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Varden Nuttall Ltd and another v Nuttall and another

Varden Nuttall Limited was a volume provider of IVAs, which entered into Administration in March 2016. At that point, its IPs were administering around 2,800 cases.

Mr Nuttall was a director of the company, and a shareholder and director in its parent company, Release Money Group Limited (“RMG”). He also acted as one of the IPs, and supervised over 1,600 cases as at the date of the Administration.

At the date of the Administration, it became apparent that there was a shortfall in the client monies. This was estimated at around £4.8m.

In August 2016, a court order was obtained by the joint Administrators to begin a full reconciliation of the client accounts. After this reconciliation, it was discovered that there was not only a shortfall of around £9m.

Various fraudulent practices had also been discovered, which had led to losses to the creditors of the numerous IVA estates.

A claim was brought against Mr Varden and Mr Nuttall by the new IVA Supervisors and the joint Administrators. It was also alleged that Mr Nuttall had acted dishonestly, and had breached his duties as a Supervisor. Mr Varden did not attend, and indicated an intention not to defend the proceedings. The trial proceeded against Mr Nuttall, and he was ordered to pay the claimants some £12.8m.

Significant allegations were made against Mr Nuttall regarding the way in which the IVA estates had been managed. These included an arrangement for a former employee of the company to provide IT and document management services to each IVA, an arrangement between Mr Nuttall and two PPI mis-selling providers, and an arrangement with a property appraisal service provider.

With regard to the IT arrangement, the cost that was charged to each estate which should have been payable to the IT company, was not actually paid, either in part or in full. Payments were also made from the IT company to RMG, allegedly for the provision of servers, staff and office space.

It was held that it was not the direct cost of the IT arrangement that was objectionable, but the fact that the fee contained a secret commission, in breach of SIP 9. There was also found to be no transparency or fairness to the arrangement, also as required under SIP 9.  Full disclosure was not made to creditors about these arrangements, and there was no evidence of any services being provided by RMG.

Similarly, the PPI fee payable to RMG was described as a ‘referral fee’ of 25% of the net fee payable to the PPI mis-selling claims provider. The PPI fee had also been described as an ‘admin fee’ which amounted to a referral fee. This meant that fees payable from each IVA were increased where there was a successful PPI re-claim. Some disclosure of these fees was made, but was found by the judge to have been made after the event, and completely inadequate. There was no explanation of the services RMG was alleged to have provided for these fees.

Mr Nuttall was also found liable to contraventions of SIP 9 in relation to the property appraisal services.

This case was discussed in more details in another of our recent CPD Tap webcasts

Posted: 18.06.2019
Tags:  newsletter

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