Holland v Revenue and Customs and Another: SC 24 Nov 2010

The Revenue sought an order under section 212 of the 1986 Act, for payment of the tax debts of the insolvent company by a de facto director. H had organised a scheme under which IT contractors had worked through companies created by him under a composite company scheme, and in each of which he retained one share. When the companies became insolvent, HMRC said that the companies had paid dividends without the supporting assets, and that H was a de facto director having retained a single share in each company through his own company. No allegation was made that this structure was a sham and there was never any pleading of dishonesty. HMRC now appealed a finding that he was not so liable.
Held: The appeal failed (Lords Walker and Clarke dissenting). The mere fact of acting as a director of a corporate director will not be enough for an individual to become a de facto director of the subject company. Acts entirely within the ambit of the duties and responsibilities of a director of the corporate director, are to be attributed to that capacity. The court must respect the separate identities in law of the various companies. The court must look to the actual actions of the person to see whether they amounted to an assumption of the responsibilities of a director.
Lord Walker said that a person which takes all the important decisions of a company’s management, and ensures that they are given effect to acts as a director. He would have allowed the appeal.

Lord Hope, Deputy President, Lord Walker, Lord Collins, Lord Clarke, Lord Saville
[2010] UKSC 51, UKSC 2009/0131, [2010] STI 3074, [2010] 1 WLR 2793, [2011] BCC 1, [2011] 1 All ER 430, [2011] Bus LR 111
Bailii, SC Summary, SC, Bailii Summary
Insolvency Act 1986 212
England and Wales
At First InstanceHM Revenue and Customs v Holland and Another ChD 24-Jun-2008
The Revenue sought to recover from the defendant substantial sums in respect of allegedly unlawful dividends paid from an insolvent company. They said that the defendant and his wife were de facto directors.
Held: Claims agains the second . .
Appeal fromHolland v Revenue and Customs and Another CA 2-Jul-2009
The appellant supported IT workers. Through his own company, he set up companies in which his company was a director, and which companies in turn employed the IT workers securing substantial savings in higher rate Corporation Tax.
Held: The . .
CitedSalomon v A Salomon and Company Ltd HL 16-Nov-1896
A Company and its Directors are not same paersons
Mr Salomon had incorporated his long standing personal business of shoe manufacture into a limited company. He held nearly all the shares, and had received debentures on the transfer into the company of his former business. The business failed, and . .
CitedIn re Lo-Line Electric Motors Ltd 1988
When considering the filing of additional evidence changing allegations made under the 1986 Act, the paramount requirement is that the director facing disqualification must know the charge he has to meet. As to the standard of misbehaviour required . .
CitedRe Kaytech International plc; Secretary of State for Trade and Industry v Kaczer and others CA 1999
Robert Walker LJ said that the expression ‘de facto director’ had been in use for a long time, and commented on the failure to distinguish in pleadings between pleas that someone was a shadow or a de facto director. The two different labels were not . .
CitedRe Canadian Land Reclaiming and Colonizing Co CA 1880
The court was asked whether two individuals who had been appointed and acted as directors while they were ineligible were directors or other officers liable to a summons for misfeasance.
Held: The test was was whether a man who had assumed a . .
CitedIn re Hydrodam (Corby) Limited ChD 1994
ET plc wholly owned MCP Ltd which wholly owned Landsaver MCP Limited, which wholly owned Hydrodam (Corby) Limited (‘HCL’). The only de jure directors of HCL were two Channel Island companies. HCL went into compulsory liquidation and its liquidator . .
CitedRe County Marine Insurance Co (Rance’s Case) 1870
The directors of an insurance company had declared a bonus by means of a an account of receipts which failed to deal properly with the risks underwritten. They then sought to have the company wound up voluntarily.
Held: The Directors could be . .
CitedRe Exchange Banking Co, Flitcroft’s Case CA 1882
For several years, the company had paid dividends drawn against false accounts, and paid them to the directirs as shareholders. When in insolvent liquidation, the copany sued thosee directors for the return of all the dividends wrongly paid out.
CitedRe Lands Allotment Company CA 1894
A limited company is not a trustee of its funds, but their beneficial owner. However, the fiduciary character of the duties of its directors mean that they are treated as if they were trustees of those funds of the company which are in their hands . .
CitedIn re Kingston Cotton Mill (No 2) ChD 1895
The power to order a director to repay a company’s funds lost as a result of ‘misfeasance’ does not apply to conduct engaged in honestly and reasonably.
Vaughan Williams J disused the general principle the directors will be liable to restore . .
CitedSecretary of State for Trade and Industry v Hall and Nuttall ChD 28-Jul-2006
The Secretary sought disqualification of the defendants. The second defendant had not been a director of the company, but director of another company which in turn held a directorship in the defaulting company.
Held: The claim failed: ‘i) As I . .
CitedRe Loquitur Ltd ChD 2003
. .
CitedBelmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) 1980
It had been alleged that there had been a conspiracy involving the company giving unlawful financial assistance for the purchase of its own shares.
Held: Dishonesty is not a necessary ingredient of liability in an allegation of a ‘knowing . .
CitedDovey and The Metropolitan Bank (of England and Wales), Limited v Cory HL 1901
In fulfilling this personal fiduciary responsibility, a director is entitled to rely upon the judgment, information and advice of a fellow director whose integrity skill and competence he has no reason to suspect.
Earl of Halsbury LC said ‘The . .
CitedSelangor United Rubber Estates Ltd v Cradock (No 3) ChD 1968
The expressions ‘constructive trust’ and ‘constructive trustee’ are ‘nothing more than a formula for equitable relief. It is the actual control of assets belonging beneficially to a company which causes the law to treat directors as analogous to . .

Lists of cited by and citing cases may be incomplete.

Company, Corporation Tax

Leading Case

Updated: 01 November 2021; Ref: scu.426472