Monday 3 March 2025
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
I hope you had a great weekend! Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
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Question: GreenTech Ltd., a renewable energy company, has gone into insolvent liquidation after failing to repay its debts. The company has £5 million in outstanding liabilities but only £2 million in assets available for distribution among creditors.
GreenTech Ltd. owes money to several parties, including:
• Secured creditors with a fixed charge (e.g., a bank that lent money secured against GreenTech’s headquarters).
• Employees who are owed wages and redundancy payments.
• HM Revenue & Customs (HMRC) for unpaid VAT and corporation tax.
• Unsecured trade creditors (e.g., suppliers who provided equipment and services).
• Shareholders, who are expecting to recover part of their investment.
The liquidator must now distribute the company’s remaining assets in accordance with the statutory order of priority under UK insolvency law.
In what order will GreenTech Ltd.’s assets be distributed among its creditors in an insolvent liquidation?
1. Secured creditors (fixed charge), preferential creditors (employees), HMRC, unsecured creditors, shareholders.
2. Unsecured creditors, secured creditors, HMRC, preferential creditors, shareholders.
3. HMRC, secured creditors (fixed charge), unsecured creditors, preferential creditors, shareholders.
4. Shareholders, preferential creditors, secured creditors, unsecured creditors, HMRC.
5. Preferential creditors (employees), unsecured creditors, secured creditors, shareholders, HMRC.
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Answer and feedback to last week’s question: Emma purchases a new laptop from TechWorld Ltd. for £1,200. After just three weeks of normal use, the laptop stops working completely. Emma contacts TechWorld Ltd. and asks for a refund, but the store refuses, stating that she must contact the manufacturer for repairs instead. Emma is unsure about her rights and wants to know whether she is entitled to a refund, replacement, or repair. Under the Consumer Rights Act 2015, what are Emma’s rights when a product becomes faulty within a short period after purchase?
1. Emma is entitled to a full refund because the laptop developed a fault within 30 days of purchase.
2. Emma must accept a repair or replacement first, as refunds are only available if the product cannot be fixed.
3. TechWorld Ltd. can refuse a refund because only the manufacturer is responsible for dealing with product defects.
4. Emma has no automatic rights since the laptop was in working condition when she bought it, and faults can happen over time.
5. Emma is only entitled to a partial refund, as retailers are not required to provide full refunds after a product has been used.
Correct Answer: 1. Emma is entitled to a full refund because the laptop developed a fault within 30 days of purchase. Explanation: Under the Consumer Rights Act 2015 (CRA 2015), when a consumer purchases goods, they have statutory rights regarding refunds, repairs, and replacements.
1. Right to a Full Refund (Within 30 Days): If a product is faulty within 30 days of purchase, the consumer has the right to reject it and get a full refund (Section 20 CRA 2015). Since Emma’s laptop stopped working completely after three weeks, she is entitled to a full refund.
2. Right to a Repair or Replacement (After 30 Days): After the 30-day period, the retailer must offer a repair or replacement before a refund can be claimed (Section 23 CRA 2015).
3. Retailer Responsibility, Not Manufacturer: The retailer (TechWorld Ltd.), not the manufacturer, is responsible for addressing product defects under consumer law. A retailer cannot shift responsibility to the manufacturer.
Why the Other Options Are Incorrect: Option 2 is incorrect because the right to a repair or replacement applies after the 30-day period. Since Emma’s claim is within three weeks, she can reject the laptop and demand a refund. Option 3 is incorrect because the retailer, not the manufacturer, is legally responsible for handling defective goods under CRA 2015. The store cannot tell Emma to contact the manufacturer. Option 4 is incorrect because consumer law protects buyers from faulty goods, even if they initially worked. Emma’s laptop was not of satisfactory quality, making her eligible for a refund. Option 5 is incorrect because within 30 days, a consumer can claim a full refund—not just a partial refund—if the product is faulty.
Conclusion: Emma does not have to accept a repair or replacement—since she reported the fault within 30 days, she has a clear right to a full refund under the Consumer Rights Act 2015.
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Dr Ioannis Glinavos
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