Delay makes it unusual
ITIC has often assisted ship agents who have received demands from trustees in bankruptcy seeking to recover disbursements paid to the agent in the period shortly prior to their principal entering bankruptcy. The agent will frequently have settled with suppliers and face a loss if they have to return money. While ITIC does not cover the amounts at stake, agreed legal costs can be reimbursed under the debt collection cover.
Different jurisdictions have their own precise rules but generally these laws are intended to prevent individual creditors from wrongly jumping the queue and getting paid in full at the last moment rather than receiving their proportion of the bankrupt’s assets. Many jurisdictions have laws that provide that if the payments were made in the usual course of business on usual terms the trustee in bankruptcy cannot recover them.
A case reported to ITIC in the USA ended with a different outcome for two offices of the same worldwide agency company. The trustee in bankruptcy of their principals attempted to reclaim US$ 107,000 from the ship agent’s office in Africa and US$ 70,000 from one in Europe.
ITIC arranged for a US lawyer to make representations on the agent’s behalf. The trustee in bankruptcy accepted that disbursements paid to the African office were made in the usual course of business and therefore did not have to be returned.
A dispute arose regarding the disbursements paid to the European agency office. The only difference was there had been considerable delay in that agent invoicing for his disbursements. The invoice had been submitted shortly before the bankruptcy for an earlier call. After a period of negotiation the member agreed to return US$ 12,000 to settle the matter.
ITIC covered the cost of the US lawyer.