Liability of Directors - Misfeasance Flashcards
Which section of the Insolvency Act 1986 concerns misfeasance?
s212
Who typically brings actions of misfeasance against the directors under s212 IA 1986?
Liquidators
What does s212 do?
Section 212 does not create any new liability or rights but simply provides a summary procedure to enable the company (acting by its liquidators) to pursue claims against directors who have breached their duties.
Who may bring a claim of misfeasance?
Under s 212(3) I
• A liquidator (NOT an administrator);
• The Official Receiver
• Any creditor or contributory
Who is the burden of proof on?
Claimants to establish misfeasance on the part of the director or other defendant, it is not for the defendant to justify their conduct
Case that decided burden of proof is on the claimants?
Mullarkey v Broad [2008]
Mullarkey v Broad [2008]
The burden of proof is on the claimants to establish misfeasance on the part of the director or other defendant, it is not for the defendant to justify their conduct
Against whom may a claim be brought? s212(1)
1) Any person who is or has been an officer of the company (including present or former directors, managers or secretaries of the company)
2) Any others who acted in the promotion, formation or management of the company
3) A liquidator or administrative receiver (a claim for misfeasance can also be brought against an administrator under Schedule B1 to the IA 1986)
Re Centralcrest Engineering Co Ltd [2000]
Facts?
- The Inland Revenue brought proceedings against a liquidator under s 212.
- The liquidator had allowed the company to continue to trade for 27 months after it had gone into compulsory liquidation, resulting in £73,230 being owed to the IR.
- The court held that there were two elements to the misfeasance:
1) Allowing the company to trade without the sanction of the court or liquidation committee a
2) Allowing the company to trade when it was apparent that the assets should have been realised. - The liquidator was held liable to compensate the company for losses of £120,826 incurred during the trading period.
Case for misfeasance found against a liquidator?
Re Centralcrest Engineering Co Ltd [2000]
What amounts to misfeasance?
Misfeasance covers the whole spectrum of directors’ duties
Remedies to misfeasance?
Court will examine the conduct of the director and make an order for
- repayment,
- restoration or
- contribution to the company’s assets as it thinks just
Can a director claim relief?
Yes under s1157
When will s1157 give a director relief?
Where the court is satisfied that the director acted honestly and reasonably and, having regard to all the circumstances of the case, ought fairly to be excused
When else will a finding of misfeasance be relevant?
When considering whether to make a disqualification order against a director for unfitness under s 6 Company Directors’ Disqualification Act 1986 (CDDA 1986).
