Outcome at a glance
The Supreme Court recognised that directors’ duties can require attention to creditors’ interests, but unanimously dismissed this appeal because the duty was not engaged when the dividend was paid. [1; 2]
Allegations & issues
BTI, as assignee of AWA’s claims, challenged directors’ payment of a €135 million dividend to Sequana while AWA faced uncertain future pollution liabilities. [2, Background]
Key rulings & findings
A real risk of future insolvency was not sufficient. AWA was solvent when it paid the dividend, and insolvency was neither imminent nor probable in the circumstances recorded. [2, Judgment and Reasons]
Admissions
The directors defended a contested claim; the appeal outcome was not a settlement admission. [1; 2]
Disposition
BTI’s appeal unanimously dismissed. [2, Judgment]
Penalties, damages & redress
The Court did not order repayment or award damages on this creditor-duty claim. [1; 2]
Restrictions & obligations
The decision concerned the content and timing of directors’ duties, not disqualification proceedings. [1; 2]
A duty to the company, taking creditors into account
The Court treated creditor interests as capable of modifying the directors’ duty to the company. It did not create an ordinary freestanding duty owed separately to each creditor. As financial distress deepens, shareholders’ and creditors’ interests can diverge because creditors increasingly bear the risk of losses. [1; 2, Issue 1]
Compliance with the statutory rules on dividends did not, by itself, answer every question about directors’ duties. The Court accepted that a dividend could be examined under the creditor-interest principle where the conditions for that principle were met. [1; 2, Issue 2]
Why the claim failed on these facts
AWA’s contingent environmental liabilities and the uncertainty of its insurance assets created financial risk, but the dividend was paid while the company remained solvent. Its eventual insolvent administration occurred nearly ten years later. The proposed trigger of a real risk of future insolvency was too early. [1; 2, Background and Issue 4]
The judgment should therefore be read in two parts: it affirmed a creditor-protective principle while rejecting liability on this factual basis. Treating the dismissal as permission for directors to ignore creditors whenever a dividend is technically lawful would miss the Court’s reasoning. [1; 2]
THE UNDERLYING RECORD
Primary sources
Read the full documents for their precise wording and context. Regulator summaries are identified separately from court records.
Court record · supremecourt.uk01 · Supreme Court · Case record and judgment ↗Court record · supremecourt.uk02 · Supreme Court · Press summary, 5 October 2022 ↗