Power & Ors v Hodges & Ors

Summary judgment is appropriate where the respondent’s case has no real prospect of success and there is no other compelling reason for trial. The court must avoid conducting a mini-trial, although it may decide clear issues on credible documentary evidence. A director cannot reasonably authorise the disposal of an insolvent company’s assets for no actual consideration. In misfeasance proceedings, the court may order an interim contribution and direct an enquiry into the full compensation due. For a transaction at an undervalue, the statutory protection requires both good faith for the purpose of carrying on the company’s business and reasonable grounds for believing that the transaction would benefit the company.

The applicants were the joint liquidators of Nixon & Hope Limited. They sought summary judgment against former directors and connected companies concerning payments made after insolvency, unexplained payments to one director, transfers of intellectual property, and transfers of tangible assets and stock.

The application concerned claims under the Insolvency Act 1986 and related issues under the Companies Act 2006. The central questions were whether the respondents had a real prospect of defending the claims and whether any other compelling reason required a trial.

1. The court granted summary judgment on the claims that were sufficiently clear. The summary judgment test required the applicants to establish the claim with credible evidence, after which the respondents had to identify a defence with a real prospect of success or another compelling reason for trial. The court was not permitted to conduct a mini-trial.

2. The directors conceded liability for payments made after N&H became insolvent. Judgment was entered against them in the agreed sums, with interest and instalment arrangements. The directors thereby acknowledged breaches of their duties, including the duty to consider creditors’ interests and the proper-purpose duty under section 171(b) of the Companies Act 2006.

3. The unexplained payments claim against RAH succeeded. His schedule and unsupported assertions did not amount to a defence with a real prospect of success. Summary judgment was entered for £339,000.

4. The challenge to the transfer of N&H’s intellectual property also failed. The financial statements, assignment and registration documents, together with the term sheet signed on behalf of the relevant holding company, made the contention that N&H was merely a licensee unarguable for summary judgment purposes.

5. Under section 212 of the Insolvency Act 1986, no director acting reasonably could authorise agreements that gave away N&H’s assets for no actual consideration. There was no realistic prospect of relief under section 1157 of the Companies Act 2006. The directors were ordered jointly and severally to pay £250,000 on account, with an enquiry into the full compensation due.

6. Bencher’s receipt of N&H’s tangible assets was a transaction at an undervalue. The statutory conditions in section 238(5) of the Insolvency Act 1986 were not realistically arguable. Bencher was ordered to make an interim payment of £150,000, subject to an enquiry into the assets’ value. The orders were to prevent double recovery. The stock claim against F2G Retail Sales Limited was not determined on this application.

First-instance decision. No appellate history is stated in the judgment.