Corporate insolvency – s.214 Insolvency Act 1986 – wrongful trading – burden of proof – pleading
The liquidators of Robin Hood Centre Plc applied under section 214 of the Insolvency Act 1986 for a contribution from its directors. The liquidators’ application, in summary, was that the directors had known for many years that the company had been insolvent.
The directors argued: (i) that the liquidators’ case was inadequately particularised regarding the date on which the directors were alleged to have known or ought reasonably to have concluded that the company could not avoid insolvent liquidation; (ii), that the directors had not known that the company was unable to avoid insolvent liquidation at any of the dates alleged; and, (iii) that the directors had taken all the steps they ought to have taken to minimise the loss to creditors.
The court granted the liquidators’ application. It found that it was not necessary for the liquidators to allege, and then prove, a specific date or dates on which the directors knew that the company could not avoid insolvent liquidation. It was enough that the liquidators allege that the directors had, or ought to have had, the necessary knowledge before the liquidation, and that the directors knew the essence of the case against them and were able to meet it.
The court further found that it was for the directors to prove the defence in section 214(3) and not for the liquidators to disprove it. In holding this the Registrar rejected the notes in the 2015 edition of Sealy and Milman and followed Re Idessa (UK) Limited (In liquidation) [2011] EWHC 804 (Ch).
This case contains a lucid review of the law applicable to applications under s.214 of the 1986 Act. It is the second recent decision to hold that, where directors rely on the ‘all steps’ defence in s.214(3), it is for them to prove it.
