In Ward (acting as liquidator of Brady Property Developments Ltd) v Hutt and others, the liquidator brought claims in misfeasance and preference against the directors of the company in liquidation. The liquidator eventually discontinued the claim.
However, he then went on to start a new claim against the defendants in respect of a different preference.
The court was required to consider CPR 38.7, which requires a claimant to obtain permission of the court where a claim has been discontinued and a second claim is to be brought based on the same facts.
Given due consideration, this could be quite common in insolvency litigation in that office holders may often identify and bring claims, and later after continued investigation, identify further claims to bring. The facts will likely be the same.
In this case, the liquidator did not seek the court’s permission under CPR 38.7.
The court considered that it did have the power to grant permission regardless, however the test for exercising such power was not clear. The main factor that the court considered was the fact that it would only be the liquidator that would benefit economically from any success in the proceedings, which it considered would be a general abuse of process. As such, the court struck out the claim in respect of the liquidator’s failure to comply with CPR 38.7, and for general abuse of process.
This case serves as a warning for office holders considering bringing claims – it is imperative that all possible claims are considered before action is brought. Whilst certain categories of claims may be attractive to pursue quickly and cheaply (such as preferences), it is often the case that the facts surrounding such claims could also give rise to other actions (misfeasance and TUVs).
Short Richardson & Forth is experienced in identifying claims in insolvency situations, usually on a contingency basis. Please do get in touch for more information.