Hurst v BDO Stoy Hayward LLP

On an appeal from summary judgment, the appellate court reviews whether the decision below was wrong or unjust because of serious procedural irregularity. A claim may properly be struck out where the alleged loss depends on a chain of events that has no realistic prospect of occurring. This includes a claim based on the assumption that a court would make an order outside its jurisdiction. A possible breach of duty does not establish recoverable loss unless the breach caused a realistic change in the relevant outcome. Statutory jurisdictional limits cannot be overridden by consent or acquiescence.

The claimant appealed against the Master’s order dismissing his application for summary judgment and granting summary judgment to the defendant accountancy firm. The claim alleged negligence in preparing a proposed individual voluntary arrangement during the claimant’s bankruptcy proceedings.

The claimant argued that omitted information concerning his beneficial interest in a property and an equity of exoneration would have made the proposal more attractive. He contended that the Registrar would then have made an interim order, and that the petitioning creditors would have accepted the arrangement. The central issues were whether those events had a realistic prospect of occurring and whether the alleged omissions caused recoverable loss.

1. The appeal was dismissed. Under CPR 52.11, the court’s task was to review the Master’s decision and intervene only if it was wrong or unjust because of serious procedural or other irregularity. No procedural irregularity was established.
2. The Master was entitled to conclude that the claimant’s case had no realistic prospect of success. The Registrar’s refusal of an interim order was based principally on the proposal’s lack of seriousness and viability, the claimant’s failure to make full disclosure, the absence of finality, and the likelihood that the voluntary arrangement would be used to prolong litigation. Correcting the figures concerning the property would not have altered that conclusion.
3. The alleged omission concerning the equity of exoneration was arguably a failure by the defendant. The issue was technically significant and the defendant ought arguably to have appreciated it. Nevertheless, the omission caused no loss because it would not have led the Registrar to make an interim order or changed the underlying outcome.
4. The claimant’s case also depended on the Registrar making an order which he had no jurisdiction to make under section 255(1)(c) of the Insolvency Act 1986. The Registrar’s reliance on section 375(1) and re RS & M Engineering Co Ltd [1999] 2 BCLC 485 was wrong, as later decisions had confirmed. The statutory time limit was mandatory and could not be overridden by the parties or the court.
5. It would be contrary to public policy to award damages on the assumption that a court would make an order beyond its jurisdiction. Any such order would have been liable to be set aside promptly. The summary judgment and strike-out order therefore stood.

1. High Court (Chancery Division): Master Moncaster dismissed the claimant’s application for summary judgment and interim payment, granted summary judgment to the defendant, struck out the claim and ordered costs. Permission to appeal was refused.
2. High Court: Mann J refused permission on paper on 8 December 2005. Warren J granted permission for an oral hearing on 20 January 2006.
3. High Court (Chancery Division): The appeal was dismissed.