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11.3.8.2 Problems of Enforcement/Procedural
The most important factor which will influence the liquidator‘s decision whether to
enforce the right under the Act is the question of the availability of funding. Since it
is an expensive process to bring an action against a director for trading while
insolvent, a liquidator will not commence the proceeding unless he or she is certain
that the costs are recoverable. 239 In addition, the liquidator needs to consider whether
there are funds available to pay costs of the other party should the claim fail.
In the UK, a liquidator can cover the costs under section 214 proceedings from the
company funds since they are regarded as part of the liquidator costs and expenses,
provided the liquidation takes place after 1 January 2003. 240 Due to lack of funding,
a liquidator is forced to find other alternatives in order to fund the proceedings. The
liquidator is unlikely to find assistance from the secured creditors on this matter
since they are not going to benefit from the claims made. It is further complicated by
the rules against maintenance 241 and champerty 242 as illustrated in Re Oasis
Merchandising Services Ltd. 243 The court held that section 214 vested certain rights
in the liquidator and these rights did not constitute the property of the company.
239 Andrew Keay ―The Duty to Take Account of Creditors‘ Interests: Has It Any Role to Play?‖
(2002) JBL 379 at 389-393 [―The Duty"]; Richard Schulte ―Enforcing Wrongful Trading as a
Standard of Conduct for Directors and a Remedy for Creditors: the Special case of Corporate
Insolvency (1999) 20 Co Law 80 at 87-88 Walters above n186 at 153-159; Hicks above n208 at 18;
Andrew Keay and Michael Murray ―Making Company Directors Liable: A Comparative Analysis
of Wrongful Trading in the United Kingdom and Insolvent Trading in Australia‖ (2005) 14 Int.
Insolv. Rev 27.
240 See the UK Insolvency Rules 1985, r4.218(1)(a)(i) as amended by r23 of Insolvency (Amendment)
(No 2) Rules 2002.
241 Assistance or encouragement of proceedings by someone who has no interest in the proceedings
nor any motive recognised by the law as justifying interference in the proceedings- see Trendtex
Trading Corp v Credit Suisse [1982] AC 679.
242 Form of maintenance in that assistance or encouragement of proceedings is provided in exchange
for a promise to provide a share of the proceeds of the action. (An archaic doctrine which intends to
stop a person from intermeddling in other‘s disputes where he or she has no interests - see British
Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006); see Schulte
above n239 at 87-88; Walters above n186 at 153-159.
243 [1995] 2 BCLC 493.
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