Pantiles Investments Ltd & Anor v Winckler (Rev 1)

The liquidator of Pantiles Investments Limited alleged that the company had been used to conceal the beneficial interest in and proceeds of a property sale for the benefit of a third party and brought claims under section 213 (fraudulent trading) and section 212 (misfeasance) of the Insolvency Act 1986. The court applied the post-Ivey test of dishonesty and principles governing directors' duties in the Companies Act 2006 (notably ss.171–174 and s.1157) and found that the respondent director had been a knowing party to the scheme to keep the property and sale proceeds out of the hands of the vendor’s creditors and had, in any event, breached her duties as director.

The judge concluded that the director acted dishonestly by ordinary standards, knowingly allowed the company to be used to frustrate the trustee in bankruptcy, authorised distributions that rendered the company insolvent and entered into or permitted transactions that conferred no benefit on the company. Limitation defences in respect of the challenged loan were rejected by reference to sections 21 and 32 of the Limitation Act 1980. The court found liability under both section 213 and section 212 and directed that a further hearing be listed to determine the appropriate relief.

Background and parties. Pantiles Investments Limited was incorporated to purchase 656 Finchley Road. Its sole de jure director and shareholder was Ms Sabine Winckler. The company completed purchase in February 2011 funded by short-term loans and later sold the property in June 2012. The liquidator, Mr James Dowers, applied under the Insolvency Act 1986 seeking (i) a contribution for fraudulent trading under s.213 and (ii) orders for misfeasance and equitable compensation under s.212 in relation to various payments and transactions.

Nature of the application. The liquidator sought declarations and orders against Ms Winckler for: being knowingly party to fraudulent trading; breaches of directors’ duties in causing or allowing the company to make payments (including £181,818.51 to Goldbeck (2009)), to create and repay a charge in respect of a loan benefiting a third party (the Second Steckelmacher Loan), and to repay a loan without indemnity from the ultimate beneficiary.

Issues framed.

• Whether the business had been carried on with intent to defraud creditors such that Ms Winckler was a knowing party under s.213.
• Whether Ms Winckler was in breach of fiduciary and statutory duties (ss.171–174 Companies Act 2006) so as to attract remedies under s.212, and whether any such claims were time-barred.
• Whether relief under s.1157 Companies Act 2006 should be granted to excuse any breaches.

Evidence and factual findings. The judge considered documentary evidence and oral testimony from Ms Winckler and found her accounts inconsistent and inherently improbable. Key findings included that (i) the company was used to conceal the vendor’s beneficial interest and proceeds, (ii) there was no credible evidence that Goldbeck (2009) in fact funded the purchase, (iii) the Second Steckelmacher Loan and its repayment benefited third parties only and conferred no company benefit, and (iv) Ms Winckler knew of or deliberately shut her eyes to the vendor’s insolvency/impending bankruptcy and obstructed the trustee’s inquiries.

Legal reasoning. The court applied the Ivey test for dishonesty: ascertain subjective belief as to facts, then apply objective standards of ordinary decent people. For s.213 the judge accepted that knowledge required dishonesty and that so-called "blind-eye" knowledge suffices. On directors’ duties the court analysed ss.171–174 Companies Act 2006, adopting authority on when creditors’ interests intrude. Limitation defences to the claim concerning the 2011 Steckelmacher deed were rejected: the judge held directors are treated as trustees for the purposes of s.21 Limitation Act 1980 and that deliberate concealment invoked s.32 so that limitation did not run. On s.1157 relief the court determined that, even if the breaches had been inadvertent, Ms Winckler had not acted reasonably and had turned away from solicitors’ advice; relief was not appropriate.

Result and next steps. The court found liability under s.213 and s.212. The matter of relief and the quantum of any contribution or compensation was reserved for a further hearing and the judge invited counsel to agree the form of order to reflect those findings and to list a hearing to determine appropriate relief.

This was a first-instance hearing. The court found that Ms Winckler was knowingly a party to the carrying on of the company’s business with intent to defraud the vendor’s creditors and therefore liable under section 213 of the Insolvency Act 1986. The court also found breaches of directors’ duties and misfeasance under section 212 (Companies Act duties ss.171–174), including entering into and repaying transactions that conferred no benefit on the company and authorising distributions that rendered the company insolvent. Limitation defences in relation to the 2011 loan were disapplied by reference to sections 21 and 32 of the Limitation Act 1980. Relief under s.1157 Companies Act 2006 was declined on the facts. A further hearing was directed to determine the appropriate remedy and quantum, if any.