Manolete Partners Plc v Rutter & Anor [2022] EWHC 2552 (Ch) (07 October 2022)

Manolete Partners Plc v Rutter & Anor [2022] EWHC 2552 (Ch) (07 October 2022)

The £560,000 dividend was not lawfully distributed until 12 April 2017, when it was entered on Sage and unreservedly placed at the directors' disposal. By that date, the company was insolvent or on the verge of insolvency, so the dividend was unlawful. The directors are jointly and severally liable to account for the unlawful distribution. The directors' loan account remains owing, and set-off is not available due to breach of duty. The defendants are also liable for misapplied company funds used for personal property without accounting.

Citation
[2022] EWHC 2552 (Ch)
Parties
Claimant: Manolete Partners PLC; First Defendant: Paul Anthony Rutter; Second Defendant: Joanne Therese Rutter
Jurisdiction
England and Wales
Judgment Date
07 October 2022
Procedural Posture
Civil Company/directors' Misfeasance / High Court Trial Judgment
Outcome
Claim allowed in part; judgment for claimant
Legal Topics
Unlawful Dividend, Directors' Duties, Directors' Loan Account, Misfeasance, Distribution Under Companies Act 2006, Personal Liability of Directors
Insolvency Company Law Unlawful Dividend Directors' Duties Directors' Loan Account Misfeasance Distribution Under Companies Act 2006 Personal Liability of Directors

Case Brief

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Parties

Manolete Partners PLC

Claimant

Paul Anthony Rutter

First Defendant

Joanne Therese Rutter

Second Defendant

Procedural Posture

Civil Company/directors' Misfeasance / High Court Trial Judgment

Legal Issues

  1. 1 When was the £560,000 dividend 'distributed' for the purposes of s.829 Companies Act 2006?
  2. 2 Was the dividend lawful or unlawful?
  3. 3 Are the defendants liable for £104,668.12 on the directors' loan account?

Ratio Decidendi

The £560,000 dividend was not lawfully distributed until 12 April 2017, when it was entered on Sage and unreservedly placed at the directors' disposal. By that date, the company was insolvent or on the verge of insolvency, so the dividend was unlawful. The directors are jointly and severally liable to account for the unlawful distribution. The directors' loan account remains owing, and set-off is not available due to breach of duty. The defendants are also liable for misapplied company funds used for personal property without accounting.

Court Disposition

Claim allowed in part; judgment for claimant

Orders

  • Defendants to pay £560,000 as unlawful dividend
  • Defendants to pay £104,668.12 on directors' loan account