“An enormous weight off my shoulders” – that’s how one director described the outcome after Tom Clinton, one of our experienced insolvency solicitors, helped him settle a seven-figure misfeasance claim for a four-figure sum. This article details how we were able to move the client from missed deadlines and default judgment risk to a settlement he could actually afford.
The details of this Misfeasance claim
A litigation funder brought a claim against multiple directors and connected third parties arising out of an investment scheme said to have taken in well over £1 million. The allegations against NDP’s client included misfeasance, knowing receipt, breach of duty and transactions at an undervalue.
A difficult starting position
The director hadn’t known proceedings had been brought against him until deadlines had already passed. That left him exposed to default judgment being made against him, without the allegations of misconduct ever really being tested.
Tom’s first job wasn’t the merits of the claim at all. It was persuading the court to let the director back in.
Getting back into the litigation
Tom and experienced counsel applied for relief from sanction and for permission to file a defence.
Relief from sanction applications turn on the court’s assessment of why a deadline was missed and how promptly it was addressed once discovered, so the explanation of the director’s circumstances had to be precise and well evidenced, not simply asserted.
At a High Court hearing in London, the application succeeded. NDP filed the client’s defence, and the director was, for the first time, properly in a position to contest the claim.
Reaching a four figure settlement
Being back in the litigation didn’t itself change the underlying exposure. There remained a potential liability to the client of over £1m. Pragmatically, once the client was back on even footing, the opponent had to understand the reality of the client’s personal situation regardless of the amount claimed. The defence filed provided the cornerstone for settlement negotiations to begin. Tom used the grounds raised in the defence to advantage negotiation with the litigation funder.
Tom was able to persuade the litigation fund to take a four-figure settlement sum to compromise the liability that could have stretched into a multi-million pound judgment.
Our client was delighted
“That is great news and a huge relief! I cannot thank you enough for everything you have done over the course of this. From the outset you have been incredibly pragmatic, supportive and generous with your time, particularly towards the end when you continued to help despite knowing I had reached my financial limit. That meant a great deal to me and is something I won’t forget.
When this first started, I genuinely never imagined how stressful and consuming it would become. To finally be able to draw a line under it is an enormous weight off my shoulders, and I am very grateful for everything you did to get me here.”
Facing a misfeasance claim, or another insolvency-related claim against you as a director?
NDP has a track record of securing pragmatic outcomes for directors in this position. Read more of our misfeasance case studies and misfeasance claim client testimonials here. If you are facing a claim, the sooner you talk to our expert insolvency and misfeasance claims solicitors, the more likely we are to be able to help you.
We act for clients in London, Birmingham and across the UK – wherever the litigation is heard.
Talk to us on 0121 200 7040 or contact us for a free initial conversation.
Frequently asked questions about Misfeasance Claims in insolvency
What is a misfeasance claim against a director?
A misfeasance claim in insolvency is one where a director is alleged to have breached a duty owed to the company, causing loss, in the context of the company’s insolvency. It’s frequently pursued alongside related claims such as knowing receipt and transactions at an undervalue, particularly once an office holder or funder is pursuing recoveries.
What happens if I miss a deadline in litigation because I did not know proceedings had started?
It isn’t necessarily fatal, but it needs immediate attention. An application for relief from sanction asks the court for forgiveness and permission to comply with the missed step late. The court will look closely at why the deadline was missed and how quickly it was addressed once you found out. Delay in applying can be as damaging as the original missed deadline and can prejudice an applicant’s chances of making a successful application.
Can a claim be settled for significantly less than the amount originally pursued?
Yes, and this one settled that way for the same reason a lot of multi-defendant litigation funder claims do. Settlement figures often come down to what a defendant can actually pay rather than the size of the claim on paper, and recovering a smaller sum with certainty can suit a funder better than chasing judgment against someone who has nothing to give them.
