Vol 15 (2018) - Issue 2

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Global Corporate Limited v Hale [2017] EWHC 2277 (Ch)

Introduction

The High Court recently considered claims of unlawful dividends, transactions at an undervalue, preferences and director’s misfeasance in the context of a small business. This case concerned an application by a purchaser of officeholder claims under a deed of assignment from a liquidator. The claims related to payments made by the company to its shareholder-director, Mr Hale (the 'Respondent').
Global Corporate Limited (the 'Applicant') sought a declaration that the payments were unlawful dividends, transactions at an undervalue and/or unlawful preferences and constituted misfeasance by the Respondent. The Court dismissed the case in its entirety. The judgment focussed largely on the issue of whether the payments constituted unlawful dividends. In finding that they were not, the Court instead classified the distributions as payments for services rendered by the Respondent, taking a rather sympathetic view, in the light of the Respondent’s unfamiliarity with accountancy and legal principles and the fact that he self-represented at Court. The judgment is unlikely to be of precedent value for larger commercial cases dealing with similar insolvency and company law issues, but it does demonstrate a flexible judicial approach taken in relation to the liquidation of small, informally run businesses.
The judgment also deals with the right, or lack thereof, of purchasers of litigation claims to bring certain actions, for which there is no express provision in the deed of assignment.