Varden Nuttall, a mid-size Individual Voluntary Arrangement (IVA) firm, was placed into administration on 24 March 2016.
The administrators discovered that £9million was missing from the client account and evidence of fraudulent practices by Philip Nuttall, one of the insolvency practitioners and a director of Varden Nuttall Limited,
In October 2018, Philip Nuttall was found to be in dishonest breach of his duties as former supervisor of the IVAs in the High Court. From this report on the case, the judge concluded that Mr Nuttall:
acted dishonestly as supervisor by enhancing the fees obtained from the insolvency cases in entering into secret commission agreements with third party services providers, and that he was also negligent in respect of his financial management of the Company and its affairs.
David Clements from Harrisons Business Recovery and Insolvency said:
What is particularly saddening about this case is that vulnerable individuals, who were facing difficult debt management situations, turned to Varden Nuttall for help and advice. They trusted that these professionals, would help and manage their situation. Instead they have found themselves caught up in a situation not of their making. The actions of Mr Nuttall have quite simply been a betrayal of the trust that they have shown and this is before any consideration is given to the vast amount of monies that have been dishonestly extracted from the IVA cases and, in turn, lost by the creditors in the IVAs as a result of the dishonest schemes and arrangements that have been entered into by, or upon the instruction of, Mr Nuttall.
In July 2019, the Insolvency Service barred Nuttall for 9 years and Varden for 7 years from acting as a director, see Debt bosses’ failings lead to £7.6 million shortfall in funds, saying:
Philip Nuttall and Darren Varden abused the trust of their clients, people suffering with debt problems, by failing to adequately oversee the company’s financial transactions. That alone would have justified their disqualifications in this case but they compounded the issue when they used a convoluted trust scheme to repay loans that would otherwise have been assets in the administration.
The rest of this article shows how the story developed.
Varden Nuttall were the twelfth largest in the 2015 IVA League Table when they took on 765 new IVAs. From the Statement of Administrator’s Proposals on 3rd June 2016, the firm has about 2,500 IVA customers. They also had about 300 Trust Deeds (a Scottish form of insolvency) and few bankruptcy cases. The Administrators consider that it will not be possible to rescue the company as a going concern “given the extent of operational issues and the insolvent financial position.”
An unusual situation
Insolvency Practitioners are supposed to be good at handling money! I don’t remember the last time an IVA firm went into administration.
When I heard about the administration I assumed that most or all of their IVA clients would be transferred to a different IVA firm, probably quite quickly. This would mean the administrators didn’t have to deal with thousands of clients and “selling the book” to a different firm would also raise some cash.
This hasn’t happened. The Administrator’s Statement says that “the company has no tangible assets other than the portfolio of personal insolvency cases which the Administrators currently envisage trading to a conclusion rather than marketing it for sale on the basis that this is in the best interests of creditors as a whole.”
There are a lot of rumours about why the book of clients hasn’t been sold, some of them contradictory. I thought it would be worth looking at what is happening, and to suggest some questions which people with Varden Nuttall IVAs may want to ask.
But first let’s look at how IVA clients should be protected against problems at their IVA firm.
Insolvency Practitioner Bond
Every Insolvency Practitioner (IP) has to have insurance against any misuse of client money which is usually referred to as a Bond, see this Insolvency Service description:
“An insolvency practitioner is not qualified to act in relation to a company or individual unless there is in force security (a bond).”
The Bond covers the estimated value of assets to be received in the IVA and the value has to be kept up to date. Each month an IP creates a schedule of new IVAs and any significant new assets that are expected to be realised (if for example you inherited some money which has to be paid into your IVA, or if a PPI refund is being paid) and sends this schedule, called a “Bordereau”, to the insurance company. If you look at the details of your IVA’s fees, you are likely to see a reference to insurance or bond or bordereau costs.
If there was some sort of fraud which resulted in client money going missing, the Insolvency Service says:
“The beneficiary of the bond is the insolvency practitioner’s authorising body on behalf of the creditors of the defrauded estate. In practice the authorising body generally assigns the benefit of the bond to another insolvency practitioner who is appointed office-holder in place of the practitioner whose bond is the subject of a claim and pursues a claim against the bond on behalf of creditors.”
So the insurance should pay out, replacing the missing money, the creditors get the correct amount and there are no problems for the IVA clients.
Change of IP
On 10th May 2016, Phil Nuttall was removed as the IP for all Varden Nuttall IVA cases, see The Gazette entry.
UPDATE on February 1st 2017 the Insolvency Service announced Phil Nuttall’s IP license had been removed. The report mentions that £6 million is missing. There has been no indication that this will cause any problems (apart from delays) for people with Varden Nuttall IVAs.
The newly appointed IPs are from the two firms appointed as administrators. This suggests to me that the administrators aren’t expecting to sell the client book to another IVA firm very soon.
Administrator tries to close some IVAs
It is likely that Varden Nuttall has several hundred people who have made their last IVA payment and are waiting for their completion certificate.
The administrators are trying to close some of the cases where the client has made the last payment. The administrators asked the High Court on the 18th May to determine that where a client has complied with the terms of their IVA and made all the relevant payments, a completion certificate could be issued. But the judge wanted the creditors to have been given notice of the hearing and have the chance to put their views forward:
“The main thrust of his concerns was based on bringing the IVAs to an end which might have adverse consequences for the creditors who are still to be paid and may wish to keep them open.”
A new hearing was then held on 8th July. The following update was added to the Varden Nuttall Website on 18th August:
As regards the issuing of completion certificates the Joint Supervisors are pleased to advise that at the hearing before HHJ Pelling on 5th August 2016 we obtained the necessary Order to be able to start to issue customers with completion certificates. Work has started in this regard and we have a tight and strict process to follow in order to make sure the completion certificates are issued correctly and in the correct circumstances. Telephone calls to the office requesting an update will only serve to distract staff from completing the actual task of preparing the certificates, as a result, we ask that customers please bear with us whilst we undertake this exercise. We will post updates as and when we have progress to report.
So basically “please go away and let us get on with the work because it’s fiddly” … If you have a specific and urgent need for your completion certificate or for the restriction on your house to be removed, I suggest you ignore this and phone up and explain your situation.
UPDATE July 2017 The administrators say that all completion certificates and reports have now been issued to those IVA cases who were waiting to complete.
If your Varden Nuttall IVA is still continuing
If your IVA is still underway, you may want to ask the following questions:
- have any of the payments I made to my IVA already been distributed to my creditors?
- is the rest of the money I have paid, less any allowable fees, correctly sitting in a client money bank account?
- how many of my PPI reclaims have been paid to Varden Nuttall? Have they already been distributed to my creditors, if not are they correctly sitting in a client money bank account?
You should carry on making the normal payments and contact Varden Nuttall if you are having difficulty, are concerned about equity release etc. I hope this would be “business as normal” for most situations, although I suspect any requests for variations such as a final settlement offer will take longer than usual to get agreed.