L & S Accounting Firm Umbrella Limited (In liquidation) v Idusogie Laurel Oronsaye & Ors

Summary judgment may be granted where the defendant has no realistic prospect of success and no compelling reason for trial. The court must avoid a mini-trial, but may evaluate evidence and decide a short legal or factual issue where the available material is sufficient. This caution applies particularly to fraud claims, although fraud does not make summary judgment unavailable.

A director’s duties include properly accounting for tax, maintaining accurate accounts and investigating suspected fraud. The statutory duty to promote a company’s success is generally subjective, but an objective approach applies where there is no evidence that the director considered the company’s interests. Knowing receipt requires a disposition in breach of duty, beneficial receipt of traceable company assets, and knowledge making retention unconscionable.

The claimant company, now in liquidation, sought summary judgment against two individual defendants and three companies they owned or controlled. The claims concerned alleged diversion of company funds arising from a labour-supply business, non-payment of VAT, PAYE and national insurance contributions, breaches of directors’ duties, knowing receipt, dishonest assistance and proprietary relief.

The individual defendants had filed no defences. The court considered whether any defendant had a real prospect of successfully defending the claims and whether any compelling reason required a trial. The central issues included the reliability of the documentary and witness evidence, the applicable test for dishonesty and directors’ duties, and whether the diverted funds and property were traceable to the claimant.

1. Summary judgment. The claimant established that none of the defendants had a real prospect of successfully defending the claims and that there was no other compelling reason for a trial. The court applied the principles in Easyair Ltd v Opal Telecom Ltd, including the need to avoid a mini-trial while permitting appropriate evaluation of evidence. The caution required in fraud claims did not prevent summary judgment where the evidence was compelling.
2. Fraud and dishonesty. Applying Ivey v Genting Casinos (UK) Ltd, the court found that the business model deliberately under-declared VAT, PAYE and NICs, operated an unlawful payroll scheme and diverted the resulting funds. The fabricated or altered documents and the defendants’ explanations had no real substance or prospect of succeeding.
3. Directors’ duties. Under Companies Act 2006, ss 170(4) and 171–175, the directors were required to account properly for tax, prepare accurate accounts and investigate suspected fraud. The duty under s 172 was ordinarily subjective, but the objective approach applied because there was no evidence that either individual had considered the claimant’s interests. Their conduct was a blatant breach of duty. Mr Oronsaye was also a de facto director.
4. Knowing receipt and proprietary relief. Applying Bank of Credit and Commerce International (Overseas) Ltd v Akindele, the court found a breach of fiduciary duty, beneficial receipt of traceable claimant assets and knowledge making retention unconscionable. The claims succeeded against all five defendants, subject to accounting for legitimate deductions and the beneficial interests in 1 Hazelwood Road. The claimant was entitled to declarations that traceable assets and specified properties were held on trust for it. The alternative dishonest-assistance claim was unnecessary to decide.