The National Association of Bodyshops plans legal challenge after members were left £7m out of pocket
The National Association of Bodyshops (NAB) has hit out at the “totally unacceptable” way its members have been left £7m out of pocket by the failure of Drive Assist.
The NAB is planning a legal challenge against failed credit hire firm Drive Assist’s administrator Zolfo Cooper over the funds due to its members.
But Zolfo Cooper said the amounts were not placed in a protected account and so were not ring-fenced.
Background to the dispute
Under Drive Assist’s business model, it would arrange repairs to the cars of not-at-fault drivers involved in accidents and then collect the payment for the repairs from the insurers of the at-fault drivers.
The NAB argues that money due to repairers was ring-fenced, but Zolfo Cooper disagrees.
The NAB, part of trade association Retail Motor Industry (RMI) said it would challenge Zolfo Cooper’s decision “not to honour repairers’ FSA protected funds”.
RMI board member Tony Lowe, representing the affected NAB members, said: “The repair network has contracted to provide accident repairs to customers of Drive Assist on the agreement that when insurers paid for the services provided, the consequential payments would be kept safely in an FSA-regulated account. The administrators are now refusing to accept that these payments have been made ‘in trust’.
“The repair community has been left with more than £7m in outstanding payments and it appears the only winners will be the corporate funders, bankers and the administrator. We find this totally unacceptable and intend to right this wrong.”
But Zolfo Cooper partner Alastair Beveridge, Drive Assist’s joint administrator, said that although Drive Assist set up an FSA regulated account for the purpose of holding the money due to repairers, it was not used, and there was no money in it when the administrator was appointed.
Beveridge said: “We have taken extensive legal advice on this matter, which has confirmed that no trust had been created for the benefit of repairers and any outstanding monies due to repairers following the administration of Drive Assist represents an unsecured creditor claim.”
The NAB believes it can prove that the at-fault insurers’ payments were made to Drive Assist for onward transmission to repairers and that a trust exists as a result. Therefore, it argues, the money is ring-fenced.
Unsecured creditors are the least likely to be paid when a company fails. Drive Assist’s unsecured creditors will not be paid in full. A statement of affairs issued by Drive Assist in January showed that the assets fell £42.7m short of the amounts due to creditors.
Drive Assist called in the administrators on 10 December last year after the loss of a major client put the company in financial difficulty.
A statement of proposals issued by Zolfo Cooper, which outlines the next steps for the administration, said that the major client accounted for 30% of Drive Assist’s business.
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