How will the court approach misfeasance cases against office-holders? Top Brands Ltd v Sharma; Re Mama Milla Ltd

How will the court approach misfeasance cases against office-holders? Top Brands Ltd v Sharma; Re Mama Milla Ltd

Original news

Top Brands Ltd v Sharma; Re Mama Milla Ltd (in creditors voluntary liquidation) [2014] EWHC 2753 (Ch), [2014] All ER (D) 32 (Aug)

Can reliance on legal advice defeat a claim for breach of fiduciary duty or negligence?

James Morgan of St Philips Chambers, who appeared for the applicants in a recent misfeasance case, says the court will enquire whether the adviser was provided with all the relevant information.

What were the facts of the case?

The applicants were creditors of Mama Milla Ltd (MML) who brought misfeasance proceedings under IA 1986, s 212 against the respondent (as former liquidator of MML) alleging breach of fiduciary duty and/or negligence as a result of her paying away the company’s only major asset—namely £548,000 in cash—to multiple (and largely) overseas bank accounts in reliance on purported instructions from a company claiming (wrongly) that this cash was held on trust for it.

What were the main legal arguments arising?

To a large extent the case turned on the facts, but the main legal arguments concerned:

• whether the respondent’s fiduciary duty extended to not acting perversely or irrationally or for irrelevant or extraneous reasons

• the extent to which the respondent could rely on legal advice that she received in relation to entitlement to the cash, and

• in circumstances where MML had been used by its directors for some form of VAT fraud, whether the claim against the respondent was barred by reason of illegality or ex turpi causa

What was the decision of the judge and why do you

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About the author:
Eleanor qualified in 1998 into the insolvency team at ASB law. She became a partner in 2005, and went on to head up the Recovery & Insolvency team. Whilst traditionally specialising mainly in contentious corporate insolvency matters, in recent years she has moved into the non contentious arena, in particular specialising in company administrations.