When Billy finally left the building last month, having received his twelfth written warning, to be (more than) replaced by Jamie, NTI's Erling Haaland marquee signing over the summer, the quality of news bulletins escaping the NTI newsroom has massively improved.
This is not least the last one, which reported on compensation orders being ordered against directors for just some of the terrible things they do. Jamie is away today (Friday 6 October) on a now compulsory Xtreme Boot Camp training 48 hours, as an essential part of NTI's induction process and we are following his theme. Earlier this month the court awarded a personal compensation order against a disqualified director. This person cannot be named (his name is Barnsby) who rode a company so hard when it entered CVL its total receipts stood at just over £200, whereas unsecured creditors’ claims amounted to an impressive £350,000.
Barnsby was disqualified for seven years and then the Secretary of State brought further proceedings to obtain a compensation order against him. You almost certainly know that compensation orders, introduced in 2015, are a relatively new feature of director disqualifications and are, you may think, the glaze on the cherry on the icing on the cake. The courts have to go to all the hassle of calculating the amount to be ordered. They do so by examining an individual’s conduct and deciding whether it amounts to negligence, or a breach of a director’s duty to exercise reasonable care, skill and diligence. Then compensation is traditionally calculated using common law principles where loss is only recoverable if it was foreseeable at the time of the breach and is not too remote.
Barnsby advanced various arguments why the amount of compensation should be lowered, including that he was in a difficult financial position and may be driven to Bankruptcy by a substantial compensation order. The judge was heard to say, "Oh diddums" under his breath and in a fell swoop awarded compensation equal to the amount the creditors had paid to the company before it went insolvent.
Excellent.
Only two compensation orders have been awarded, and they are a potentially useful remedy where a Liquidation or Administration yields little in the way of recovery and creditors remain uncompensated. Creditors need to persuade the Insolvency Service to take the case and it is unlikely to do this if an Insolvency Practitioner is already taking action against the director in respect of the same conduct, or if the director has already contributed to the company’s assets in insolvency proceedings to compensate for their conduct.
But it is an additional arrow in the court's quiver as they take aim against the feckless and the terrible.
