Ecohouse Developments Limited - In Liquidation ( the Company )

Transcription

1 To members and all known creditors 11 March 2016 Our ref: AT/VR/ /Ecohouse/CVL033 Dear Sir/Madam Ecohouse Developments Limited - In Liquidation ( the Company ) Please find enclosed the liquidators first progress report to members and all known creditors in the above liquidation. If you have any queries in connection with the report, please contact Adam Thompson at adam.x.thompson@uk.pwc.com who will be pleased to deal with them. Yours faithfully David Chubb Joint Liquidator Enclosure: Liquidators first progress report David Chubb and Robert Lewis are both licensed to act in the United Kingdom as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. The joint liquidators are bound by the Insolvency Code of Ethics which can be found at: The joint liquidators are Data Controllers of personal data as defined by the Data Protection Act PricewaterhouseCoopers LLP will act as Data Processor on their instructions. Personal data will be kept secure and processed only for matters relating to the liquidation. PricewaterhouseCoopers LLP, Benson House, 33 Wellington Street, Leeds, LS1 4JP T: +44 (0) , F: +44 (0) , PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.

2 Private & Confidential First progress report to members & creditors 14 March 2016 Company Ecohouse Developments Limited Registered Number Registered address Benson House, 33 Wellington Street, Leeds, LS1 4JP Type of Insolvency Creditors Voluntary Liquidation Date of Appointment 15 January 2015 Liquidators David C Chubb and Robert N Lewis Address PricewaterhouseCoopers LLP Benson House 33 Wellington Street Leeds LS1 4JP Dividend Prospects Current estimate Previous estimate p in p in Preferential N/A N/A Unsecured unknown N/A Please note that the guidance on dividend prospects is indicative only. It should not be used as the sole or principal basis of any bad debt provision decision.

3 Ecohouse Developments Limited In Liquidation ( the Company ) Report to Members & Creditors In accordance with Rule 4.49C of the Insolvency Rules 1986 ( IR86 ), this is the Liquidators first progress report to members and all known creditors. Attached at Appendix A is a summary of the financial information relating to the Liquidation. Liquidators actions and investigations On appointment, the directors statement of affairs stated that the Company had no assets. However, we were made aware of three potential areas where actions may be taken to recover funds for the benefit of creditors: 1. c 544,000 held by the Company s escrow agents, Sanders & Co; 2. Review of whether the escrow agent undertook duties in compliance with instructions; and 3. Possible action to trace funds which left the escrow account. These matters are discussed further below. To date, there have been no realisations due to the complexity in identifying, investigating and tracing these. 1. Funds held by Sanders & Co ( Sanders ) On appointment, we became aware that Sanders held funds of c 544,000 which related to the escrow accounts of specific investors. Sanders made an application to the Court, to which the Liquidators were joined in as a respondent, for permission to return these funds to the specific investors. We could find no grounds upon which to contest the application and the view of the creditors committee was that we should not oppose the application. The Court gave permission to Sanders to return the funds it held to the specific investors and we understand that this has now been done. 2. Escrow agent A member of Liquidators team visited the offices of Sanders on 29 July 2015 to review their files. The purpose of the visit was specifically to obtain information on the operation of the escrow agreement and account, take copies of certificates used for the payment of drawdowns, review bank statements and gain a better understanding of the firms operations. Following this visit, we engaged Taylor Wessing, a well-regarded law firm which is highly experienced in fraud and asset tracing, to provide legal advice in relation to our investigations and findings. We subsequently made further requests to Sanders for the production of relevant documents. Sanders have now agreed to produce the requested documentation by 18 March 2016 and to provide the Liquidators with a witness statement to explain why certain information is not available. Following receipt of this information, we will consider the Company s options on this matter. It has come to our attention that a number of different creditor groups have been formed, normally led by a firm of lawyers and that they have raised funding from the creditors in their group. We understand that some of these firms may be contemplating action against Sanders & Co. In doing so, they are competing with the Liquidators and each other which is an inefficient approach for creditors as a whole. The Liquidators will bring claims on behalf of all creditors, whereas a splintered approach by separate creditor groups could, at best, result in some creditors receiving a pay-out and others missing out. Obviously, we cannot stop these other actions but using the statutory powers available to us, we have already started the process of gathering information from these various creditor groups through a formal request for the provision of relevant documentation. Using the Liquidators powers, we have

