The importance of being earnest: file your proof of debt on time

The case of Re Premier FX Limited (in Liquidation) highlights the potentially dire consequences for a creditor who does not file their proof of debt by a set deadline - and makes clear that mistakenly forgetting to do so is not a sufficient excuse.

Premier FX was in business as a foreign exchange dealer and money transfer agent. Financial advice was sought when it became clear to the (newly appointed) directors that the claims received from customers exceed the balance of the funds held by the company. 

Meanwhile, the Financial Conduct Authority had also been alerted to the Company's questionable financial status. Further, the FCA discovered that Premier FX had significantly overstepped the remit of the authorisation which the FCA had afforded to it. Suspecting criminal activity, the FCA applied to Court for an Administration Order which was granted and the Company was thereafter moved into liquidation.

Late Filing of the Proof of Debt

The Joint Liquidators applied to Court for an order approving their distribution plan. The court sanctioned the plan which provided a deadline for all creditors submit a proof of debt by 28 June 2021. Creditors were required to submit a proof of debt even if one had already been submitted unless their proof had previously been acknowledged in writing by the Joint Liquidators.

Mr Hutchings did not lodge his proof of debt (for the sum of £35,537.90) until 27 August 2021. Mr Hutchings stated in his covering email that there had been a "terrible mix up" on his part and he believed that because he had previously submitted the proof to the administrators, this was sufficient. The Joint Liquidators nonetheless rejected the proof of debt and Mr Hutchings applied to court for an order reversing the decision.

The Decision

The Court held that the correspondence from the Joint Liquidators had been clear as to the terms of the distribution plan, what creditors were required to do and the deadline within which to do it. They had also provided as FAQ page which made clear that even where a proof had been previously submitted to the administrators, it would need to be submitted again to the Joint Liquidators.

The Joint Liquidators did everything they could possibly do to make it as clear as possible what was required of the creditors but, nonetheless, to someone not familiar with the insolvency process, I can understand how these documents might be daunting to review or even perhaps easy to ignore if you think you've already done everything you need to do.   

In any event, the Court concluded that the deadline set out in the distribution plan was there to enable clarity and certainty.  In particular, it enables those who have submitted claims to understand their position within a short period of time and shortly thereafter receive their dividends.  The Court noted that to allow Mr Hutchings' claim would be to cause delays to the creditors who had complied with the deadline and drive up costs. Mr Hutchings was therefore left without the ability to claim a dividend in the liquidation (understood to be 9p in the £).

Double Whammy

Mr Hutchings misfortune did not end there. He also suffered a further blow last month when the FCA made their ruling on Barclays involvement with Premier FX's account mismanagement issues. The FCA found the Barclays had failed to properly manage or review Premier FX's accounts. They did not confirm that Premier FX's internal controls were sufficient and did not check that Premier FX's business activities aligned with those stated.  

Not only have Barclays paid a voluntary fine of £783,800 but they have also agreed to cover all the balance of all losses of all 167 of Premier FX customers whose claims were accepted the Joint Liquidators (at a cost of over £10m).

Mr Hutchings' "terrible mistake" has therefore, unfortunately, meant that he has missed out on a 100% recovery of his debt - quite the price to pay for not reading his emails.