his client could face I was told the figure had been put at somewhere in the region of £250,000!  It is not the first time this scenario has occurred as all too often the red mist prevails over commerciality or, simply the litigating parties are so far down the dispute path they feel they must now see it through to the end.

“Hidden” cost

Many litigating parties get embroiled in dispute with part of their focus on actual cost, together with the risk of adverse costs awards.  However, how many consider the hidden costs?  This will include your time dealing with the case itself, reading/approving witness statements, endless correspondence, gathering the evidence or having to look back into original agreements.  All of this before even attending court where a trial could last for several days.  Litigation can become a distraction from your daily business operations and be a drain on you generally.

Uncertainty

Outside of costs there is the uncertainties that come with litigation.  Your solicitor will prepare you and your argument in a concise and professional manner that best presents your position.  Naturally, litigating parties both believe their argument represents the facts that should prevail.  However, a judge is not emotionally attached to either side and will generally look at the arguments on a legal, reasonable and practical basis.  This will also include the general conduct of both parties as this could sway decisions, both on the principal argument and cost implications.

Mediation

There is clear guidance coming from the courts that a litigating party who unreasonably refuses to consider Alternative Dispute Resolution, such as mediation, runs a significant risk to an adverse costs award.  In one case I heard about the claimant won £10,000 but, because they were so certain of winning, they refused mediation citing it was pointless because they had a “Cast iron” case where there can be no point of negotiation.  While they were awarded the full amount of their claim that refusal to mediate cost them £30,000 in adverse costs!  A harsh lesson indeed.

Gary Pettit, a CEDR accredited mediator at PBC, says,

“All too often the warring parties are guilty of not seeing the wood for the trees.  In those cases where I have acted as mediator (whether it is an insolvency-related or general commercial disputes) it has been proven the reality of their situation had been lost.  It is the task of the mediator to bring that reality back onto the table as part of facilitating a settlement.”

Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to garypettit@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

CHARITY QUIZ A GREAT SUCCESS

CHARITY QUIZ A GREAT SUCCESS

Greens’ Restaurant was filled with the sound of brains whirring as thirteen teams did battle at PBC’s charity quiz in aid of Ronald McDonald House at Alder Hey.

The winners were Cottons (below), with a score of 133 out of a possible 150, with Clifford Roberts taking second place only 1 point behind in a good night for the Accountants.

PBC would like to thank everybody who attended and made the event such a success, with £1,640.50 being raised for charity as PBC have covered the costs for the evening.

The team’s tuck shop and donations has also raised £57.29 so far this year, bringing 2019’s current total raised to £1,697.79.

Our next event for the Charity is our Golf Day on September 19th and we look forward to seeing many of you there.

#ronaldmcdonaldhouse
#charity

Brexit vs Cash

How many readers like change?  Do you remember the constant barrage of doom and gloom surrounding the Millennium Bug or what about GDPR?  Let us face it, in general we all fear changes that may interfere with our comfort zone.

The “B” word has been with us for 2 years and, personally, I have adopted the position of why write about it?  After all, nobody knows what post EC departure means so anything written pre-Brexit surely must be rhetoric or simple guesswork.  Admittedly, the older generations know what it was like before we joined but times have moved on since then and the economic World is vastly different.

So, let us focus on what we do know.

I bet when asked about your salary you cite your gross earnings.  However, gross earnings cannot be taken into account when it comes to paying the bills; you have to look at your take home pay and hopefully it is sufficient to meet your domestic needs.  Similarly, in business there seems to be a heavy focus on the level of turnover rather than the net profit or, more importantly, cash flow and the ability to meet debts as they fall due.

Through 2018 the average amount owed to a company was £80,141 rising to £82,000 for professional services.  Late payments are the most significant threat to SMEs and the longer they remain unpaid, the higher the risk of an inability to collect.  If your business had to write off £80,000 how much additional business would you need to secure in order to recover that loss?  Going back to the salary scenario if your employer paid you late could you still meet your debts as they fell due?  There is little difference.

At PBC we would say most of our clients have suffered from poor cash flow.  Some are due to poor credit control, some through a slow burn as the business suffers for one of many reasons, while others fall victim to a one-off catastrophic write off.  In one particular case PBC are handling the company suffered a 7-figure debt as their customer went into liquidation, bringing the company to its financial knees.  Thankfully, the director took early advice and we had time to restructure his company via a company voluntary arrangement, safeguarding all of the employees and the company going forward.

