PK Investments Limited v Sebajeevan Sabaratnam

The claimant, assignee of a liquidated company's claims, applied for summary judgment under CPR 24.3 for breaches of directors' duties alleged to have caused loss to the company while it was insolvent. The court analysed the duties in the Companies Act 2006 (notably section 172 and section 174), the summary judgment test (Easyair / Doncaster line of authorities) and the consequences of missing books and records (Wetton v Ahmed).

The judge found that substantial advance payments were made to overseas third parties at a time when the company was insolvent, that there was no documentary evidence that the payments produced a commercial benefit, and that the defendant had not produced or identified relevant books or records despite repeated opportunities. The defendant's explanations were inconsistent and unsupported. Applying the summary judgment test, the court concluded there was no real prospect of the defendant successfully defending the claim and entered judgment for the claimant, ordering that the defendant compensate the claimant for losses caused by the impugned payments (on the basis of breach of duty as pleaded under section 174).

Background and parties: Finno Medical Limited went into compulsory liquidation in December 2018. PK Investments Limited is the assignee of the company's claims and a creditor under a loan facility. The claim against Mr Sabaratnam, a director from October 2015, alleges he breached duties owed to the company by causing or allowing high‑risk, undocumented advance payments to overseas companies while the company was insolvent, causing loss to creditors.

Relief sought and procedural posture: PK Investments sought summary judgment (application dated 10 October 2023) on the pleaded claim. The defendant resisted, arguing his pleaded defence raised triable factual issues and that supporting documents would show he acted in the company's best interests. The matter was decided on the summary judgment application.

Issues for decision:

• Whether, applying the summary judgment test (CPR 24.3 and relevant authorities), the defendant had a real prospect of defending the claim.
• Whether the impugned payments were made negligently or in breach of directors' duties (principally section 174 of the Companies Act 2006) while the company was insolvent and whether they produced commercial benefit.
• How the absence of books and records in the defendant's hands (and the defendant's failure to produce them) affected the credibility of his account and the court's willingness to proceed to trial.

Evidence and findings of fact: The judge summarised the liquidator's recorded interviews with the defendant, noting inconsistent accounts, admissions that payments were made while the company was "not doing very well", and repeated failures to deliver up laptops, server data or other documentary proof of the asserted commercial transactions. One contemporaneous e‑mail by the defendant accepted fault for the company's failure and showed limited communication with the creditor. The liquidator's enquiries produced no corroboration from the recipient companies and in some cases the recipient no longer existed or was unresponsive.

Legal reasoning and outcome: The court applied the summary judgment principles (Easyair; Doncaster; Allianz), noting that a respondent who relies on further evidence must identify it and its likely source. The defendant failed to demonstrate that relevant books and records existed, were accessible and were likely to support his defence. The judge also emphasised the law on directors' duties and remedies (section 172 and section 174 CA 2006; fiduciary remedies and equitable compensation). Given the absence of documentary support, the defendant had no real prospect of success and the court would inevitably draw adverse inferences (Wetton v Ahmed) at trial. The court therefore granted judgment for the claimant and ordered that the defendant compensate PK Investments for losses caused by the impugned payments.

Procedural note: The judge invited the parties to agree terms of an order specifying the relief and quantum procedures.

First instance: summary judgment entered for PK Investments. The court concluded there was no real prospect of the defendant successfully defending the claim because the impugned payments were made while the company was insolvent, produced no evidentially supported commercial benefit, the defendant failed to produce or identify relevant books and records despite opportunities, and adverse inferences would follow. The judge ordered that the defendant compensate the claimant for losses caused by the impugned payments (relief fashioned on breach of duty as pleaded under section 174 Companies Act 2006).