In the Matter of Mobigo Ltd (in liquidation)

A liquidator’s claim against directors for breach of duty arising from a company’s regulatory fine is not necessarily an abuse of process or an attempt to enforce the fine personally. Whether recovery is barred depends on the statutory and regulatory context, including whether liability is personal to the company and whether a policy prevents recourse against directors. Claims involving the creditor-duty rule and the Duomatic principle are fact-sensitive and ordinarily unsuitable for summary determination where insolvency, knowledge, ratification, causation or the directors’ conduct remains disputed. Previous tribunal findings may be admitted to show what occurred and the tribunal’s reasons, but not generally as proof of facts or legal conclusions against strangers to the decision.

The joint liquidator of Mobigo Ltd brought proceedings under section 212 of the Insolvency Act 1986 against the company’s former and registered directors. The claim alleged breaches of directors’ duties, including failures relating to compliance with a premium-rate-services regulator’s code, engagement with the regulator, preservation of records and payments made to the directors and associated companies.

The directors applied to strike out the claim, obtain reverse summary judgment, and exclude the regulator’s tribunal decision and related documents. They argued that the claim improperly sought to recover a regulatory fine from them, that their conduct had been ratified under the Duomatic principle, and that the evidence was inadmissible.

1. Application dismissed. The claims were not plainly abusive, disclosed reasonable grounds, and had realistic prospects requiring trial. The delay in making the application was an additional reason not to grant discretionary strike-out or summary judgment.
2. The reasoning in Safeway Stores Ltd v Twigger did not establish a general rule preventing a company from claiming against directors for loss associated with a regulatory penalty. Its result depended on the particular statutory scheme, under which the penalty was imposed only on the undertaking for an infringement committed intentionally or negligently by that undertaking. The present regulatory Code contained no equivalent clear restriction. Whether its context or policy nevertheless precluded recovery required findings at trial.
3. The creditor-duty issue was also fact-sensitive. Under section 172(3) of the Companies Act 2006, the duty to consider creditors’ interests arises when directors know or ought to know that the company is, or is likely to become, insolvent. The court could not determine on the application whether the directors knew or ought to have known that suspension of the service and a likely regulatory fine would cause insolvency.
4. The Duomatic principle could not provide a complete answer. It does not operate where the company is insolvent or likely to become insolvent and creditors’ interests have become engaged. Trial was also required on whether the shareholder had actually considered and assented to the alleged breaches, and whether any assent was objectively manifested.
5. The PSA tribunal decision was admissible for the limited purpose of showing what the tribunal did and the basis on which it imposed the fine. It was not relied upon as proof of the truth of its factual or legal findings against the directors. The Warning Notice, Case Report and risk-assessment documents were likewise relevant background material. Any inadmissible opinion within them could be disregarded at trial rather than excised in advance.
6. The allegations were imperfectly drafted and partly repetitive, but the section 212 procedure commonly proceeds through witness statements. The alleged breaches were sufficiently intelligible, and issues concerning loss, records, remuneration and commercial payments required factual investigation.