Toone & Anor v Robbins & Anor

Toone & Anor v Robbins & Anor

Payments to directors recorded as dividends were unlawful as there were no distributable profits and no proper authorisation; directors must repay sums not shown to be lawfully paid as remuneration. Failure to comply with formalities in company articles did not invalidate remuneration decisions, but directors could not re-characterise unlawful dividends as remuneration. The Duomatic principle did not apply to validate unlawful dividends, and unjust enrichment could not override statutory requirements.

Parties
Applicant / Joint Liquidator: Richard Toone; Applicant / Joint Liquidator: Kevin Murphy; Respondent / Director: Dean Robbins; Respondent / Director: Richard Robbins
Jurisdiction
England and Wales
Judgment Date
20 March 2018
Procedural Posture
Appeal / Judgment on Appeal and Cross Appeal
Outcome
Appeal allowed in part; cross-appeal dismissed.
Legal Topics
Unlawful Dividends, Directors' Remuneration, Fiduciary Duties of Directors, Duomatic Principle, Burden of Proof in Misfeasance, Relief Under Companies Act Section 1157
Company Law Insolvency Law Unlawful Dividends Directors' Remuneration Fiduciary Duties of Directors Duomatic Principle Burden of Proof in Misfeasance Relief Under Companies Act Section 1157

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Parties

Richard Toone

Applicant / Joint Liquidator

Kevin Murphy

Applicant / Joint Liquidator

Dean Robbins

Respondent / Director

Richard Robbins

Respondent / Director

Procedural Posture

Appeal / Judgment on Appeal and Cross Appeal

Legal Issues

  1. 1 Whether payments to directors were unlawful dividends or remuneration
  2. 2 Whether failure to comply with company articles invalidated authorisation of remuneration
  3. 3 Whether Duomatic principle could validate informal decisions

Ratio Decidendi

Payments to directors recorded as dividends were unlawful as there were no distributable profits and no proper authorisation; directors must repay sums not shown to be lawfully paid as remuneration. Failure to comply with formalities in company articles did not invalidate remuneration decisions, but directors could not re-characterise unlawful dividends as remuneration. The Duomatic principle did not apply to validate unlawful dividends, and unjust enrichment could not override statutory requirements.

Court Disposition

Appeal allowed in part; cross-appeal dismissed.

Orders

  • Directors to repay £10,092 not shown to be lawfully paid as remuneration.
  • Unlawful dividends to be repaid by directors.