Personal costs orders made against directors of insolvent company

The directors of a company which had been wound up following a creditors’ winding-up petition were ordered to pay the costs of the petitioning creditors and of the company.

The creditors petitioned for the winding-up of MPB Developments Limited (MPB) on the basis it would not be able to repay unsecured loans made by the creditors of £50million as they fell due.

The creditors’ case was that the value of MPB’s assets was c£5.5million. MPB’s directors asserted the value of the assets was £30.8 million and opposed the winding-up petition on this basis until the start of trial. The court rejected that assertion as the creditors served no expert evidence in support of the valuation and made a winding-up order.

The creditors then applied for MPB’s directors to pay the costs of the winding-up petition, and to pay MPB’s costs, personally.

The court held that it had the jurisdiction to make personal costs orders, and the creditors would need to show that either MPB’s directors were seeking to benefit personally from MPB’s approach to the litigation or that they were guilty of impropriety.

Applying this to the facts, the court held that:

• MPB’s directors had controlled and funded the defence of the petition in their own interests and not that of MPB (for example, MPB’s directors had each received c£200,000 in salary after the presentation of the petition).
• MPB’s directors had acted improperly in defending the petition without any genuine or reasonable belief in MPB’s solvency and based on a speculative defence without the support of expert accountancy evidence. The court therefore made the personal cost orders. 

In reference to MPB Developments Ltd, Re [2025] 4 WLUK 44.