When a company fails, who can be held accountable is not always restricted to those who directly caused the collapse. Sometimes, those who assisted them can also be ordered to compensate creditors.
Thousands of holidaymakers, who were left stranded abroad when a travel company went bust without warning, stand to be compensated after the High Court ordered the company's former boss and others who assisted him in his dishonest designs to pay millions of pounds in compensation.
The company had appeared to be prosperous and growing and was licensed by the UK Civil Aviation Authority (CAA) to carry more than 200,000 passengers annually. However, in 2010, it was put into administration by its sole director and shareholder and the Air Travel Trust (ATT) had to step in to repatriate holidaymakers. The company later went into liquidation owing ATT, as its main creditor, more than £20 million.
The director had absented himself from the UK and the likelihood of recovering any money from him was remote. However, the company's liquidators launched proceedings against a number of other companies and individuals who were alleged to have dishonestly assisted the director in his breaches of fiduciary duty and misapplication of the company's funds.
In upholding the liquidators' claim, the Court found that the director had entered into contracts with the others which were clearly designed to line his own pocket and were not in the travel company's best interests. Those who had assisted had helped him to disguise the true terms of the deals, thereby potentially frustrating the regulatory oversight of the CAA.
The other defendants argued that they were 'the primary victims' of the director's fraudulent activity and had themselves lost substantial sums of money. However, the Court found that, as between them and the ATT, it was 'clear where the justice of the case lies'. They were ordered to pay more than £5 million in compensation to the travel company for the dishonest help that they had given to the director in breach of Section 175 of the Companies Act 2006. The director was found liable to pay a similar sum, although the judgment against him was unlikely to be enforceable.
If you have suffered a loss as a result of a company you deal with going broke in suspicious circumstances, contact Leanne Schneider-Rose for advice on 0121 698 2200, email l.schneider-rose@sydneymitchell.co.uk or fill in our online enquiry form.
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