4 already requested one law firm to provide all relevant documentation to us and we intend to take this approach with the other law firms. Once the information is collated, the Liquidators will be in the unique position of having the best available information with which to pursue any appropriate claims on behalf of all the creditors. With the involvement of the team from Taylor Wessing, one of the most highly respected law firms in this area, the Liquidators are confident that the creditors' interests are best served by pursuing claims through the Liquidation and are therefore keen that all creditors are united behind this single initiative. 3. Tracing funds Some limited forensic work has been undertaken on the Company s bank statements. Further work is anticipated but will be subject to the availability of funding. Statutory investigations The Liquidators have reviewed the affairs of the Company prior to Liquidation and have also considered the points raised by creditors in discharging their duties under the Company Directors Disqualification Act The Liquidation Committee also identified certain matters for review and the Liquidators have reported to the committee in that regard. In addition to the above matters, the Liquidators have a statutory obligation to consider the directors conduct and to submit a return/report to the Insolvency Service. The Liquidators can confirm that they have complied with this requirement. The contents of this submission are confidential between the Liquidators and the Insolvency Service. Requirement for further funding At present, the Liquidators have insufficient funds to cover the costs currently being incurred and it is our intention to write to creditors in the near future to request further funding to support our ongoing action. Liquidation committee We continue to keep your committee updated on significant matters relating to our work. However, at this point in time we are unable to provide these updates to the wider body of creditors as this could prejudice any future actions taken by the Liquidators. Outcome for Creditors Secured creditors Based on the information provided by the Company, it appears that there are no secured creditors Preferential creditors Preferential creditors principally arise in respect of unpaid wages, subject to statutory limits, and holiday pay for employees. As the Company did not have any employees at the time of our appointment, we do not expect any preferential claims.

5 Unsecured creditors The unsecured creditors per the directors statement of affairs total 21,443, If creditors have not already done so, they should complete and return a statement of claim form to the Liquidators as soon as possible. This form can be found on the Liquidators website at If you are not shown on the statement of affairs as a creditor, or the amount shown is incorrect, if you have not already done so, please send your details to the Liquidators on the statement of claim form so the correct details are on file in the event that a dividend becomes payable. The Liquidators will not be in a position to respond to creditor enquiries of this nature on an individual basis. At this stage, the Liquidators will not be undertaking any work to verify claims and you will be advised later if further information on your claim is required. If you paid VAT, you may be able to claim VAT bad debt relief once six months have elapsed from the due date of any unpaid invoices, and providing the debt has been written off in the your books. Creditors are entitled to receive a dividend on the total amount of their claim, including VAT. However, if creditors receive a dividend they are required to account to HM Revenue and Customs for the VAT element of the dividend. Due to the uncertainty surrounding any future asset realisations, we are unable to provide further information on dividend prospects for unsecured creditors. Professional Advisers On this assignment the Liquidators have used the professional advisers listed below. Name of Professional Adviser Taylor Wessing Nature of Work Legal advice regarding the escrow accounts and wider strategy on pursuing claims Basis of Fee Arrangement To be confirmed, likely to be a conditional fee arrangement The Liquidators choice was based upon their perception of the advisers experience and ability to perform this type of work, the complexity and nature of the assignment and the basis of the fee arrangement with them. Liquidators remuneration You may recall that at the first meeting of creditors held on 15 January 2015, the Liquidators remuneration was fixed by reference to the time properly given by them and their staff in attending to matters arising in the Liquidation, including time given by them and their staff to such matters before the Liquidation commenced. It was agreed that a fee of up to 15,000 plus VAT would initially be taken by the Liquidators, from available funds raised by creditors, to be transferred to the Liquidators by CPC Worldwide ( CPC ). In the event, CPC did not provide us with the full amount but a total of 9,700 was received from them and has been drawn as Liquidators fees in the period. This amount includes payment of the VAT element of the Liquidators fees as the Company is not able to reclaim VAT. To 14 January 2016, the Liquidators have incurred time costs of 188,979. This represents hours at an average hourly rate of These figures include a change in charge out rates effective from 1 July 2015 for insolvency staff, a summary of which is shown below. Please note that this does not necessarily reflect the total amount that will be drawn in due course.

