28th November, 2018
Mark Baldwin of our Insolvency Service team considers the recent decision in Ingram v Singh [2018] EWHC 1325 (Ch) which dealt with the question of de facto directorship.
In this case, His Honour Judge Hodge QC had to adjudicate on claims made by a liquidator for a breach of director’s duties. To be successful against Surjit Singh (SS) the liquidator had to prove that SS had acted as a de facto director of MSD Cash & Carry plc (MSD) on 5 November 2011 when credit notes of £996,495 were raised by MSD. MSD’s appointed directors were: -
Considering the authorities the Judge was unable to say that SS had acted on an equal footing with the directors of MSD because there were no directors at the material time. He therefore chose to adopt the wording of Lord Justice Arden in Re Mumtaz Properties Ltd [2011] EWCA Civ 610 who considered a de facto director to be a “nerve centre” from which “the activities of the company radiated”.
The facts in relation to SS’ role were: -
Accordingly, the Judge found that “In my judgment, Surjit had assumed a role in the company, MSD, sufficient to impose upon him a fiduciary duty to MSD and to make him responsible for the misuse of its assets. I am satisfied that Surjit would act on his own authority in relation to MSD and its continuing business and that he was one of the nerve centres from which the activities of MSD radiated. I have no doubt that Surjit was acting on a superior footing to Mrs Kuman, and it was Surjit, rather than she or Mohinder, who was conducting MSD's business. At the very least, he was on an equal footing, and not subordinate, to Mrs Kuman; but I find that, in fact, he was the person running the business”.
The liquidator was therefore successful in his applications against SS.
This is an interesting illustration of the factors that will lead to a finding of de facto directorship as set out in my previous article on the topic - https://www.howespercival.com/articles/insolvency-de-facto-directorship-top-ten-tips-on-how-to-evidence-it/ - with five of the badges of de facto directorship outlined being present here.
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