Peters (The Liquidator of Automold Ltd) v Menzies & Ors

Where a strike-out application requires prolonged and serious argument, the court should generally decline to hear it unless striking out would avoid a trial or substantially reduce its preparation or burden. The [1986] Appeal Cases 368 approach is reinforced by the CPR overriding objective and proportionate allocation of court resources. The court may retain pleadings where the same evidence will be required for surviving claims, even if the pleading’s soundness is doubtful. Expert evidence concerning hypothetical alternatives may remain relevant to negligence, fiduciary-duty and misfeasance issues.

The liquidator of Automold Ltd brought claims concerning the conduct of the company’s administration. The defendants applied, 16 months into the proceedings, to strike out parts of the points of claim, including a pre-appointment claim and negligence allegations. The surviving claims included alleged breach of fiduciary duty and misfeasance arising from the administrators’ alleged partiality towards Ford. The application also challenged expert evidence concerning alternative administration steps and options. The central issue was whether the disputed pleadings should be removed when the evidence would substantially overlap with the issues remaining for trial.

1. The court declined to proceed with the main strike-out argument. Under the approach stated by Lord Templeman in Williams & Humbert Limited v W & H Trademarks (Jersey) Limited [1986] Appeal Cases 368, a prolonged and serious strike-out argument should generally be refused unless striking out would avoid a trial or substantially reduce the burden of preparing for or conducting it. The CPR overriding objective reinforced that approach.

2. The judge had doubts about the soundness of the pre-appointment pleading, particularly in light of paragraph 75 of Schedule B1 to the Insolvency Act 1986, which appeared to concern conduct by administrators acting as such. Nevertheless, the administrators’ prior instructions, plans and intentions would inevitably be examined when determining the claims concerning the actual administration. Strike-out would therefore not materially shorten the trial.

3. The negligence claim could not at that stage be said to have no foundation. The allegation was not a collateral challenge to the validity of the administrators’ appointment. It was that, having accepted appointment, they failed to act as truly independent administrators. The evidence relevant to that claim would substantially overlap with the fiduciary-duty and misfeasance claims.

4. The existing expert-evidence direction remained appropriate. Evidence about the steps and options available to an insolvency practitioner was relevant not only to negligence, but also to whether the administrators should have accepted appointment and what alternatives were available in the actual administration. The direction was not revisited.

5. The separate argument concerning administrators’ remuneration was not part of the ruling and remained to be heard.

Not stated in the judgment.