MACLENNAN AND ALEXANDER IAIN FRASER AS JOINT LIQUIDATORS OF CS PROPERTIES (SALES) LIMITED FOR AN ORDER UNDER SECTION 212 OF THE INSOLVENCY ACT 1986 [2018] ScotCS CSOH_24 (20 March 2018)

MACLENNAN AND ALEXANDER IAIN FRASER AS JOINT LIQUIDATORS OF CS PROPERTIES (SALES) LIMITED FOR AN ORDER UNDER SECTION 212 OF THE INSOLVENCY ACT 1986 [2018] ScotCS CSOH_24 (20 March 2018)

The respondents, as directors, breached their fiduciary and non-fiduciary duties by arranging leases and a licence to a connected party (AFMS) and themselves at undervalue, without proper authority, and for personal benefit, diverting rental income from the company and frustrating the administration and sale of assets. These actions caused quantifiable loss to the company. The court found the arrangements to be shams, lacking commercial justification, and made to benefit the respondents at the expense of the company and its creditors.

Citation
[2018] ScotCS CSOH_24
Parties
Noters: Thomas Campbell Maclennan and Alexander Iain Fraser as joint liquidators of CS Properties (Sales) Limited; Respondents: Kumar Soni and Ajay Soni
Jurisdiction
Scotland
Judgment Date
20 March 2018
Procedural Posture
Section 212 Insolvency Act 1986 Application / Judgment After Proof
Outcome
Application granted
Legal Topics
Directors' Duties, Breach of Fiduciary Duty, Misfeasance, Summary Remedy Under Insolvency Act, Connected Party Transactions
Insolvency Company Law Directors' Duties Breach of Fiduciary Duty Misfeasance Summary Remedy Under Insolvency Act Connected Party Transactions

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Parties

Thomas Campbell Maclennan and Alexander Iain Fraser as joint liquidators of CS Properties (Sales) Limited

Noters

Kumar Soni and Ajay Soni

Respondents

Procedural Posture

Section 212 Insolvency Act 1986 Application / Judgment After Proof

Legal Issues

  1. 1 Whether respondents breached fiduciary duties under sections 171, 172, 175 Companies Act 2006 by arranging leases and licence
  2. 2 Whether respondents breached non-fiduciary duties under section 174 Companies Act 2006
  3. 3 Whether breaches caused loss to the company and quantum thereof

Ratio Decidendi

The respondents, as directors, breached their fiduciary and non-fiduciary duties by arranging leases and a licence to a connected party (AFMS) and themselves at undervalue, without proper authority, and for personal benefit, diverting rental income from the company and frustrating the administration and sale of assets. These actions caused quantifiable loss to the company. The court found the arrangements to be shams, lacking commercial justification, and made to benefit the respondents at the expense of the company and its creditors.

Court Disposition

Application granted

Orders

  • Respondents ordered to pay compensation to the company for loss caused by breach of duty, quantified at £930,816.
  • Respondents to account for profits received as a result of the breaches.