Attention All IPs With Rejected Northern Rock Cases
Ron Hutcheon, a Liverpool solicitor, is involved in defending two actions brought by Northern Rock (NR) against two debtors. Nothing new in this but the litigation has been brought by Northern Rock after they refused IVAs prepared by Licensed Insolvency Practitioners. Ron can’t go into too much public detail because of the litigation but what these two actions have in common are:

• Northern Rock were the only creditor at the meeting to vote against the IVA
• Northern Rock were the majority shareholders so had overall say
• The debt owing was unsecured
• Northern Rock, following rejection of the IVA, took immediate court action against the debtor
• Northern Rock obtained a judgement
• Following judgement Northern Rock applied for an immediate charging order
• Northern Rock’s unsecured position is now secured

Ron would be very appreciative for any feedback from IPs if this is a similar situation that anyone might have faced with Northern Rock rejected IVAs.

From a commercial point of view what Northern Rock did seems sensible. They are protecting their shareholders and reducing their risk. Where the problem lies is how does Northern Rock’s actions fit in with the Banking Code to treat their customers “fairly and positively”.

A number of questions have arisen as a result of these cases. Does the rejection of a properly presented IVA from an Insolvency Practitioner automatically mean that Northern Rock has not treated their customers “fairly and positively.?” Certainly from the customer’s point of view they have not. Should these words be construed objectively or subjectively or a bit of both? Research suggests there is no definitive answer.

One thing that concerns Ron is that he has spoken to many IPs who have informed him that Northern Rock’s rejection rate of IVAs is much higher than the industry standard. Certainly the two clients Ron is currently representing both involve Northern Rock and the commonality of facts are strikingly similar.

Then in July 2007 was the public comments of Northern Rock’s chief executive as reported in the Telegraph, blaming practitioners of IVAs and claiming they are not acting in the customers’ interest. “In 9 of 10 cases”, Northern Rock felt that all the customer needs is to reorganise their finances and that there is some “ambulance chasing” going on.

Ron wants to know if IP’s believe that each case Northern Rock is considered on its own merit or is there an adverse attitude towards Individual Voluntary Arrangements?

Ron says, “It would be interesting to find out from IPs their experience with Northern Rock and other institutions where they think there may be an unusually high rejection rate of IVAs. If I am able to produce factual evidence from IPs which lends support to other IPs I have spoken to, it may open to a flood of claims to the court to re-open IVA refusals. Ultimately the court will decide, in my view, whether creditors who reject an IVA have treated their customers “positively and fairly” in accordance with the Banking Code.”

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