So, our message to you is Brexit is currently uncertain whereas cash is king.  Look after your cash controls and let Brexit unwind in whatever format it is destined to take.

Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit and PBC Business Recovery & Insolvency on (01604) 212150 or email to garypettit@pbcbusinessrecovery.co.uk

What has 2018 been like?

 

When I get that call from Business Times informing me it is time to draft your editorial reviewing the past year a mild panic strikes like a bolt out of the blue! Is it really that time already?  What has happened over the past year and what can I write about?

The year started with PBC launching its mediation service.  So far, the PBC mediation service has successfully settled every dispute where acted, either on the day or in the immediate period thereafter.  It has included insolvency-related matters, a shareholder dispute and a professional negligence claim.  All but one were pre-legal action and it is fair to say in two of those the claimant was probably relieved that a settlement was reached!

For those who believe they want their day in court then beware. The courts are penalising those who refuse mediation as an alternative dispute resolution by imposing cost awards.  In one report I read the Claimant won £10,000 but because they refused mediation a cost order of £35,000 was made against them!

While mediation is proving successful our principal area remains insolvency and once again we have found ourselves being asked to act on some challenging assignments, including a deceased estate on the South coast and a corporate group that has two foreign subsidiaries (one in Canada and the other in Australia).  We were also delighted to accept our first nomination from HM Revenue & Customs for the appointment as liquidator, replacing the directors’ choice of insolvency practitioner.

The advisory side has also seen some interesting matters where PBC have assisted creditors of companies either entering into an insolvency process or, in one case, challenging the conduct of the residing liquidator. As we always say at PBC, awareness (of your rights) can often protect your financial interest.

The retail sector has taken a pounding this year as we witness the likes of House of Fraser and Toys R Us fall under the regime of the Insolvency Act. Until the retailers look at new ways of improving foot fall then the outlook continues to look bleak.

Gary Pettit was also invited to be party to the Government consultation on corporate governance, being proposals following the experiences of these large-scale corporate failures and the devastating legacy they leave. As the Government say, “When Parliamentary time allows” there could be some stark changes imposed, including the ability to pursue directors of companies that are struck off the register.

For the time being directors should be aware HM Revenue & Customs are continuing their campaign to recover tax from “Disguised remuneration schemes” such as Employment Benefit Trusts and other tax avoidance schemes. At PBC we have seen an increase of these incidences and with the constant pressure to reduce the level of unpaid taxes, it is an area that will continue to grow in recovery procedure terms.

It has to be said the final word must go to Jamie Cochrane who passed his accountancy qualifications. It is a great achievement and the PBC Team all congratulate him on his success.  That hard work and his dedication to PBC has also been rewarded with promotion to associate.

Should you have an insolvency-related issue or a corporate dispute then please contact Gary Pettit and PBC Business Recovery & Insolvency on (01604) 212150 or email to garypettit@pbcbusinessrecovery.co.uk

HMRC to be a preferential creditor once again

 

The 2018 Budget has seen the announcement that HMRC will regain their preferential creditor status, a position which they lost in 2002 under the Enterprise Act. Since then they have ranked alongside unsecured creditors (such as suppliers, landlords etc).

Chancellor Philip Hammond, speaking in Parliament said, “We will make HMRC a preferred creditor in business insolvencies…to ensure that tax which has been collected on behalf of HMRC, is actually paid to HMRC”.

Further detail announced by HM Treasury states, “Taxes paid by employees and customers do not always go to funding public services if the business temporarily holding them goes into insolvency before passing them on to HMRC. Instead, they often go towards paying off the company’s debts to other creditors.  From 6 April 2020, the government will change the rules so that when a business enters insolvency, more of the taxes paid in good faith by its employees and customers but held in trust by the business go to fund public services as intended, rather than being distributed to other creditors such as financial institutions”.

It is understood HMRC will become a “secondary preferential creditor”, ranking after current preferential creditors, which includes the Redundancy Payments Service and employees for certain elements of their employment rights. HMRC will only become preferential for debts collected by the company on behalf of HMRC, such as VAT, PAYE and employee’s NI contributions but will remain unsecured for Corporation Tax and employers’ NI contributions.

