Defence to a wrongful trading claims - burden of proof clarified

Philip Anthony Brooks and Julie Elizabeth Willetts (Joint Liquidators of Robin Hood Centre Plc) v Keiron Armstrong and Ian Walker [2015] EWHC 2289 (CH)

This case is noteworthy for the commentary by Registrar Jones which clarifies that the burden of proof to establish a defence in wrongful trading claims is on the directors, contrary to established guidance as set out in Sealy & Milman: Annotated Guide to the Insolvency Legislation (2015) 18th edition. The full judgement is available here.

In summary, the High Court considered a wrongful trading application against the company’s directors made by the joint liquidators of the company. The court held that, once it had been established that a director knew or ought to have concluded that there was no reasonable prospect that the company would avoid insolvent liquidation, the onus would be on him to establish the defence under section 214(3) of the Insolvency Act 1986 that he had taken every step to minimise potential losses to the company’s creditors. On the facts, the directors failed to demonstrate that “every step” had been taken.

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