Henderson & Jones Limited v Price

The claimant, assignee of the liquidator's claims, succeeded at first instance in a claim for sums recorded on Hunnyhill Electrical Limited's QuickBooks director's loan ledger. The court treated the ledger as reliable evidence of payments to the defendant and applied the established principle that, once payments from the company to a director are shown, the evidential burden shifts to the director to prove entitlement to those sums (citing Re Idessa, Re Mumtaz and GHLM Trading v Maroo).

The judge held the claim was not statute-barred: the primary debt claim was repayable on demand under the Limitation Act 1980 (s.5 read with s.6) so time ran from the written demand of 3 June 2015, and alternatively claims in breach of trust fell within s.21(1)(b). The assignment to the claimant was valid.

On the facts the defendant could only demonstrate entitlement to £30,000 dividend (year-end 2011) and £5,700 remuneration, leaving an unproved balance. The court rejected the defendant's belated and inconsistent case that large dividends were declared in 2012, held section 1157 Companies Act 2006 could not relieve him in respect of sums received, and awarded judgment to the claimant for £94,596.10 with statutory interest from 3 June 2015 at 2% and costs (standard basis to 7 August 2020, indemnity thereafter) with an interim costs payment ordered.

The claimant, a purchaser of legal claims from the liquidator of Hunnyhill Electrical Limited, sued the former director, Mr Price, for £130,296.10 said to represent an overdrawn director's loan account as shown in QuickBooks at liquidation. The claimant relied alternatively on (1) a contractual debt, (2) breach of statutory and fiduciary duties under the Companies Act 2006, and (3) unjust enrichment.

Procedural posture: First instance trial before District Judge Kelly. The defendant was represented in earlier stages but gave evidence in person; the claimant relied on liquidator and solicitor evidence.

Issues for decision:

• Whether the claim was statute-barred under the Limitation Act 1980;
• whether the assignment to the claimant was valid;
• whether the ledger accurately reflected sums received by the defendant and, if so, whether he was entitled to them (including claims as remuneration, business expenses, and dividends);
• whether the defendant breached directors' duties or was unjustly enriched;
• whether section 1157 Companies Act 2006 could afford relief;
• part 36 consequences and costs.

Court's reasoning and findings:

• Limitation: The primary debt claim was held to be a loan repayable on demand so time ran from the liquidator's demand on 3 June 2015 (s.5 and s.6 Limitation Act 1980); alternatively, claims in breach of trust were not time-barred under s.21(1)(b). The claim was within time.
• Assignment: The deed of assignment and notice were in evidence and there was no basis to invalidate them; the claimant had locus to sue.
• Ledger and receipts: The QuickBooks director's loan ledger was accepted as the best evidence of payments received by the defendant. The judge applied authorities (Re Mumtaz and related cases) endorsing the ledger as probative where bookkeeping was informal.
• Evidential burden and entitlement: Once payments were shown, the evidential burden shifted to the defendant to prove entitlement (per Re Idessa, GHLM Trading). The defendant's pleaded explanations (limited reimbursements, payments to a brother, remuneration, dividends, and payments to a payroll manager) were inadequately evidenced. The defendant's late, inconsistent witness evidence alleging large 2012 dividends was not proven. The judge found entitlement only to a £30,000 dividend (2011 accounts) and £5,700 remuneration for 2011–12.
• Duomatic and dividends: The Duomatic principle was considered but the judge found no properly constituted declaration of the large 2012 dividends and, in any event, any dividend after HMRC's substantial demand in June 2012 would have been unlawful (no accounts to justify a dividend and would have rendered the company insolvent).
• Section 1157: The judge applied Toone & Murphy to hold that s.1157 cannot be used to avoid liability for monies received; relief under s.1157 was inappropriate.
• Unjust enrichment and directors' duties: Given the primary findings, the judge would also have found unjust enrichment proven as an alternative; the defendant had breached duties of care and to promote the company's success in the way the company's funds were removed.
• Remedy: Judgment for the claimant in the sum of £94,596.10; statutory interest at 2% from 3 June 2015; costs to follow with standard basis to 7 August 2020 and indemnity thereafter; interim costs payment on account of £75,000.

The judgment emphasised the practical limits of informal company bookkeeping and the requirement that directors justify withdrawals; it also noted the court's reluctance to abridge CPR 36 time limits and to grant s.1157 relief where there is misapplied company money.

The claim succeeded. The court found that the QuickBooks director's loan ledger reliably evidenced sums paid to the defendant; the evidential burden shifted to him and he failed to prove entitlement except to £30,000 dividend (year-end 2011) and £5,700 remuneration. The claimant, as valid assignee, was awarded judgment for £94,596.10, statutory interest from 3 June 2015 at 2%, and costs (standard to 7 August 2020, indemnity thereafter) with an interim costs payment ordered. Section 1157 Companies Act 2006 relief was not available to defeat the primary debt claim.