ILA President’s Column - Some things never change?

22/10/10

As even the indefatigables of the ILA's Technical Committee will now know, summer is over.  If any affirmation was needed, the return of the "Alex" cartoons to the pages of the Daily Telegraph provides it amply.  But even in that tongue in cheek offering, we can see a snapshot of the broader economic sentiments that "catastrophe has been avoided", but the "outlook is not cheery", with austerity measures on the horizon, and companies and individuals retrenching. Everywhere one looks, there are bearish headlines of a double dip ahead (something of a certainty in the US, perhaps as soon Q4 2010), and quite probable in the UK, but perhaps not until Q2 2011. 

One does not have to be quite as bearish as Albert Edwards of SocGen, but the frequency of double dip warnings seems to be gathering pace, albeit matched by the  number of commentators with a "glass half full" view, for whom the risk is exaggerated, even if the growth posted in the UK economy in Q2 2010 may not be sustained.  And yet, despite it all, it seems something of a curious paradox that amid all the gloom and doom, constrained lending to SMEs and fragile consumer confidence, that activity levels in the insolvency and restructuring markets have been more subdued than many would have predicted, notwithstanding the court lists which seem to be occupied with a growing volume of insolvency related applications and actions.  

When I wrote my inaugural words as President, I reflected that 2010 marked the 21st anniversary of the ILA since its incorporation in 1989.  The very recent, and massively publicised, return of Asil Nadir of Polly Peck International to these shores provides a reminder that Mr Nadir declared that "1989 was our coming of age" when he congratulated PPI's shareholders for being investors in "the stock of the decade"  at its AGM in 1990.  Before the year was out, PPI was in administration with Morritt J (as he then was) appointing Michael Jordan, Richard Stone and Chris Morris as joint administrators.  They were the  luminaries and "insolvency barons" of the day, with Michael Jordan described as "the flamboyant doyen of the insolvency business".

Although many, but not all, of those who were there on 25 October 1990 have since retired, the affairs of PPI remain open to this day, almost as a constant companion to the ILA since its own establishment.

And as if to reinforce the coincidences, Asil Nadir himself was (and still is) a bankrupt. The petitioner was BZW, thought to be one of several brokers which had extended credit to Mr Nadir.  These included Lehman Brothers International, now one of the most prominent insolvencies of the modern era, itself under the stewardship of the successors to Messrs Jordan, Stone and Morris as insolvency barons, in the shape of Tony Lomas and his joint administrators.

Notwithstanding their baronial status, two of the PPI administrators found themselves with a rap on the knuckles from ICAEW for breaches of professional rules in taking an appointment when their firm had provided personal tax advice to Asil Nadir. The old style consent to act in use in 1990 did not require a statement of whether or not there had been a prior professional relationship or to give details of it.  The prior relationship in PPI emerged as an issue only on the morning of the hearing for the administration order before Morritt J.  Some modern echoes might be found in the remarks attributed to HHJ Purle QC in the DRC Distribution case, critical of the appointee's lack of attention to his prior relationship, or those of Henderson J in the Miss Sixty CVA challenge, referring the conduct of the administrators to their RPBs.

Even the location of PPI's head office in Berkeley Square has an echo to the modern restructuring era as the favoured haunt of the hedge funds and private equity houses who have endured the travails of the post 2008 recession, whether as subjects of an insolvency procedure, or having been caught up in the collapse of others, most notably Lehman Brothers International itself.

I am delighted to inform members that Sarah Paterson of Slaughter & May has agreed to join Council. She has a pedigree which needs no introduction, although it would be impolite of me not to point out that all of it has been since PPI's demise.

For the ILA's members and friends, events on the horizon include its Annual Dinner on 10 November 2010 at its regular home of the National History Museum, and I look forward to welcoming a full house on the evening.  Please also look out for the events to be organised by the RILN in the autumn.  Members are also urged to consider their nominations for the Debbie Phillips Bursary which was announced this Spring at the annual conference, the details of which can be found on the website.  The bursary is designed to foster interest in insolvency law and practice, and to provide support to those who aspire to succeed in that field notwithstanding obstacles in their way.

Peter Cranston

President