Warning to liquidators claiming against non-active directors for misfeasance (Re IT Protect)

Article summary

Restructuring & Insolvency analysis: The case concerned a misfeasance application against a director who had taken no active involvement in the running of the company, seeking to recover losses arising from the actions of those managing the company. While the application succeeded, the judge found that, where liquidators seek to recover losses from a director on the basis that they abdicated their duties, they are subject to a strict requirement to particularise and, where possible, evidence three matters: first, the alleged knowledge the non-active director ought to have had of the company’s affairs had they performed their duties; second, the steps the director should have taken in light of that knowledge; and third, that their failure to act caused the company loss. This level of rigour is required not only where pleadings are ordered, but also where the claim proceeds by application notice and witness evidence only. Written by Jessica Brooke, barrister at Enterprise Chambers.