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Misfeasance claims

As you may be aware, the remedy available to Liquidators pursuant to s212 of the Insolvency Act 1986 is for directors (who have misapplied money or breached their fiduciary duties) to repay, restore or account for the money or property, or any part of the same.

S212 allows a Liquidator to seek a contribution from the misfeasant director, rather than creating a new cause of action.

Remedies sought by claims under s212 are subject to the Limitations Act 1980. In Eurocruit Europe Limited (2007), it was held that the six year period ran from the date that the damage was suffered by the Company, rather than the date of winding up.

This can naturally cause problems for Liquidators, as the limitation period may have expired before they were appointed.

In Burnden Holdings (UK) Limited v Fielding (2018), the Supreme Court upheld the Court of Appeal’s decision that s21 of the Limitations Act [i.e. that there is no limitation period where a beneficiary is claiming against a trustee for fraudulent breach of trust or to recover property or proceeds of trust property] does apply where directors have misappropriated funds or property from a company for their own use. The court also recognised that directors are trustees of company property.

The Supreme Court also recognised that such claims are likely to arise more than six years after the breach of duty. Claims by Liquidators where company property has been converted to the use of the directors are therefore not subject to a limitation period.

Posted: 12.04.2018
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