In Mental Health Care (UK) Limited v Edward Lupen Healthcare Limited & others  EWHC 1 (Ch) the court had to consider whether a defendant was a de facto director. Mark Baldwin of our Insolvency Service team considers the decision.
In a widely drafted claim, the Claimant (C) alleged breaches of director’s duties by the second defendant (D) and, to succeed in those claims, had to prove that D was a de facto director of C.
The factors that C argued constituted D to be a de facto director were as follows: -
- D was the “Medical Director” of C
- D was on the “Executive Board of Directors” of C
His Honour Judge Pelling QC found that:
- D had provided his services to C via a service company (the first defendant).
- C had never held D out as being a director of C and in an Employment Tribunal C had stated D was an agent of C.
- “Medical Director” was understood to be a senior and managerial role in the medical sector.
- The “Executive Board” was subordinate to the actual board of the two formally appointed directors and whilst making recommendations to it and making operational decisions it did not have the final say on capital investment or the appointment of directors to C and its subsidiaries.
D was therefore found not to be a de facto director.
This is an interesting illustration of the pitfalls in making an allegation of de facto directorship, the evidencing of which is dealt with in my previous article on the topic (click here to read the article).
It is therefore important to look beyond the title of the putative de facto director and focus upon whether he/she was actually on an equal footing with those who were formally appointed.