FRP, the accountancy firm overseeing the liquidation, has published its third official Progress Report on the liquidation of Club la Costa (UK) PLC. We have been awaiting this update since November, and the report suggests there may have been good reason for the delay.
Carefully controlled communication
As expected, the report uses cautious, non-committal wording on what funds may ultimately be available to creditors. Most creditors now recognise this as part of the Liquidators’ tightrope: FRP must report on progress, while avoiding detail that could reveal strategy or developments to those potentially affected by the liquidation process (in this case, CLC).
For example, FRP states: "It is currently uncertain as to whether there will be sufficient funds available to make
a distribution to preferential creditors." For anyone unfamiliar with insolvency reporting, that can read as alarming.
What FRP has written is, of course, factually correct. It is currently uncertain whether there will be sufficient funds. Currently is doing the heavy lifting here: funds may yet be recovered, but they have not been retrieved… yet.
ECC’s analysts are more focused on the section headed Investigations, where the most encouraging movement appears.
Investigations funded
FRP explains that it has received “positive advice on the merits” of bringing claims, but that funding was needed to pursue those claims.
The key update is that an agreement is now in place with third-party litigation funders to provide sufficient funding for the Liquidators to pursue claims. That is significant. As noted later in Appendix C, LBAs (Letters Before Action) are already being issued.
Third-party litigation funders are typically hard-nosed and risk-averse. They generally only commit funds to litigation where they believe the potential return justifies the risk.
FRP also confirms that both it and its legal advisers consider the claims to have “strong prospects of success”.
In our experience, FRP—like most Liquidators—tends to avoid hyperbole. If anything, they usually understate matters for the reasons above. The wording “strong prospects of success” therefore stands out. We interpret this as a rare glimpse of growing confidence within FRP’s liquidation team about the likely outcome of the investigations and any resulting claims.
Any indication of timescales?
The report then returns to measured legal language, reiterating that FRP is “not in a position to disclose further information as it may prejudice the outcome.” That is unsurprising. Where significant sums may be at stake, the sensible approach is to disclose as little as possible to potential targets.
Another positive note is FRP’s promise to update creditors in subsequent reports, adding: “and potentially beforehand”.
If there is scope for updates ahead of the next scheduled report, we are cautiously optimistic that creditors could receive a positive development before the next reporting date.
Finally, FRP reiterates that potential creditors can still submit claims.
Expert comment
Greg Wilson, CEO of European Consumer Claims (ECC), encourages any current or former CLC owner who has not already submitted a claim to act now, with the end potentially in sight.
"Now is the right time to get on board for people who have not yet made up their minds whether or not to pursue a financial claim against CLC," says Wilson. "Litigation funders have been secured. FRP have the money they need to do their work.
"With 'strong prospects of success', would you rather be on the outside looking in? Or part of the litigation and in line for your share of any money retrieved…?"
Any current or former CLC owner who would like more information about claiming compensation in CLC’s liquidation proceedings can get in touch with ECC for free, confidential advice.
