Manolete Partners Plc v Austin Bell & Ors
[2024] EWHC 1636 (Ch)
Kieran Michael Bourne & Anor v Manuk Manukyan & Anor
16 April 2024
[2024] EWHC 832 (Ch)
High Court
A company director and his wife were ordered to repay money they received from a bankrupt company. The judge didn't believe the director's explanations for the payments, and found that the wife received preferential treatment, making her repay some money, too. Basically, they misused the company's funds before it went bankrupt.
Key Facts
- •M.M. Apartment Letting Ltd (the Company) was in compulsory liquidation.
- •Mr. Manuk Manukyan was the Company's sole director, and Mrs. Yolanda Manukyan was the company secretary.
- •The liquidator sought repayment of a £10,000 dividend paid to Mr. Manukyan and various payments totaling £93,003.73.
- •The payments included cash withdrawals and payments made using Mrs. Manukyan's credit cards.
- •Mrs. Manukyan had allegedly lent the Company £76,670.57.
- •Mr. Manukyan's evidence was largely unconvincing and contained conflicting statements.
- •The Company's financial records were incomplete and inadequate.
Legal Principles
Company officers who misapply company money or breach fiduciary duties can be ordered to repay.
Insolvency Act 1986, s. 212
Transactions at an undervalue can be set aside if not made in good faith for the purpose of carrying on business and without reasonable grounds to believe it would benefit the company.
Insolvency Act 1986, s. 238
Preferences given to connected persons within two years of insolvency can be set aside if the company was influenced by a desire to improve the creditor's position.
Insolvency Act 1986, s. 239
A company must have distributable profits to make a dividend payment.
Companies Act 2006, ss. 830, 836, 847
The burden of proof shifts to the respondent to explain transactions once the liquidator proves payment.
Re Idessa (UK) Ltd [2011] EWHC 804
Insolvency is determined by both cash flow and balance sheet tests, considering present and future liabilities.
Re Casa UK Limited [2014] BCC 269
Outcomes
Mr. Manukyan must repay the £10,000 June 2018 dividend.
The dividend was unlawful as the Company lacked distributable profits and was insolvent.
Mr. Manukyan must repay various payments totaling £75,024.35.
He failed to adequately explain the purpose of these payments, and they were not for proper company purposes.
Mrs. Manukyan must repay £8,996.40.
The Company's payments to her constituted a preference, and she failed to disprove the presumption that the Company was influenced by a desire to improve her position.
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