SSF Realisations Ltd v Loch Fyne Oysters Ltd & Ors

SSF Realisations Ltd v Loch Fyne Oysters Ltd & Ors

The management charge was a disguised distribution to the shareholder, not supported by any prior obligation or agreement, and together with the dividend constituted an unlawful distribution out of capital in breach of Part 23 of the Companies Act 2006. The directors and shareholder knew or had reasonable grounds for believing the distribution was unlawful to the extent it exceeded the true distributable profits. Relief under s.1157 was granted only to Mr Lucas due to his lack of financial expertise and limited involvement.

Parties
Claimant: SSF Realisations Limited (In Liquidation); First Defendant: Loch Fyne Oysters Limited; Second Defendant: Robert Harvey Craig; Third Defendant: Timothy Lucas; Fourth Defendant: Richard Julian Organ; Fifth Defendant: Bruce Charles Davidson; Sixth Defendant: Stephen Alexander Sutherland
Jurisdiction
England and Wales
Judgment Date
21 December 2020
Procedural Posture
Company Law / Insolvency Proceedings / Judgment After Trial
Outcome
Claim allowed in part
Legal Topics
Unlawful Distribution, Directors' Duties, Shareholder Liability, Accounting Standards, Breach of Duty, Relief Under Companies Act
Company Law Insolvency Law Unlawful Distribution Directors' Duties Shareholder Liability Accounting Standards Breach of Duty Relief Under Companies Act

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Parties

SSF Realisations Limited (In Liquidation)

Claimant

Loch Fyne Oysters Limited

First Defendant

Robert Harvey Craig

Second Defendant

Timothy Lucas

Third Defendant

Richard Julian Organ

Fourth Defendant

Bruce Charles Davidson

Fifth Defendant

Stephen Alexander Sutherland

Sixth Defendant

Procedural Posture

Company Law / Insolvency Proceedings / Judgment After Trial

Legal Issues

  1. 1 Whether the distribution and management charge were unlawful distributions under Part 23 of the Companies Act 2006
  2. 2 Whether the directors and shareholder are liable to repay or compensate for the unlawful distribution
  3. 3 Whether any director is entitled to relief under section 1157 of the Companies Act 2006

Ratio Decidendi

The management charge was a disguised distribution to the shareholder, not supported by any prior obligation or agreement, and together with the dividend constituted an unlawful distribution out of capital in breach of Part 23 of the Companies Act 2006. The directors and shareholder knew or had reasonable grounds for believing the distribution was unlawful to the extent it exceeded the true distributable profits. Relief under s.1157 was granted only to Mr Lucas due to his lack of financial expertise and limited involvement.

Court Disposition

Claim allowed in part

Orders

  • Loch Fyne Oysters Limited to repay £316,859 to the Company under s.847 of the Companies Act 2006
  • Mr Craig and Mr Davidson to compensate the Company in the sum of £316,859 for breach of duty as directors