English Court makes only the second ever compensation order against a director

The English Court has, for only the second time, made a compensation order under the Company Directors' Disqualification Act 1986 against a disqualified director.

Background 

The director was the sole director of a travel company.  Its Air Travel Organiser's Licence (ATOL), a legal requirement to sell package holidays, expired in March 2017 but the director failed to renew it despite being aware that it had expired. The company continued to use the ATOL logo and took five payments for holidays before going into liquidation in December 2017, leaving the five customers without a holiday or a refund.

In April 2022, the court made a disqualification order against the director for a period of seven years.

Decision 

• The conduct of the director led to contraventions of the ATOL regulations which misled customers as to the legal protection they would receive.
• Having regard to the public policy considerations, the Court ordered that the director must personally pay the full amount due to the five customers plus interest. 

Key takeaways 

Only the Secretary of State can apply for a compensation order and is unlikely to do so if a liquidator or administrator is bringing a claim against the director for the same conduct.  This case shows, however, that it can be a useful tool for creditors who stand to receive nothing from a liquidation where a director's misconduct has caused identifiable loss to the creditors.

Find out more

To discuss the issues raised in this article in more detail, please contact a member of the Restructuring and Insolvency team.

Secretary of State for Business and Trade v Barnsby [2023] EWHC 2284 (Ch)