Hinton v Stobinski: Reliance On Accountants

A sole director who addressed many key questions at the Trial with “you would have to ask my accountant” has been ordered to pay £190,153.99 to its liquidator. In Hinton v Stobinski the court held that a director may rely on professional advice, but remains personally responsible for such matters that involve their director duties.

What happened

St. Mark Lions Limited was a service company for part of Dr Marek Stobinski’s work as a medical doctor. He was its sole director and shareholder. It was incorporated 19 March 2015 and entered creditors voluntary liquidation on 12 October 2022, with corporation tax of about £79,000 shown on the director’s own statement of affairs.

The liquidator, applied under section 212 of the Insolvency Act 1986 for £214,195.29 plus interest. The claim had three parts:

• £112,506 said to be an overdrawn director’s loan account, taken from the “Other Debtors” figure in amended accounts the director approved in May 2022.
• £63,189.29 of payments from the company’s only bank account with no invoices behind them. They included online marketplaces, auction houses, subscriptions, pubs and restaurants.
• £38,500 paid to the director in nine transfers between May 2020 and January 2021, each labelled “MGMT CHARGE”.

Very little was delivered up to the liquidator: some filed accounts and bank statements. There were no accounting records, board minutes, dividend paperwork or supplier invoices.

“You would have to ask my accountant”

The court held that a director cannot answer for his own decisions by pointing to his accountant. In the witness box Dr Stobinski repeatedly said “I am not an accountant” or that counsel would “need to ask my accountant”. He had taken the same line with the liquidator’s staff early in the liquidation.

The judge called that position “obviously wrong”. A director need not have an accountant’s expertise. But a director must know why they caused the company to make a payment or leave a liability unpaid.

The judge said a director may take and rely on professional advice, yet remains “ultimately and inescapably responsible” for the duties of the office.

Three features of the evidence appeared notable:

• Limited records. Applying Re Mumtaz Properties Ltd, the court tested the case against both the documents that existed and those that were missing. Following GHLM Trading v Maroo, it is for a director to explain what became of company property in their hands.
• Shifting explanations. The £38,500 was described in correspondence as contractor pay, then as dividends. The director’s own witness statement called it salary.
• No accountant in court. The defence rested on the accountants’ explanations, but nobody from the firm was called to give evidence.

The Court found that Dr Stobinski did not treat the company’s interests as separate from his own.

The result

The liquidator succeeded in seeking to recover £190,153.99, with interest and costs still to be decided.

The £24,041.30 reduction is a useful point for office-holders. The liquidator relied on the loan account figure in the amended accounts. The judge held he therefore had to accept that some later payments might already be counted within it.

The judge reached that conclusion “with some regret”, noting it may have allowed the director too much.