Cavendish IP Solutions Limited v On And On Consultants Limited & Anor [2026] EWHC 2247 (Ch)

[2026] EWHC 2247 (Ch)Case No CR-2023-003357
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Venue The Rolls Building, 7 Rolls Buildings, Fetter LaneDate 28 August 2026
LONDON
EC4A 1NL
Before
MR JUSTICE FANCOURT
Between
CAVENDISH IP SOLUTIONS LIMITEDClaimant- and –
Between
ON AND ON CONSULTANTS LIMITEDDefendantNEIL MACPHERSONDefendant
Mr Adam Deacock (instructed under licensed access) for ClaimantMr Alexander Bradford (instructed by Freeths LLP) for DefendantsHearing Hearing dates: 9, 10, 22 July 2026
APPROVED JUDGMENT(circulated in draft on 20 August 2026)
[1]This is a judgment on a consolidated claim by a litigation funder, Cavendish IP Solutions Ltd. It took an assignment from the liquidator of One Property Group (UK) Limited (“the Company”) of all the Company’s claims against the Defendants.[2]The litigation began on 17 November 2021 with an insolvency application for a declaration that various payments by the Company to the First Defendant (“On and On”) or to or for the benefit of the Second Defendant (“NM”) were transactions at an undervalue (TUVs) or preferences in favour of a connected person, made within 2 years prior to the (CVL) liquidation of the Company on 18 November 2015. That claim under the Insolvency Act 1986 (“Act of 1986”) is pursued against both Defendants.[3]The Claimant then issued a Part 7 claim against NM only, on 12 June 2023, seeking damages or equitable compensation for breaches of statutory duties owed by NM to the Company, and relief against NM as a constructive trustee of the Company’s property.[4]On and On is a company ostensibly owned and controlled by NM’s wife, Susanne (“SM”). The Claimant’s case is that it was in fact controlled by NM and used as a vehicle for his benefit.[5]NM was not and is not a de jure director of the Company or the First Defendant, but the Claimant’s case is that he was a de facto director of both, concealing his involvement and interest in both companies, hiding behind a Mr Darren Bradbury, who was the sole named director and shareholder of the Company, and behind his wife as the sole named director and shareholder of On and On.[6]The Claimant’s application and claim were consolidated as a single claim under the above case number in the Insolvency and Companies List by order made on 16 June 2023, without prejudice to any limitation argument arising.[7]The limitation issue arises only in the Part 7 claim, which was issued more than six years after the start of the liquidation of the Company. Mr Deacock on behalf of the Claimant therefore accepted that the defence of limitation to the breach of duty claim (originally pleaded by NM, albeit later struck out) will succeed unless the claims come within s.21 of the Limitation Act 1980 (fraud and recovery of trust property) (“the Act of 1980”).[8]Following the making of an unless order on 14 January 2026, the Defendants were debarred from defending the claim and their defences were struck out, pursuant to a further order made by ICC Judge Mullen on 16 March 2026. This was in consequence of serious failures of the Defendants to comply with their disclosure obligations.[9]At the start of the hearing, the Defendants applied for permission to appeal out of time against the 16 March 2026 Order, but I refused permission, for reasons given in an ex tempore judgment on 9 July 2026 that do not need to be repeated here.[10]The consequences for the Defendants are serious, in that their main defence to claims for over £1 million was a factual version of the Company’s business and On and On’s and NM’s roles that is directly contradicted by the account of Darren Bradbury and other witnesses, who gave evidence to me at the trial. Although I can see the Defendants’ pleaded defence and witness statements, no oral evidence in support of it was given at the trial.[11]I must therefore decide the issues raised based on one side’s oral evidence, tested to some extent by questions that I asked the witnesses, the documents available (it being clear that swathes of relevant documents that must exist, or have existed, have not been disclosed by the Defendants) and, in that light, the inherent probability (or improbability) of the Claimant’s allegations being true. I have tried to bear in mind throughout that the Defendants, though debarred from defending, are entitled to a critical appraisal of the evidence against them and a fair evaluation of whether the case against them is sufficiently proved.[12]The claims that are pursued may be summarised in this way. i) First, payments made to On and On in the 2 years prior to the liquidation of the Company are TUVs, or, if there was any liability to make any such payment, preferences, because On and On was a connected person of the Company, and the payments should therefore be ordered to be repaid; ii) Second, other payments made to entities associated with NM in the 2 years prior to the liquidation were TUVs because they were gratuitous payments made for the benefit of NM, and NM should accordingly be ordered to repay them; iii) Third, other payments made to On and On and, in one case, a person associated with NM, which were made more than two years before the start of the liquidation, are breaches of NM’s statutory duties owed to the Company as a director, and damages or equitable compensation should be ordered against NM in the amount of those payments; iv) Fourth, the business model of the Company, which NM operated, was one that was bound to leave it insolvent, and so its operation was a continuous breach of those same duties and resulted in a shortfall to the Company’s creditors of £1,098,093.20, which sum NM should be ordered to pay by way of damages or equitable compensation. The limitation issue arises under (iii) and (iv) above. The claims under (i) and (ii) above are alternatively brought as claims for breach of duty, and as such the limitation defence also arises in those alternative claims.[13]In order to determine these claims, I must address and decide the following questions: i) Whether NM was a de facto director or a shadow director of the Company, or both. If he was not, he owed no statutory duties as a director and the claims under (iii) and (iv) above cannot succeed. ii) Whether the Company was insolvent at the time of making each of the payments that is challenged. It is presumed to be insolvent in connection with any TUV if the payment was made to a connected person (s.240(2) Act of 1986). If the Company was not insolvent, the payment in question cannot be a TUV or a preference. iii) Whether On and On was a person connected with the Company, either as being an associate of the Company, or as being an associate of NM, if he was a director of the Company (see s.249 Act of 1986). iv) For what reason the payments to On and On, or to those associated with NM, were made. v) Whether the payments were breaches of duty, and if so whether they were fraudulent breaches within s.21(1) of the Act of 1980. vi) Alternatively, whether NM is liable as a constructive trustee in relation to any of the payments. vii) Whether the conduct of the Company’s business by NM was a fraudulent breach of duty.[14]Before turning to those questions, I will consider first the nature, ownership and business of the Company itself, and of On and On.

