Cavendish IP Solutions v On And On Consultants: concealed director found liable for six-figure transactions at undervalue

A man who avoided formal appointment as a director while running a property development company on behalf of an offshore principal has been found to have dishonestly diverted company funds through his wife's consultancy, defeating a limitation defence that would otherwise have barred the bulk of the claim against him.

In Cavendish IP Solutions Ltd v On And On Consultants Ltd [2026] EWHC 2247 (Ch), handed down on 28 August 2026, Fancourt J gave judgement on a consolidated claim brought by an assignee of a liquidator's causes of action against a consultancy and its de facto controller. The defendants had been debarred from defending after serious disclosure failures, leaving the court to assess the claimant's case against oral evidence from the company's nominal director and other former staff, tested only by the judge's own questions.

The company had been set up in 2011 to take over the management of an offshore entrepreneur's residential property interests from an earlier vehicle that had itself been dissolved owing substantial VAT arrears. Its registered director held the shares as nominee and, on his evidence, did no more than sign what he was given and manage the construction side, while the second defendant ran the finance and business side throughout, using a consultancy nominally owned by his wife to extract payments. A salary of £12,000 a year was declared, a figure the judge found nowhere near the going rate for the work being done, with a later redundancy claim citing £42,300.

De facto and shadow director despite formal absence

Applying the guidance of Lord Hope in Revenue and Customs Commissioners v Holland [2010] UKSC 51 and the principles distilled by Arden LJ in Smithton Ltd v Naggar [2014] EWCA Civ 939, the court examined the company's governance structure and found no board meetings, no documented decisions and a nominal director who did as he was told. The second defendant decided which creditors were paid, instructed solicitors, dealt with employment contracts and ultimately directed the company into liquidation. He was found to be both a shadow director, on the basis that the nominal director was accustomed to act on his instructions, and a de facto director, having assumed responsibility for the company's affairs and sat at what Arden LJ termed the nerve centre of its activities.

That finding carried statutory duties under sections 172 and 174 of the Companies Act 2006, and made the consultancy an associate for the purposes of the connected person provisions in the Insolvency Act 1986, since the wife was found to have acted on her husband's instructions in running it.

Numerous payments to the consultancy and to businesses near the couple's home, including building works and a substantial sum linked to a company incorporated using the second defendant's own email address, were found to be transactions at an undervalue or preferences, the company having received no or negligible consideration beyond a reasonable remuneration figure the judge fixed by reference to the redundancy claim.

Limitation defeated by dishonesty

The claim for breach of duty, issued outside the ordinary six year period, depended on establishing fraud under section 21 of the Limitation Act 1980. Applying Armitage v Nurse [1998] Ch 241 and the recent appellate guidance in Saxon Woods Investments Ltd v Costa [2025] EWCA Civ 708, the court distinguished a bare breach of the duty to promote the company's success from dishonest conduct. It found the second defendant knew of the company's insolvent trading position from mid-2012 onward, having overseen the earlier failure of its predecessor, and knowingly allowed it to continue trading for the benefit of himself and the offshore principal while creditors went unpaid, a course of dishonesty that defeated limitation and exposed him to damages for the resulting increase in the deficit, assessed at over £900,000.

The court noted, in admitting a confiscation order made against the second defendant some years earlier as background context under section 7(3) of the Rehabilitation of Offenders Act 1974, that it placed no reliance on the underlying spent conviction itself as evidence of any general propensity to dishonesty.