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Misfeasance Claims Against Directors

A Misfeasance Claims Case Study and the Likely Outcome.

We are representing the director of a company that entered into voluntary liquidation at the end of December 2012.  The liquidator is bringing various claims against the director including misfeasance claims arising out of section 212 of the Insolvency Act 1986. This case study, in what is an on-going case, shows our approach to defending Misfeasance Claims against directors, and details what we consider to be the likely outcome.

Misfeasance Claims and the Details of this Case

Misfeasance Claims usually involve an allegation that a director has misapplied money or other property of the company and/or breached his/her duties as a director. In this case, the amounts claimed by the liquidator total £148,000 plus interest and legal costs. In the three years prior to insolvency the company reported modest profits. The core of this Misfeasance Claim is that the liquidator alleges that the director took drawings and loans far in excess of the stated profits in that period.

The liquidator complains that by authorising, arranging and/or otherwise being involved with the director’s loans, that our client, as a director of the company, breached her duties to the company.  In addition, the liquidator claims that the drawings and loans constituted the misapplication or unlawful retention of company money which (on the liquidator’s analysis) amounts to misfeasance and/or a breach of duties owed by the director to the company.

The liquidator claims that our director client is liable for misfeasance under section 212 of the Insolvency Act 1986 and the liquidator is seeking an order that our client and one other director repay or contribute to the assets of the company (on a joint and several basis) to the tune of £148,000 plus interest.

The Likely Outcome for this Misfeasance Claim – Settlement by Negotiation

The case is ongoing. It is inevitable on these facts that a settlement will be reached with the liquidator, that will reflect not only this financial liability but also the director’s other pressing financial obligations which also need to be taken into account.

We envisage negotiating a settlement in the region of 15p – 20p in the pound (of the total claimed), in light of the above.

That will produce for the liquidator a settlement sum of £25,000 – £30,000, significantly less than the amount claimed. In addition, we anticipate that the agreed amount will be paid over a period of time and incorporated into the terms of the settlement agreement.

Contact us if you are facing Misfeasance Claims

Misfeasance Claims against directors are increasing. We specialise in helping to defend directors against Misfeasance Claims. So, if you are a director and have received a Misfeasance Claim from a Liquidator, have a look at our our 5 best tips to get a flavour of how you might deal with such a claim. Then contact us or call us on 0121 200 7040 for a free initial discussion so we can assess the merits of your case and how much we can help. The sooner you get in touch, the more likely it is that we can help.