''Re Brian D Pierson (Contractors) Ltd''

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BCC 26 is a

UK insolvency law United Kingdom insolvency law regulates companies in the United Kingdom which are unable to repay their debts. While UK bankruptcy law concerns the rules for natural persons, the term insolvency is generally used for companies formed under the ...

and company law case, concerning misfeasance and

wrongful trading Wrongful trading is a type of civil wrong found in UK insolvency law, under Section 214 Insolvency Act 1986. It was introduced to enable contributions to be obtained for the benefit of creditors from those responsible for mismanagement of the inso ...

Facts

Brian D Pierson (Contractors) Ltd built and maintained

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s. It fell into difficulty after contracting parties failed to pay on two projects. It continued to trade. In June 1994 the auditor reported a ‘fundamental uncertainty’ about whether the company would continue as a going concern. (Importantly, this was not, however, what is known as a ‘going concern qualification’ of the accounts which would amount to an expression of the auditor's ‘significant doubt’ about the company's ability to continue as a going concern.) It went into insolvent liquidation in January 1996. The liquidator, amongst others, applied for a contribution for wrongful trading for the period after June 1994. The court considered whether at that point in time the directors ought to have realised that there was no reasonable prospect of avoiding insolvent liquidation.

Judgment

Hazel Williamson QC held there was

from June 1994, but company's losses were partly due to extraneous actors like bad weather. The order was accordingly reduced by 30%. She noted that under IA 1986 s 214, ‘One cannot be a “sleeping director”; the function of “directing” on its own requires some consideration of the company's affairs to be exercised.’ Furthermore, the absence of warnings from one's advisers is no excuse for wrongful trading.

Notes

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References

* United Kingdom insolvency case law High Court of Justice cases 1999 in United Kingdom case law