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Avacade duo granted appeal over ban

As judge finds discrepancies in disqualification orders

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The two former directors of pension introducer firm Avacade have been granted permission to appeal their disqualification orders at the UK court of appeal.

Father and son Craig and Lee Lummis were banned for six years in September 2021 over the liquidation of Avacade in 2015.

The Insolvency Service found that the two former directors paid themselves £1.3m ($1.7, €1.5m) and ignored creditors.

But justice Snowden granted the duo permission to appeal their bans on two grounds.

Firstly, the secretary of state who approved the disqualification orders did not allege during proceedings that Avacade was insolvent, the judge confirmed. This meant that the father and son duo, as directors, were not automatically required to hold a sum in reserve to settle a potential claim by HM Revenue & Customs (HMRC).

Secondly, the Insolvency Service claimed HMRC was a “creditor” of Avacade with equal status to other creditors. But the judge says that this may not be correct, as the original judgment stated that the taxman was a “contingent creditor”, since its claim was and remains unproven.

Judgment

Justice Snowden said: “It is arguable with a realistic prospect of success that in circumstances in which the secretary of state did not allege that the company was insolvent, it was not a breach of duty for the directors to cause the company to pay its known creditors, including themselves, rather than set aside a reserve for an unknown contingent liability to HMRC or take other steps to protect HMRC against the risk of the company eventually being determined to be under an actual liability to HMRC.”

He continued: “It appears not to have been part of the secretary of state’s case – at least in opening – that the company was insolvent at the time of the transactions […] It is realistically arguable that the judge erred in deciding that the directors breached their duties as directors by failing to make a reserve or take other steps to mitigate the risk to HMRC in such a situation.”

The Lummises intend to overturn the disqualification verdict on appeal.

The case was formulated and argued by Lee Lummis personally, without legal counsel.

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