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One strike and you're out!

Schofield Sweeney’s Bradford based litigation team has just achieved a striking result for three clients faced with a £39 million claim against them.

The clients were former directors of a company which went into administration in 2009.  They, along with the Bank of Scotland and accountants/administrators Ernst & Young were sued by the Isle of Man based former majority shareholder in the failed company.  The Claimant, who had been subject to directors’ disqualifications in the past, alleged that there had been an alliance between the three directors, the bank and the accountants to engineer an insolvency so the company could be bought out of administration “on the cheap” by the three directors.  As it happened, whilst the company did go into administration, the three directors did not succeed in buying it from the administrators as they could not obtain the funding they needed from the bank with which they were supposed to be colluding!

The Claimant alleged multiple breaches of duty by the Defendants, including breaches of fiduciary duty and sought to get round the issue of limitation (the proceedings were not issued until more than eight years after the company went into administration) by claiming that the Defendants were guilty of fraud and deliberate concealment so that the normal limitation period did not begin to run until a much later date. 

All the Defendants made applications to strike out the claim and/or obtain summary judgment against the Claimant on the grounds that:-

1. The Claimant’s allegations of fraud against the Defendants disclosed no reasonable grounds for bringing the claim and had no reasonable prospects of success; they were fatally deficient and lacked any sufficient particulars to justify the case going forward;

2. His claims were time barred and the Claimant’s attempts to push back the start of the limitation period were wholly misconceived;

3. There was no other compelling reason why the case put forward by the Claimant should proceed to trial; and

4. Much of the alleged claim was for reflective loss and was not really the Claimant’s claim at all, but that of the defunct company.

The strike out applications were heard by Mr Justice Teare in the Commercial Court over four days of submissions by counsel for the various Defendants and the Claimant.  In his judgement, the Judge found for the Defendants on all grounds saying that the Claimant’s beliefs were speculation for which there was no rational support.  The Judge said that if he was wrong on the conclusion that the Claimant’s case was nothing more than speculation, he took the view that the Claimant’s case had no real prospect of success so that the Defendants should be given summary judgment in respect of the allegations against them.  He went on to say in his judgment that the Claimant had not been able to show that the limitation period only began to run less than six years before the proceedings were begun in any event. 

In addition to giving judgment for the Defendants, the Judge ordered the Claimant to pay the Defendants’ costs of the action and to make interim payments on account of those costs, in the case of Schofield Sweeney’s clients, he has to pay £40,000 within 21 days of the judgment.

For further advice contact James Staton and his team on 01274 306000 or email JamesStaton@schofieldsweeney.co.uk

About the Author

James Staton

Partner

James is a Partner and Head of the Dispute Resolution team and primarily handles commercial…

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