Rawnsley & Anor v Weatherall Green & Smith North Ltd

On an application for summary judgment or strike out, a claim should proceed where the evidence raises a genuinely arguable breach, causation issue or loss-of-chance assessment. A liquidator may sell a company’s bare cause of action under paragraph 6 of Schedule 4 to the Insolvency Act 1986, including for a share of recoveries. That does not permit assignment of the liquidator’s personal statutory powers or discretionary control of proceedings. An assignment of the cause of action itself is therefore distinguishable from an assignment of the fruits of proceedings together with the liquidator’s power to prosecute. Claims brought by a shareholder for loss reflecting the company’s loss are barred by the reflective-loss rule.

The consolidated proceedings arose from the liquidation of Canal Dyeing Company Limited and the sale of its principal property. David Rawnsley claimed in several capacities against the liquidator, Peter O’Hara, and Weatherall Green & Smith North Ltd, alleging inadequate marketing, negligent valuation advice, failure to pursue claims against the valuers, and delay in executing an assignment. The Company was also named as claimant, but its joint liquidator did not prosecute the proceedings.

The defendants applied for summary judgment or strike out. The central issues were the effect of the court-authorised assignment, the assignability of the claims, the application of the reflective-loss rule, and whether the alleged breaches, causation and loss had realistic prospects of success.

The applications succeeded in part and failed in part.

1. Claims brought by Mr Rawnsley as shareholder were bound to fail under the rule against reflective loss, as stated in Johnson v Gore Wood [2001] 2 AC 1 and Gardner v Parker [2004] EWCA Civ 78.
2. The order of 22 May 2008 authorised assignment of claims against Weatheralls, not claims against Mr O’Hara. The claims against Mr O’Hara in the originating application were struck out. The Company’s claims were also struck out for want of prosecution.
3. The duty of a liquidator was to take reasonable care to obtain the best price permitted by the circumstances, following Re Charnley Davis [1990] BCLC 760. The admitted failure to market the property, unresolved insurance issues, apparent misrepresentation to HSBC and possible loss of a better sale raised triable issues. The failure to investigate or pursue Weatheralls after receiving the joint liquidator’s report, and the failure promptly to execute the assignment, were also arguable.
4. Relief under section 1157 of the Companies Act 2006 was unsuitable for summary determination. It was seriously arguable that a liquidator fell outside the section’s ambit, and the issue was fact-sensitive.
5. Paragraph 6 of Schedule 4 to the Insolvency Act 1986 permitted sale of a bare company cause of action. The assignment here transferred the cause of action itself and its management. It was distinguishable from Ruttle Plant Ltd v Secretary of State for Environment, Food and Rural Affairs [2008] EWHC 238, where assignment of the fruits of proceedings was coupled with an impermissible assignment of the liquidator’s discretionary power to prosecute.
6. Whether Weatheralls’ valuation advice caused a significant contribution to the Company’s loss was a matter for trial.

The claims by Mr Rawnsley as assignee against Weatheralls and as assignee of the Pension Fund against Mr O’Hara were not struck out. The remaining claims identified above were struck out.

First-instance decision. The judgment records no appeal from an earlier decision.