Enforcement and asset recovery in a challenging economy

17 December 2020

Even in the best of times it’s important to have an eye on enforcement prospects before embarking on a claim. The momentous events of 2020 have reminded us that this adage is more relevant than ever.

A claimant has two key questions before embarking on costly litigation. Firstly, will your counterparty still have the means to satisfy the claim and/or debt when you prevail in court? Secondly, will an unsuccessful defendant be even more reluctant than usual to satisfy judgments or awards made against them?

These are pressing questions for those already involved in ongoing litigation or arbitration, who will naturally want to pay close attention to the creditworthiness of their opponent as their case progresses.  

It’s not all doom and gloom, however. Our conversations with law firms, corporate counsel, insolvency practitioners, and financial investigators over recent months have revealed some useful tips to help ensure claimants can realise the value of their disputes:

Keep a close eye on defendants

They have bills to pay as much as anyone else. Previously hidden assets may be revealed as they are sold or transferred to maintain liquidity. This generates important trails which assist in tracing and therefore proving beneficial ownership. Through regular and close monitoring of your defendants and their associates (including family members) it may prove easier to identify breaches of court orders, to identify further assets or to track down previously elusive assets.

Creditors and shareholders should be vigilant

In many countries there has been a relaxation of rules which ordinarily require directors to promptly notify the court of a company’s insolvency. Whilst this may protect an otherwise viable business, it does pose a potential risk to shareholders and creditors who may wish to push directors to provide information and evidence on the company’s current financial status. If they fail to do so, applications can often be made to secure company assets against debt.

Have a clear and well-resourced plan

A clear enforcement plan centred on a thorough asset analysis has a better chance of success than proceeding on an ad-hoc basis, but properly resourcing the plan is vital (both with cash and capabilities), Harbour can assist with both. A good plan is only half of a solution; the other half is the right team to execute the plan. In our experience, a good enforcement plan requires a multi-disciplinary and often multi-jurisdictional team coordinated by an experienced law firm. Such a team would consist of reputable financial and asset investigators who have been engaged from the outset, lawyers in the jurisdictions where enforcement is to be pursued, forensic accountants and, possibly, a communications professional. Other specialised disciplines may also be needed depending on the nature of the enforcement and the nature of the assets being enforced against.

The court is your friend

Inevitably the workload of the courts has been impacted by the global pandemic, but in England and Wales (even if not in other jurisdictions) judges have generally been keen to keep the court lists moving.  Defendants’ arguments that Covid-19 is creating unavoidable delays have mostly fallen on deaf judicial ears; remote hearings and even remote trials have been effectively conducted, and courts have embraced virtual means to facilitate legal processes. Whilst Covid-19 is not an excuse for claimants to fail to comply with their service obligations, courts have generally been sympathetic to applications to dispense with the requirement to serve in person. A good example is applications relating to service of proceedings, which has been made more difficult with travel restrictions. Email “Read” receipts and delivery notifications are proving to be better evidence of service than might normally be the case.

Delay need not disadvantage claimants

The slower movement of case traffic through the courts does not necessarily mean claimants must wait until the conclusion of proceedings before realising the value of their litigation or arbitration. Harbour has both funds and patience, allowing us to purchase judgments and awards, or monetise all or parts of ongoing cases. We can provide claimants with immediate cash sums, which can be a welcome option in the current economic climate.

Contact Maurice MacSweeney

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