Liquidators’ bond claims against IPA fail in “time dumping” dispute

The High Court has dismissed claims by liquidators seeking to compel the Insolvency Practitioners Association to assign rights under insolvency practitioner bonds, in a ruling that addresses the intersection of regulatory functions, trust law, and recovery tools under the Insolvency Act 1986.

The claim was brought by the liquidators of F.W. Mason & Sons Limited, Ugo Stores Limited, and William Sessions Limited, who alleged that prior officeholders had engaged in dishonest overbilling described as “time dumping” by claiming for work not performed and inflating fees charged to the estates. The liquidators sought to access indemnity coverage under bonds issued by Intact Insurance, arguing that the rights to claim under those bonds were held by the IPA on trust for the estates.

The bonds, a statutory requirement for insolvency practitioners, provide security against fraud or dishonesty in the conduct of appointments, with the surety jointly and severally liable alongside the practitioner. The liquidators contended that this framework created enforceable proprietary rights in favour of the estates, enabling them to compel assignment of the claims under section 234 of the Insolvency Act 1986.

The defendants, including the IPA and Intact, resisted the claim on two principal grounds: first, that the IPA’s role in administering bond claims is public or quasi-public in nature and not amenable to private law trust analysis; and second, that the necessary elements of a trust, particularly intention, were not established.

The Court agreed, holding that the alleged “claim rights” under the bonds were not held on trust for the insolvent estates. The Court found that the IPA’s functions in relation to insolvency practitioner bonds are rooted in its regulatory mandate rather than any fiduciary obligation to individual estates, and that challenges to the IPA’s handling of bond claims must be pursued, if at all, through public law mechanisms rather than private law trust claims.

The Court also addressed the scope of section 234 as a recovery tool. While confirming that section 234(2) can extend to intangible property such as contractual rights, the Court reiterated that the provision is procedural in nature and does not create substantive rights. As such, the liquidators could not rely on section 234 to compel transfer of rights that were not, in law, property of the companies.

In rejecting the trust argument, the Court emphasised the absence of certainty of intention required to establish a trust over the bond claim rights. The statutory and regulatory framework governing insolvency practitioner bonds, including their origins in reforms following the Cork Report, was found to support a public interest function focused on discipline and compensation, rather than private proprietary entitlement.

Notably, the Court made no findings on the underlying “time dumping” allegations themselves, which were contested by at least one of the former officeholders.

Read the decision here.

Professionals involved:

• Siward Atkins KC of Maitland Chambers (instructed by Weightmans) for the IPA

• Stephen Davies KC and Kavan Gunaratna, both of Enterprise Chambers (instructed by Francis, Wilks & Jones) for Intact Insurance

• Thomas Williams of Selborne Chambers (instructed by Pannone Corporate) for the Third Defendant

• Ian Wilson KC of 3 Verulam Buildings, Ben Strong KC of One Essex Court, and Ryan Ferro of 3 Verulam Buildings (instructed by Gateley Legal) for the liquidators