Nicholson & Anor v Ghuman & Ors Re Octavian Security Ltd  EWHC 3509 (Ch): The trial of this insolvency case was heard on 14 and 15 December 2016. The case was brought by the liquidators of Octavian Security Limited (“Octavian”), Nicholas Nicholson and Stratford Hamilton of Haslers against two of the former directors of Octavian, Sukhjit Ghuman and his wife Kiranjit Ghuman.
His Honour Judge Barker QC (sitting as a judge of the High Court) heard the case and gave judgment in favour of the liquidators on 15 December 2016. Whilst an appeal was filed at the Court of Appeal, it was later withdrawn by Mr and Mrs Ghuman. The judgment can be found here.
On 8 January 2010, Octavian was placed into administration and a pre-pack sale of its business was effected in favour of Octavian Continental Limited. In mid-2010 Octavian was placed into liquidation. Following liquidation, enquiries were made as to Octavian’s pre-insolvency affairs. Various pre-administration payments of Octavian’s funds were identified by the joint liquidators, including unauthorised payments to each of Mr and Mrs Ghuman. Payments were also identified as having been made by Octavian to Octavian Continental Limited, shortly before it purchased Octavian’s business.
Claims were duly brought under sections 212 and 238 Insolvency Act 1986, that is, for misfeasance and transaction at an undervalue. Having considered all of the evidence, and having reviewed the relevant law, the learned judge concluded that all of the claims were made out.
The judge made various conclusions on each of the classes of payments made, including: “…I have no hesitation in finding Mr. and Mrs. Ghuman jointly and severally liable in misfeasance under the s.212 procedure” and “…I conclude that the liability was caused by Mr. and Mrs. Ghuman's wrongdoing, in obvious breach of their fiduciary duties as directors. There is no ground on which I can do other than hold them liable, jointly and severally, under the s.212 procedure.”
This case is a helpful reminder of the duties and responsibilities of directors, particularly in the period leading up to the insolvency of a company. It is also a credit to those insolvency practitioners who prosecute cases of director wrongdoing such as this. A strong and independent insolvency regime has a vital part to play in ensuring that creditors’ interests are properly respected.
Haslers, Moon Beever and James Pickering of Enterprise Chambers helped to bring this case to trial.
If you wish to discuss this issue, please email Frances Coulson (firstname.lastname@example.org)
This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained