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The appointment of a liquidator or administrator marks a turning point for everyone connected with a company. The practitioner takes control of the company’s affairs, assumes responsibility for realising whatever value remains, and must investigate how the company came to struggle. Where that investigation reveals potential claims, the practitioner must decide whether pursuing them represents a sensible use of estate resources.
Tower Bridge Legal acts for practitioners pursuing recoveries and for those defending against such claims. We understand the framework thoroughly from both perspectives and that dual experience informs everything we do in this area.
Practitioners inherit whatever claims the company could have brought had it survived. This could be breach of contract claims against customers who failed to pay or suppliers who failed to deliver, professional negligence claims against accountants, solicitors or other advisors whose work fell short, or debt recovery claims for money owed to the company, including claims against directors for breaching the duties they owed during their tenure.
Additionally, insolvency legislation creates specific claims that only arise when a company becomes insolvent.
Preferences could be:
- Where creditors received payments that improved their position relative to other creditors
- Transactions at undervalue, where the company gave away value without receiving proper return
- Wrongful trading, where directors continued operating when they knew or ought to have known that insolvent liquidation was unavoidable
- Fraudulent trading, involving actual dishonesty in the conduct of company business
- Misfeasance, covering various breaches of duty and misapplications of property by directors and others.
Each claim type has specific elements that must be established. Timing matters enormously. The company’s financial position at relevant dates matters. The state of mind of those involved may be critical. Technical defences exist for most claim types. Experienced legal analysis is essential to assess which potential claims actually have substance and which will collapse under scrutiny.
The combination of inherited claims and statutory claims gives practitioners a powerful toolkit. But having tools available differs from knowing when and how to use them effectively. Poor claim selection wastes resources and inadequate preparation lead to failure. We guide practitioners through these waters successfully.
Investigating What Went Wrong
Investigation typically starts with the company’s own records. Bank statements reveal where money went and when. Management accounts show the deteriorating financial position month by month. Board minutes (where they exist) record what directors knew and decided. Email correspondence illuminates relationships, disputes, and the reasoning behind key decisions.
Directors must complete questionnaires providing detailed information about the company’s affairs, its financial history, and the circumstances of its failure. Their duty to cooperate with the liquidator is backed by potential court sanctions for non-compliance. The answers they give, and documents they produce, often form the foundation for subsequent claims. Inconsistencies between questionnaire responses and other evidence can prove particularly significant.
We assist practitioners throughout this investigative process. Early legal involvement helps focus the investigation productively. Resources get directed toward matters that might actually support viable claims rather than being wasted on comprehensive investigation of every possible angle. Where potential claims emerge, we assess their strength realistically and advise on proportionate next steps.
The investigation stage also matters for building creditor confidence. Major creditors want to know that the practitioner is taking their duties seriously. Demonstrating thorough but focused investigation reassures creditors while avoiding unnecessary expense.
Deciding What to Pursue
Not every potential claim deserves pursuit. The decision involves weighing multiple factors: legal merits, likely recovery amount, defendant’s ability to pay, anticipated costs, litigation risk, and the time required to see matters through.
A claim worth £100,000 against a defendant with substantial assets may justify significant investment in legal costs. The same claim against someone who will simply go bankrupt if judgement is entered achieves nothing beyond running up costs that reduce the estate. A complex claim requiring extensive expert evidence and a ten-day trial may not be worthwhile for a moderate sum, even if liability seems relatively clear.
We give practitioners frank advice on these questions. We understand they face competing pressures. Creditors want thorough investigation and aggressive pursuit of every pound. But creditors also want costs controlled and the administration concluded efficiently. These pressures sometimes conflict. Our role includes helping practitioners explain to creditors why particular claims do or do not justify pursuit.
Where claims appear viable, we advise on the strength of available evidence, the defences likely to be raised, and the realistic range of outcomes. This allows practitioners to make informed decisions and set appropriate expectations with creditor committees.
Representing Practitioners
Our work for liquidators and administrators spans the full claims lifecycle. We contribute to investigations, identifying legally relevant issues and helping gather appropriate evidence efficiently. We draft and send formal demands, setting out claims clearly and creating pressure for early resolution. Many matters settle at this stage without court proceedings becoming necessary.
Where litigation does become necessary, we handle every stage from issuing proceedings through to trial. We manage disclosure processes, draft witness statements, instruct experts where needed, and present cases effectively at hearings. Throughout, we focus on keeping costs proportionate and achieving the best net outcome for creditors.
We also advise on tactical decisions that arise during litigation. When should interim applications be made? How should multiple claims against different defendants be sequenced? What settlement offers should be made or accepted? Getting these judgements right can significantly affect ultimate outcomes.
Defending Claims
Directors and third parties on the receiving end of practitioner claims often feel ambushed and unfairly targeted. The company may have failed years ago, perhaps after the director had already departed. The third party dealt with the company on perfectly normal commercial terms and feels no responsibility for its subsequent difficulties. Yet suddenly they face demands for substantial sums, backed by threats of court proceedings and aggressive correspondence.
Our starting point is rigorous analysis of the claims actually made. Has the practitioner properly established each required element? Are the sums claimed correctly calculated? Has the limitation period been respected? Do the facts alleged actually support the legal claims being advanced? Many claims contain weaknesses that only emerge on close examination. Practitioners sometimes pursue claims that appear strong superficially but fall apart once properly challenged.
Directors Under Fire
Directors face particular challenges when claims arrive. The allegations may relate to specific problematic transactions, general failures of oversight, or both. The defence strategy depends heavily on exactly what is being alleged and what evidence exists.
Where specific transactions are challenged, documentary evidence from the time becomes crucial. Were proper procedures followed? Was the board properly informed? Did it properly authorise the relevant steps? Were conflicts of interest disclosed and managed appropriately? We help directors locate and present contemporaneous materials that demonstrate they acted correctly. Board minutes, emails, professional advice received, and financial information available at the time all matter.
Where general failures are alleged, the defence often centres on what the director actually knew at relevant times and whether their response was reasonable. Directors who obtained professional advice and followed it, who genuinely believed the company could be saved, who took sensible steps in genuinely difficult circumstances, have much stronger positions than those who hoped problems would somehow resolve themselves.
Limitation periods provide important protection. Different claim types have different limitation rules, and claims brought too late can be defeated regardless of their underlying merits. We analyse limitation carefully in every case.
Third Parties Facing Demands
Suppliers, customers and others who received payments from companies that subsequently failed often feel the injustice deeply. They provided goods or services in good faith. They were entitled to payment for what they delivered.
The statutory framework recognises legitimate concerns of innocent recipients through various defences. Those who acted in good faith without knowledge of the company’s financial difficulties may be protected. Payments received in the ordinary course of business can often be defended. We examine carefully whether these defences apply and build the strongest possible position for clients who have been caught up in claims they never anticipated.
Finding Resolution
Settlement resolves the majority of claims before trial. It provides certainty for both sides, saves substantial costs, and allows everyone to move forward. Practitioners can bank definite recoveries without trial risk. Defendants can close matters, have peace of mind, and get on with their lives.
We approach settlement negotiations strategically, informed by extensive experience of how these matters actually resolve. We know what comparable claims have settled for. We understand what arguments carry weight and the ones that fall flat. Where settlement makes sense, we pursue it effectively. Where claims should be resisted, we prepare thoroughly and fight hard at trial.
Contact Tower Bridge Legal if you are a practitioner assessing potential claims or a director or third party who has received demands. We can help you understand your position and pursue the best available outcome.
