Dix v Chigili: High Court upholds £147,000 preference claim against former director of insolvent 99p retailer

The High Court has ordered a former director of a failed 99p retail chain to repay £147,659.44 to the company's liquidators, finding that repayments of his director loans constituted unlawful preferences under section 239 of the Insolvency Act 1986.

In Matthew Dix & Anor (as joint liquidators of Max 99p Ltd) v Venkata Sudheer Kumar Reddy Chigili [2026] EWHC 1009 (Ch), ICC Judge Agnello KC found that the respondent, Mr Chigili, had received preferential payments from Max 99p Ltd between April and July 2018 — a period during which the company was demonstrably and heavily insolvent.

Background

Max 99p Ltd, which operated nine retail stores, had been balance sheet insolvent since at least its last filed accounts to March 2017, which recorded a net deficit of £151,114. In January 2018, the founding directors sold the company for £1 to three incoming directors, including Mr Chigili. Between January and April 2018, Mr Chigili lent the company a total of £199,911. By February 2018, a licensed insolvency practitioner had prepared a balance sheet showing liabilities exceeding £1 million and had advised the directors that a creditors' voluntary liquidation was the appropriate course.

All three incoming directors resigned on 1 May 2018, handing control to a Mr Poudel, who was appointed sole director. Despite their resignations, the company continued making repayments to Mr Chigili through to July 2018, leaving negligible sums in the company's bank accounts — on one occasion just £1.15 after a payment of £10,980.

Credibility findings

A significant feature of the judgement was the court's treatment of Mr Chigili's evidence. He had signed a witness statement asserting that repayments had been made pursuant to arrangements agreed as part of the handover to Mr Poudel. At trial, he sought to resile from this, claiming instead that his arrangement had been with a co-director, Mr Vulisi, and predated the handover.

Judge Agnello was unsparing. The shift was characterised as a deliberate attempt to improve his evidential position once he appreciated that an agreement made at handover would more readily satisfy the preference conditions. The court found, on the balance of probabilities, that an arrangement had been made with Mr Poudel at the point of handover to ensure repayments continued — the only plausible explanation for why a newly appointed director would otherwise make a series of large payments to a recently resigned one.

Desire to prefer

The respondent sought to bring the case within the Re MC Bacon Ltd [1990] BCC 78 principle — that payments made pursuant to genuine commercial obligations, actuated only by proper commercial considerations, do not carry the requisite desire to prefer. The argument was rejected. Unlike the debenture in MC Bacon, which had enabled the company to continue trading and avoid immediate collapse, the repayments here served no commercial purpose whatsoever for the company. Mr Chigili had ceased lending by the time the relevant agreement was made; the arrangement was purely for his benefit. Given his status as a connected person, the statutory presumption of desire under section 239(5) also applied, and the court found the desire independently established in any event.

Discretion declined

Arguments that the court should exercise its discretion under section 239(3) to make no order were similarly dismissed. The contention that ongoing trading had preserved value for creditors was unsupported by evidence; the financial position had in fact deteriorated throughout the period. The submission that delayed issue of proceedings had caused prejudice — particularly regarding bank mandates and missing records — was rejected as immaterial given the court's findings on the substantive agreement. Mr Chigili was ordered to pay £147,659.44 to the liquidators, together with interest from the date of liquidation.