Katherine Merry and Ben Dyer & Anor v Sabir Esa
[2023] EWHC 2011 (Ch)
Manolete Partners Plc v Austin Bell & Ors
28 June 2024
[2024] EWHC 1636 (Ch)
High Court
A company director was sued for mismanaging his insolvent company. The judge found he broke the rules by unfairly favouring himself and other connected companies, causing losses. He has to pay back the money he improperly took and transferred.
Key Facts
- •Manolete Partners plc brought a Part 7 claim and an application under section 238 of the Insolvency Act 1986 against the director, Steven Bell, and others, related to the liquidation of BSS LED [R&D] Limited.
- •BSS LED [R&D] Limited went into creditors' voluntary liquidation with a deficiency of £961,532.29.
- •The claims involved allegations of transactions at an undervalue and breaches of director duties by Mr. Bell.
- •Significant transactions involved sales of equipment to related companies (MSV Engineering Limited and BSS LED Manufacturing Limited), payments to Mr. Bell and his sons, and payments to other entities.
- •The court heard evidence from the liquidator, Mr. Bell, his sons, and other witnesses.
- •Mr. Bell's evidence was deemed inconsistent and unreliable by the judge.
Legal Principles
Transactions at an undervalue under section 238 of the Insolvency Act 1986.
Insolvency Act 1986, section 238
Preferences under section 239 of the Insolvency Act 1986.
Insolvency Act 1986, section 239
Relevant time for transactions at an undervalue and preferences under section 240 of the Insolvency Act 1986.
Insolvency Act 1986, section 240
Director's duty to promote the success of the company under section 172 of the Companies Act 2006, and the duty to creditors when insolvency is imminent.
Companies Act 2006, section 172; BTI v. Sequana [2022] UKSC 25
Subjective and objective tests for determining whether a director acted in the best interests of the company.
Regentcrest plc (in liq) v Cohen & Anor. [2001] BCC 494; HLC Environmental Projects Ltd (in liq.) [2013] EWHC 2876 (Ch)
Outcomes
Claim against Mr. Bell succeeded.
The court found that Mr. Bell had breached his director's duties by engaging in transactions at an undervalue and preferring certain creditors, leading to losses for the company's creditors.
Mr. Bell was ordered to pay compensation for various transactions, including the sale of equipment to Engineering at an undervalue (£65,000), payments to Manufacturing (£143,139.90), transfer of stock and equipment to Manufacturing (£138,680.16), foreign exchange and travel payments (£54,013.37), payments to Mr. Bell personally (£50,712.24), payments to BSS Australia (£68,000.88), missing laptops and iPhones (£5,251.44), payments to Newcastle University (£3,145), and expenses reimbursed to Christian (£4,888.93).
These transactions were deemed to be breaches of Mr. Bell's duty to act in the best interests of creditors, occurring while BSS was insolvent and ceasing trading.