Brooks and Another V Armstrong and Another 
Author: Nigel Cook
In this appeal from the Registrar the directors succeeded in overturning a compensation award in favour of the liquidators
The case had previously been reported and commented on in last our IP Seminar. On appeal the directors argued that the Registrar, in awarding a contribution of £35,000 to the company’s assets, had adopted a method for calculating the net deficiency which had not been advanced either by the liquidators or the directors.
The Judge hearing the appeal noted that the liquidators had failed to set out the basis for calculating the net deficit and how it had been increased. The Registrar had been left to use his own methodology and in fairness to the directors they could legitimately have challenged this.
It is the net deficiency (or rather its increase) which justifies a compensation award under s.214 not simply the fact of losses to individual creditors.