The nature of the Company’s business operations

[15]The nature of the Company’s business operations There is no doubt that the true owner of the Company was not Mr Bradbury, despite the issued shares of the Company having been registered in his name. It was common ground on the parties’ pleaded cases that the Company was in reality owned by one Richard Goddard, a mysterious figure who operated as an off-shore based, wealthy entrepreneur. Mr Bradbury’s ownership of the issued shares of the Company was as nominee for Mr Goddard.[16]Mr Bradbury’s account of his involvement was that he did not really act as director of the Company either, but only as the manager of the property construction part of its business, with NM being the effective director of the Company, who ran the investment and financial side. Mr Bradbury did, in one sense, act as the director, because, on his own account, he was given documents by NM to sign as director of the Company, which only a director can sign, and which he did sign. However, his evidence, which was supported by the other witnesses that I heard from, was the Company was effectively run by NM on behalf of Mr Goddard, and that he, Mr Bradbury, simply did what he was told to do by NM.[17]The most reliable documentary evidence of what the Company did is probably the account of the Company’s history and business provided to its liquidator on 18 November 2015 (“the liquidation statement”). It was signed and provided by Mr Bradbury. He says that it was written by NM and given to him to sign. It portrays the Company as being owned and controlled by Mr Bradbury, which he says is false, and it conceals the identity of Mr Goddard and NM, but Mr Bradbury accepts that the description of the Company’s business activity is otherwise reasonably accurate. It describes how the Company would seek out residential property development opportunities and then carry out developments (or obtain planning permission) on behalf of external clients, doing the project management work, with the costs being charged to the underlying client, and with a commission for the Company from any profit obtained. That description accords with the description of the various witnesses, all former employees of the Company, from whom I heard evidence.[18]In truth, there was only one client, Mr Goddard, who provided (or caused other companies controlled by him to provide) to the Company the funds needed to buy the properties and develop them. How Mr Goddard was operating behind the Company is shrouded in mystery, but Mr Bradbury described the Company as “just doing Mr Goddard’s bidding; its only clients were Mr Goddard’s offshore entities”.[19]I have no doubt that the account given by Mr Bradbury of NM preparing the liquidation statement is correct. That is partly because I formed the impression from hearing Mr Bradbury give evidence that he is a straightforward and truthful person, but also because it is consistent with such documentary evidence as exists. This includes emails dated 9 October 2016 and 11 October 2016, in which NM (using an @onandonconsultants.com email address and signing off as “Neil Macpherson, On & On Consultants Ltd”) suggests that Mr Bradbury tell the liquidators that: and Mr Bradbury then does so. “I have provided all of the books and records which were in my possession. You are aware that One Property Group (UK) Limited was simply a holding company which held no assets and did not itself trade. As such the amount of books and records are extremely small”,[20]I conclude that Mr Bradbury’s account is true also because no liquidation statement written by Mr Bradbury himself would have omitted to identify NM as being closely involved in the business (which the prepared statement entirely conceals), or present an untruthful account of the termination of the Company’s business, which the liquidation statement does. It refers to the Company entering into negotiations with its landlord “for a new [un-associated] tenant to take over the lease from November 2015” following a settlement of arrears of rent. The person who took over the office premises was a company called Nexus Land Limited (“Nexus”), which, according to Deborah Hunt, who was employed by the Company and then by Nexus, simply carried on the same business as the Company had, from the same offices, using the same computer equipment and without any data being deleted. SM was the sole de jure director of Nexus until 2019, when NM because its de jure director. It effectively took over and continued the Company’s business, freed from the substantial debts that the Company had built up.[21]The same pattern had taken place previously, with a company called One Property Group Ltd (“OPG”). OPG had carried on the same business from about 2007, before the Company was created, and it was then dissolved in 2012. Mr Richard Hasseck, a director of the Claimant, made a trial witness statement that, for the most part, simply explains the documents that were available to the liquidator or that have become available to the Claimant and what they show, but he also gives admissible hearsay evidence of a conversation that he had in December 2022 with Mr Peter Bracken, a former VAT advisor of the Company. Mr Bracken regrettably died after the conversation had taken place and before he could make a witness statement. Mr Hasseck took a note of their conversation and exhibits it to his witness statement.[22]Mr Bracken told Mr Hasseck that he was introduced by Mr Bradbury to some of Mr Goddard’s and his friends’ companies to give VAT advice. He was then introduced to NM. The note states:
“Recalls OPG (old co) was liquidated as 3 Vat returns in arrears and owed c£100k i.e., to avoid paying its creditors. Says NM had a cavalier attitude to his VAT obligations. After Dave Barton left NM had a desk at the front of open plan office and ‘Lorded it over everyone’. NM was mostly the only person he saw and dealt with. DB was in occasionally … DB didn’t seem to be in charge. NM was very much GB’s boss and NM made all the decisions …. PB considered NM to be an officer of the company i.e., someone in authority and NM behaved in that manner. …. PB was very unhappy that lots of seemingly unconnected expenditure went through the books and VAT was incorrectly claimed. They (NM) dabbled in lots of businesses. OPGUK was the phoenix of OPG”
.

NM was very much GB’s boss and NM made all the decisions

[23]Mr Bradbury’s reliability was challenged by the Defendants in their Defence on the basis that he had attempted to secure a large payment from Mr Goddard or NM in return for keeping quiet when interviewed by the liquidator, and that when such payment was not made, Mr Bradbury made up the account that he has given the court. Mr Bradbury wholly denied that, and explained that at one stage he was seeking to negotiate a payment for his share of the profits and a redundancy payment, which did involve asking for money, but that otherwise he had not done what is alleged. I accept his evidence about that, which I find to be reliable generally.

Was the Company a trading company, or merely a conduit for money, and dormant?

[24]Was the Company a trading company, or merely a conduit for money, and dormant? Contrary to what Mr Bradbury was advised by NM to tell the liquidators, the evidence clearly establishes that the Company was a trading company that filed accounts and VAT returns. These show that it was operating at a loss almost throughout but with a substantial turnover, with quarterly sales shown on VAT returns at an average of about £300,000. The Company’s filed financial statements for 2012, 2013 and 2014 record its principal activity as “property development management” and a turnover of £80,682, £575,374 and £401,253 respectively. It was clearly not, as NM still suggests, just a holding company, even if subsidiaries performed other substantial roles (the extent of which is unclear).[25]Substantial sums of money were passing through the Company’s bank accounts. It had three accounts: a business current account, a direct reserve account and a clients account. However, as Mr Richard Hasseck demonstrates in his second (trial) witness statement, these accounts appear to have been used interchangeably, so that, for example, On and On was paid and NM’s expenses were reimbursed out of both the current account and the clients account, Mr Goddard paid money into and received money out of each of the three accounts, and various solicitors’ firms paid money into and received money from each of the three accounts.[26]In addition, NM, on behalf of the Company, was instructing solicitors, dealing with tax liabilities and paying suppliers. Despite the inadequacy of the Defendants’ disclosure, there are sufficient documents to show that the Company was clearly trading.[27]Mr Bradbury’s evidence was that the Company was set up by NM to take over the management of Mr Goddard’s property interests from OPG, which was itself a substantial company. NM told him that nothing would change as a result of the incorporation of the Company, but that it would “streamline accounting and taxation arrangements”. Mr Bradbury explained that he was presented by NM with documents relating to the Company to sign, which he did, unquestioningly. He said that invoices relating to building material supplies were generally issued to the Company, which, unlike its subsidiaries, had trade accounts with the main building material suppliers. It was Mr Bradbury’s role to confirm whether supplier invoices were valid and accurate, and to provide project-specific information which was used by NM to prepare cashflow forecasts. He exhibited emails from NM attaching these cashflow forecasts for the Company’s property developments. Mr Bradbury said that he attended monthly meetings with Mr Goddard and NM, at which he provided the project information, and NM then dealt with the financial side.[28]Mr Bradbury explained that NM recruited a team to assist him with the running of the finance/accounts department, and Mr Bracken to advise in relation to VAT matters. Gary Bullock was a project accountant appointed in 2012. NM and Mr Bullock prepared the Company’s accounts for Mr Bradbury to sign. NM would prepare the VAT returns. Mr Bradbury said that he was not involved in the question of what the Company should charge Mr Goddard’s offshore entities for its services. The projects were a mix of building projects, renovations, option deals and attempts to achieve planning gain, initially funded by the offshore companies and then by funds obtained by the Company from National Westminster Bank, from a facility that NM had set up and controlled.[29]Mr Bradbury said that NM controlled which invoices should be paid when, and that this included Mr Bradbury’s expenses, which also included materials purchased for the Company’s projects. Mr Bradbury incurred the expenses on a personal Amex card and then submitted reimbursement claims to NM for approval. He exhibited to his witness statement various emails chasing payment of expense claims. Mr Bradbury spent most of his time travelling around the country, visiting the Company’s sites, and so incurred substantial expenses.[30]The Defendants’ case as to what the Company was is hard to square with these and other documents, which show that there was a substantial turnover, including the payment of numerous invoices from On and On (identifiable from VAT returns), which have not been disclosed by the Defendants. Their case is that the Company was only a “Topco”, which carried out no services itself for which it was remunerated, but which acted as a conduit for the funds from Mr Goddard to be paid into its client account, and then out to the relevant subsidiary company to fund the particular development, and to On and On.[31]The funds, while they were in the Company’s account, are said by the Defendants to have been held on bare trust for Mr Goddard. The evidence, however, establishes that there was no single account that was only used to receive funds, purchase properties and receive profits on behalf of Mr Goddard. NM was a signatory on all three accounts, and in the mandate for the current account was described as “financial controller”. The evidence of all witnesses from whom I heard was that the Company was certainly not dormant.[32]The Defendants’ case was that NM’s role “was simply that of a conduit between Mr Goddard and either Mr Bradbury or any external counterparties engaged by the Company … to advise and observe on behalf of Mr Goddard, not to make executive decisions”. Who these external counterparties are was not identified. The account that NM advised Mr Bradbury to give the liquidators, and that he maintained to be the case, is clearly false. Exactly how the role of the Company interrelated with the roles played by the project-specific subsidiaries is unclear, but that does not matter for the purposes of this trial. It is sufficiently clear that the Company was playing a substantial role in the conduct of Mr Goddard’s business. Ms Hunt described it as being the main company for the business.[33]It was NM who instructed solicitors on behalf of the Company (using his @onepropertygroup.com address). He did this for the purpose of setting up and naming the Company’s subsidiaries, in connection with litigation against an entity called “Elevate”, and for the corporate restructuring whereby the Company took over OPG’s business. It was NM who signed the solicitors’ retainer for that work and who approved the invoices. It was NM who dealt with contracts of employment for staff, an employment agency that he used referred to him as a director of the Company.[34]Mr Bradbury took care of the construction side of the business, subject to direction from Mr Goddard and NM, and NM took care of the business and financial side, on the basis of collaboration with Mr Goddard from time to time. Ms Hunt said that NM was in charge of the office and all the accounts team reported to him. I accept that evidence. Although Mr Goddard was ultimately in charge of what was done, he played no part in the governance of the Company or in day-to-day control of the Company’s operations. That was left to NM, using Mr Bradbury as a front when any particular role had to be performed by the de jure director. Mr Bradbury said that there were no board meetings, and that in the time of Nexus there was greater formality. He did also say that Mr Goddard decided the big issues, but based on NM’s advice.

