Brewer & Anor v Iqbal: IP Breach of Fiduciary Duty

Brewer & Anor v Iqbal

 

Insolvency Practitioners have a duty to provide the best value from assets for the benefit of creditors on an insolvency case. Administrators are increasingly open to scrutiny to demonstrate that all options were explored to protect the interests of creditors.

The  case of Brewer & Anor v Iqbal [2019] EWHC 182 (Ch) serves as a reminder to insolvency practitioners “to act with single minded loyalty to the Company.”

The Recovery First process offers protection to insolvency practitioners, ensuring they meet their obligations to creditors.

Brewer & Anor v Iqbal

The case of Brewer & Anor v Iqbal [2019] EWHC 182 (Ch) revolves around allegations of misfeasance and breach of fiduciary duty against Zafar Iqbal, an insolvency practitioner, during the administration of ARY Digital UK Limited.

The primary issue in the case was the handling and sale of the company’s assets, specifically Electronic Programming Guides (EPGs), which were sold below market value without proper market exposure or valuation efforts. The EPGs were licensed by British Sky Broadcasting Limited.

The court found that Iqbal did not perform his duties with the required care and skill expected of a competent administrator. Significant criticism was directed at his failure to adequately investigate the market for EPGs, his reliance on insufficient advice from the directors of the company, and his decision-making process regarding the asset sale.

It was noted that Iqbal had not even performed a basic internet search to identify potential markets or leading sellers for EPGs, nor had he sought independent valuation or marketing advice for these specialised assets.

This negligence prejudiced the interests of the creditors, as the assets were not exposed to an open market for a reasonable period, potentially leading to a higher sale price.

The court also highlighted a breach of fiduciary duty by Iqbal for acting with divided loyalties. They stated that he had failed to act with single-minded loyalty to the company. His decisions were influenced by considerations that should not have factored into his role as an administrator, such as concerns over the company’s public image and the directors’ needs, rather than focusing solely on the creditors’ best interests.

The judge’s remarks pointed out that Iqbal’s failure to expose the EPGs to a specialist market for a reasonable time was a clear oversight. He accepted the directors’ advice without verifying their claims, particularly regarding the risks of the EPGs being taken off air. This reflected a failure to act independently and with the necessary diligence​​.

 

How does the Recovery First process protect the IP?

 

When dealing with law firm insolvency, insolvency practitioners have a duty to ensure they explore all options to get the best value from assets for creditors. It is important to note that pre-pack sales are not the only route when it comes to law firm insolvency.

When IPs handle law firm insolvencies, one of the major assets to consider is the Work in Progress (WIP).

This is the unbilled work that, once completed and billed, can offer significant returns for creditors. Realising the value of WIP is often a complex task. It is not just about selling off assets; it involves understanding the value of ongoing legal work, its potential for completion, and the ability to bill and collect for that work. 

It Is also essential to preserve the goodwill and support of ‘live’ clients to ensure that they do not move their matter elsewhere and diminish the WIP value. Excellent client care and communication is therefore essential.

There are often matters where it is only the costs issues that are not fully resolved and require negotiation and collections to maximise and realise full value.

Recovery First has tailored its services specifically for this scenario. It focuses on assisting law firms and their proposed IPs, to maximise recovery of their valuable WIP asset

ensuring 100% of the recoverable WIP value is returned to by  law firm in administration or liquidation. This is of paramount importance, as hastily selling or undervaluing these assets could mean significant financial losses for creditors.

Recovery First ensures a structured, phased, and strategic process. This provides continuity for the law firm’s clients, potentially preserving the firm’s reputation and offering better outcomes for stakeholders.

We work alongside insolvency professionals to ensure the most profitable outcome is achieved on any file transfer agreement. This collaborative approach ensures that all obligations to creditors and other stakeholders are met, and often exceeded.

We guarantee 100% confidentiality for all clients. Our process is SRA compliant and fully transparent.

If you would like to find out more about Recovery First’s process, feel free to get in touch today.

It's never too late to speak to Recovery First. Contact us now in the strictest confidence

Sally Dunscombe:

sally.dunscombe@recoveryfirst.co.uk

David Johnstone:

david.johnstone@recoveryfirst.co.uk

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