Dumville & Anor v Rich

An appellate court should not interfere with factual findings unless the decision was one that no reasonable judge could have reached. Respect is required for evaluative conclusions drawn from documentary evidence as well as findings based on oral testimony.

In assessing a director’s liability for misfeasance, uncertainty about whether the director might have prevented a loss does not automatically justify reducing the contribution below the whole loss. The court must consider the nature and extent of the breaches. Relief under Companies Act 2006, section 1157 requires the officer to have acted honestly and reasonably, and that fairness requires relief. Speculation about a different transaction is not sufficient.

Where company property is transferred in an uncommercial transaction, loss arises when the property is transferred. Interest may be calculated from that date, subject to credit for subsequent recoveries.

Joint liquidators of DCL Hire Ltd appealed against findings made by Deputy ICC Judge Schaffer on claims under section 212 of the Insolvency Act 1986.

The judge dismissed a claim concerning a £250,000 payment to O’Hara Bros Surfacing Ltd, holding that it repaid part of a loan. He found misfeasance in relation to eight vehicles but ordered the director to contribute only 75 per cent of the loss. He also awarded interest from the date of liquidation.

The appeal concerned whether the factual finding about the payment was sustainable, whether the reduction in liability and relief under section 1157 of the Companies Act 2006 were justified, and when interest should run.

1. Surfacing payment. The appeal was dismissed on the factual finding that the £250,000 payment represented repayment of part of a loan from the O’Hara Pension Scheme. The deputy judge had considered sparse and conflicting documentary evidence. Although substantial criticisms could be made of his analysis, his conclusion was rationally supportable and was one reasonably open to him. The appellate court therefore applied the stringent restraint applicable to appeals on findings of fact.
2. Vehicles claim and section 212. The deputy judge’s findings established multiple serious breaches. The director sanctioned the transfer of company assets at the direction of a non-director, without proper terms or documentation, failed to exercise independent judgment, and failed to secure recovery of sums due. The 75 per cent contribution was an error of principle. Uncertainty whether the transactions might otherwise have occurred did not itself justify a discount. On the findings, the director was liable for the whole loss of £116,790.65.
3. Section 1157 relief. The reasons relied on by the deputy judge did not satisfy the statutory conditions. The director’s conduct was not reasonable, his lack of personal benefit was insufficient, and trust in another participant did not make the conduct reasonable or fair. The speculative possibility that a different transaction might have been arranged was irrelevant. No relief was granted.
4. Interest. The loss arose when DCL parted with its money in the uncommercial vehicle transactions, not when liquidation occurred. The appropriate practical calculation was interest at 2.5 per cent on the net loss, calculated from the date of purchase of the last vehicle, with credit for all recoveries.

• High Court (Chancery Division): Appeal from the decision of Deputy ICC Judge Schaffer dated 25 January 2019. The appeal was dismissed concerning the Surfacing payment and allowed concerning the vehicle-loss contribution and interest.