What does the Drayton Manor Park sentencing decision mean for insolvency practitioners?

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Last week the Court grappled with the tricky situation where a business that had been involved in a fatal accident was in administration as a result of COVID-19 at the time it was prosecuted in connection with the incident.

Some of the key questions considered by the Honourable Mr Justice Spencer included whether it was lawful and appropriate to issue a full fine versus a nominal one in an insolvency situation. Also implicit in the Judge’s sentencing remarks is the notion that it is very much considered to be in the public interest for cases of this sort to be brought, notwithstanding the subsequent insolvency event.  Administrators can therefore be expected to consider requests for consent for the prosecution to proceed in this public interest context and all office holders will face requests to co-operate in the proceedings, particularly in providing detailed information on the state of the insolvency at the point of sentencing.

A number of important points arise from this case:

  • The authorities, especially the Police and HSE, see a public interest in pursuing investigations and prosecutions even where they know there are no funds to pay a fine and will pursue their investigation and enforcement powers to the fullest extent
  • There are different interests to consider in situations like this between the office holders, outgoing management team and the insurer (where policies can cover defence costs and prosecution costs awards) and it is important to have an experienced defence team who understand and will properly address all of those interests, especially given the intense press goldfish bowl that swarms around these high profile cases.  This is of course not forgetting the interests of creditors at the sentencing stage
  • The Court will look carefully at the company’s insolvency position in terms of whether a fine might dilute any potential distribution to the pool of unsecured creditors – it is by no means automatic that the Court will issue a full fine in circumstances which would prejudice the existing interests of unsecured creditors when a distribution is made so insolvency practitioners will have to consider with their legal team whether to make representations in appropriate cases

What to consider when a prosecution is threatened or ongoing?

There are a number of key points to consider when a prosecution is threatened or ongoing. Please don’t hesitate to contact us or your local restructuring partner, who will be ready to discuss any issues with you and put you in touch with our experienced regulatory team at short notice.

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