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FOR IMMEDIATE RELEASE
Creditors recover losses from Insolvency Practitioner
Administrators settle major negligence case for £1.1million.
PRESS RELEASE - FOR IMMEDIATE
USE
Griffins Insolvency Practitioners and stevensdrake solicitors have just
completed 2 years of litigation against Casson Beckman & Partners Licensed
Insolvency Practitioners based in London and two of their former partners in
relation to their handling of an Administration.
THE FACTS
In November 1993, the directors of a company, Steel Drums and Containers
Limited, sought insolvency advice from Casson Beckman & Partners. The
company had almost no assets and £500,000 in liabilities. The business of the
company was the reconditioning of oil drums and dealing with associated chemical
processes. The company was based at Fresh Wharf, Barking, Essex. Two partners
from Casson Beckman & Partners were appointed Administrators by the court,
and they were charged with implementing a plan to return the business to
solvency.
After 6 months it became clear that the aims of the Administration could not be
achieved and the Administrators received legal advice to bring the
Administration to an end. Despite this, they allowed the Administration to
continue. After a year they admitted to creditors that they could not achieve
the aims of the Administration and asked the creditors to support a change of
direction and proposed that the company enter into a Company Voluntary
Arrangement. The creditors agreed.
It was at about this time the Administrators realised they had allowed the
company to run up even more debt than the company had at the outset of the
Administration. This seems to have
occurred because the Administrators allowed the company’s management to
continue running the company but without adequate controls on the expenditure by
the company.
In April 1998, over four years into the period of 'control' by the
Administrators, the Landlord of the trading premises, frustrated by the lack of
control, applied to court and succeeded in removing the Administrators. The
Court ordered that a partner from Griffins be appointed in their place.
Unfortunately this was not the end of the difficulties.
The Administrators did not know who was in control of the site or who was
in occupation. This led to some
costly litigation to remove the company occupying the site.
Griffins succeeded after substantial effort and cost in securing the site.
A substantial amount of documentation was discovered relating to this and
other insolvent companies and passed to the Dti. The
Dti later brought disqualification proceedings against Andrew Gosling, a
director of Steel Drums & Containers Limited. Mr Gosling was subsequently
disqualified for 7 years.
Griffins, now acting as Liquidators, then instigated proceedings against the
former Administrators for misfeasance under Section 212 of The Insolvency Act
1986. The liquidator was seeking to
compensate the £1.3 million of creditors who had lost money after the
Administrators' took control of the company. This figure was almost three times
the amount of trade creditors' claims that were outstanding at the time the
company went into Administration.
On 22nd March 2002, three weeks before the matter was due
to go to trial, the liquidator accepted £1.1million plus costs to settle the
claim. It is anticipated that the
post-administration creditors will receive a substantial part of their money
back as a result of this action.
Stephen Hunt, partner at Griffins and a Licensed Insolvency Practitioner, said
'”We are delighted with the outcome of this case. It is important for all
Insolvency Practitioners to understand our duties and responsibilities to
creditors and to make sure that we don't make things worse when we step in to
try and save a company. The job that an Insolvency Practitioner does is a
difficult and important one. It is essential that we maintain the highest
possible standards and this is a case where those standards were not met.
Showing creditors that they do have rights and that enforcing them can produce
repayment is something that should be welcomed by everyone."
Gavin Pickering, Corporate Recovery and Insolvency partner at stevensdrake, said
"This was an important case. It
should be remembered that an Administrator is an officer of the court with
strong duties of care while the company is under his control.
The courts in particular are very concerned to make sure when making
Administration Orders that they are made on proper foundations.
After making the initial order the courts often only see the case again
when the Administrators apply for their release at the end of the
Administration. Administrations by their nature are supposed to be a
relatively short intervention to put a company back on its feet or to improve
the creditors position. Sadly,
neither happened in this case and it should serve as a salutary reminder to
Administrators of their duty to go back to court for further sanction and not
allow the Administration to run on.
For More Information Contact:
Insolvency Creditors Association
Russell Square House, 10-12 Russell Square, London WC1B 5EH
Tel: 020 7307 8246
FAX: 020 7307 8222
Internet: info@insolvencycreditors.org
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