Ingram v Singh & Ors

A person may be a de facto director where he assumes a role sufficient to impose fiduciary duties and acts as a governing nerve centre of the company. Formal appointment, use of the title and a formal board structure are relevant but not essential.

A preference is assessed by reference to the company’s state of mind when the transaction occurred. The statutory presumption for connected persons applies at that time. An amendment does not introduce a new cause of action where it retains the same essential factual basis. A fiduciary account may be ordered without a limitation bar, although consequential payment may remain subject to limitation.

The liquidator of MSD Cash & Carry plc sought relief against members of the Singh family and Dale Wholesale Ltd. The claims concerned an alleged preference involving motor vehicles and a director’s loan account, a substantial credit note issued shortly before the company’s liquidation, three alleged cash payments, and an account of MSD’s trading and receipts.

The liquidator also sought permission to amend the application. The respondents objected on limitation and case-management grounds. The central issues were whether the amendments introduced new claims, whether Surjit Singh was a de facto director, whether the transactions constituted preferences or void dispositions, and what relief should follow.

1. Amendments. The amendments were allowed, subject to a qualification concerning the account claim. The preference amendment retained the same essential factual basis: the preference and its amount, rather than its composition. The applicable limitation period was therefore twelve years for the restorative claim, although the claim for payment of the £50,261 balance was subject to a six-year period. The amendment concerning payments to suppliers merely gave a different label to the same underlying facts. A claim for an account based on a fiduciary relationship was not itself barred by limitation, although any consequential payment could be subject to limitation.
2. De facto directorship. The relevant question was whether Surjit had assumed a role sufficient to impose fiduciary duties and responsibility for misuse of MSD’s assets. He acted on his own authority, was one of the nerve centres from which MSD’s activities radiated, and in reality conducted its business. He was therefore a de facto director.
3. Preference. Under Insolvency Act 1986, sections 239 and 240, the relevant time for assessing the preference and the company’s desire to improve the creditor’s position was the time of the transaction. The transfer of vehicles and registrations from insolvent MSD to solvent Lionheart improved Mohinder’s position and was motivated by a desire to protect the assets from MSD’s creditors. The statutory presumption was not rebutted. The preference claim succeeded in full.
4. Credit note. The liquidator established a powerful inference that the goods had been delivered and that the later credit note was unjustified. The respondents failed to justify either the alleged non-delivery element or the claimed price adjustment. The credit note was a void disposition for nil value of MSD’s debt claim against Dale and involved breaches of fiduciary duty by Mohinder and Surjit. The amount of loss was remitted to an inquiry.
5. Cash payments and account. The £61,478.23 payment was genuine and pre-dated the winding-up petition; that part of the claim was dismissed. Dale failed to prove the two other payments and was liable for £75,000, but the claim against Mohinder was dismissed because receipt by him was not established. An account was ordered because the respondents’ records were inadequate and the exercise might reveal further recoverable sums.