Any civilised system of civil justice affords those who are accused of wrongdoing a fair opportunity to defend themselves in court. However, as a High Court ruling in a corporate insolvency case showed, disobeying judicial orders can place even that fundamental entitlement in jeopardy.
The liquidators of a company that formerly ran a chain of convenience stores had been unable to identify any assets belonging to the business that they could sell for the benefit of its creditors. They claimed that all of the company’s funds, stock, fixtures, fittings and trading operations had effectively disappeared shortly before it was wound up, leaving it an empty shell.
With a view to recovering the value of those assets, the liquidators launched proceedings against a businessman and two of his corporate vehicles (the defendants), claiming more than £660,000. He denied allegations that he had been a shadow director of the company, that he had orchestrated the transfer away of its assets and that he had personally received unjustified payments from the company’s funds.
Sceptical about the businessman’s explanations, the liquidators obtained a court order against the defendants, requiring full disclosure of their accounting records, bank statements, trading invoices and other documents. The liquidators applied to the Court for appropriate sanctions to be imposed on the defendants on the basis that they had failed to comply with that order.
In upholding that application, the Court noted that large numbers of documents had been disclosed late, in redacted form or not at all. The breaches of the order were serious and the defendants had given no good reason for them. The consequences of those breaches were that the defendants’ evidence was struck out, they were barred from defending the proceedings and judgment was entered against them in the full amount of the liquidators’ claim.
