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Duties of Directors, Limitations and Insolvency Litigation Solicitors

Duties of Directors, Limitations and Insolvency Litigation Solicitors

Burnden v Fielding: Duties of Directors and Limitation

‘Nowhere to run to, nowhere to hide for Directors?’ There is however hope for Directors… read on

As insolvency litigation solicitors, specialising in director disqualification, insolvency claims and misfeasance, the duties of directors, and whether they have been carried out correctly and lawfully, sits at the centre of the work we do. This article looks at an important case, Burnden v. Fielding, in which the outcome of the judgement was that Company Directors cannot now use the normal 6 year Limitation period as a defence to a Liquidator’s claim under certain circumstances. The judgement is not good news for Company Directors. However, there is still hope for directors, as we point out.

Background to this Duties of Directors and Limitation Case: Burnden v Fielding

Prior to 4 October 2007, Mr and Mrs Fielding, (“the Defendants”) were directors and controlling shareholders of Burnden Holdings (UK) Limited (“the Claimant”). The Claimant was the holding company of a number of trading subsidiaries, including Vital Energi Utilities Ltd (“Vital”).

On 4 October 2007, the shareholders of the Claimant exchanged their shares for shares in a new holding company for the group, BHU Holdings Ltd (“BHUH”). On 12 October 2007, in an approved transaction, the Claimant effected a distribution in specie of its shareholding in Vital to BHUH. Subsequently, the shareholding in Vital was transferred to another new holding company (“VHL”). Mrs Fielding later sold her shareholding in VHL, and the Claimant went into liquidation on 03 January 2013.

The Claimant Issues Proceedings Against the Defendant More Than 6 years After the Distribution

On 15 October 2013, more than six years after the 12 October 2007 distribution, the Claimant, by its liquidator, issued proceedings against the Defendants for the unlawful distribution in specie of the Claimant’s shareholding in Vital. This was outside of the six-year limitation period set out in section 21(3) of the Limitation Act 1980 in respect of an action by a beneficiary for breach of trust. The Defendants applied to the High Court for summary judgment on the basis that the Liquidators claim was time barred.

The High Court granted summary judgment in favour of the Defendants on the ground that the Liquidators claim was time-barred.

The Liquidator appealed that judgement to the Court of Appeal. The Court of Appeal set aside the judge’s order for summary judgement on the basis that the limitation period did not run against the Claimant, because section 21(1)(b) of the Limitation Act 1980 (“section 21(1)(b)”) provides that no limitation period applies to an action by a beneficiary under a trust to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.

The Court of Appeal further held that, in any event, there was a ‘triable issue’ as to whether section 32 of the Limitation Act 1980 (“section 32”) applied. Section 32 provides that where any relevant fact has been deliberately concealed by the Defendant, the period of limitation does not begin to run until the plaintiff has, or could have, discovered the concealment.

The Defendants Appeal to the Supreme Court

The Defendants appealed to the Supreme Court on the proper construction of section 21(1)(b) asking the Supreme Court to resolve the question of whether ‘company directors are in possession of or have previously received trust property’ within the meaning of that section, and on section 32.2.

The Judgment of the Supreme Court

The Supreme Court unanimously dismissed the Defendants appeal, finding that section 21(1)(b) applies to trustees who are company directors, who are to be treated as being in possession of the trust property from the outset. In other words, Company directors who deal with Company money and Company property are Trustees of those assets for the Company.

Our Comments on the Judgement – Bad News for Directors

The decision is great news for Liquidators and Administrators, and bad news for Directors. The uncertainty that existed as to whether the 6 years rule applied to office holders pursuing Directors, who have misappropriated Company assets, has gone.

The decision acts as a welcome explanation as to when section 21(1)(b) of the Limitation Act 1980 applies. Company Directors cannot now use Limitation as a defence to a Liquidator’s claim in such circumstances.

As insolvency litigation solicitors specialising in the law of the duties of directors and corporate responsibility, we are well used to dealing with the tactics and strategy of prosecuting and defending such cases.

Other Routes for Directors – There is still hope

Despite this decision, Directors still have in their armoury a number of other legal arguments, practical and strategic approaches that can be deployed on their behalf, on the particular facts of the particular case.

They can be and are regularly deployed by Directors to achieve the best possible settlements in cases, where resolution might otherwise seem totally unattainable or unachievable.

Our insolvency litigation solicitors here at Neil Davies and Partners regularly advise on and achieve such solutions in such duties of directors cases. Please contact us or call us on 0121 200 7040 for a free initial discussion. The sooner you get in touch, the more we can make a difference

‘No hole too deep to help!’

