Key Points

Where a sole director and shareholder of a company had breached fiduciary duties he could not ratify the breach if the company was insolvent;

Claims against the company in liquidation by dishonest assisting parties could not be set off under rule 4.90 Insolvency Rules against any liability they had in damages for that assistance.

The Facts

Goldtrail, a holiday tour operator through its sole director and shareholder (X) entered into agreements with the co-defendants (CDs). Those transactions were shams or designed to divert assets away from Goldtrail.

The liquidators of Goldtrail brought claims against X for breach of duty and CDs for dishonest assistance to recover cash paid by Goldtrail and certain payments made by CDs to M a company set up by X which it was claimed should have been paid to Goldtrail.

The Decision

The court held that X was liable for breach of fiduciary duty in misappropriating monies belonging to the company and having a conflict of interest in breach of section 175 Companies Act 2006. The CDs were found liable for dishonest assistance. X could not ratify the breaches of duty.

Comments

The Court rejected CDs argument that the doctrine of ex turpi causa prevented Goldtrail from recovering on the basis Goldtrail was a victim of X's breach of duty which could not be attributed to the company. Even though it was accepted CDs had legitimate counterclaims for seating provided on their aircraft the Court refused to allow set off of those claims because the dishonest assistance could not be categorised as a "dealing" with Goldtrail.

Goldtrail Travel Limited v Aydin and others