Contentious insolvency
“Now
that we’re on the way out of the recession, the time may be right
for people and institutions who’ve lost money in the credit crunch
to look towards recovering their losses – through litigation if
appropriate," says Malcolm Cohen, Business Restructuring partner
at BDO.
Cohen is upbeat about the amount of contentious insolvency work that litigation departments are likely to see in the coming months, as creditors and other claimants look to boost their recoveries. But insolvency work requires rock-solid attention to detail, and the right choice of experts: investigations are likely to involve specialists from different departments, and it's important to make sure that teams are communicating.
"Understanding the factual background to the losses which have been incurred may involve sifting through an awful lot of data, particularly as the nature of a lot of contentious insolvency work can be international," he continues. "But there are so many elements in play it would be foolish to think that one department, with its own specific skill set, can handle the work alone."
BDO have seen increasing amounts of contentious insolvency work recently. Key to this growth in business is the firm's cross-team approach. “We are selling our clients broad litigation expertise, and that should mean they receive the very best we can offer in all areas," says Cohen. "Although this type of work may come into the firm through Business Restructuring, we would be crazy not to use our Forensic team to go over the raw data, with a fine-tooth comb if necessary, before we decide what action to take on behalf of creditors. And the forensic people would be an integral part of the team from the beginning."
The involvement of different experts from the beginning of the process also means a clear overall picture comes quickly into focus and pre-emptive action can be taken if needed. "The real benefit for lawyers can be seen in the quality of information we are able to gather prior to a case beginning, and how quickly we are able to do this," he confirms. "For example, the fact that an integrated BR and Forensic team can act immediately and gather evidence means that a freezing order can be obtained very early in a case. This can make the difference between significant asset recoveries and no recovery at all.”
Asset recovery is, of course, the whole point of contentious insolvency litigation – and this is something else that a good team should consider very carefully. "If the initial research we undertake doesn’t point towards a winnable case, we definitely won’t push litigation through just to earn a fee," says Cohen. "Another advantage of involving our Forensic team early on is that we often find that defendants might be unable to pay even if litigation were pursued successfully. In these circumstances we would advise extreme caution in pursuing litigation, however good the case may be.”
BDO's record of success in contentious insolvency work is testament to the importance of instructing the right experts early, working with closely integrated teams, and taking a hardnosed commercial view of the merits and financial realities of each case. The Advisory team is going to be seeing a lot of this kind of work for the foreseeable future.
