Mimo Connect Limited v Matthew Robert Buley & Ors
[2023] EWCA Civ 909
Keith Arjoon and 2 others v Maria Daniel (Trinidad and Tobago)
4 December 2023
[2023] UKPC 42
Privy Council
A company's directors sued the receiver managing its assets after the company failed to pay its debts. The court ruled the directors had to provide a financial guarantee to cover potential legal costs before suing, and they couldn't sue personally for the company's losses. The lawsuit was dismissed.
Key Facts
- •KPG Co Ltd (the Company) experienced financial difficulties and defaulted on loans from Republic Bank Ltd.
- •A receiver, Maria Daniel (the appellant), was appointed over the Company's assets.
- •The Company's directors (the respondents) brought proceedings against the receiver, alleging breaches of equitable and statutory duties.
- •The directors sought an injunction to restrain the sale of the Company's assets.
- •The High Court struck out the Company's claim and the directors' claims, while the Court of Appeal reversed this decision.
- •The receiver appealed to the Privy Council.
Legal Principles
Directors of a company in receivership may authorise proceedings in the company's name against the receiver or debenture-holder, provided it does not prejudicially affect the debenture holder's interests.
Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814; various common law jurisdictions.
While proceedings may be brought by directors in a company's name, they must not put the charged assets at risk; this risk is mitigated by a third-party indemnity for costs.
Tudor Grange Holdings Ltd v Citibank NA [1992] Ch 53; Sutton v GE Capital Commercial Finance Ltd [2004] EWCA Civ 315; Deangrove Pty Ltd v Commonwealth Bank of Australia (2001) 108 FCR 77.
A third-party indemnity is not a pre-condition to commencing proceedings, but the debenture holder or receiver can apply for a stay pending its provision if there's a risk of depleting charged assets.
Privy Council judgment in this case.
Sections 295, 296, and 297 of the Companies Act 1995 (Trinidad and Tobago) and sections 12-24 of the Bankruptcy and Insolvency Act 2007 (Trinidad and Tobago) outline the duties and powers of receivers.
Companies Act 1995 and Bankruptcy and Insolvency Act 2007 (Trinidad and Tobago)
Directors generally lack standing to bring claims in their own names for losses suffered by the company, except for claims relating to breaches of duties specifically owed to them personally.
Privy Council judgment in this case.
Outcomes
The Privy Council allowed the receiver's appeal on Issue 1 (striking out the Company as a claimant).
The Company failed to provide a third-party indemnity to protect the debenture holder's interests against potential costs orders depleting the charged assets, despite the insufficiency of assets to cover the debt.
The Privy Council allowed the receiver's appeal on Issue 2 (striking out the directors' claims).
The directors lacked standing to bring claims for losses suffered by the company. Their personal claim related to an indemnity lacked pleading of a duty owed to them personally by the receiver.
The interim injunction restraining the sale of the Company's assets was discharged.
This followed the striking out of the Company and directors' claims.