Stephen John Hunt v Jagtar Singh

Stephen John Hunt v Jagtar Singh

The judge applied the wrong test for determining when the creditor duty arises; the correct test is triggered when directors know or ought to know that there is at least a real prospect of insolvency due to disputed liabilities. The creditor duty had arisen by September 2005 and continued thereafter.

Parties
Applicant/appellant: Stephen John Hunt; Respondent: Jagtar Singh
Jurisdiction
England and Wales
Judgment Date
11 September 2024
Procedural Posture
Appeal / Judgment on Appeal
Outcome
Appeal allowed; case remitted for reconsideration.
Legal Topics
Director Duties, Creditor Duty, Fiduciary Duty, Insolvency Triggers, Tax Liability, Breach of Duty
Company Law Insolvency Law Director Duties Creditor Duty Fiduciary Duty Insolvency Triggers Tax Liability Breach of Duty

Case Brief

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Parties

Stephen John Hunt

Applicant/appellant

Jagtar Singh

Respondent

Procedural Posture

Appeal / Judgment on Appeal

Legal Issues

  1. 1 When does a director's duty to consider the interests of creditors arise in the context of disputed tax liabilities and insolvency?
  2. 2 Was the judge correct in applying the test for the creditor duty as set out in Sequana?
  3. 3 Did the directors breach the creditor duty by continuing the Scheme and distributing assets while facing substantial tax liabilities?

Ratio Decidendi

The judge applied the wrong test for determining when the creditor duty arises; the correct test is triggered when directors know or ought to know that there is at least a real prospect of insolvency due to disputed liabilities. The creditor duty had arisen by September 2005 and continued thereafter.

Court Disposition

Appeal allowed; case remitted for reconsideration.

Orders

  • The matter is remitted to the judge to give directions for further disposal, including consideration of transfer to a High Court Judge.