Goldfarb (Liquidator of Eurocruit Europe Ltd.) v Poppleton

A misfeasance application under section 212 of the Insolvency Act 1986 enforces the company’s existing cause of action. It does not create a separate claim accruing when liquidation begins. The applicable limitation period therefore runs from the accrual of the company’s underlying claim.

For section 32(1)(b) of the Limitation Act 1980 to postpone limitation, the defendant must deliberately conceal from the claimant a fact relevant to the right of action. Time then resumes when the claimant discovers, or could with reasonable diligence discover, that fact.

The liquidator of Eurocruit Europe Ltd applied under section 212 of the Insolvency Act 1986 for a contribution from its former sole director. He alleged negligent and fiduciary breaches which caused the company’s deficiency.

The director sought to strike out the proceedings under CPR 3.4(2)(a), or alternatively sought summary judgment under CPR Part 24, because the claims had accrued more than six years before issue. The liquidator contended that his section 212 claim accrued only upon liquidation, or that deliberate concealment postponed limitation under section 32(1)(b) of the Limitation Act 1980.

The central questions were when limitation began and whether relevant facts had been deliberately concealed.

1. The application to strike out succeeded. Section 212 of the Insolvency Act 1986 is procedural. It supplies a summary method by which a liquidator, creditor or contributory may enforce liabilities which the company could have enforced. It neither creates a new substantive right nor gives a liquidator a separate cause of action accruing upon liquidation.

2. The company remains the claimant in substance. Relief under section 212 restores property to the company or contributes compensation to its assets. Whether proceedings are brought by the company or formally by its liquidator, there is only one cause of action. Its limitation period is that applicable to the underlying breach and does not restart when liquidation begins.

3. The claims were founded upon duties arising independently of statute. The negligence claim was governed by section 2 of the Limitation Act 1980. The pleaded fiduciary breach was equivalent to a tort claim for limitation purposes under sections 2 and 36. Section 9, concerning sums recoverable by virtue of an enactment, did not apply. The six-year period had therefore expired before issue.

4. Hill v Spread Trustee Ltd [2007] 1 All ER 1106 was distinguished. Sections 423 and 424 of the Insolvency Act 1986 create a statutory cause of action in which the statutory identity of the applicant is a substantive ingredient. Section 212 merely permits enforcement of the company’s existing claim.

5. Section 32(1)(b) of the Limitation Act 1980 requires deliberate concealment from the claimant of a fact relevant to the right of action. The director did not conceal his overall responsibility for the company’s financial management. The liquidator already knew the material facts about the deficient records, unpaid tax liabilities and the director’s sole control. Section 32(1)(b) did not postpone limitation.

6. The proceedings were struck out as time-barred.

not stated in the judgment.