Holland v Revenue and Customs & Anor [2009] EWCA Civ 625 (02 July 2009)

Holland v Revenue and Customs & Anor [2009] EWCA Civ 625 (02 July 2009)

Mr Holland was found to be a de facto director of the composite companies because he directed their affairs and assumed the functions of a director, notwithstanding that he acted through the sole corporate director. He was liable for misfeasance and breach of duty in causing the payment of unlawful dividends after he knew of the tax liability, but the court exercised discretion to limit his contribution to the amount of higher rate corporation tax unpaid during the relevant period, rather than the full amount of unlawful dividends.

Citation
[2009] EWCA Civ 625
Parties
Appellant: Michael Holland; First Respondent: The Commissioners for Her Majesty's Revenue and Customs; Second Respondent: Linda Holland
Jurisdiction
England and Wales
Judgment Date
02 July 2009
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court (chancery Division)
Outcome
Appeal dismissed; cross-appeal dismissed.
Legal Topics
De Facto Directors, Unlawful Dividends, Misfeasance, Breach of Fiduciary Duty, Corporate Veil, Director Liability, Relief Under Companies Act 1985 S.727, Insolvency Act 1986 S.212, Corporation Tax Liability
Insolvency Law Company Law Tax Law De Facto Directors Unlawful Dividends Misfeasance Breach of Fiduciary Duty Corporate Veil +4 more

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Parties

Michael Holland

Appellant

The Commissioners for Her Majesty's Revenue and Customs

First Respondent

Linda Holland

Second Respondent

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court (chancery Division)

Legal Issues

  1. 1 Whether Mr Holland was a de facto director of the composite companies
  2. 2 Whether Mr Holland was liable for misfeasance and breach of duty in causing payment of unlawful dividends
  3. 3 Whether relief should be granted under section 727 of the Companies Act 1985

Ratio Decidendi

Mr Holland was found to be a de facto director of the composite companies because he directed their affairs and assumed the functions of a director, notwithstanding that he acted through the sole corporate director. He was liable for misfeasance and breach of duty in causing the payment of unlawful dividends after he knew of the tax liability, but the court exercised discretion to limit his contribution to the amount of higher rate corporation tax unpaid during the relevant period, rather than the full amount of unlawful dividends.

Court Disposition

Appeal dismissed; cross-appeal dismissed.

Orders

  • Mr Holland held liable as de facto director for misfeasance and breach of duty in respect of dividends paid from 23 August to 19 October 2004.
  • Contribution limited to the amount of higher rate corporation tax unpaid during that period (about £144,000) plus interest.