Sean Richard Ormsby Lindsay v Penny O’Loughnane & Anor (Re FX Solutions Ltd (in liquidation))
[2023] EWHC 2247 (Ch)
Anthony Davidson and Andrew McTear (acting as Joint Liquidators of Kieran Looney & Co Ltd) v Kieran Joseph Looney
2 February 2023
[2023] EWHC 197 (Ch)
High Court
The company's boss took a lot of money. The court said he had to pay it back because he broke the rules about how to use company money. He said it was a loan, but the court didn't believe him.
Key Facts
- •Kieran Looney & Co Ltd (the Company) was liquidated.
- •Kieran Joseph Looney (Mr. Looney) was the sole director and shareholder.
- •Liquidators allege Mr. Looney misappropriated £2,169,604.91.
- •Mr. Looney claims the payments were director's loan account (DLA) advances.
- •Conflicting company accounts exist (Original, First Revised, Second Revised).
- •Payments involved transfers to Mr. Looney and third parties.
- •Mr. Looney failed to provide sufficient documentation to support his claims.
- •Disputes surround the Trafigura Agreement and related litigation expenses.
Legal Principles
A director is a fiduciary of company assets; once a payment to a director is proven, the burden shifts to the director to justify it.
Colin Thomas Burke and others v John Morrison and others [2011] EWHC 804 (Ch)
A director must exercise powers only for the purposes for which they were conferred (objective test).
Extrasure Travel Insurances Limited and others v Alan Herbert Scattergood [2002] EWHC 3039 (Ch)
A director must act in good faith to promote the success of the company (subjective test, or objective test if the director didn't consider company interests).
Charterbridge Corp Ltd v Lloyds Bank Ltd [1970] Ch. 62
A director must avoid conflicts of interest.
Breaches of duty may be ratified by members, but not if they constitute an unlawful return of capital or occur during insolvency.
Re Duomatic [1969] 2 Ch 365; CA s 239
Claims for breach of fiduciary duty are not subject to limitation if they involve misappropriation of trust property.
Burnden Holdings v Fielding [2018] UKSC 14
Court may excuse director liability if they acted honestly and reasonably; considering all circumstances.
Dickinson v NAL Realisations (Staffordshire) Ltd [2017] EWHC 28 (Ch)
Insolvency set-off is not permitted against sums awarded under IA section 212.
Manson v Smith [1997] 2 BCLC 161
Outcomes
Mr. Looney is liable for misfeasance under IA s 212.
Failed to justify payments; payments were not loans; mostly unlawful distributions of capital; breaches of director duties under CA s 171(b), 172(1), and 175(1); not ratified; not excused under CA s 1157(1).
Mr. Looney owes the company £1,583,502 on his DLA.
Starting point for DLA calculation is the 2010 accounts (£179,056); payments made by Mr. Looney were considered; yacht purchase credited, but sale proceeds debited.
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