Commercial litigation podcast series – Episode 21: General update

In this 21st episode of our series of commercial litigation update podcasts, we look at developments relating to litigation funding since the Supreme Court’s dramatic decision in Paccar in late July, as well as brief updates on ADR, pre-action conduct and costs. We also discuss developments relating to Russian sanctioned parties, and the disqualification proceedings brought against former non-executive directors of Carillion which came to an abrupt end when the claim was dropped shortly before trial.

This episode is hosted by Maura McIntosh, a professional support consultant in our litigation team, who is joined by Ajay Malhotra, a disputes partner, and Richard Mendoza, a senior associate in our disputes team.

Our podcast is available on iTunesSpotify and SoundCloud and can be accessed on all devices. A new episode is released every couple of months. You can subscribe and be notified of all future episodes.

Below you can find links to our blog posts on the developments and cases covered in this podcast.

Maura McIntosh
Maura McIntosh
Professional support consultant
+44 20 7466 2608
Ajay Malhotra
Ajay Malhotra
+44 20 7466 7605
Richard Mendoza
Richard Mendoza
Senior associate
+44 20 7466 2024

Carillion director disqualification proceedings – Insolvency Service drops proceedings against non-executive directors in so-called “test case”

On the eve of trial, the Insolvency Service (IS), acting on behalf of the Secretary of State for Business and Trade, has discontinued disqualification proceedings brought in January 2021 against five former non-executive directors (NEDs) of Carillion plc. The trial, which had been listed for around 13 weeks (and originally as long as 6 months) had been due to start on Monday 16 October 2023.

The IS had been seeking to disqualify the NEDs from being involved in the management of any company on grounds that they did not know the alleged true financial position of Carillion (in particular alleged fraudulent misstatements of group accounts) at all times, including from the date on which they were appointed – ie a strict liability for the directors.

The IS’s case contrasted with established principles as to the standard of conduct expected of directors, including under the Companies Act 2006. If the IS’s claim had succeeded, it would have had serious and immediate consequences for corporate governance practices in the UK, no doubt impacting the willingness of individuals to act as non-executive directors of UK companies, particularly large and complex corporate groups. Continue reading

Court of Appeal considers when a person may be a de facto or shadow director

In a recent decision, the Court of Appeal upheld a finding that a director of a holding company had not become a de facto or shadow director of its subsidiary: Smithton Ltd v Naggar and others [2014] EWCA Civ 939.

A person may take on the duties of a company director, and therefore be liable for their breach, without ever having been formally appointed to the role. This may be because he has acted as a director, so as to become a de facto director (or director “in fact”), or because he has persuaded the directors to act in a particular way, so as to become a “shadow” director.

As the Court of Appeal noted in Smithton, the question of whether a director of a holding company has become a director of its subsidiary is one which often arises in practice. It is therefore important for group companies and their directors to understand when liability as a de facto or shadow director may arise. Although the assessment is a question of fact and degree in every case, the Smithton decision provides some insights as to the factors the court will take into account. Gregg Rowan and Emily Russell consider the decision below. Continue reading