Hugh James successfully defends company director against disqualification proceedings
24 I 09 I 10
The Hugh James dispute
resolution team was successful in its defence of a company director
who had been forced to take drastic action to protect his group of
petrol stations when one of his businesses was faced with
liquidation.
Proceedings were brought
against our client who owned a group of petrol stations in South
Wales when one of his companies went into liquidation. The
liquidation was brought on following one of the group companies
suffering a serious fraud affecting its cashflow. The Secretary of
State for Innovation and Skills issued proceedings claiming the
director had preferred to pay one creditor of the liquidated
company who supplied his other businesses and to whom he had given
a personal guarantee over another to whom he had did not. The civil
proceedings claimed that he was unfit to be a director and should
be disqualified from holding any such position as he had acted in
such a way as to breach his fiduciary duties to the liquidated
company in acting in this way.
The claim was rigorously
defended. At trial our client successfully explained to the court
that he had not, in fact, acted in any self motivated way. Rather,
as a company director he was faced daily with decisions he needed
to take in the best interests of the company. In this instance, the
company had funds on one particular day to pay one creditor only.
The director made an instant commercial decision to pay the
creditor who continued to supply the wider group companies who owed
the liquidated company monies. Had he not, future of the entire
group would have been in jeopardy and would have resulted in a
poorer result for creditors of the liquidated companies generally.
.
Following two days of
evidence at trial the Secretary of State withdrew the claim against
our client. In making the order, the judge recognised that the
director had in fact acted in good faith and with good commercial
reason. At all times it was clear that although this was a complex
situation, the director had the objective of furthering the
interests of the liquidated company and the other group companies.
He admitted that directors who hold such posts in more than one
company can, at times, find themselves in positions where they have
to consider the interests of more than one company, but it would
not be wrong to do so where a group was operating essentially as
one.
Speaking about the case
Richard Locke, head of dispute resolution at Hugh James, said:
"We are delighted with
the outcome for our client who can now continue to manage a group
of successful businesses which have benefited the local community
and employed dozens of local people for over twenty two years. Our
client was faced with a very difficult decision in a highly
pressured situation and the result and comments from the judge in
this case simply highlight the dangers of hindsight. We are very
glad that in this case we able to successfully defend his position
and common sense prevailed."