“Time dumping” case opens new recovery route

The High Court has ruled that rights of action under insolvency practitioner bonds are held on trust by the Insolvency Practitioners Association for the benefit of the relevant insolvent estates, in a decision that arose out of substantial litigation alleging dishonest overbilling, or “time dumping,” by former officeholders. 

The proceedings were brought by Nick Nicholson and Russ Parkin of Grant Thornton, the current liquidators of Ugo Stores Limited, William Sessions Limited and FW Mason & Sons Limited (Nick Nicholson only). The liquidators allege that prior administrators and liquidators claimed fees for work not performed and inflated time costs, causing loss to the estates. Against that backdrop, the liquidators sought to unlock an alternative recovery route by accessing indemnity claims under bonds issued by Intact Insurance UK Limited, which respond to fraud or dishonesty by insolvency practitioners.

The core issue in this application was not the underlying misconduct itself, but whether the liquidators could control and pursue those bond claims. The bonds named the IPA as the formal beneficiary of the claim rights, creating a structural barrier to direct enforcement by the estates. To overcome that, the liquidators argued that the IPA held the claim rights on trust for the estates, such that the rights formed part of the companies’ property and could be compelled to be assigned to them under section 234 of the Insolvency Act 1986. The relief sought was therefore strategic, aimed at enabling the liquidators to pursue recovery from the insurer as part of the broader litigation into alleged fee misconduct.

The defendants resisted on two fronts. First, they argued that the IPA’s role in relation to bonding was regulatory and public in nature, meaning its decisions could only be challenged through public law mechanisms, not private trust claims. Second, they contended that the bond structure lacked the certainty required to create a trust, and that any claim rights remained within the IPA’s control unless and until it chose to assign them.

The Court rejected those arguments, finding that, properly construed, the bond framework created a trust under which the IPA holds claim rights for the benefit of the insolvency estates. The judge placed weight on both the wording and the practical operation of the bonds, including the expectation that proceeds would flow to the affected estate rather than be retained by the IPA. That conclusion was sufficient to ground declaratory relief confirming the existence of the trust and the estates’ beneficial entitlement to the claims.

As a result, the Court held that the companies, acting through their liquidators, are entitled to bring claims against the insurer for the benefit of creditors and to require the IPA, as trustee, to transfer the relevant claim rights to them. The decision effectively clears a path for the liquidators to pursue recovery under the bonds as part of their wider litigation strategy, converting the bonds into an asset of the estate.

Read the decision here.

Professionals involved:

• 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, Nick Nicholson and Russ Parkin of Grant Thornton

• 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

Editor’s note: A previous version of this article has been retracted as it contained inaccuracies. We sincerely apologise to all the parties involved.