The well-known “CNA” case brought by the CNA liquidators against John Newton, the financial director of CNA on the basis of alleged reckless trading, is still very relevant today, even though the case was decided under the 1973 Companies Act.
Newton was sued in 2007 by CNA’s joint liquidators, who claimed that during the period 2000 to 2002 CNA’s business was run recklessly.
The law at that time required that recklessness by a director be determined in the light of what a “reasonable businessman” might have done under the same circumstances.
John Newton’s defence was built on the back of proper and detailed minutes of board and committee meetings, well-documented and carefully considered action plans and the structured implementation thereof in an effort to deal with the financial difficulties.
This case is a must read for all company directors.