Andrew Anderson Kelsall & Anor (as joint liquidators of Gamenation (UK) Limited) v Biljana Stajic & Anor

Insolvency Act 1986, section 212 is not confined to claims alleging that the respondent personally owed and breached a duty to the company. Its alternatives include misapplication, retention or accountability for company money or property. A person concerned in the promotion, formation or management of the company may therefore fall within the section even without owing a duty to it.

Dishonest assistance is an accessory liability arising from a principal’s breach of trust or fiduciary duty. The dishonest assister is personally liable to account and may be required to compensate the loss resulting from the principal breach. Such a claim can fall within section 212(1) and the remedies in section 212(3).

Joint liquidators applied under the Insolvency Act 1986 for relief concerning alleged misfeasance and breaches of duty by the first respondent, and alleged dishonest assistance by the second respondent. The second respondent sought strike out or summary judgment on the dishonest assistance claim.

The disputed question was whether dishonest assistance could fall within section 212, or whether that provision was limited to claims based on a duty personally owed by the respondent to the company. The court also determined costs arising from the strike-out application and an amendment application.

1. Application dismissed. The claim against the second respondent for dishonest assistance was permitted to continue under section 212. The court did not need to determine the alternative Part 7 issue.
2. Section 212 creates no new substantive liability. It provides a summary procedure enabling office-holders to pursue liabilities existing under the general law. Its wording identifies alternative forms of conduct: misapplication, retention or accountability for company money or property; misfeasance; and breach of fiduciary or other duty.
3. The statutory class is wider than officers of the company. Section 212(1)(c) includes a person who has been concerned in, or taken part in, the promotion, formation or management of the company. A person within that class who wrongfully misapplies company property may fall within the section without owing a personal duty to the company.
4. The reasoning in Re B Johnson & Co (Builders) Ltd did not establish the restrictive interpretation advanced by the second respondent. That decision concerned materially narrower wording and expressly declined to give a comprehensive definition of the conduct covered by the predecessor provision.
5. Knowing receipt and dishonest assistance may fall within the misapplication or accountability limb. Dishonest assistance is parasitic upon a principal breach of trust or fiduciary duty, but the assister’s liability is personal. The assister may therefore be required to account under section 212(3)(a), or to contribute compensation under section 212(3)(b), for the consequences of the principal’s breach. Section 212(3) does not require the relevant breach of duty to be the respondent’s own breach.
6. As to costs, the amendment costs were generally payable by the applicants, who sought the amendments. The respondents were entitled to those costs up to 12 October 2022; thereafter the applicants were entitled to the costs of the amendment application because of the respondents’ delay in consenting. There was no order as to costs for the abandoned parts of the strike-out application.