The reserved judgment of HHJ Cawson KC, sitting as a High Court Judge, in Aston Risk Management v Lee Jones and others [2023] EWHC 603 (Ch) a case in the Business List of the Business & Property Courts, was handed down on Monday 20 March 2023. The trial first came on for hearing in October 2022 but was adjourned until 30 January 2023 after settlement with four of the six defendants at the door of the court.
The claimant – represented by Louis Doyle KC with the assistance of Andrew Small, now in his second six at Kings as a pupil, instructed by Ian Austin, Mark Fairclough and Matthew Kurzeja of Fieldfisher – was assignee of the claims from the liquidators of Audiological Systems Services Limited (ASS) and succeeded in establishing that the first defendant had acted as a de facto director of ASS and was guilty of breach of duty in respect of both certain payments made by ASS to the fifth defendant, the first defendant’s company, Neutrino, and the sixth defendant. The breach of duty claims also succeeded against the first defendant for causing ASS to dispose of its business and assets prior to being placed into administration and what had apparently been intended originally to be a trading administration or pre-pack sale. In addition, Neutrino was found liable in accessory liability for knowing receipt as constructive trustee of certain of the monies paid to it in breach of duty by the first defendant. At trial, the claimant did not have to have recourse to various transaction avoidance claims under the Insolvency Act 1986 also assigned to it, as now permitted by s.246ZD of the 1986 Act as inserted by s.118 of the Small Business, Enterprise and Employment Act 2015.
At a case management hearing following the original trial’s adjournment, the Judge, albeit with some reluctance, permitted the trial to proceed on a hybrid basis on medical grounds. Only the claimant’s representatives and the witnesses cross-examined (save for the first defendant) were physically present in court in Manchester over the adjourned and hard-fought eight-day trial for which the trial bundles, with pro-active and intelligent case management addressing specific issues, were reduced from the original sixty-eight bundles to thirty-one.
Apart from the case law on de facto directorship, most notably Naggar in the Court of Appeal and the distinguishing of Holland in the Supreme Court, Aston Risk is important for the jurisprudence it both applied and provides in relation to matters including: how the Gestmin and subsequent authorities approach to evidence should work (given that the payments in issue happened in 2014 following earlier relevant events); the scope of the shift of the burden of proof in challenging payments caused by a director following Idessa, Maroo and Sinclair Investments; the practical relevance of the Supreme Court’s recent decision in Sequana, and significantly its modification of the principles relevant to s.172 of the Companies Act 2006 identified by Mr John Randall QC, sitting as a Deputy High Court Judge in Re HLC Environmental Projects; and the fixing of constructive trusteeship on a corporate entity in receipt of monies caused to be paid away in breach of duty by its controller, applying El Ajou v Dollar Land.
Although a trial on liability only, Judge Cawson KC quantified liability for certain elements of the claim. All outstanding issues, including quantum, will be dealt with at a further consequential hearing.
The judgment can be found here.
Aston Risk is one of a steady flow of cases involving directors’ duties, and related issues, on which Louis has been instructed over the last two years, for both claimants and defendants. Three of those cases settled in January and February 2023, two at mediation and one shortly following mediation.