The nature of On and On’s business

[35]The nature of On and On’s business What exactly On and On was doing is obscure, principally because of the serious disclosure deficiencies on its and NM’s part, which resulted in their being debarred from defending this claim.[36]The only persons said to be involved with its business are NM and SM. The documents that do exist prove that very substantial sums were paid by the Company to On and On, but only a handful or On and On invoices are available. These bear the home address of NM and SM. The only surviving invoices to the Company are one dated 22 August 2012 for £30,000 (curiously with no VAT charge) for “Financial, corporate and Legal service for the three months ended 31 July 2012”, three invoices for much smaller amounts of £100 each, for the formation of new subsidiary companies, and one dated 25 November 2014 for £9,850 plus VAT for “Services of D Bradbury”.[37]There are also On and On invoices addressed to off-shore companies for the provision of financial and funding advice. The Defendants’ pleaded case is that, in so far as On and On received any funds from the Company, this was “because it had provided services to companies owned or controlled by Mr Goddard (for example Silverstream Limited), and Mr Goddard had specifically asked that the invoice be directed for approval and subsequent payment to Mr Bradbury, using the funds paid over to the Company by, and beneficially owned by, Mr Goddard.” The services in question are said to have been corporate book-keeping, payroll and administrative support/consultancy services, provided by SM.[38]NM is known to have been a tax advisor before he became associated with Mr Goddard’s businesses. It is unknown what professional qualifications SM has, none are pleaded in the Defence.[39]Such documentary evidence as exists shows that SM was performing an essentially secretarial function on behalf of NM, who himself had and used an @onandonconsultants.com address. On 2 July 2014, SM emailed NM asking whether a payment of £17,000 to Mr Bradbury, which NM had previously directed, should be transferred “straight from On and On or transfer to personal currant account then out [sic]?”, to which the answer from NM was “No straight to Darren is fine”. On 2 August 2016, a corporate services company sent SM a chaser following their earlier email sending a draft checklist to be used to file On and On’s annual confirmation statement, which had asked her to check the details and confirm them. The chaser asked if they could proceed to file the confirmation statement. SM then emailed NM: “Ok to give the go ahead?”, to which the answer was: “Yes”.[40]These two exchanges are revealing. If SM was, as pleaded, the only person capable of making decisions on behalf of On and On, it is inexplicable why she should refer such basic matters to NM. Further, if SM through On and On was providing corporate secretarial services to off-shore companies of Mr Goddard, it is surprising that she had engaged a corporate services company to prepare On and On’s confirmation statement. The only reasonable conclusion is that it is not true that SM was personally providing that kind of service for which On and On was being paid.[41]Ms Hunt said that NM would make sure that On and On was paid ahead of Mr Bradbury, and that he would direct her to do so, and that she believed that On and On was NM’s company because “he provided me with On & On’s invoices, which included his home address and a description of services which corresponded with [NM’s] work for [the Company]”. She said that NM would sometimes email her using his On and On email address[42]As to receipt of funds by On and On, the pleaded case of the Defendants was:
“Insofar as [On and On] received any sums from the Company, it was because it had provided services to companies owned or controlled by Mr Goddard (for example, Simplestream Limited), and Mr Goddard had specifically asked that the invoice be directed for approval and subsequent payment to Mr Bradbury, using the funds paid over to the Company by, and beneficially owned by, Mr Goddard.”
[43]What is alleged by SM and NM to have happened is that On and On was asked by Mr Goddard to raise an invoice to the Company, for unspecified services, and SM would then overwrite a single template document and print out a single copy of the invoice and hand it to Mr Bradbury, with On and On retaining no copy itself, and the template being again overwritten when the next invoice was prepared. Mr Bradbury is alleged to have been in sole effective control of the Company’s finances, and he would pay the invoice out of the trust funds alleged to be held by it.[44]Mr Bradbury’s account was entirely different. He said that he had no function at all in relation to the finances of the Company (beyond approving construction-related invoices for payment by NM), and that these were entirely managed by NM. He received no invoices from SM and had no responsibility to arrange payment of On and On. He did not know what On and On was invoicing for. His only responsibility was for the construction and development side of the Company’s business, once the development opportunity had been identified by Mr Goddard and NM and the property had been acquired.[45]I accept the evidence of Mr Bradbury on this matter. The Defendants’ inherently unlikely explanation of what was going on was proved neither by documents nor by oral evidence. There is no reason for me to disbelieve Mr Bradbury’s account, which strikes me as inherently more likely to be true, given the evidence of other witnesses and what the documents show of NM’s involvement.[46]The Claimant’s case as to what was going on between the Company and the Defendants is as follows.[47]Mr Goddard and NM had known each other abroad from at least 2005 (Mr Goddard gave Companies House an address in Monaco). Both were keen to be involved in residential property development and, from 2008, for whatever reasons, they were keen that their ownership and control of OPG and then the Company were not visible. On 21 April 2008, Mr Goddard, who was the sole director and shareholder of OPG at the time, transferred his shares to Mr Bradbury and resigned as director, and Mr Bradbury was appointed. Mr Bradbury was the sole director and shareholder of the Company from the outset, in May 2011. NM was going through a divorce from his first wife in about 2010. His income for the purposes of a divorce settlement was declared at £12,000 p.a., and this led to a nil maintenance order being made against him.[48]In 2008 or 2009, NM was imprisoned. The Claimant is able to point to hearsay documentary evidence, confirmed by Mr Bradbury, that this was in connection with a fraud offence, but no certificate of conviction has been put in evidence. Mr Bradford, who was instructed by the Defendants to represent them so far as he could, was allowed by me to make submissions on the discrete issue of whether the Rehabilitation of Offenders Act 1974 precluded the Claimant from seeking to rely on the conviction. There being no sufficient evidence of the conviction in any event, I place no reliance on the hearsay evidence. However, there was put in evidence a Confiscation Order made by the Crown Court at Isleworth on 24 July 2009, which records a benefit amount of £29,717,723 and an available amount of £80,999.49. As the amount ordered to be paid (equal to the available amount) was only a small part of the benefit amount, any further substantial sums received by NM would be liable to enforcement by a receiver under the Proceeds of Crime Act 2002.[49]This Order suggests that NM was convicted of an offence, and was found to have had a criminal lifestyle, but I do not rely on it as evidence of a propensity to be dishonest, nor is the (unspecified) conviction admissible for that purpose. I am satisfied, however, that, under s.7(3) of the 1974 Act, justice cannot be done in this case without admitting in evidence circumstances ancillary to NM’s spent conviction, namely the fact of the Confiscation Order. That fact seems to me to be highly material as part of the factual context in which NM, On and On and the Company have made their arrangements, including payment of NM, following NM’s release from prison.[50]NM was apparently being paid a salary of £12,000 p.a. by the Company. His work was full-time, or virtually full-time. £12,000 p.a. is clearly not a salary commensurate with the nature of the work and the responsibilities that NM was undertaking on behalf of the Company and Mr Goddard. NM must have been paid more, or been receiving more, to compensate him for the work that he was doing.[51]The obvious conclusion to draw is that it was convenient for NM to appear only to be receiving a salary of £12,000 and for him not to be seen to have an important role at the Company, or at On and On. In reality, NM must have been being paid significantly more, either as salary, or bonuses, or for other services. The reality was, I find, concealed by a limited company, On and On, apparently being run by SM and with which NM had no apparent role, invoicing the Company for substantial sums, apparently for services that it was providing. In reality, I find, NM controls On and On and uses it to charge the Company and other entities for the work that he is doing for them. It may be that, through On and On, NM is also doing work for some of Mr Goddard’s other companies, which was invoiced to them directly. It is unnecessary to decide that. However, the invoices that the VAT returns show were addressed by On and On to the Company are remuneration or reward, in one form or another, for the work that NM was doing for the Company or for Mr Goddard.[52]Without disclosure, which was not provided, it is difficult to establish on what basis NM was remunerated fully for his work. After the liquidation of the Company, NM claimed redundancy payments on the basis that he was being paid at an annual rate of £42,300. It is unclear why that figure was put forward, as the employment contract specified £12,000 p.a. However, the figure of £42,300 is a more realistic level of basic pay for the work that NM was doing (excluding any success or reward elements), than an annual salary of £12,000, which is manifestly below the going rate. Given the nature of the business, I consider that it is likely that the total amount being paid to NM through On and On was much higher than this.[53]NM was clearly using On and On for his own purposes, to conceal the money that he was receiving from the Company or from Mr Goddard or his companies. I find that it is likely that the payments from the Company to On and On were payments for his services, or for profit shares in the developments carried out by the Company. There is no obvious pattern to the amounts or dates of the invoices to the Company that enable me to identify from them a ‘true’ rate at which NM was being paid for his work.[54]Whether NM was either a de facto director or a shadow director of the Company, or both. A “shadow director” of a company is defined in s.251(1) of the Companies Act 2006 (“Act of 2006”) as “a person in accordance with whose directions or instructions the directors of the company are accustomed to act”. A professional person who advises the company, and a person exercising a function conferred by or under any enactment, are not to be regarded as a shadow director simply because the directors of the company act on their advice, instructions or direction: s.250(2) Act of 2006. The general duties of directors specified in Chapter 2 of Part X of the Act of 2006 apply to a shadow director, where and to the extent that they are capable of so applying: s.170(5) Act of 2006.[55]There is no definition of “de facto director” in the Act of 2006, unlike “shadow director”, but s.250 specifies as follows: Accordingly, any person occupying the position of a director, whether lawfully appointed or not, is a director and subject to the general statutory duties of a director. “In the Companies Acts ‘director’ includes any person occupying the position of director, by whatever name called.”[56]The question of how to prove a de facto directorship was addressed by Lord Hope of Craighead DPSC in Revenue and Customs Commissioners v Holland [2010] UKSC 51; [2011] Bus LR 111 at [39]:
