PT 2023 000474 - [2025] EWHC 2397 (Ch)

Mr Agnew at paragraph 9 of his first witness statement explains why the fund was set up, which was,

“to provide Federation members (GGF Members) with a way of protecting consumer deposits at a low cost as part of the benefits of being a GGF Member. Essentially, the Fund would protect a consumer's deposit and stage payments up to certain limits and subject to certain rules. In the event that an installer that was covered by the Fund became insolvent and could not carry out the agreed work for the customer, the Fund would (subject to the payments being covered under its rules) either enable the work to be carried out by another installer at a cost to the consumer that took into account the deposit and stage payments already paid, or would repay the deposit and stage payment amounts to the consumer.”

This has the added benefit of giving consumers peace of mind and therefore encouraged them to contract with fund members, relatively secure in the knowledge that any deposit and certain stage payments would be protected in the event of the business they contracted with going insolvent so that either the work would be carried out or the monies refunded. Indeed the rules have a text box at the top of the page which says, “Always use a GGF fund member. To see the latest list of GGF Fund Members visit www.myglazing.com”.

The fund is administered in accordance with the rules (the GGF Deposit Indemnity Fund rules). Those have been amended from time to time, but the ones in force in March 2020 were the rules dated January 2020. There was a modest rule change in July 2020 in respect of the time limits of claims and the issue of vouchers.

Mr Agnew describes the members of the fund as being bound by the rules. He references article 48.1 of the federation’s articles of association (Footnote: ³), which provides that the claimant,

“shall adopt a set of rules as it may deem necessary or expedient or convenient for the proper conduct and management of the Company and for the purposes of prescribing the classes and conditions of membership, … such rules shall regulate -

48.1.1

… the rights and privileges of such members”.

Article 48.2 provides that the rules are binding on all members of the federation.

The federation made rules that were amended from time to time. The version in force prior to the closure of the fund to new contributions were those dated August 2017 (“the federation rules”). Rule 3.1.12 of the federation rules provides that applicants for membership of the federation agreed to be bound by the federation rules. Rule 3.1.10 provides that,

“Where an applicant sells directly to consumers and takes deposits from them, the applicant must protect these deposits by subscribing to GGF Fund Ltd via the Deposit Indemnity Scheme.”

Rule 4.3.15 of the federation rules provides that.

“Where a Member sells directly to consumers and takes deposits from them, the applicant must protect these deposits by their subscription to the GGF Fund Ltd via the GGF Deposit Indemnity Scheme. The Member will submit and make quarterly returns and payments on time, and observe the terms and conditions laid down by GGF Fund Ltd.”

Section 14 of the federation rules deals with resignation and termination of membership and seven scenarios are provided for. Under rule 14.1 a member may terminate its membership by giving 3 months written notice to the Membership Department. Under rule 14.3 there is automatic termination within 3 months of a non-member acquiring a member, unless within that period they apply for and are accepted into membership. Immediate termination may arise under rule 14.4 which provides that,

“14.4

The Membership of any Member which is a corporate body will be terminated immediately if any of the following happen: …

14.4.2

the Member being unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986

14.4.3

A receiver, manager, administrator or administrative receiver being appointed by the Member (Footnote: ⁴) undertaking assets or income or a substantial part of them

14.4.4

the Member passing a resolution for it to be wound-up or having a petition presented to any court for it to be wound-up or the member ceasing (or threatening to cease) to carry on its business ”.

Rule 14.6 sets out when the federation may terminate membership.

“14.6.1

The Membership Department may resolve to expel a Member who fails to pay any subscription due to the GGF in accordance with the Rules, and does not pay such outstanding subscription within 14 days of demand being sent by the Federation.

14.6.2

The Membership Department may resolve to expel a Member for a material or persistent breach of the Rules or Consumer Code of Practice under Rule 13.”

Rule 15.1 provides that an applicant for membership or a member may appeal to the board of directors against a decision of the membership department. The circumstances in which this may arise are set out in rules 15.1.1 to 15.1.3.

Mr Agnew’s evidence is that the fund has operated successfully since 1979. He says that the fund’s ledgers from 2008 to 2020 reveal that the fund has paid out or accrued £350,600 in claims. For 2020 there is £40,753.89 accrued but not yet paid out. He also says there are a further 71 customers with possible claims known by the claimant, but they have not approached the fund for assistance. The value of those claims is £171,189.11, and this has not been included in the accrued figures. In addition there is a retention of £37,627.94 as a general provision to cover claims in relation to consumers who requested cash refunds, rather than vouchers. To encourage the uptake of vouchers the payments are calculated at 80% of the voucher value.

The fund was financed by fund member contributions but was ultimately backed by Stop Loss insurance. This was designed to protect against extreme or unpredictable losses that the fund might suffer.

Mr Agnew explains in his evidence that there were concerns before the Covid 19 pandemic that the fund was vulnerable to the financial instability of the larger fund members. There was potential for a shortfall between the fund’s cash reserve and its Stop Loss cover. The fund’s accountants recommended in 2019 that insurance cover should be increased to mitigate against this risk.

The existing insurer’s view of the finances of one of the larger fund members, combined with the impact of the pandemic, meant that it was unwilling to offer like for like cover for the year 2020/21. The premium increased from £50,000 to £89,600, with several new endorsements limiting the insurer’s exposure.

Stop Loss cover was renewed until 31 March 2021, as I have indicated at a higher premium to try to cover for any failures during that period. However it was not sufficient to cover several large or multiple small failures of existing fund members. At the claimant’s board meeting on 30 March 2020 the board resolved to close the fund to new business with effect from 1 April 2020, to terminate the fund and distribute any excess to fund members in accordance with the rules and after valid claims had been paid out. Mr Agnew sent a letter to the fund members dated 31 March 2020 notifying them of this decision.

The board initially set 30 September 2020 as the deadline for claims from customers. The deadline in respect of the third defendant was extended to 8 October 2020. On 16 October 2020 the claimant’s board resolved that the termination date of the fund would be 31 March 2021.

Due to the uncertainty of the interpretation of the rules and because the claimant did not have complete information about payments to the fund going back to its inception the claimant was left with little option but to seek assistance from the court.