By their nature, ‘Contentious Insolvency’ appointments take a long time to conclude and when we do reach the finish line, they rarely grab the headlines. In the last few months, the contentious team at Mercer & Hole have reached a positive conclusion on a number of matters, one of which I’ve summarised in this article as a means of illustrating what is possible.
As this matter was settled via confidential agreement, which is common for this type of work, we are unable to disclose the details in full.
Creditors funding returned and healthy distribution
The company in question was wound up by the only non-connected creditor who had suffered a loss as a result of an unfortunate accident.
Prior to the winding-up, the creditor successfully obtained judgement for their loss only to be told by the directors that the company couldn’t pay.
I was introduced to the creditor by their solicitors as they were particularly frustrated by what they perceived to be a severe injustice. After a preliminary conversation when we agreed on the level of funding the creditor was willing to invest, we were appointed liquidators.
This funding was not sufficient to cover all the costs of my investigation but enough to reduce my risk to an acceptable level in light of the strength of the case and financial resources of the proposed target.
Once in office we undertook a streamlined investigation, focusing on the accident and what happened to the underlying business in the period that followed. Not only were we able to articulate a claim in respect of events surrounding the accident but we also discovered evidence suggesting that key income-generating assets were moved out of the business while the creditor was going through court proceedings. A big ‘no no’ as far as ‘acting in the interests of creditors’ is concerned when a company is doubtful solvent.
A little over a year after being appointed we were able to instruct solicitors to start pre-action correspondence with the directors.
Fortunately for all involved, we reached an acceptable settlement early on in the process, which reduced costs being drawn from the settlement sum and produced a greater return to the creditor.
In litigation it is always a fine balance between securing the best possible figure that the defendant can afford and managing the costs associated with reaching that position.
In this case, after paying my outstanding professional fees and the costs of my legal team, we were able to refund the creditor’s contribution to costs and make a meaningful distribution to them as the largest creditor.
Despite their initial concerns, the creditor was pleased with the outcome; they didn’t fully recover their losses but did get a much better outcome than they might have expected when the company was wound up and a sense that some justice had been done.
If you have clients or contacts who are creditors and there are concerns surrounding recovery, do not hesitate to get in touch.