Refusing a liquidator’s wrongful trading application

Restructuring & Insolvency analysis: David Bowden, solicitor-advocate of David Bowden Law, Andy Whelan, insolvency practitioner and partner at WSM Marks Bloom LLP, and David Oliver, consultant at Verisona Law (who acted for the successful directors), discuss the recent decision in Grant and another v Ralls and others.

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 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 be appropriate to make the director’s 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.

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Exploring how best to secure payment of the Court award

The Defendant was the sole owner of his property and we discovered there was one mortgage registered against it.  Mortgage enquiries and a valuation showed there was over £300,000 of equity in the property. 

Taking Court action to settle the debt

First we obtained a Final Charging Order. This means that the Judgment debt is registered and secured against the property as an equitable charge.

We then applied to the Court for an Order for Sale whereby the property would be sold and the proceeds of sale, following the discharge of the mortgage and other costs, would be used to settle the client’s claim. 

Although the Defendant strenuously opposed the application, the Court granted an Order for Sale and ordered the Defendant to vacate the property. They refused to leave.

Full repayment of the debt

At this point the Bailiff was instructed to take possession of the property and the Defendant was evicted.   It was then sold and we recovered full settlement of the debt and payment of legal costs for our client. 

The balance of the proceeds of sale was paid to the Defendant. 

Orders for Sale are granted at the discretion of the Court and the Court may be unwilling to make an Order for Sale if there are young children, elderly or disabled occupiers living in the property.

A building company

  • Nick Oliver

    Nick Oliver

    Director, Head of Insolvency and Business Turnaround

    T: 023 9231 2050 or 07718 159136


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