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Mediation reduces claim by over £2.5 million in Insolvency Litigation Case

Settling £2.9m of claims against the Directors for £350,000 at mediation

The Mediation process often gets a bad press as being a bit wishy-washy and expensive, especially when a successful outcome is not achieved at the end of the Mediation-day. Used properly, Mediation is a fantastic tool that saves money, saves time, gives certainty and avoids the angst and risks inherent in Litigation. The insolvency litigation case we describe below, which centred around a £2.9 million insolvency claim, demonstrates that when conducted properly, with the right Mediator and the right attitude on all sides, Mediation can produce great outcomes. In this case* a reduction of over £2.5m for a client on the original claim.

(*Article by: Neil Davies, Insolvency Litigation Solicitor and Managing Director of N D & P Solicitors Ltd (‘NDP’) and Contributory Editor to ‘Mithani: Directors’ Disqualification’ – the leading work on Director Disqualification law and practice.)

Background to the insolvency claims

Our Director clients saw their long-established manufacturing company fall into liquidation.  Brexit clearly played a part in the demise of the company with loss of consumer confidence in the lead up to it.

The company had proposed a Company Voluntary Arrangement (‘CVA’) with its creditors in the months before liquidation, but a major creditor scuppered the prospects of that happening despite the proposed CVA arrangement offering creditors 100p in the pound on their claims (there is just no pleasing some people).

The company then went into liquidation and there began the problems. The Liquidators of the company, during the pandemic, sold (to a claims management company) the right to pursue claims against the Directors personally, to include claims for:

  • Misfeasance under section 212 of the Insolvency Act 1986.
  • Other related insolvency claims.

Our clients thus faced the daunting prospect of defending wide ranging claims, from a well-financed and determined Claimant. What to do?

The Objective of our Mediation and Insolvency Litigation Solicitors

Uppermost in our minds as advising Solicitors was to avoid the commencement of legal proceedings. Being locked into a timetabled and rigid Court driven procedure was never going to be good news for either the proposed Claimant or the target Directors.

Very significant pre-action correspondence was exchanged by us with the Solicitors for the Claimant (to narrow down the issues) and that eventually resulted after 19 months, in a Mediation.

Parallel Insolvency Service (‘IS’) investigation – A win for the Directors

Matters were further complicated because the IS commenced a very detailed and thorough Director Disqualification investigation into the conduct of the Director clients, which took up a lot of financial resource of the clients and which, with the assistance of our experienced Director Disqualification Solicitors, eventually resulted in that Director Disqualification investigation being abandoned by the IS. The allegations of Unfit Conduct investigated by the IS were virtually the same as the subject matter of the financial claims that became the subject matter of the Mediation.

Nevertheless, the Claimant saw fit to continue to threaten the commencement of financial recovery claims against the Directors which is why and how we ended up at a Mediation.

Mediation day – The outcome of the Mediation

With the assistance of the ever-brilliant Mark Harper KC of Kings Chambers and NDP’s ever enthusiastic and very experienced Insolvency Litigation and Director Disqualification Solicitors, a negotiated settlement was achieved after 10 hours of Mediation, which saw the claims settled against the clients for about 15% of the claim values.

2 years of future uncertainty in contested litigation and significant cost and risk was therefore avoided for the clients. An outstanding result.

A lot of detailed preparatory work went into achieving that result by NDP, before the Mediation, as is always the case. Proper preparation is always the key in the circumstances.

Our clients said of the outcome:

“The attention to detail and tactical and legal skills of Mark Harper KC and the NDP team, led by Neil Davies, resulted in a very satisfactory outcome in this case. We are very grateful to them for their assistance and support. We recommend their services to anybody who find themselves on the wrong end of litigation claims, to include in particular Insolvency and Director Disqualification claims as here.

Our CEO, Neil Davies said:

“Mediation is the way forward in most if not all disputes.   Even the most antagonistic claims resolve at or soon after the Mediation Day.  A key is choosing the right Mediator and setting the expectations of the clients, on both sides, before Mediation Day.  The benefits of settling at Mediation are enormous.

Talk to us if facing an Insolvency Claim

This testimonial/case study demonstrates the kind of results a mediation can achieve in reducing an insolvency claim without the need to go to Court. Our Insolvency Litigation Solicitors have all the experience and expertise you need to recommend Mediation as a viable option if you are facing a litigation claim.

Contact us or call us on 0121 200 7040 for a free, no obligation, initial discussion.