The Government believe this measure will result in an extra £185 million in taxes being recovered each year. However the policy will have other consequences such as:

  • Banks and other lenders may be unwilling to support companies, or charge higher interest rates on lending, as their risk will increase.
  • Other unsecured creditors, including small businesses, landlords, pension funds, suppliers and employees will see the amount they receive reduced.

The full release from HM Treasury is available here:

The budget also included confirmation of proposals whereby directors could be held liable for debts due to HMRC where there is a risk that the company may deliberately enter insolvency. Following Royal Assent of the Finance Bill 2019-20, directors and other persons involved in tax avoidance, evasion or phoenixism could be jointly and severally liable for company tax liabilities in certain cases.

Abseil Total Exceeds Target

 

 

Back in August 2018, Natasha Pink and Jamie Cochrane took part in an abseil event which was organised by the Ronald McDonald charity to help raise much needed funds for families of sick children.

There are 14 Ronald McDonald Houses as close as is possible to specialist children’s hospitals across the country, from Southampton to Liverpool.  They provide accommodation for families whose child is receiving treatment at the hospital, free of charge, so parents can stay close to their children.

PBC are supporting the charity because of the support they have given to Kym Carvell’s family.  Kym’s baby grand daughter, Billie-Marie was born 10 weeks premature with a number of health issues.  In total, Billie-Marie has spent approximately six months of her short life in hospital (she turned two in August), and on almost every one of those days, Ronald McDonald House has provided a room for her parents to stay.

Both Natasha and Jamie really enjoyed the abseil and everyone at PBC are very proud of them.  Natasha said that it was an amazing experience and that she was very grateful to be able to support such an important cause. She is also very grateful to all those that have supported her and Jamie and donated so generously, with the latest donation taking them past the £1,000 target.  It has also taken the total earned this year from all of PBC’s events past £3,250.

If anyone else would like to donate to this very worthwhile cause, and recognise Natasha and Jamie’s bravery, please click onto the link here.

Restoration of Company Results in Dividend to Creditors

PBC are pleased to report that a dividend of 66.40 pence in the pound was paid to unsecured creditors in a liquidation that, at first, appeared to have no distributable assets.

The company was placed into creditors’ voluntary liquidation in June 2012 and following closure of the liquidation the company was dissolved. PBC were subsequently approached to restore the company to the register and act as liquidators to realise a refund of fees from the company’s former bankers.

With the assistance of Katie Summers, a partner at Howes Percival LLP, a successful application was made to restore the company to enable the fees to be recovered and subsequently a payment to be made to creditors.

PBC CONFIRM DIVIDEND PAID FROM AN IVA

PBC are pleased to announce a first and final dividend to creditors from an individual voluntary arrangement (IVA).

The debtor’s proposals for an IVA were approved in November 2017 and comprised a lump sum following the sale of an investment property. The arrangement included the removal of a second charge against the dwelling property, with the creditor in question submitting a claim in the IVA.

Joint Supervisor, Gary Pettit said, “It is pleasing to see this dividend paid to creditors and the IVA nearing a successful completion. The IVA has successfully dealt with the debtor’s financial difficulties, which were not helped by the debt management plan he was previously using”.

For more information on IVAs, please see this video.

Jamie and Natasha abseil for Ronald McDonald

 

Here at PBC, we are determined to raise as much money as possible for this excellent cause.  So far we have had a charity craft fair, Kym and Jamie walked 80 miles from London Euston to Northampton and the quiz night.  We also have an extremely popular tuck shop in the office!  To date, PBC have raised an amazing £3,303 in 2017 which equates to keeping the Ronald McDonald House at Alder Hey Hospital open for two whole days and in 2018 we have raised £1,817 so far.

But we’re not stopping there!

Jamie and Natasha have taken on the next charity challenge in August 2018 which is a 500ft abseil down Liverpool Cathedral and they can’t do it without your support!  Jamie and Natasha have set up a JustGiving page so please help us made a difference for the Ronald McDonald House Charity and all the families that use it.

Further details on why PBC support Ronald McDonald, can be found here.