Deloitte partners face £19m insolvency lawsuit
Relationship between insolvency practitioners and banks under spotlight again
Two Deloitte partners are to face a £19m legal action in the High Court over their administration of Rhino Enterprises, a storage business.
Rhino Enterprises owner Jason Schofield alleges that Deloitte insolvency practitioners (IPs), Matthew David Smith and Clare Boardman failed to pursue Barclays Bank for mis-selling the business credit swaps due to the “close relationship” between the bank and the IPs.
Schofield and Rhino Enterprises allege that Smith and Boardman “should not have accepted the administration appointment because of a close relationship through which Barclays enjoyed the upper hand or ‘informal control’.”
They also claim that the IPs “acted in breach of duty because their close relationship with Barclays disabled them from exercising sufficient independence to properly investigate, pursue, and litigate the Swaps Claims against Barclays; and… had the Swaps Claims been properly pursued, the Companies’ liabilities would have been extinguished or reduced to a level which could have been refinanced,”
The documents also show that Schofield sought legal advice on his claim against Barclays for mis-selling swaps, who advised him that he had at least a 60 percent chance of success if he were to pursue his claim. Were this claim successful, Schofield claims the business would have survived, but Deloitte IPs ignored this advice and sought their own legal counsel, who said the claim had a less than 50 percent chance of success.
As a result, Boardman and Smith did not proceed with legal action against Barclays and the business eventually entered into a Company Voluntary Agreement (CVA) with the bank. The lawyers who advised Deloitte’s Boardman and Smith are now facing a professional negligence claim for the advice they gave.
Judge Simon Barker QC ruled last week that Smith and Boardman were not protected against legal action through a clause connected to the CVA, meaning that the £19m lawsuit is now due to go ahead.
Deloitte refused to comment on the matter.