6 Grade of staff Rate per hour from 1 July 2015 Rate per hour from 1 July 2014 Partner Director Senior manager Manager Senior associate Associate Secretarial/other support staff It has been the Liquidators policy to delegate the routine administration of the Liquidation to junior staff in order to maximise the cost effectiveness of the work performed. These staff have been supervised by senior staff and the Liquidators. Any matter of particular complexity or significance that has required responsibility of an exceptional kind has also been dealt with by senior staff and the Liquidators. Details of the time costs incurred from the Liquidators appointment to 14 January 2016, by work category, are attached at Appendix B. In common with all professional firms, scale rates increase from time to time over the period of the administration of each insolvency case. PricewaterhouseCoopers LLP, or any successor firm, reserves the right to change the rates and grade structure. Following the funding request which was sent out to creditors on 20 March 2015, the charge out rates were increased on 1 July Full details of the charge out rates charged to this case from this date are included at Appendix B. Liquidators disbursements Category 1 disbursements The Liquidators have incurred disbursements of 3, during the period 15 January 2015 to 14 January No disbursements have been drawn in this period as shown on the attached receipts and payments account. Category 2 disbursements The Liquidators current disbursements policy, as approved by the creditors, is as follows: 1. Photocopying for circulars or any other bulk copying is charged at 5p per sheet; 2. Mileage this is reimbursed at a maximum of 67p per mile (up to 2,000cc) and 80p per mile (over 2,000cc). All other disbursements are reimbursed at cost (Category 1). The Liquidators have incurred and in respect of photocopying and mileage respectively, during the period 15 January 2015 to 14 January 2016, none of which have been drawn. Statement of expenses The following expenses have been incurred during the period of the report, irrespective of whether payment has been made:

7 Category Amount Archiving costs Courier costs Other professional fee Postage 1, Printing Rail fares Network costs Accommodation Mileage Knowledge searches Taxi fares Total 3, We anticipate that future expenses will comprise archiving costs, postage and printing. We expect these will be of a similar level to those above. Additional information If any creditor requires further explanations on any aspect of the Liquidators progress report, then please write to Jordan Sleightholme at jordan.r.sleightholme@uk.pwc.com who will be pleased to deal with such enquiries. However, any request for further information regarding the Liquidators remuneration or disbursements should be made in writing (Rule 4.49E). In addition, should any creditor consider the Liquidators remuneration and disbursements to be excessive or inappropriate, they have the right to challenge the amounts in accordance with Rule IR86. The Liquidators will not be in a position to update creditors and investors on an individual basis due to the financial constraints in the Liquidation, however, the Liquidators will update the website with any developments to the strategy and case. Please refer to the website in the first instance for information and updates. This can be found at

8 Ecohouse Developments Limited - in Liquidation Liquidators' receipts and payments account to 14 January 2016 Appendix A Total for the period from appointment to 14 January 2016 Statement of affairs figures Receipts Funding from third parties/chargeholder 26, Bank interest Gross Total: 26, Payments Office Holders' fees 9, Total: 9, Bank balance (held in high interest current account) 16, Note: Funding from third parties comprises 9.7k collected by CPC Worldwide towards the statutory costs of the Liquidation, as well as c 16k raised by investors, following our funding request. Repayment of these funds will be made from any recoveries made, before funds are distributed to unsecured creditors.

9 Appendix B Ecohouse Developments Ltd Analysis of time costs for the period from 15 January 2015 to 14 January 2016 Aspect of assignment Partner Director Senior Manager Manager Senior Associate Associate Secretarial Total hours Time cost Average hourly rate 1 Strategy & Planning , Assets Inv estigations , Creditors , Accounting and treasury , Statutory and compliance , Tax & VAT , Employ ees & pensions Total for the period ,

10 Explanation of work undertaken The following table explains the key elements of our work, as summarised in the previous table of time costs, by grade of staff and area of work. Area of work Work undertaken includes: Strategy and planning Setting up internal systems on appointment Budgets and cost monitoring Regular case team reviews Regular communications with the committee regarding case strategy and progress Detailed consideration of matters in relation to investigations and asset tracing Funding request to investors in relation to investigations Assets Asset searches and review of statement of affairs Investigations Liaising with the Insolvency Service Review of company records Matters in relation to the escrow accounts Creditors Dealing with a large volume of creditor enquiries by phone, post and Accounting and treasury Opening liquidators bank account Accounting for receipts and payments Performing bank reconciliations Discussions with CPC regarding payment of liquidation funding Providing receipts to investors who had provided funding Statutory and compliance Statutory notifications on appointment Drafting this report Maintaining case records and standing data Appointee and case manager reviews Filing documents at Companies House Tax and VAT Review of tax and VAT position of the company Liaising with HMRC Employees and pensions Fulfilling statutory obligations Why this work was necessary The work carried out by the Liquidators and their staff to date was necessary for the following reasons: Compliance with our statutory and other obligations Dealing with receipts and payments in an appropriate manner Ensuring the case was properly managed Ensuring the committee members understood the full extent of the situation and their role Assessing the prospects of recoveries for investors through various actions and pursuing these Responding to enquiries from regulators and law enforcement agencies Dealing with a vast range of creditor enquiries Estimated cost of future work Owing to the uncertain funding position, we do not yet know what further work is going to be carried out. It is therefore not possible to provide creditors with an estimate of the costs of future work.