“It is plain from the authorities that the circumstances vary widely from case to case. Jacob J declined to formulate a single decisive test in Secretary of State for Trade and Industry v Tjolle [1998] 1 BCLC 333, as he saw the question very much as one of fact and degree. He was commended by Robert Walker LJ in In re Kaytech International plc [1999] 2 BCLC 351, 423 for not doing so, and I respectfully agree that there is much force in Jacob J’s observation. All one can say, as a generality, is that all the relevant factors must be taken into account. But it is possible to obtain some guidance by looking at the purposeof the section. As Millett J said in In re Hydrodam (Corby) Ltd [1994] 2 BCLC 180, 182, the liability is imposed on those who were in a position to prevent damage to creditors by taking proper steps to protect their interests. As he put it, those who assume to act as directors and who thereby exercise the powers and discharge the functions of a director, whether validly appointed or not, must accept the responsibilities of the office. So one must look at what the person actually did to see whether he assumed those responsibilities in relation to the subject company.”
[57]The relevant principles, distilled in part from the Holland case, were summarised by Arden LJ in Smithton Ltd v Naggar [2014] EWCA Civ 939; [2015] 1 WLR 189:
“35 A person may be de facto director even if there was no invalid appointment. The question is whether he has assumed responsibility to act as a director. 36 To answer that question, the court may have to determine in what capacity the director was acting (as in Holland’s case). 37 The court will in general also have to determine the corporate governance structure of the company so as to decide in relation to the company’s business whether the defendant’s acts were directorial in nature. 38 The court is required to look at what the director actually did and not any job title actually given to him. 39 A defendant does not avoid liability if he shows that he in good faith thought he was not acting as a director. The question whether or not he acted as a director is to be determined objectively and irrespective of the defendant’s motivation or belief. 40 The court must look at the cumulative effect of the activities relied on. The court should look at all the circumstances in the round (per Jonathan Parker J in Secretary of State for Trade and Industry v Jones [1999] BCC 336). 41 It is also important to look at the acts in their context. A single act might lead to liability in an exceptional case. 42 Relevant factors include: (i) whether the company considered him to be a director and held him out as such; (ii) whether third parties considered that he was a director. 43 The fact that a person is consulted about directorial decisions or his approval does not in general make him a director because he is not making the decision. 44 Acts outside the period when he is said to have been a de facto director may throw light on whether he was a de facto director in the relevant period.”
[58]In Re Mumtaz Properties Ltd [2012] 2 BCLC 109, Arden LJ had previously said that the first step was to examine the governance structure of the company in question, to see whether the defendant was part of that structure – was he “part of the nerve centres from which the activities of the company radiated?” (at [47]).[59]It is difficult to assess the governance structure of the Company. Its constitution was not put in evidence by the Claimant, nor were its registration records. I was invited to assume that the model articles for a private company limited by shares applied on the basis of the statement in the application to register the Company. On that basis, its affairs were determined by its directors, and a single director was permissible as long as the articles did not state otherwise. However, the Company’s affairs were not governed in accordance with what is known of its governance structure, because Mr Bradbury did not take governance decisions on its behalf. Mr Bradbury confirmed that there were no meetings. All significant business decisions were taken by NM and Mr Goddard, perhaps by NM following consultation with Mr Goddard, and were not documented. All governance formalities, such as the signing and filing of financial statements and annual returns, were done by Mr Bradbury, as directed by NM.[60]There is no doubt that NM carried on at least a senior management role for the Company, looking after its finances and its employees, but the question is whether what he did was directorial in nature. NM decided which creditors should be paid, and when. He decided (doubtless in consultation with Mr Goddard) that the Company should be wound up in November 2015 and gave instructions to Mr Bradbury about what to do. Mr Bracken considered that NM was acting as a director. The Company deliberately did not regard him as a director, even if certain staff might have thought that he was, and he was not held out as a director of the Company: the opposite was the case. Asking, more broadly, whether NM was part of the nerve centres from which the activities of the Company radiated, the answer is probably that he was, and that (whether he liked it or not) he had assumed responsibility for the conduct of the Company’s business, albeit making decisions in accordance with the overall wishes and direction of Mr Goddard.[61]I consider that Mr Deacock was right to argue that NM was both a de facto director and a shadow director of the Company. So far as compliance and formalities were concerned, he was a shadow director, giving instructions to Mr Bradbury about what to do, sign, file and report, with which directions Mr Bradbury, as he explained, was accustomed to comply. In relation to other matters, that were not required to be seen to be done by the de jure director, I find that NM and Mr Goddard acted as directors of the Company and so (albeit invisibly to the outside world) occupied the position of directors, deciding every aspect of its business between them. That included the incorporation of the Company, in June 2011, and its voluntary liquidation, and NM therefore acted as a director, or a shadow director, throughout the life of the Company, prior to its liquidation in November 2015.[62]As a cross-check of that conclusion, I have asked myself, in accordance with the dicta of Millett J in Re Hydrodam (Corby) Limited (quoted in [56] above), whether NM was in a position to avoid damage to the creditors of the Company by taking proper steps to protect their interests, and in accordance with the dicta of Jacob J in Secretary of State for Trade and Industry v Tjolle [1998] BCLC 333, whether it is fair to hold NM liable as a fiduciary for the consequences of the Company becoming insolvent, having regard to the degree of factual and legal control that he had over events. The answer to both questions, on the evidence, is clearly “yes”. NM was in control of the finances of the Company and could have taken practical steps alongside Mr Goddard to protect their interests, and could have directed Mr Bradbury to do anything that was formally needed in that regard.[63]That means that throughout that period, NM owed the Company the general duties of a director, in particular the duty in s.172 of the Act of 2006 to act in the way that he considered, in good faith, would be most likely to promote the success of the Company for the benefit of its owner, having regard to (among other things) the interests of the Company’s employees and the need to foster its business relationships, and the duty in s.174 to exercise reasonable care, skill and diligence.[64]Whether the Company was insolvent at the time of each of the payments alleged to be TUVs The payments in question were made between December 2013 and September 2015.[65]The Claimant’s case is that the Company was balance sheet insolvent throughout its existence, as its business model did not include obligations on its customers to pay its expenses. Whether, when and in what sums Mr Goddard’s companies paid money to the Company, other than in connection with the initial acquisition of a property, seems to have been left to him and NM to decide. Mr Bradbury had no influence over that at all, nor knowledge of the basis on which the Company would be remunerated for its work.[66]With the exception of the first two quarters in 2011, the quarterly VAT returns showed a higher level of inputs than outputs (recorded costs exceeding recorded sales), and the accounts for the financial years ending 31 May 2012, 31 May 2013 and 31 May 2014 (which were the last to be filed) record operating losses of £186,057, £50,957, and £480,882 and net current liabilities of £220,318, £290,978 and £758,111 respectively.[67]Following its liquidation, there is a shortfall of assets of £1,098,093. OPG, which carried on the same business as the Company, presumably on the same model, also went into insolvent liquidation, with substantial debts owing to HMRC in excess of £100,000.[68]A company is unable to pay its debts for the purposes of s.240 of the Act of 1986 if it is “unable to pay its debts” within the meaning of s.123 of that Act. That may be because it is unable to pay its debts as they fall due, or because the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities (s.123(1)(e), (2)). Even where a company is making payment of its debts as they fall due for payment, if it is only doing so on the basis of a model that is increasing liabilities in the long term, it will be “unable to pay its debts” on account of the longer-term deficiency of its assets: BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3 BL plc [2013] UKSC 28; [2013] 1 WLR 1408 and Bucci v Carman [2014] EWCA Civ 383; [2014] BCC 269 at [29], per Lewison LJ.[69]There is insufficient evidence that throughout the period of 2 years starting in December 2013 the Company was unable to pay its debts as they fell due, though it is an obvious inference that it was not by the latter part of that period. However, the evidence shows that the Company had a substantial deficit of current assets over current liabilities at all times, increasing year by year, and insufficient fixed assets to bridge the gap in the longer term. The Company was incurring substantial expenses in carrying on its business but its receipts appear to have been insufficient for it to make a profit. It was, therefore, balance sheet insolvent throughout. The likelihood, I infer, is that in addition to any genuine sales revenue, money was paid into the Company’s accounts as and when required by one of Mr Goddard’s companies, so that it had funds with which to pay any debts that NM considered needed to be paid. Foremost among these were staff wages and invoices from On and On, with Mr Bradbury’s expenses some way behind.[70]I therefore conclude that, throughout the period of the challenged payments set out in Annexes C and D of the Particulars of Claim, the Company was unable to pay its debts. The payments were therefore made “at a relevant time” for the purposes of s.240 of the Act of 1986 if On and On was connected with the Company. If that connection is established, the Company is in any event presumed to be unable to pay its debts, unless the contrary is proved (which it was not).

