Company director recovers £2m wrongly taken by her brother
A company director has won her legal fight to recover more than £2m that was misappropriated by her business partner who was also her brother.
The couple were directors and shareholders of a company that owned a property operating as a restaurant.
The restaurant ceased trading in 2017 and the property was put up for sale. It was agreed that the sale proceeds would be used to pay off bank loans totalling £2m.
The property was sold for £3.75m and the proceeds paid into the company's bank. Before the loans were discharged, the brother made payments from the company's account of £292,571 to an Italian company, £250,000 to a former restaurant employee and £1,554,850 to his own back account, leaving insufficient funds to pay off the bank loans.
The sister took legal action for recovery of misappropriated funds.
The brother claimed that he had acted to prevent the sister from taking all the company money which she had claimed was due to her.
He said he had intended to pay company creditors from the sum transferred to his personal account; he had been entitled to a 2.5% commission for arranging the property sale; the restaurant employee had been paid £25,000 to £30,000 per annum but she had done such a good job that her contract had provided for a redundancy payment of £40,000 for every year that she had been employed; the Italian property development would have realised a profit for the company of £300,000.
The court ruled in favour of the sister. It said the brother had not put forward anything like an arguable defence. The alleged terms of the restaurant employee's contract were extremely handsome and fundamentally implausible.
The suggestion that a director should charge estate-agent like fees for doing what he should be doing as a director was not an attractive one. The brother had not given a proper explanation for not producing a signed contract for the Italian investment; a far more convincing explanation was that the contract did not exist.
His explanations for the payments were a contrivance. The money had not been applied for genuine company purposes and the sister was entitled to have it returned.
Please contact Jon Alvarez if you would like advice about company law and litigation.