Bezant v Cork

An application under Insolvency Act 1986, section 212 may be made only by a person who is a creditor when the application is heard and determined. A creditor who has been paid in full and has expressly ceased to be a creditor has no locus standi and no basis for the application. A liquidator is not subject to an absolute duty to take every possible step to recover assets or pursue alleged wrongdoers. The relevant duty is to exercise reasonable care and skill, including a properly informed discretion about investigation and litigation. Any case based on failure to investigate must identify what should have been done, what was not done, and how the omission could have affected the result.

Dr Bezant applied under section 212 of the Insolvency Act 1986 against the former liquidator of Tertiary Enterprises Ltd, alleging misfeasance and breaches of duty. The liquidator applied to strike out the application under CPR 3.4 and the inherent jurisdiction. After the application was issued, Dr Bezant entered into a compromise agreement settling her sex discrimination claim and expressly confirming that she was no longer a creditor of the company. The central issues were whether she retained standing under section 212 and, alternatively, whether her allegations disclosed a properly pleaded and sustainable case against the liquidator.

1. Standing under section 212. The application was struck out because Dr Bezant was no longer a creditor of the company. Section 212(3) permits an application by the Official Receiver, the liquidator, a creditor or a contributory. The applicant must have the relevant status not merely when the application notice is issued, but when the application is made and dealt with by the court.
2. The compromise agreement showed that Dr Bezant had been paid in full and had expressly agreed that she was no longer a creditor. The dissolution of the company and the fact that it was not a party to the agreement did not alter that conclusion. This was substantive, not technical: she had suffered no loss and had no conceivable basis for a section 212 application.
3. Alternative pleading observations. The court considered that an absolute duty on a liquidator to take every possible step to collect assets or pursue directors and others was unsustainable. A liquidator must exercise reasonable care and skill and decide, in the exercise of professional discretion, whether proceedings or other recovery steps are justified. The court will not lightly interfere with that discretion.
4. A possible duty to investigate existed only within the limits of the resources reasonably available and subject to reasonable care and skill. A claimant alleging breach had to identify what investigation should have been undertaken, what the liquidator failed to do, and how the omission could have made a difference. Bare assertions that proper investigation would have produced recoveries were inadequate.
5. Where the complaint concerned failure to pursue primary wrongdoers, the claimant had to plead and substantiate both the alleged primary misconduct and the consequential breach by the liquidator. The pleaded allegations of conspiracy, dishonesty and concealment were inadequately particularised and unsupported. The court would have struck out the application on this alternative basis and would not have allowed a further opportunity to reformulate it, given the history of repeated pleading attempts, delay and serious unsubstantiated allegations.
6. The court also observed that section 219 could not be engaged unless criminal proceedings had been instituted by the Director of Public Prosecutions or the Secretary of State. The proposed substitution of Mr Bezant was not before the court, but the submissions that the requirements of CPR 19.2(4) were unsatisfied were considered well-founded. The application was struck out.

First-instance decision. No prior appellate decision is stated in the judgment.