Divorce & Director’s Loan Accounts – Savings of £1 Million +
We recently settled a complex case involving a Director’s Loan Account (DLA).
It involved a divorce, a liquidated business, two separate DLA accounts, litigation and litigation funding. A family business was liquidated in late 2013 and someone thought to be a ‘friendly liquidator’ was appointed. Accounts showed that c£500,000 in total was due to the company in the form of a Director’s Loan Account.
There were no assets within the business so at the time, no recovery action was taken. The clients divorced in 2018 and their overall combined wealth was in excess of the claimed amount of £1,600,000. This is where the trouble began for them. This is a long one, so we are going to adopt a series of bullet points to explain how we achieved the very best for our clients:
- The liquidator’s practice was sold in 2018
- These new owners reviewed this case and discovered the sum of £500,000 owed to the company,
- They investigated and when reviewing the ‘incomplete’ records produced a claim of £1,200,000 and £450,000 against the couple, for the Director’s Loan Accounts
- The larger claim was excessive and the true amount owed was closer to £900,000, a substantial difference
- Clients were at loggerheads, but they and their representatives agreed to our separate appointment – with us avoiding all conflicts
- The ‘new’ Insolvency Practitioners, obtained Counsel’s opinion and with this then secured Litigation Funding
- The solicitors appointed were ‘rottweilers’ and over the course of the case, ran up fees of more than £400,000, duly funded!
The settlements achieved were:
- Against the £1,200,000 settlement, 6-months of negotiation saw a full and final agreement at £550,000, and
- The second claim for £450,000 was withdrawn in its entirety, with both sides meeting their own costs.
How did we reach this settlement?
- Undertook days of forensic investigation on the incomplete records – disproving the second claim and casting doubt on the larger claim,
- We then actually ensured the client with the smaller claim against them from being a debtor in the liquidation to a creditor,
- Work with the legal representations for both
- Working and directing a ‘Magic Circle’ firm in London, working with the backdrop of potentially huge costs from them i.e our own side,
- Introduce the potential of other contingent liabilities. In the event of Bankruptcy, these would leave the claimant as less than 50% of the overall debts,
- Use our foreign asset/foreign debt knowledge and valuations to demonstrate the precarious side of dealing in Cyprus where a foreign property was owned by the couple in a Cypriot company,
- Very importantly understanding the tactics and financial expectations on the position of the Litigation funders. They had the right to input on the decision process and we played on that,
- Validation and supporting documents throughout against the claims made, and
- Much, much, much more – too much to mention here.
Yes, this was a tricky case, but we stuck to our principles, even when it got nasty. We got stuck in and achieved what was a brilliant result here for the clients. The Divorce is ongoing. Hopefully, this example showcases why it’s critical to have the very best representation working on your behalf, especially when it comes to DLA’s.