Was On and On a person connected with the Company?

[71]Was On and On a person connected with the Company? Since NM was a director of the Company, On and On is a person connected with the Company, for the purposes of the Act of 1986, if it is an associate of NM.[72]On and On clearly is an associate of NM because SM was the director and shareholder of the Company, and SM is an associate of NM.[73]In reality, NM was also controlling the business of On and On. He was, in my judgment, a shadow director of that company too, as SM acted as director of On and On in accordance with the instructions and direction of NM and was accustomed to do so. On that basis, On and On is itself an associate of the Company: s.435(6) of the Act of 1986.[74]The relevant period of time for the purposes of s.238 and s.239 of the Act of 1986 is therefore 2 years, which means that all of the payments sought to be challenged by the Claimant as TUVs or preferences were made at a relevant time.[75]The reason for the Annexe D payments to On and On and the Annex C payments Annexes C and D, as pleaded in the consolidated Particulars of Claim, are reproduced as an annexe to this judgment. The total of Annexe C payments is £240,607.04, of which two payments in respect of, or to, “Felis Silvestris” account for £185,000.[76]The Claimant corrected the total of £453,985 for Annexe D during the hearing, to exclude one payment of £11,820 that was in fact made to Mr Bradbury and to give credit for two payments in the nature of loans made by On and On to the Company, as shown in Annexe B. The corrected total for Annexe D is therefore £377,165.[77]The Annexe D payments cover the period 4 December 2013 to 22 September 2015. In the Defendants’ pleaded case, there is no explanation of them, beyond the facts alleged that On and On made loans to the Company on occasions (which Annexe B reflects, but which does not otherwise explain the much larger payments by the Company to On and On), that any payments made to On and On were not for NM’s benefit, and that they were payments for services provided to Mr Goddard’s overseas companies by On and On.[78]If, as seems possible, On and On provided some services directly to Mr Goddard’s offshore companies – because NM was a tax and finance adviser and the offshore companies were the principal beneficiaries of the property developments that the Company managed on their behalf – then the services of NM, or On and On, were provided, to that extent, to the offshore companies, not to the Company. In other words, the Company did not benefit in any way from them.[79]The Defendants’ pleaded case is that services were provided to the offshore companies (by SM, acting through On and On) and were paid for by those companies transferring their funds to the Company, and held in a client account, so that the Company could use them to discharge On and On’s invoices to the Company. There was, of course, no oral evidence in support of this case, and there are no documents to support it. Instead, the documentary evidence, in the form of the Company’s VAT records, shows that it was paid substantial sums as management fees, or management and negotiation fees, by various offshore companies, and substantial sums on a regular basis by Mr Goddard himself: see paras 7.3 and 11.4 of Mr Hasseck’s second witness statement.[80]The evidence of the bank accounts, set out in Mr Hasseck’s second witness statement, undermines the suggestion that there was a separate trust account. Mr Bradbury was unaware of any such account. The Company’s financial statements identified no trust monies held by it. I find that there was no such account, and that the case that funds belonging to others were held by the Company to discharge invoices sent to it for services provided by On and On to the offshore companies is not proved. More likely is that the offshore companies, or Mr Goddard, paid the Company for its services, so that it could carry out its role as development manager, and the funds enabled it to pay its staff and other expenses.[81]Given that there was no trust bank account of the Company to hold clients’ funds separately from the funds of the Company, the payment of On and On’s Annexe B invoices was made with the Company’s own funds. To the extent that the invoices related to services provided to the offshore companies (if they did), the Company received no consideration for such work of On and On: only the offshore companies benefited. The payments made by the Company to On and On for such services were therefore gifts to On and On, within s.238(4)(a) of the Act of 1986; alternatively, the payment was a transaction in respect of which the Company received consideration that was far less in value than the consideration that it provided to On and On, within s.238(4)(b). There was no evidence that the Company was under any obligation to pay.[82]To the extent that payment of On and On’s invoices was a disguised payment for NM’s services to the Company, the payments were not a gift if the Company had a liability to pay NM (through On and On), nor were they a TUV if the payment made was commensurate with the value of NM’s services.[83]The Claimant’s case here is that if, as appears to be the case, NM had an agreement that the Company would pay him at the rate of £12,000 p.a., any further payments made were not his remuneration, nor did the Company have any obligation to pay them, and so the payments were in the nature of a gift, and so a TUV. However, the rate of £12,000 p.a. was plainly not the going rate for the services that NM provided. In the absence of a contract limiting his remuneration to £12,000 p.a., he was entitled to be paid the going rate for the work that he did, and the Company was obliged to pay him that. NM himself appears to have assessed this as £42,300 p.a., by making a credible redundancy claim. In reality, he was paying himself far more than that, probably by reference to the value of completed developments, or profits made from them. Expenses would not have been included in these payments, as they were separately charged and paid out of the Company’s bank accounts.[84]The evidence of Mr Bradbury and Ms Hunt was that it was NM who decided what payments were made and when. I conclude that it is most likely that the payments made to On and On were a mix of additional remuneration of NM as a director/manager of the Company’s business, and then much larger sums paid as a share of profit made on particular developments during the period.[85]The Claimant contends that, to the extent that On and On had an entitlement to any part of the payments, the payment of that part put it in a better position than it would otherwise have been, if the Company had gone into insolvent liquidation (s.239(4)(b) of the Act of 1986). As for the requirement that the Company was influenced in making the payment by a desire to achieve that improved position for the payee (s.239(5)), that is presumed in the case of a payment to a connected person, save where the payment was made by reason that the payee was an employee of the Company.[86]Accordingly, the payments reflecting NM’s services at the rate of £42,300 p.a. were not unlawful preference, as to that extent no desire to put NM in a better position is proved. This was just regular remuneration for work done. Any payments in excess of that rate were not preferences because the Company had no obligation to pay them. They were voluntary payments.[87]The position in relation to the alleged TUVs is that if there was no entitlement of On and On to be paid the Annexe D payments then, for the most part, the consideration that the Company received from On and On was significantly less than the amount of the payments. Up to £42,300 p.a., whether paid to NM directly or through On and On, would not have been a TUV because it was payment for NM’s services. Accordingly, some £30,300 p.a. of the On and On Annexe D payments were not TUVs.[88]The remainder of the (corrected) amounts in Annexe D are therefore TUVs.