The Waiting Game
At BRI we like to be able to close cases promptly, assuming all I’s have been dotted and T’s crossed, in order to avoid the need for unnecessary annual meetings. Having said that we are only now closing a Bankruptcy case which we opened in 1998. Not quite a record, but, being some 16 years later than our normal objective which is “to close cases within 15 months”, this might appear to have been a bad result.
Not the case. We are proud to have received a letter from a creditor which says “We think you have worked wonders so far in securing payments of 30p, 18p, 13p and 24p and anything further will be even more icing on the cake” is a delight. We are happy to report that we are sending a further dividend of 13.19p was sent to all creditors taking the total dividend paid to unsecured creditors up to 98.19p in the pound, a distribution of £611,010.27 in addition to which preferential creditors were paid in full a total of £26,765.99.
The debtor left the country in 1998, some months after the flooding of his principal place of business over the Easter bank holiday weekend of that year had forced a business move upon him at a time when business was already in decline and when significant other issues were arising in his personal life. He took with him a significant sum of cash and, in anticipation of his departure, had transferred considerable sums of money and land to various pension schemes, believing that by doing this they would be safely out of the reach of any Trustee in Bankruptcy were a Bankruptcy to ensue.
The new trading premises were managed by a husband and wife team. They arrived at work one morning to find a note which said simply “Gone to New Zealand – appoint receivers”. He was a sole trader.
There are no provisions for the appointment of “receivers” in this situation. A trade creditor was identified who was sufficiently agitated to help progress matters through what was perceived likely to be the “least bad” way forward. The creditor agreed to petition the Court for the debtor’s Bankruptcy and for the appointment of Peter Windatt as Special Manager. On 13 November 1998 a Bankruptcy Order was made and shortly thereafter Peter was confirmed as Trustee in Bankruptcy by appointment of the Secretary of State for Trade and Industry on 16 November 1998.
While acting as Special Manager Peter Windatt and the BRI team were able to identify a Bank Account which had been opened in New Zealand by the Debtor. New Zealand is a commonwealth country with reciprocity arrangements in place in respect of insolvency matters. An Order in Aid and Mareva Injunction were obtained which resulted in the New Zealand bank account being frozen. The Debtor, whose intention it had been to purchase a property in New Zealand the following day, was alarmed to find that he could not then do so as his account had been frozen subject to “living expenses” being withdrawn pending the making of a Bankruptcy Order or other order(s).
The Debtor reported the above freezing of accounts to the Auckland police who, in turn, reported matters to Interpol who likewise advised Northamptonshire police. The following morning two policemen attended at our offices to enquire as to what had taken place. Within minutes they departed shaking their heads and saying “its civil”.
As special manager we sold all stock, the dwelling house (though completion was delayed due it having been transferred into a pension), additional land, funds held by third parties were subject to the order of the special manager and subsequently appointed trustee, property in New Zealand were subject to a NZ Court Order.
As trustee there followed a number of Court hearings with pensions companies to unravel the Debtors attempts to put assets “beyond the reach of creditors”. S423 of the Insolvency Act (Transactions Defrauding Creditors) was used.
This, in turn, gave rise to a number of considerations as regards tax relief on contributions to pensions.
Since around 2003 we have been endeavouring, through a series of legal advisers, to deal with two plots of land and a barn whose title has been under some dispute.
The debtor had been married previously and that marriage had ended in divorce. The divorce took place in the mid 1980’s following the debtor and his former wife having traded both individually and together in a partnership. The land that remained to be dealt with, and from which rental income was being earned, was unregistered. The title deeds were known to have been in the possession of the Debtors former solicitors who had dealt with both his property matters and his subsequent divorce. However, the title deeds were believed to have been collected by the debtor for reasons which are far from clear but, one might now suppose, may have been another attempt to put the property out of the reach of creditors.
The debtor has been required to account for what happened with the title deeds and to clear up what may have happened to the property as a result of the divorce from his former wife. He was unhelpful in both regards, including by way of a public examination in Court.
Agents were engaged to trace the former wife. Upon opening communications, via solicitors (who changed regularly throughout our dealings), it was clear that some compromise/settlement was to be sought given that there was some value in the property and “doing a deal” was likely to be more cost-efficient than trying to obtain determination by the Court.
All evidence lead the Trustee to conclude, given the payment of rental income to the debtors’ estate and the absence of any action in respect of the land by the former spouse for some decades, that title had remained with the debtor. It was, however, not something that the Land Registry would accept without either the agreement of the former spouse or an appropriate Order of the Court. Accordingly, and after many years of wrangling, a settlement was reached and a payment has been made to the former spouse for her waiving any potential interest and a contribution towards her associated legal costs. This final realisation was concluded in 2014.
Accordingly, and many years later than would have been hoped, matters are now drawing to a close.
The debtor has been very unhelpful throughout these proceedings and appears to have done his best to secure his own financial position at the expense of his creditors. Whilst there is little doubt that he was in a very poor state of mind in the run up to his insolvency and that his business suffered a natural disaster on Good Friday 1998 (as did ours) through flooding he has had many opportunities to do the right thing but had railed against that throughout. His pension providers too fought every endeavour to restore funds to the estate and his former wife has done little to assist, with matters exacerbated by numerous changes in which solicitors were acting for her.
It would have been nice to have been able to pay creditors in full and to make some contribution to the interest they would have been entitled to. The distributions made were some six times our fees (which were only double those of the Secretary of State fee for just “looking on”!) and feedback from creditors has been very positive.