Liquidator’s attempt for a second claim against same defendants

Ward (acting as liquidator of Brady Property Developments Ltd) v Hutt and others [2018] EWHC 77 (Ch)

The High Court has struck out a liquidator’s following an attempted fresh claim arising out of substantially the same facts, on the basis that (a) he failed to adhere to CPR 38.7 and (b) it was an abuse of process.

The case involved three respondents, all of whom were (a) directors (b) shareholders, and (c) creditors of the company. The third Respondent petitioned for its winding up, on the basis that the first and second respondents received payments from the company in the run up to liquidation in respect of sums they were owed, but left out the third Respondent from these payments. The liquidator accordingly brought a claim in the first instance against the first two respondents alleging misfeasance and breach of fiduciary duty.

On the second day of the trial, 9 May 2017, the liquidator was cross examined, taken through various documents, and accepted that none of the transactions that he was complaining about had caused the company any loss. The trial was adjourned and subsequently a notice of discontinuance was filed. The liquidator agreed to pay indemnity costs to the first and second Respondents.

The day following the discontinuance of the original claim, a new claim was issued against all three respondents for a preference payment made by the company to a separate partnership to whom it owed monies, which was in essence the three respondents together.

The first and second Respondents applied to strike out the liquidator’s further claim on the basis that

1. In breach of CPR 38.7 (which provides that a claimant who had discontinued a claim after the filing of a defence had to obtain the court’s permission before bringing another claim against the same defendant arising from substantially the same facts);
2. the rule in Henderson v Henderson [1843-60] All E.R. Rep. 378 (which required claimants to bring forward the whole of their case at one attempt);
3. it was an was an abuse of process.HHJ Matthews held that
4. The new claim was brought against the same defendants and arising out of the same facts of the 1st claim, accordingly CPR 38.7 was engaged. The liquidator had failed to seek permission of the court;
5. the principle in Henderson was not applicable as the 1st claim had not been decided; and
6. the new claim was an abuse of process as effectively the liquidator was the only person to whom any economic benefit was likely to accrue as a result of his claim, as any payment made by the respondents would have gone back to the respondents by way of the monies owed to them in the liquidation.This case highlights the importance of proper investigation of claims with a view to bringing all potential claims, if necessary as alternative causes of action, in one go. It also highlights the risks associated with office holders brining claims where they are the only one who is likely to benefit from the claim although they are a stakeholder in the liquidation in respect of the costs and expenses of the liquidation.