Dickinson v NAL Realisations (Staffordshire) Ltd

Application of the “real risk” of insolvency test in BTI v Sequana

Corporate insolvency – directors’ duties to creditors – section 172(3) Companies Act 2006 – risk of insolvency – section 423 Insolvency Act 1986

A director procured the transfer of the company’s premises to himself at an undervalue.  At the time of the transaction, the company was trading successfully with ample capital for such trading. However, there was a recognised risk of an environmental claim of uncertain value, which was “far from remote”.

Notwithstanding the court’s finding that there was a “real risk of insolvency if the claim was lost”, following the judgment in BTI v Sequana [2016] EWHC 1686 (Ch), because there had also been a “real prospect” of avoiding insolvency, the duty to creditors had not arisen.  Neither a “recognised risk” nor a “real risk” is necessarily enough for the duty to arise.

The director had, however, breached his fiduciary duties to the company and the sale of the premises was a transaction to defraud creditors pursuant to section 423 of the Insolvency Act 1986.

As in BTI v Sequana, the threshold is now very difficult to judge.  There appears to be a tension between the fulcrum identified here and the earlier formulations of “doubtful solvency” rehearsed in Re HLC Environmental Projects Limited [2013] EWHC 2876 (Ch).