Manhattan Coffee and a director in liquidation

The file

Manhattan Coffee Investment Holding is an investment holding company incorporated in Mauritius. Its only assets were shares in two other Mauritius companies, Cedar IV Ltd and CedarSoc Ltd. Stephen Mbugua Mwagiru is a director of Manhattan Coffee. He is neither a creditor nor a shareholder.

In March 2017 the company lodged a plaint in the Supreme Court. It asked the Court to annul share issues in the Cedar companies which, it said, had diluted its holdings from 46.5 per cent to 14.5 per cent in one company and from 51.2 per cent to 14.6 per cent in the other, or to award damages of US$340 million. In May 2023 the Supreme Court ordered the company to be wound up on the petition of an unpaid creditor, and two joint liquidators were appointed.

In November 2023 Mr Mwagiru asked the Commercial Division for two orders, each made the day it was filed, without notice to the company or the liquidators and without a hearing. The first, the Leave Order, gave him leave under Insolvency Act 2009 section 154 to apply for permission to continue the plaint. The second, the Derivative Order, gave him leave to continue the plaint in the company’s name. He relied on provision 170 of the Companies Act, which is the provision that lets a shareholder or a director ask the Court for leave to bring or continue proceedings in the company’s name, and on Insolvency Act 2009 section 174, which is the Court’s supervision of a liquidation.

The company, acting by the joint liquidators, appealed. The Court of Civil Appeal set both orders aside. Mr Mwagiru appealed to the Judicial Committee of the Privy Council. Lord Richards gave the judgment on 14 May 2026, after a hearing on 19 March 2026. Lord Briggs, Lord Leggatt, Lady Rose and Lord Doherty sat with him. The appeals are [2026] UKPC 21, Privy Council Appeals 0043 and 0044 of 2025.

Issues the court decided

The Board decided three questions.

First, once the company was in liquidation, could Mr Mwagiru use provision 170 of the Companies Act to continue the plaint in the company’s name? All parties agreed that he could not. The Board held that this was clearly right. That provision is for a company that is still being run by its directors and shareholders. In a liquidation the people with the primary interest in the company’s assets, including its claims, are the creditors. The provision does not give a creditor a right to apply, and it does not hand the conduct of the company’s affairs to the liquidator. The Leave Order, which existed to open the door to that application, was misconceived.

Second, does the Court have power, in a liquidation, to authorise someone other than the liquidator to bring or continue a claim in the company’s name? The Board held that it does. Insolvency Act 2009 section 174 lets the Court give directions in connection with the liquidation. The same power has long been exercised so that a person with a real interest in getting in the company’s assets can sue in the company’s name when the liquidator will not. That interest belongs to creditors, and to contributories where a surplus for them is likely. A contributory is a person liable to contribute to the company’s assets on a winding up, which for a company limited by shares is generally a shareholder, and only to the extent that shares are unpaid.

Third, did Mr Mwagiru have standing to ask for that authority? He did not. He remained a director. Under Insolvency Act 2009 section 154 the directors stay in office, but they cease to have powers, functions or duties other than those that Part III of that Act still requires or permits. Staying in office did not leave him a residual power to sue in the company’s name. Being listed in Insolvency Act 2009 section 174 as a person who may apply for directions, with the Court’s leave, does not by itself give a director standing to ask for every direction. He has to show a legitimate interest in the direction he wants. A recovery on the plaint would increase the assets available for creditors and, if anything remained, for contributories. A director, as director, does not share in that distribution.

The holding in the court’s words

“In the Board’s judgment, the Leave Application and the Leave Order were entirely misconceived and have led to considerable and unnecessary procedural confusion.”

“Consistently with that principle, the power to authorise a person other than the liquidator to bring a claim in the name of the company has always been treated as one available to creditors and contributories, but not to others.”

“The Board is satisfied that there is no basis for saying that directors in this position retain any powers, however residual, save as expressly allowed under the legislation.”

The Board adopted the description given, for the equivalent New Zealand provision, by Wild J: “the directors, while they remain in office, are shorn of their powers and functions in favour of the liquidators.”

“A director or former director does not therefore have any legitimate interest in pursuing claims in the name of the company, at any rate in the absence of exceptional circumstances.”

The exceptional cases the Board described were different from this one. Directors who have been given a specific job in a voluntary liquidation may need to ask the Court for directions about that job. Directors may also need to ask whether a liquidator was validly appointed, so they know whether to hand over the assets. Neither situation was Mr Mwagiru’s. The Derivative Order was wrongly made on either footing. Provision 170 of the Companies Act did not apply. Insolvency Act 2009 section 174 did not give this director standing.

The Court of Civil Appeal was also right about the procedure. Both orders were made with no notice to the joint liquidators.

“Orders should be made on an ex parte basis only in exceptional circumstances, such as where giving notice might well frustrate the order sought (for example, in the case of an application for a freezing order), or where the urgency makes it impossible to give notice.”

“For the reasons given in this judgment, the appeals are dismissed.”

What the court did not decide

The Board did not decide whether the Cedar share issues were unlawful, or whether the company would have recovered US$340 million. It said it was unnecessary to go further into the facts of the plaint. Dismissing these appeals leaves the winding-up order and the liquidators’ control of the company’s claims where they were. It does not decide the plaint.

The Board also accepted that a creditor, or a contributory with a real prospect of a surplus, can in a proper case be authorised to sue in the company’s name. This appeal failed because the applicant was a director only.

The trap

Two facts in this file are easy to join up wrongly. The directors remained in office after the winding-up order, and Insolvency Act 2009 section 174 names a director among the people who may apply for directions. Together those facts can look like permission for a director to carry on a claim the liquidators have decided not to pursue. The Board separated them. Office continues. The powers of that office do not, except where the Act still allows them. A name in the list of applicants is the start of an application, and standing still depends on an interest in the assets that will be collected and distributed.

The judgment

Lord Richards, Manhattan Coffee Investment Holding (in liquidation) v Stephen Mbugua Mwagiru [2026] UKPC 21, 14 May 2026. The directors chapter explains what directors do while the company is a going concern: Directors and their duties.