Key points

  • Payments under a remuneration scheme did not constitute dividends, as the formal decision to categorise them as such was taken by an accountant at the end of the year.

  • Assignments of claims should expressly include all claims which can be made under that assignment in order for title to pass.

The facts

Global Corporate Limited (GCL) was assignee of a claim against Dirk Hale (DH), former shareholder of a company in liquidation. Under a tax scheme proposed by the company’s accountant, DH reduced the payments he received as an employee and increased the monthly payments he received characterised as dividends. GCL claimed DH was liable to repay these payments:

  • as a member receiving an unlawful dividend pursuant to sections 830 and 847 Companies Act 2006 (CA);

  • for misfeasance as a director pursuant to section 212 Insolvency Act 1986 (IA); and

  • as a party to a transaction at undervalue or a preference pursuant to sections 238 and 239 CA respectively.

Decision

The Court dismissed the first claim, finding that DH did not think he was making definitive decisions about declaring dividends as the accountant categorised the payments as either dividends or salary at the end of the year, based on whether there were sufficient distributable profits. Accordingly, section 847 CA did not apply. As to the second and third claims, the court held that DH was merely causing the company to pay for services he had provided to it, so he was neither guilty of misfeasance nor liable as a recipient of a transaction at undervalue. Finally, as the drafting of the assignment to GCL was held not to extend to preferences, this claim was also dismissed.

Global Corporate Limited v Dirk Stefan Hale [2017] EWHC 2277 (Ch)