HomeFWJ TakeawayResourcesWhat are the Defences to Misfeasance?

The answer to this question will often depend on the allegation that supports the remedy sought.  

Where an insolvency claim exists, for example preferring a creditor or causing or allowing the Company to be involved in a transaction at an undervalue, then there are various statutory defences to such claims.

Generally, there may also be counterclaims to consider.  For example, where a simultaneous claim exists in favour of the Director against the Company.  However, caution must be taken when considering such claims as set-off is generally not available to counter a claim for Misfeasance.

Reliance on professional advice could be a defence to any such claim, but this will be largely dependent on the individual circumstances.  

In addition, there is a provision under the Companies Act 2006 that provides for a statutory defence where it can be demonstrated that a Director acted with honesty and integrity in such matters and was innocent to the losses being caused or suffered as a result of his/her actions.  

However, honesty alone will not provide a defence where the decisions or actions of the Director were not reasonable.

The Court will take account of the standards expected of a director generally, and the standard expected of a Director with the qualification, skills and experience of the individual subject to the proceedings.

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