The importance of being serious: file your proof of debt on time
The case of Re Premier FX Limited (in liquidation) highlights the potentially disastrous consequences for a creditor who fails to file proof of debt within a set deadline – and makes it clear that mistakenly forgetting to do so is not a sufficient excuse.
Premier FX was in business as a currency trader and money transfer agent. Financial advice was sought when it became clear to the (newly appointed) administrators that claims received from clients exceeded the balance of funds held by the company.
Meanwhile, the Financial Conduct Authority had also been alerted to the company’s questionable financial situation. In addition, the FCA found that Premier FX had significantly exceeded the scope of the authorization granted to it by the FCA. Suspecting criminal activity, the FCA applied to the court for an administrative order which was granted and the company was subsequently put into liquidation.
Late filing of proof of debt
The joint liquidators applied to the court for an order approving their distribution plan. The court sanctioned the plan which provided a deadline for all creditors to submit proof of debt no later than June 28, 2021. Creditors were required to submit proof of debt even if one had already been submitted unless their evidence had previously been recognized in writing by the joint liquidators.
Mr Hutchings did not file his proof of debt (for the sum of £35,537.90) until August 27, 2021. Mr Hutchings said in his cover email that there had been a “terribly confusing” on his part and he believed that because he had previously submitted the evidence to the administrators, that was sufficient. The joint liquidators nevertheless rejected the evidence of the debt and Mr Hutchings asked the court to overturn the decision.
The court found that the correspondence from the joint liquidators had been clear as to the terms of the distribution plan, what the creditors were required to do and when. They had also provided an FAQ page which made it clear that even where evidence had already been submitted to the administrators, it should be submitted again to the joint liquidators.
The joint liquidators did all they could to make as clear as possible what was required of creditors but, nevertheless, for someone unfamiliar with the insolvency process, I can appreciate how these documents can be intimidating to review or even perhaps easy to ignore if you think you have already done everything you need to do.
In any event, the Court concluded that the deadline set out in the distribution plan was there to provide clarity and certainty. In particular, it allows those who have submitted claims to understand their position in a short period of time and to receive their dividends shortly after. The Court noted that granting Mr. Hutchings’ request would delay creditors who have met the deadline and increase costs. Mr Hutchings therefore found himself without the ability to claim a dividend on liquidation (understood as £9p).
Mr. Hutchings’ misfortune did not end there. It also suffered a further blow last month when the FCA issued its ruling on Barclays’ involvement in Premier FX’s account mismanagement issues. The FCA concluded that Barclays failed to properly manage or review Premier FX’s accounts. They did not confirm that Premier FX’s internal controls were sufficient and did not verify that Premier FX’s business activities were as stated.
Not only did Barclays pay a voluntary fine of £783,800, they also agreed to cover the full balance of all losses from the 167 Premier FX clients whose claims were accepted by the joint liquidators (at a cost of over £10 million).
Mr Hutchings’ ‘terrible mistake’ therefore unfortunately resulted in him missing out on 100% collection of his debt – quite a price to pay for not reading his emails.
Following the liquidator’s distribution of 9p for every pound lost, Barclays’ voluntary payment of £10,076,943.75 will make up the difference,’ the watchdog continued, meaning the 167 Premier FX customers with accepted claims will have 100% of their money returned