- Fraud—rescission of contracts, judgments and orders under the court’s inherent jurisdiction—application to directors’ disqualification undertakings and section 216(3) of the Insolvency Act 1986 (Re Soiram Ltd)
- What are the practical implications of this case?
- What was the background?
- What did the court decide?
- Case details
Restructuring & Insolvency analysis: The application concerned raised a novel issue on the application of the maxim ‘fraud unravels all’ to disqualification undertakings under the Company Directors Disqualification Act 1986 (CDDA 1986) and the prohibited names restrictions under section 216(3) of the Insolvency Act 1986 (IA 1986). The court held that there are established mechanisms for rescission due to fraud that are applicable to contracts, judgments and orders. Notwithstanding that disqualification undertakings have unique features, they are essentially contractual in nature. It followed that an applicant seeking to rescind his disqualification undertaking must look to the established mechanism of fraudulent misrepresentation. The court did not have a wider supervisory jurisdiction to retrospectively dismantle a disqualification undertaking on the general proposition that ‘fraud unravels all’. The court also declined to grant retrospective permission for the use of a prohibited name—a company in liquidation as a result of fraud could not be treated as though it was not insolvent and the fraud did not of itself justify granting retrospective permission for the use of a prohibited name. Written by Tiran Nersessian, barrister at 4 Stone Buildings.
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