Misfeasance in UK Law

Misfeasance in public office is an intentional tort of considerable gravity. It seems to me that what Lord Bridge was concerned to discount in McLoughlin v O'Brien (above, paragraph 14) was “normal human emotions”, not significantly abnormal manifestations of non-physical sequelae.

The ratification by the shareholders was effective unless the decision of the directors was proved to have been misfeasance on their part. The evidence gives rise to suspicion that at the time of the decision by the directors and of the purported ratification the company was not in a position to pay £10,000 to Mr. Horsley. But that evidence fell far short of proof that the directors should at the time have appreciated that the payment was likely to cause loss to creditors.

There remains the question whether the grant of the pension was in the circumstances a misfeasance committed by the two directors who procured the grant and by Mr. Horsley Senior, the director who accepted the grant. If the company had been doubtfully solvent at the date of the grant to the knowledge of the directors, the grant would have been both a misfeasance and a fraud on the creditors for which the directors would remain liable. But the good faith of the directors is not impugned.

In the absence of fraud there could still have been negligence on the part of the directors. If the company could not afford to spend £10,000 on the grant of a pension, having regard to problems of cash-flow and profitability, it was negligent of the directors to pay out £10,000 for the benefit of Mr. Horsley Senior at that juncture. There could have been gross negligence, amounting to misfeasance.

If the company could not afford to pay out £10,000 and was doubtfully solvent so that the expenditure threatened the continued existence of the company, the directors ought to have known the facts and ought at any rate to have postponed the grant of the pension until the financial position of the company was assured.

The findings of the learned judge are sufficient to support the suspicion that the company could not afford to pay out £10,000 for the benefit of Mr. Horsley Senior, but this suspicion is largely based on hindsight. The accounts show that business was expanding, that there were no discernible cash-flow problems and that past profits were sufficient to absorb half of the payment for the pension, leaving the other half to be absorbed in the future.

A party who seeks to advance a different case, in circumstances such as this, bears a heavy burden as regards showing that the case could not have been conducted differently, in any material respect, as regards the evidence.