Robin Hood’s men—merry again (Brooks v Armstrong)

Robin Hood’s men—merry again (Brooks v Armstrong)

*Stop press (9 January 2017) - liquidators have applied for permission to appeal the decision*

How important is it for an insolvency office-holder to quantify the increase in the net deficiency to creditors in support of a wrongful trading claim? Chloe Poskitt and Emma Taylor, both associates at Browne Jacobson, review the appeal decision in Brooks v Armstrong.

Original news

Brooks and another (Joint Liquidators of Robin Hood Centre plc in liquidation) v Armstrong and another [2016] EWHC 2893 (Ch), [2016] All ER (D) 117 (Nov)

The Chancery Division allowed, in part, a cross-appeal by the directors of a company in creditors' voluntary liquidation against an order that they were jointly and severally liable to pay compensation of £35,000 for wrongful trading. The directors had argued that the process by which the registrar had calculated the compensation payable by them had been unfair. The court held that the liquidators had failed, in the earlier proceedings, to advance and establish a properly formulated case that there had been any increase in net deficiency of the company during the period of wrongful trading, and that, on the approach adopted and facts found by the registrar, there had been no such increase. Accordingly, it held that the registrar should not have ordered any payment by the directors to the liquidators, under section 214(a) of the Insolvency Act 1986 (IA 1986).

What are the practical implications that those advising can take away from this appeal?

This appeal judgment serves as a useful reminder—hot on the heels of Re Ralls Builders Ltd [2016] EWHC 243 (Ch), [2016] All ER (D) 142 (Feb)—of the risk of a pyrrhic victory when pursuing wrongful trading actions if claims are not properly particularised by quantifying the increase in net deficiency and any additional losses properly attributable to a wrongful decision to continue trading. The benefits of obtaining expert evidence to

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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.