St Mark Lions Limited: the debt, the doctor and his director's duties

In the recent decision of Lloyd Edward Hinton (Liquidator of St. Mark Lions Limited (in creditors’ voluntary liquidation)) v Dr Marek Stobinski [2026] EWHC 2386 (Ch), the High Court has clarified that a simple debt claim by a company against its director does not fall within the ambit of s. 212 of the Insolvency Act 1986 (IA 1986), the provision by which a delinquent director may be pursued for misfeasance or breach of duty.

What began as a procedural dispute developed into a detailed interpretation of the relevant statutory provision, informed by its legislative predecessors and the case law decided under them.

The judgment also serves as a useful reminder of the nature and scope of various of the general directors' duties, including the so-called creditor duty, and specifically the circumstances in which a subjective or an objective test is applicable when assessing a director's conduct.

The facts

The liquidator brought proceedings against Dr Marek Stobinski, the company's sole director and shareholder, on the basis that he had breached his duties under the Companies Act 2006 (CA 2006), in relation to:

• an overdrawn director's loan account (DLA);
• sums paid away to third parties which were apparently not for the benefit of the company; and 
• sums paid directly to Dr Stobinski from the company's bank account.

The liquidator contended that the payments were made when the company was insolvent or bordering on insolvency, and constituted misfeasance arising from breaches of duty. Alternatively, the liquidator argued that the outstanding DLA was recoverable as a simple debt, an issue that became central to the case.

Most of claims were brought under s. 212 IA 1986, being the summary procedure enabling an office holder to pursue claims belonging to the company for breach of duty and misfeasance. The claims were therefore commenced as insolvency proceedings in the usual way by an application under rule 1.35 of the Insolvency (England and Wales) Rules 2016 (IR 2016). Dr Stobinski disputed that procedural approach, arguing that a debt claim could not be pursued under s. 212 or by way of insolvency proceedings.

The judge made clear that the procedural skirmishes had not affected the outcome of the claim: the liquidator succeeded on his primary case for breach of director's duties. The judge's analysis of the debt claim will however be of interest to practitioners when considering how such claims should be pursued.

Section 212 IA 1986

Section 212 IA 1986 provides a summary procedure enabling a liquidator, creditor or contributory to seek relief against a current or former officer of a company who has misapplied company property or committed misfeasance or a breach of fiduciary or other duties owed to the company. The court may order the individual to repay or restore company money or property, or to contribute compensation to the company's assets.

The judge noted that the question of whether a company's debt claim against a director falls within the scope of s. 212 had not been considered since the pre-IA 1986 decision in Re ETIC Limited [1928] Ch 861.

Dr Stobinski advanced two arguments: first, that a liquidator could not pursue a simple debt claim under s. 212; and secondly, that any such claim belonged to the company and could not be brought in the liquidator's own name.

The liquidator argued that a failure to repay a contractual debt amounted to a breach of an "other duty in relation to the company" for the purposes of s. 212. Although the judge accepted that a literal reading of the provision appeared to support that interpretation, he ultimately rejected it. The authorities establish that s. 212 is concerned with misconduct and with duties arising from a person's office as director. A contractual obligation to repay a debt is different in character, as it does not arise from the office itself. Accordingly, a simple debt claim does not fall within the scope of s. 212.

The court nevertheless rejected the argument that the proceedings were a nullity because they had been commenced using the wrong procedure. The liquidator had authority to cause the company to pursue the debt claim, and the procedural defect was capable of being remedied.

Directors' duties

The liquidator's case was that Dr Stobinski had breached his duties under s. 171 (only to exercise powers for the purposes for which they are conferred), s. 172 (to act in the way the director considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole), s. 174 (to exercise reasonable care, skill and diligence) and s. 175 (to avoid conflicts of interest). 

Further, from the point the company was insolvent or bordering on insolvency, Dr Stobinski's duties to the company under s. 172 "were modified by the need to have regard to the interests of its creditors". This is the so-called creditor duty as established in BTI 2014 LLC v Sequana SA [2024] AC 211. 

The judge found that the company was at least bordering on insolvency on both a cash flow and balance sheet basis, but emphasised that the weight to be given to creditors' interests is "heavily fact-dependent and will vary with the circumstances".

In considering whether Dr Stobinski had complied with his duties, the judge addressed the subjective and objective elements of the s. 172 duty, recently confirmed by the Supreme Court in Saxon Woods Investments Ltd v Costa [2026] UKSC 21. On the evidence, the judge considered that an objective assessment was appropriate, finding that Dr Stobinski did not "really understand what a company is or [accept] that it has separate interests beyond his own personal interests". The relevant question was therefore what a reasonable director acting in good faith would have done in the circumstances. The answer was to stop drawing on the DLA and repay the debt.

The judge was highly critical of Dr Stobinski's evidence. He rejected allegations of dishonesty because Dr Stobinski was "incapable of acting with .. calculation or intent". The judge's view was that Dr Stobinski was unable to properly engage with the material facts, including those contained in his own witness statement.

The judge was equally unimpressed by Dr Stobinski's attempt to place responsibility on his accountant. Referring to Re Westmid Packing Service Ltd [1998] 2 All ER 124, he reiterated that while directors are entitled to take and rely on advice, they remain "ultimately and inescapably responsible for the statutory and fiduciary responsibilities of that office".

Comment

The decision illustrates the important distinction between a director's contractual obligation to repay a debt and liability arising from a breach of duty. A simple debt falls outside s. 212, but the same underlying facts may support a misfeasance claim where the director's conduct in incurring or failing to address the liability amounts to a breach of duty. Directors must distinguish their personal interests from those of the company, particularly once creditors' interests are engaged.

For office holders dealing with claims involving an outstanding DLA, the legal clarity provided by the decision is significant. The particular circumstances of a case are key, and here the judge emphasised that “where a director is subject to a liability capable of being described as a director's loan account, the facts giving rise to that liability will also be capable of being characterised as disclosing a breach of duty in their capacity as director.”