Barclay Pharmaceuticals Ltd & Ors v Waypharm LP & Ors

A claim against a court-appointed receiver requires the court’s permission. Permission is discretionary. The applicant must show a genuine claim calling for an answer; where the claim is fully pleaded, the court may also consider whether it has a real prospect of success. A receiver’s duties arise only in relation to the powers conferred by the appointment order and extend to persons with a sufficient interest in the relevant property. A claim should be struck out where it has no reasonable grounds, is not genuine, or has no real prospect of success. A shareholder or beneficial owner generally cannot recover reflective loss suffered by a company.

Following an earlier judgment awarding the First Claimant £8.7 million against certain defendants, the Second Defendant advanced claims exceeding €58 million against the Claimants and a court-appointed receiver. He alleged losses arising from investments in a French company, pharmaceutical validation expenditure, and the merger of insolvency estates in France.

The Claimants applied to strike out the claims. The Receiver sought dismissal on the basis that permission was required to sue him and that the proposed claims were neither genuine nor viable. The central issues were whether the claims disclosed reasonable grounds, whether permission was required and should be granted, and whether the Receiver had breached duties causing recoverable loss.

1. Disposition. The Second Defendant’s claims against the Claimants and the Receiver were dismissed. He was ordered to pay the costs of and incidental to the applications on the standard basis.
2. The claims against the Claimants disclosed no reasonable grounds and were totally without merit. They were struck out under CPR rule 3.4 and the court’s inherent jurisdiction. The alleged investment losses lacked evidential support, and any corporate loss would ordinarily have belonged to the companies rather than the Second Defendant. The reflective-loss principle stated in Johnson v Gore Wood & Co (A Firm) [2002] 2 AC 1 was applicable.
3. Permission was required before proceedings could continue against the court-appointed Receiver: McGowan v Chadwick and Grant [2001] EWCA 1758, applied in Glatt v Sinclair [2012] BPIR 309. There is no hard-and-fast procedural test, but permission requires a genuine claim in the sense that the allegations call for an answer. Where the claim is fully pleaded, the court may consider whether it has a real prospect of success.
4. A court-appointed receiver owes equitable duties to act in good faith and for proper purposes, not to profit from the office, and to take reasonable care in selling property. Any wider duty of care depends on the facts. The receiver’s powers and duties are confined to those arising under the appointment order. The Receiver had no powers over the French property or SCILDV itself, beyond exercising the shareholder companies’ powers.
5. Even assuming that the Second Defendant had a sufficient beneficial interest to invoke duties owed by the Receiver, he showed no breach, causation or recoverable loss. The French liquidation was inevitable, the merger was unavoidable, the Receiver’s conduct was proper, and there was no obligation to fund the insolvent operation or its validation process. The Receiver’s failure to seek further directions could not have caused loss because the outcome would have been the same.