Ferris will herald a new era
21 July 1998
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Murdoch McKillop, president of the Society for Practitioners of Insolvency, responds to last week’s City Comment.
Readers of last week’s “City Comment” might have thought that the opportunity for licensed insolvency practitioners had just passed. Apparently “the gravy train might be about to hit the buffers”.
The public only believes in such a “gravy train” because headline numbers focus on the cost and not the value achieved. This is partly because the principles by which office-holders should be remunerated are poorly defined in legislation.
But things are going to change. Mr Justice Ferris’s forthcoming report will help provide a framework for the future, which will be welcomed by creditors and insolvency practitioners alike.
I expect the report to follow the main principle set out in Mr Justice Ferris’s July 1997 judgment on receivers’ fees in the Maxwell private estate, that: “Remuneration should be fixed so as to reward value, not so as to indemnify against costs.”
It must be to PricewaterhouseCoopers’ chagrin (as liquidator of Peregrine) that the Ferris guidelines are not already in place.
In three months, it brought under control a global operation with 2,000 open positions, worth US$8bn. The liquidator’s fee of US$5m, criticised by the judge, represents just 1.4 per cent of assets recovered so far. The creditors unanimously confirmed the liquidator’s appointment without questioning fees.
In many other cases, creditors’ committees have been rigorous in examining the fees of the insolvency practitioners involved and have approved them in nearly every case.
Sadly, in many insolvencies, there is little value left for creditors. Nearly 70 per cent of UK insolvencies are in companies that turn over less than £1m. Here our role is to get what we can for creditors while determining what went wrong.
If society wants this work done, then creditors will have to pay for it. But the profession must show creditors that the task is being handled effectively and at minimum cost.
We must communicate with the people we serve - providing maximum transparency and accountability to creditors - which will come from the Ferris report. The profession started this process with a statement of insolvency practice issued in 1996.
Taxation of fees is not the answer. Lawyer-style time recording takes no account of the work insolvency practitioners do - we move from crisis to crisis making commercial, pragmatic decisions and working through their consequences.
Excessively detailed time recording is not cost-effective, and could prevent office-holders from doing the job they are meant to do - achieving maximum net realisations.
Readers' comments (1)
Trevor Thompson | 8-Oct-2010 11:23 pm
I am indeed concerned that Mr. Justice Ferris during an appeal by a banrupt who could not attend due to illness, ignored the basic principal that personal service must be occasioned upon the defendant to an application.
Not only was the Defendant Bankrupt not in England when he was supposedly personally served by a service agent for the applicant and swore a statement claiming he had personally served the defendant bankrupt with the notice of hearing. This was impossible as the defendant Bankrupt was in Scotland at the time of the alledged personal service.
Further there was a complete offset against the Applicants claim as evidenced by the insurance company paying out the claim to the appointed trustee. In fact the Applicant had been negligent in notifying the Insurers of the claims under the policy as required by the policy. The Applicant was to make the claims to the INsurance company and not the insured. Mr. Justice Ferris clearly made the simple mistake of thinking that the Insured was to make the claim to the insurance company and there was no duty on the Applicant to make the claims to the INsurance company. However, the INsurance company confirmed that the Applicant certainly did have the duty to make the claims and was required under the policy to do so.
It should also be noted that Mr. Justice Ferris, failed to heed the comments of the original District Judge in the Bankruptcy matter. The Bankrupt Appellant went before the original County Court Judge who made the Order of Bankruptcy and presented the evidence to the Judge proving beyond any doubt that the service agent could not have served him at all. The District Judge commented " If I had known this at the time, I could not and would not have made the Order of Bankruptcy" and further commented that " As the matter is with the RCJ you must advise the RCJ of these facts." Clearly Mr. Justice Ferris totally ignored these facts and indeed the original Applicant owes the Bankrupt Appellant money. What a travesty of Justice.
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