As true specialists in our field, we act for clients nationwide in claims against insolvency practitioners, as well as in claims against other professionals.
Resolving claims against insolvency practitioners
From the outset, we focus not on making professional negligence claims on behalf of our clients, but on resolving them. In this way, we ensure that ours is a broader perspective and a more open mind.
Moreover, and by harnessing:
- Our wealth of experience acting in claims against a wide-range of professionals
- Our unique insight into the defence of claims against insolvency practitioners
- Our commitment to providing a client-centric service as part of our core values
- Our innovative and highly efficient service provision
we ensure that our clients achieve better results for substantial claims, time and again.
The profession and roles of insolvency practitioners
Within the UK the insolvency practitioners’ profession is a relatively small one, comprising only around 1,750 licensed practitioners, not all of whom are practising. However, of those practitioners that are active, many will undertake a variety of official roles and insolvency appointments, including acting as nominees, supervisors, administrators, liquidators, trustees in bankruptcy and receivers.
All licensed insolvency practitioners must belong to a recognised professional body. As well as providing regulatory oversight, these bodies seek to promote and maintain the standards of the profession. Included amongst them is the Insolvency Practitioners Association (IPA), the Association of Chartered and Certified Accountants (ACCA) and the Institute of Chartered Accountants of England and Wales (ICAEW).
Like solicitors, insolvency practitioners also act as officers of the court. While this additional status bestows certain privileges upon them, it also imposes special obligations, in addition to those imposed by statute. Moreover, it makes them subject to the inherent jurisdiction of the court.
Common mistakes by negligent insolvency practitioners
Historically there has been an inverse correlation between the level of professional negligence claims against insolvency practitioners and the health of the national economy. Latterly, however, and despite the economic fallout from the financial crash of 2007/8, there has been little sign of a dramatic increase in claims against insolvency practitioners. But that is not to say that the profession is devoid of claims and while high levels of credit dependency exist within the wider economy, a latent prospect of a surge in claims against insolvency practitioners remains.
Some common mistakes that can give rise to successful claims against insolvency practitioners are:
- Failing to take account of assets or liabilities when preparing financial status reports
- Failing to make reasonable enquiries into the historical dissipation of assets
- Failing to realise the best price reasonably obtainable for assets
- Failing to achieve a reasonable settlement of claims received
- Failing to apply money or property in a lawful manner
- Failing to prosecute claims on behalf of a company or individual within prescribed time limits
Assessing the merits of claims against insolvency practitioners
It is not in every case where financial loss arises that a professional will be held responsible and before embarking on any claim against an insolvency practitioner, a careful assessment will need to be undertaken of a number of important issues. These include:
- The scope of the legal duties owed by the insolvency practitioner
- Any actions taken by the insolvency practitioner to comply with those duties
- The nature and extent of the loss caused by any breaches of those duties
This can be a particularly complicated process in claims against insolvency practitioners, whose duties emanate from a variety of sources and reflect the multifaceted nature of their role, and the merits of each claim will often depend on the specific background events that give rise to it. For this reason, a degree of caution should always be exercised when relying on the reported outcome of one claim, to assess the merits of another.
An insight into the issues and complexities that arise in claims against administrators can be found in our article Top Five Claims Against Administrators, in which we identify and comment upon the leading cases arising in relation to this role.
How to make a claim against an insolvency practitioner
Most professional negligence claims against insolvency practitioners are commenced by correspondence and by following the procedures set out in the Pre-Action Protocol for Professional Negligence.
The aim of the Protocol is to make the process of resolving professional negligence claims more open and more efficient and, by doing so, to reduce the number of claims that require judicial intervention. Happily, and since the introduction of the Protocol in July 2001, the vast majority of professional negligence claims are now resolved at the Protocol stage and without the need to institute and pursue costly and time-consuming court proceedings.
However, it is as well to appreciate that as helpful as the Protocol is, it provides only a generic framework for resolving professional negligence claims. It does not identify or assess what facts, issues or evidence is relevant and irrelevant in any particular case, nor does it contain legal advice.
Time limits for claims against insolvency practitioners
There are a number of important reasons for acting promptly when a mistake has been made or discovered. One of these are the time limits that apply to all professional negligence claims.
These time limits can be found in the Limitation Act 1980. In short, they require legal proceedings to be commenced within:
- 6 years of the date upon which damage or financial loss occurs – section 2
- 6 years of the date upon which the mistake occurred – section 5
- 3 years of the earliest date upon which the claimant has both the knowledge required for bringing a claim and the right to bring a claim – section 14A
- 15 years of the date on which the mistake occurred, even if the time limit prescribed by section 14A has not expired – section 14B
Therefore, where there are grounds for pursuing a claim against an insolvency practitioner, a claimant will generally have 6 years from the date of wrongdoing or loss, but may have 3 years from the date of discovery, if later, in which to bring any claim, subject to a long stop of 15 years.
However, while these time limits may appear straightforward in summary form, applying them in practice can be much more challenging. Unfortunately, there are a multitude of cases in which they have been misapplied, not only by lay clients acting as litigants in person but also by solicitors and other lawyers who have themselves fallen into error.
Although limitation is a complicated area of law with a large body of case law relating to it, further information about it can be found in our introductory guide: Time limits for professional negligence claims – FAQs
Funding claims against insolvency practitioners
Before embarking on any professional negligence claim it is imperative to consider how it will be funded. In comparison to other more routine forms of litigation, professional negligence claims can be more complicated, more time-consuming and more costly to resolve.
Fortunately, there are a number of ways to fund litigation. Each has its own advantages and disadvantages and can be more or less suitable, depending on individual circumstances. Further information about these different funding options can be found in our related guide: Fund a claim
Reporting an insolvency practitioner for misconduct
Regrettably, and although not commonplace, issues of misconduct do arise from time to time in the context of professional negligence claims against insolvency practitioners, as they do in claims against other professionals. While in some instances the misconduct in question can also amount to negligence or a breach of statutory duty, this will not be so in every case.
Misconduct is often defined by a breach of professional codes of practice that govern the professional, such as the IPA Code of Ethics. Where the breach is serious, reporting an insolvency practitioner to the IPA, ICAEW or such other regulator of the practitioner concerned, may be appropriate. If it appears that the misconduct might also constitute a criminal offence, it may also be appropriate to report it to the police.
Where an insolvency practitioner is reported for misconduct, disciplinary proceedings may follow. However, while disciplinary proceedings can result in penalties and sanctions being imposed upon the practitioner, they do not usually result in an award of compensation. Accordingly, they are rarely a substitute for, or an alternative to, pursuing professional negligence claims against insolvency practitioners where financial loss or damage is sought to be recovered.
Specialist legal advice
If you are contemplating making, or even currently pursuing, a professional negligence claim against an insolvency practitioner for losses in excess of £100,000, and if you would like to arrange an initial consultation with us, free of charge or commitment, please complete our Enquiries Form or email us at mail@pnclegal.com.