[89]Turning to Annexe C, the payees are a variety of businesses in the vicinity of NM’s and SM’s home address (Duck End, Stebbing, Essex), which is also the address from which On and On conducted its business. These payees are: Oak Service Station (which Mr Bradbury said dealt with landscaping supplies, heating oil and winter fuels) and two public houses, all in Great Dunmow; a building contractor, Number 7 Odd Jobs, whose proprietor lives opposite SM and NM; and Travis Perkins invoices for materials supplied to SM’s and NM’s property.[90]Number 7 Odd Jobs submitted invoices to On and On. Mr Bradbury exhibited to his witness statement a picture of work being done at SM’s and NM’s home address that Number 7 Odd Jobs had posted on Facebook, and said that it did not do any work for the Company. Mr Hasseck’s thirteenth witness statement exhibits planning documents showing that SM applied on 21 August 2012 for planning permission to extend their home, naming the director of Number 7 Odd Jobs, Ralph Sturch, as the point of contact, and that permission was granted in October 2012 and the works certified as completed in September 2014. The picture on Facebook is of works as described in the planning application.[91]The Defendants addressed these matters briefly in their Defence. They pleaded that Number 7 Odd Jobs carried out work on various projects for Mr Goddard’s companies via the Company, admitted that Mr Sturch lived opposite, but contended that NM allowed Mr Sturch use of their driveway for the receipt of building materials. That would not explain why the Company was paying Travis Perkins, however, nor does it answer the compelling evidence that Number 7 Odd Jobs was doing building work on SM’s and NM’s house.[92]The other Annexe C payments were pleaded by the Defendants to be payments made in respect of projects carried out for the benefit of Mr Goddard’s companies, including Felis Silvestris, said to be a project in Llangollen, in Wales. The payments made to public houses were not addressed.[93]The most obscure of these cases is the two large payments relating to Felis Silvestris. If that was, as the Defendants pleaded, a development project of Mr Goddard, it is not explained why two large payments were being made on the same day by the Company to or for it. A relevant document is an email from NM to his and SM’s accountants, Rickard Luckin, headed “Re: Felis Silvestris Limited Y/E 30.09.15”, copied to SM, in which NM provides answers to some questions from the accountant. One of these relates to a payment of £50,000 to “Tidewell Properties FS Loan”, which is explained by NM as being “a loan to a company associated with the shareholders of Felis”. A database of work done by Rickard Luckin for On and On as a client shows that Felis Silvestris Ltd was one of the companies in respect of which that firm had billed On and On.[94]A search carried out by Jenny Diep of Made Simple Group Limited into the formation of various companies, including Felis Silvestris Ltd, demonstrates that it was incorporated on 10 September 2012 using the email address neil@onandonconsultants.com. NM’s NatWest foundation bank account for 2019 shows payments in from “Felis Silves Ltd” in June and August 2019.[95]In light of this evidence, and given that the other Annexe C payments appear to be matters of personal benefit to NM, it seems more likely that Felis Silvestris was something to do with NM rather than a development project owned by one of Mr Goddard’s companies. The answer would very likely have been provided by disclosure from the Defendants, but that disclosure was withheld in large part. No loan agreement between the Company and Felis Silvestris has been disclosed. It is appropriate to draw the inference that disclosure would have provided evidence adverse to the Defendants’ case. I therefore conclude, on the balance of probabilities, that the £185,000 paid to Felis Silvestris was also paid for the benefit of NM.[96]All the Annexe C payments were therefore probably payments for which the payee provided no or no substantial consideration, and as such all but one were TUVs. The exception is the payment of £9,200 to Number 7 Odd Jobs on 28 May 2012, which was made more than 2 years before the start of the Company’s liquidation.[97]Were the Annexe B and C payments breaches of duty, and if so were they fraudulent breaches within s.21(1) of the Act of 1980? For the most part, this question does not matter, in view of the conclusions that I have reached about the TUVs. However, the answer must be that, except to the extent that payments were reasonable remuneration of NM, they were all breaches of the s.172 duty, as they were payments made for NM’s benefit, directly or indirectly, and the Company was balance sheet insolvent at the time.[98]As such, the director(s) of the Company owed its creditors the Sequana duty (BTI 2014 LLC v Sequana SA [2022] UKSC 25; [2024] AC 211). A decent and honest person in the position of a director of the Company at the time of each payment would have understood that these payments, voluntary payments for the benefit of one director, were all prejudicial to the interests of the Company’s creditors. NM would have understood exactly the Company’s financial position because he was the person who had control of its finances and who prepared its financial statements for Mr Bradbury to sign off.[99]Although the payment dated 28 May 2012 was made 3 days prior to the first set of statutory accounts filed by the Company (which showed a deficit of in excess of £200,000 after a year’s trading), it is obvious that there could have been no significant difference in the company’s solvency between 28 and 31 May 2012, and so this payment too, though it cannot be a TUV caught by s.238 of the Act of 1986, is a payment made in breach of statutory duty.[100]Subject to the limitation defence, NM is therefore liable to pay damages or equitable compensation for the losses caused all by the payments save to the extent that they included elements of reasonable remuneration for his work.[101]Section 21 of the Act of 1980 provides: Subject to that, s.21(3) provides that a 6-year limitation period applies. “(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action—(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.[102]In Armitage v Nurse [1998] Ch 241 at 251, Millett LJ explained that the test was whether the breach of trust was dishonest, which: And added:
“connotes at the minimum an intention on the part of the trustee to pursue a particular course of action, either knowing that it is contrary to the interests of the beneficiaries or being recklessly indifferent whether it is contrary to their interests or not.” “It is the duty of a trustee to manage the trust property and deal with it in the interests of the beneficiaries. If he acts in a way which he does not honestly believe is in the interests of the beneficiaries then he is acting dishonestly.”
[103]These principles were applied in the context of a company director in the case of Gwembe Valley Development Company Ltd v Koshy [2003] EWCA Civ 1048; [2004] 1 BCLC 131.[104]The breaches of duty were, in substance, NM knowingly preferring his personal interests to those of the Company, by paying himself (through On and On) large sums of money to which no honest entitlement has been established. The notion that these payments were for services provided by SM to Mr Goddard’s companies is obviously untrue. NM has provided to the liquidator and, through his pleaded Defence, to the court, a thoroughly misleading account of what the Company was doing. NM used such monies as were available to prefer his own interests to those of the Company’s creditors and must have done so knowingly, or at the very least with reckless indifference to the interests of the creditors.[105]There are two additional points. First, to the extent that the payments to On and On were disguised remuneration for NM’s services, the means of payment was avoiding liability for PAYE and NICs (the declared wages of £12,000 avoided or almost avoided those consequences entirely). Second, the Company wrongly reclaimed as inputs VAT paid on On and On’s invoices, as payments made to On and On were not for the services or goods of that company.[106]In all these circumstances, I have no difficulty in concluding that the breaches of duty committed by NM as a director of the Company by making the payments were dishonest, and as such the limitation defence does not avail him, by virtue of s.21(1) of the Act of 1980.

