How to run a wrongful trading case—Re Ralls Builders Ltd (No 2)

How to run a wrongful trading case—Re Ralls Builders Ltd (No 2)

Discussing the judgment in Re Ralls Builders Ltd (No 2), Christopher Boardman, a barrister at Radcliffe Chambers, says the case is an illuminating example of the problems and difficult decisions directors of insolvent companies face when considering how to properly conduct themselves and avoid potential liabilities.

Original news

Re Ralls Builders Ltd (in liquidation); Grant and another v Ralls and others [2016] EWHC 1812 (Ch), [2016] All ER (D) 113 (Jul)

The Chancery Division ruled that, having found that the joint liquidators’ application, under section 214 of the Insolvency Act 1986 (IA 1986), for a contribution from the directors of a company on a wrongful trading claim, had failed, it would not beappropriate to make the directors pay a contribution to the assets of the company in respect of the joint liquidators’ fees and expenses in investigating and pursuing that unsuccessful claim.

What was the background to this judgment?

This was a claim for wrongful trading pursuant to IA 1986, s 214. The liquidators, Steven Grant of Wilkins Kennedy and James Tickell of Portland, sought a £1.5m contribution to the company’s assets from the three former directors of a South East building company that had gone into administration during the course of the last recession. The liquidators alleged that the directors knew or ought to have known by 31 July 2010, alternatively 31 August 2010, that the company could not avoid insolvent liquidation and had taken no steps to protect the interests of creditors until it went into administration on 13 October 2010.

The trial took place in June 2015. In February 2016, the judge handed down his main substantive judgment: Re Ralls Builders Ltd (in liquidation); Grant and another (Joint Liquidators of Ralls Builders Ltd) v Ralls and others [2016] EWHC 243 (Ch), [2016] All ER (D) 142 (Feb). The judge found that although the directors ought to have known that

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.