An experienced and respected insolvency practitioner who paid out almost £550,000 from a company in liquidation when she should not have done has been found liable to repay every penny after the High Court found that she had slipped below the standards of care and diligence to be expected of a professional.
The woman, who had 30 years’ experience of insolvency work, had been appointed as liquidator of a company and had authorised 18 money transfers from its account. Although she appeared to have been taken in by a fraudster, she argued that she had a reasonable belief, based on legal advice, that the company was obliged to make those payments to a customer.
Creditors of the company, whose interests were said to have been undermined by the dispersal of the funds, launched proceedings against the woman under Section 212 of the Insolvency Act 1986 seeking restoration of the sum.
In upholding their claim, the Court found that the woman had taken inadequate steps to ascertain the state of the company’s finances at liquidation. She had given inadequate, if any, consideration, to its trading position, assets and liabilities. There had also been a failure to obtain important missing information and inadequate inquiries were made as to the bona fides of those who received the payments.
In ordering her to repay £548,074 to the company, the Court found that she had failed to meet the standards of an ordinary, skilled insolvency practitioner. Her conduct could also be ‘characterised as a conscious disclaimer or disregard of responsibility for the assets in her charge on a material scale and a breach of fiduciary duty on her part’.