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The Latest Twist in the Handling of Mis-Selling Claims in Insolvency

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In Hockin & Ors v Marsden & Ors [2014] EWHC 763 (Ch) the High Court held that it would unfairly prejudice a company’s creditors if the company’s mis-selling claim against a bank were not assigned by its administrators to a creditor to pursue.

In the particular circumstances of this case, the mis-selling claim could only be made good with reliance on evidence provided by the directors of the company.  As a result, the administrators did not want to pursue the claim however the directors of the company did.  The two directors made an application to Court for an order to direct the administrators to assign the mis-selling claim to them.

The application was brought pursuant to paragraph 74 of Schedule B1 to the Insolvency Act 1986, however an application under this paragraph can only be invoked by a creditor or a member of the company.  Neither director was a member of the company and only one of them was a creditor.

The Court held that the administrators’ decision not to pursue the mis-selling claim was not unreasonable, however the real question was whether it was justifiable not to assign the claim. The Judge held that in the circumstances the ‘directors would have nothing to lose and the administrators would be spending creditors’ money on the costs’, and so it was held that it would unfairly harm the company’s creditors if the claim against the bank were not assigned to a creditor to pursue.

If you have any questions please contact our Corporate Recovery and Insolvency Team.

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