Was the conduct of the Company’s business a fraudulent breach of duty by NM?

[107]Was the conduct of the Company’s business a fraudulent breach of duty by NM? This is the final and largest part of the Claimant’s claim. The Claimant contends that the entire business model of the Company was flawed, because the Company did not have the right to be paid enough for the work that it was doing to make a profit. As such, the Company was bound to be and remain insolvent, causing a loss to creditors unless Mr Goddard chose to bail them out (which had not been done in the case of OPG). The conduct of the business is therefore alleged to have been a continuing breach of NM’s statutory duty to act in good faith in the best interests of the members and creditors of the Company.[108]The Claimant points to the fact that the Company’s VAT returns show that its chargeable sales were lower than its claimable expenses throughout 2012, 2013 and 2014, though this could have been because VAT inputs were being claimed wrongly (see above). According to its filed accounts, the Company’s expenses exceeded its turnover in each year, though again this assumes that its taxable income was being correctly stated.[109]There is no evidence of a contractual indemnity or a resolution of another company or individual to fund the Company’s work, or to maintain it as a going concern.[110]Beyond these essential points, there was not much analysis of the Company’s financial position by the Claimant at trial. It asserted that the model was bound to fail and that therefore NM, as its director, must have been in breach of duty, which breach was moreover fraudulent, and so the claim in respect of it is not time-barred. The Claimant did not, of course, have the opportunity to cross-examine NM as to whether he addressed the ability of the Company to continue as a going concern and, if so, where the funding would come from. Nor did it have full disclosure from NM.[111]The answer to the question of where the funding was to come from is, in any event, reasonably clear: it would come from Mr Goddard, personally or through one or other offshore entity that he controlled. The purpose of the enterprise was to carry out valuable developments that made profits for Mr Goddard (principally) and NM. To do so, Mr Goddard had to fund the process of finding, investigating and acquiring the properties, the costs and expenses of development and the sales process to realise the profits.[112]The business was of course intended to make profit, and the Company was a means to an end: it would not matter if it did not make profits itself, as long as its owners and directors did. As the sole member (in effect) of the Company, while the Company was solvent Mr Goddard was entitled to be content with limited or no profits (which would be transferred elsewhere) and authorise the directors to proceed on that basis. But once the Company was on the verge of being insolvent, Mr Goddard could not authorise the Company to trade at a loss. At that stage, the duty to its creditors was paramount: Sequana.[113]Even when on the verge of insolvency, the directors of the Company could properly have continued to trade on the same model if satisfied that the necessary funds to meet current and future liabilities would be forthcoming. The Claimant’s case that it would not be forthcoming really depends on its suggestion that the Company was set up to fail, as a way of avoiding paying large amounts of accrued debt, in particular tax.[114]This is what is alleged to have happened with OPG, which went into liquidation owing over £100,000 of VAT, in the opinion of Mr Bracken to avoid paying its creditors (see [20] above). NM instructed the solicitors who were acting for the Company (in litigation against Elevate) that OPG “was resolved for tax planning reasons”, and its subsidiaries were “transferred” to the Company.[115]The liquidation statement of the Company stated: It is accepted by the Claimant that this was a true statement of the way that the Company operated, though it points out that there was no contractual entitlement to reimbursement. “The company would charge the costs of the work to their client throughout working on the jobs. In addition, upon completion of the developments the company would be entitled to receive a Commission on the profit element of the project from the client.”[116]The funding of the Company (and OPG before it) was entirely down to Mr Goddard and his associates. NM was doubtless not in a position to compel payments and, when money was available, appears to have preferred his own interest to repaying debt. The business model was flawed in the limited sense that there was (apparently) no structured approach to recharging work on a project. It needed Mr Goddard to come good on the working assumption that he would keep the Company in funds to perform its role. But unless there was reason to believe that he would not do so, the model was not flawed in the sense that it was inevitable that the Company would remain (and become more seriously) insolvent. One of the difficulties that the Claimant faces is that, with the debarring of the Defendants, it did not get the opportunity to cross-examine NM about such matters, when the truth might have become clear, or alternatively a clearer basis for an adverse inference established.[117]There appears to have come a time, with OPG and the Company successively but not with Nexus, when it became “convenient” (or “good tax planning”) to put them into liquidation. The decision to do so does not mean that that was the intention from the outset, and I do not feel able to draw such an inference. It was not necessary or inevitable that the Company should fail in that way. However, that finding does not exonerate NM from the charge of breach of duty if he was duty bound during the period 2012 to 2015 to take steps to deal with the increasing debts of the Company, or alternatively put it into administration or liquidation to prevent further loss accruing.[118]By 31 May 2012, when the Company had been trading for about a year (having effectively taken over an established business operation from OPG), it had a net deficit of funds of £185,957 (taking into account a net credit balance of inter-company debt of about £158,000). In that year, the Company had billed only £80,682 of expenses. From that time, if not before, NM was in my view under a duty to consider how to avoid causing harm to the Company’s external creditors. The turnover increased substantially in the following year but a relatively small operating loss was made, and the overall deficit of funds increased to £234,580.[119]I consider that the obvious inference is that NM failed properly to consider the interests of creditors at a time (mid-2012) when the Company was clearly insolvent. The creditors were being put at risk by the way that Mr Goddard was funding (or not funding) the Company. NM should have asked questions about how the increasing list of creditors was going to be paid. That is what NM’s fiduciary responsibilities required him to do. An ordinary decent person in the position of a director would have done so. He was not entitled to sit back and leave that to Mr Goddard.[120]No inroads were made into the Company’s overall debt level during the financial year to 31 May 2013: the debt increased. I conclude that no steps were taken to avoid causing harm to creditors’ interests. NM was therefore in breach of the s.172 duty from (at the latest) 31 May 2012.[121]The final question is whether that breach was fraudulent. The fact that an ordinary decent person in NM’s fiduciary position would have acted differently does not, of itself, mean that NM’s conduct was fraudulent. The interplay between good faith, honesty and subjective belief in the context of the s.172 duty has been explored recently by the Court of Appeal and Supreme Court in Saxon Woods Investments Ltd v Costa [2025] EWCA Civ 708; [2026] UKSC 21. The following propositions can be derived from the judgments: i) If a director has acted dishonestly, that will be relevant to the question of whether they have acted in good faith to promote the success of the company in the best interests of its members as a whole, but dishonesty is not itself the test of good faith in this context; ii) Acting in good faith is acting as an ordinary, decent person subject to fiduciary responsibilities could act in the circumstances, and is a broader question than whether the director acted honestly or dishonestly; iii) Acting in a way that is procedurally misleading or improper, or disloyal. may be a failure to act in good faith, even if the director considered that their conduct was justified or honest.[122]A breach of the s.172 duty is therefore not automatically to be equated to a fraudulent breach, for the purpose of s.21 of the Act of 1980, since a breach of that duty can exist without the director having been dishonest.[123]The Claimant nevertheless submits that NM was in fact dishonest, and therefore fraudulent, in ignoring the interests of the creditors of the Company between 2012 and 2015. It submits that NM must have known (i.e. he did know) that trading in the way that it did could only benefit Mr Goddard and him, and that the Company would ultimately fail, to the prejudice of creditors. The Claimant further relies on the dishonest way in which NM concealed his own interest in the business and his own benefit from it, and the use of Company funds for his own benefit in a way that amounted to a fraud on the Revenue.[124]In my judgment, NM knew of the Company’s financial position and turned a blind eye to the risk of injury to creditors. Knowing of the risk, he nevertheless allowed the Company to continue to trade, from June 2012 to November 2015, without adequate protection for their interests, indeed in all probability without considering their interests. That was clearly done in the interests of Mr Goddard and himself. From the previous failure of OPG, he was aware of the likely consequences.[125]The knowledge, self-interest and benefit mean, in my judgment, that NM was dishonest. He deliberately caused the Company to continue to trade in the way that it was, knowing of the risk of harm to creditors. NM allowed things to continue because he and Mr Goddard were benefiting from it.[126]Accordingly, the Claimant’s case that the breach of s.172 duty was fraudulent is established. The breach continued in the second part of 2012 and throughout 2013, 2014 and 2015. The eventual deficit of funds was £1,098,083, of which £185,957 had accrued by the time that NM’s breach of duty is established. The deficit was not reduced at any intervening time, and so NM’s breach of duty from 31 May 2012 caused an increase in the deficit of £912,126.

