Directors ordered to pay £1m for defending hopeless insolvency petition

Two company directors have been ordered to personally pay the costs of a creditors’ petition to wind up their firm, after the High Court found they pursued a speculative and self-interested defence they did not believe in.

Carly Davies, our Debt Control Manager, reports on this recent case.

Mrs Justice Joanna Smith ruled that Paul Hilton and Matthew Welsh, directors of MPB Developments Ltd, were the “real parties” behind the company’s failed resistance to a winding up petition issued by three property investment firms. The court had already ordered the company to be wound up in January 2025, after finding it was balance sheet insolvent.

In this costs hearing, the judge found that the directors had caused MPB to defend the petition over a 20-month period despite knowing the company could not pay its debts. The defence was based on “wildly optimistic” business plans which were neither updated nor independently verified.

The judge said Mr Hilton and Mr Welsh had acted with impropriety by continuing to run the defence in their own interests while drawing salaries of £240,000 each. She found they had rejected the opportunity to wind up the company earlier so they could negotiate settlement deals that offered personal benefits, including payments to themselves and releases from liability.

The directors were also criticised for failing to serve expert evidence, despite repeatedly stating it was essential, and then abandoning their defence on the first day of trial—after the petitioners had already incurred substantial legal costs.

Mrs Justice Smith concluded that the directors’ actions were not in the company’s interests and that they had used their control over the firm to pursue a “highly speculative” strategy. She ordered them to pay the petitioners’ legal costs, which exceeded £1 million, along with the costs MPB itself had incurred defending the case.

The company’s liquidators may now consider whether further recovery action is appropriate.

If you would like more information about the issues raised in this article or any aspect of debt collection and insolvency matters please contact Carly on 01228 516666 or click here to send her an email.