Our new Trainee Insolvency Solicitor

Our new Trainee Insolvency Solicitor

Welcome to Kunal Bhalla – Our Latest Trainee Insolvency Solicitor

Having joined us as a paralegal in 2016, here at our Birmingham headquarters, we are delighted to have offered Kunal Bhalla a training contract. More importantly, he has accepted, which we hope represents his first step towards a career with us as an insolvency solicitor. Kunal graduated from Coventry University in 2015 with an LLB in law, before completing his LPC at the University of Law in Birmingham. However, at NDP, we always look for the person behind the lawyer, so here we turn the spotlight on Kunal and find out what makes him tick.

Why did you become a lawyer?

I am not qualified, YET! But I wanted a career where the demands were high and the rewards matched.

Your most embarrassing moment as a solicitor?

Absolutely nothing, but there are plenty outside of work.

Your proudest moment in your legal career?

Graduating – both for my LL.B, LPC and Masters. I imagine qualification will feel very satisfying too.

What piece of wisdom would you pass onto a child?

Live life with a smile on your face, happiness in your heart and enjoy the ride.

What is your unfulfilled ambition?

Being a Test Match opener for England!

Persons who most influenced your life?

There are so many people that have influenced my life that it would be unfair to name only a few, and a long list to name them all. I’m grateful to each and every individual that has helped shape the ambitious, enthusiastic and positive individual I am.

What do people get wrong about you?

I would say nothing. I am an open, honest and transparent individual who is quintessentially himself. But the pronunciation of my name seems to be something many struggle with! I have acquired many a nickname as an attempt to counteract this. ‘KB’ and ‘Kun’ are office favourites.

Pet hates?

People who put empty wrappers back in the chocolate box. I know I am not alone with this.

Favourite book

This would have to be John Steinbeck’s ‘The Pearl’ – a true piece of literary genius.

Favourite movie?

Cool Runnings… I can sing the song if need be.

TV or radio?

I’ve given my time to a fair few TV series. From Criminal Minds to Masterchef, my TV viewing is pretty diverse. Recommendations are always welcome.

Favourite song?

Kanye West – Devil in a New Dress.

Greatest invention ever?

The pencil… not much else would have been made without it.

Biggest regret?

I live life without any; doing so would be a waste of my time and energy.

The person from history you would most like to have a pie and pint with?

Sir Bobby Robson, a true gentleman of life. Listening to stories of his time in football would be an honour. He is a real hero of mine and a legend of my beloved Newcastle United.

We’re Delighted to Welcome Kunal into Our Team of Insolvency Solicitors

As you can see, Kunal is a bright and engaging character, and we hope he enjoys his training contract with us as an insolvency solicitor. He’ll be working across all of our main areas, including director disqualification, commercial litigation, regulatory issues and liquidator misfeasance claims.

Contact us or call us on 0121 200 7040 for help and advice in any of these areas

Insolvency Solicitors Celebrate 11th Anniversary

Insolvency Solicitors Celebrate 11th Anniversary

We’re 11 years old!!

Today, 16th April is our 11th birthday and we now start our 12th year of trading in Birmingham as specialist insolvency solicitors. Way back on 16 April 2007, my co-director Sukhbir Mall and I embarked on the mad journey that has been NDP solicitors. Mad, but fulfilling!

We had identified lots of people who had committed to give work to our new venture, which gave us the confidence to start a business. In common with most start-ups, we soon learned who our friends really were…and who weren’t! Fortunately, there were plenty of good friends, and we quickly got up and running.

It has Been Some Journey – ‘No Hole to Deep to Make a Difference’

From the word go, our motto was ‘No Hole to Deep to Make a Difference’, and that remains the case today. We are committed to using our experience and expertise as insolvency solicitors to deliver the results our clients need in our core areas of Director Disqualification, Insolvency Claims, Insolvency and Restructuring and Commercial Litigation.

We left our serviced office base in year 4 having purchased and renovated, from the ground up, our freehold premises in the beautiful, thriving and burgeoning St. Paul’s square area of the great city that is Birmingham.

We continue to proudly welcome clients, contacts and visitors to our base at Calcameron House, from all over the country. It has proven to be a good location choice, with the City as a whole looking forward to its future as a growing business hub as much as we are.

It’s All Down to Our Great Team

It’s been flipping hard work. Long hours, as you would expect. Would we do it again? The answer is ‘Yes, in a heartbeat!’.

There is nothing you can do without a great team behind you. In our case, the Team’s brilliance has been externally recognised too, by our peers, on three occasions in the past 3 years. We won small law firm of the year in the Birmingham Law Society Awards in 2016. That was special. We were finalists in that same category in 2017 and 2018.  Blimey…!

So it’s a huge thanks to all of our team, including those who have moved on, for the enormous part they have played in NDP’s success, and not forgetting the part played by Mac the Dog, our stress relief officer. Ditto to our clients – click here to see some testimonials – introducers and professional friends. It’s been great fun.

Insolvency Solicitors

Mac, our Stress Relief Officer

Now…what will Year 12, and beyond, have in store? Gulp.

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