Relief

[127]Relief The appropriate relief in relation to the TUVs is likely to be repayment of the (corrected) sums claimed in Annexes C and D (apart from the one 2012 payment in Annexe C and the adjustment that I have made for NM’s reasonable remuneration), plus interest.[128]For the fraudulent breaches of duty, damages or equitable compensation will be payable, including for the one 2012 payment that cannot be recovered as a TUV. What loss was caused by those breaches falls to be assessed on the basis of fraud.[129]I am concerned that there is likely to be double counting if damages based on the increased shortfall of £912,126 are awarded and orders are additionally made for repayment of the Annexe C and D payments. The making of the payments by the Company will have contributed to the total shortfall. The Claimant must give some thought to the proper assessment of the loss and the Defendants are entitled to be heard on the terms in which relief should be granted, and on consequential matters.[130]I shall give directions on handing down this judgment for those matters to be resolved by agreement or on the basis of written submissions, if needed. Annexe Annexes C and D to the Particulars of Claim Annex C Other Payments for the benefit of the Second Defendant NatWest account 89501853 Date Description Payment 16/06/2014 The Starr, Great Dunmow £297.94 14/07/2014 Oak service station, Dunmow £98.14 01/08/2014 The Angel and Harp, Dunmow £42.40 07/10/2014 Cheque 103- Oak service station £750 NatWest account 91916690 Date Description Payment 14/05/2014 Number 7 Odd Jobs £12,000 23/05/2014 Number 7 Odd Jobs £2,876 28/05/2014 Number? £14,251.93 07/07/2014 Felis Silvestris £100,000 07/07/2014 Felis Silvestris £85,000 26/09/2014 Number 7 Odd Jobs £6,000 14/11/2014 Oak service station £914.50 23/12/2014 Oak service station £580.16 09/02/2015 Oak service station £993.27 23/03/2015 Oak service station £1,756.43 24/04/2015 Oak service station £829.17 19/05/2015 Oak service station £772.31 29/062015 Oak service station £594.77 03/08/2015 Oak service station £1,629.35 22/09/2015 Oak service station £776.86131. NatWest account 89778545 Date Description Payment 28/05/2012 Number 7 Odd Job £9,200132. As per the Company's VAT returns Date A/C Description Amount 27/08/2015 Travispe Duck End Cottage TP £836.75 27/08/2015 Travispe Duck End Cottage TP £167.35 01/05/2015 Travispe Duck End Cottage TP £239.71 Annex D Clawback Payments to the First Defendant Date Description Payment 04/12/2013 On & On inv 1066 £6,000 04/12/2013 On & On inv 1067 £6,000 06/02/2014 On & On Inv 1072 £13,320 28/02/2014 On&On £11,360 03/03/2014 On&On £13,320 15/04/2014 On & On inv 1078 £11,000 30/05/2014 On & On inv 1081 £8,000 30/05/2014 On & On inv 1080 £30,000 08/08/2014 ON & On Consultan inv 1085 £8,000 08/08/2014 ON & On Consultan inv 1086 £3,840 04/09/2014 On & On loan repay £20,000 11/09/2014 On & On inv 1087 & loan £23,200 17/09/2014 On & On inv 1089 & 1088 £1,315 17/09/2014 On & On inv 1090 £25,000 09/10/2014 On & On inv 1093 £11,750 21/10/2014 On & On inv 1090 £29,000 11/11/2014 On & On inv 1094 & 1095 £13,200 13/11/2014 On & On inv 1097 £11,820 25/11/2014 On & On inv 1098 £11,820 23/12/2014 On & On loan repay £35,000 23/12/2014 On & On Dec invoices £32,760 06/02/2015 On & On inv 1108/1107/1109 £28,280 04/03/2015 On & On inv 1110 £3,000 31/03/2015 On & On inv 1110 £9,000 21/04/2015 On & On inv 1113 £5,000 24/04/2015 On & On inv 1112 & 1114 £8,000 14/05/2015 On&On £8,500 22/05/2015 On & On inv 1116 £12,000 12/06/2015 On & On inv 1117 £7,000 03/07/2015 On & On 1118 £8,000 23/07/2015 On & On 1120 £20,000 07/08/2015 On & On inv 1122 £12,500 22/09/2015 On & On inv 1123/1124 £7,000 £453.985