The Connaught Income Fund, Series 1 v (Capita Financial Managers Ltd & Anor

The court determined that the claimant (the Fund), acting through its joint liquidators, may bring claims assigned to it by over 1,000 investors. The judge held that (i) the Civil Procedure Rules Practice Direction 7A paragraph 5A should be read broadly and does not prevent the Fund suing in its name as assignee; (ii) assignment of causes of action under the Financial Services and Markets Act 2000 (including section 138D/section 150 causes of action) is not, by virtue of the Rights of Action Regulations 2001, generally barred where a private person's claim is assigned to a non-private person; and (iii) the liquidators had statutory authority (notably under Schedule 4 paragraphs 4, 7 and 13 of the Insolvency Act 1986 as applied) to accept gratuitous assignments and to sue in the name of the Fund where doing so was commercially necessary or highly expedient for the winding up. The judge rejected arguments that the proceedings were a nullity, that the partnership had no authority to accept assignments after dissolution, and that the assignments were impermissible as a device to circumvent the RAR.

This was an application for summary judgment by The Connaught Income Fund (in liquidation) seeking a ruling that it could pursue claims assigned to it by investors against Capita Financial Managers Limited and Blue Gate Capital Limited. The Fund alleged unlawful promotion and misleading promotional literature in breach of provisions of the Financial Services and Markets Act 2000 and sought compensation measured by losses sustained by assigning investors. The assignments provided that any recoveries would be assets of the winding-up and distributed pari passu.

Procedural posture and issues:

• The principal issues were: (i) whether CPR Practice Direction 7A paragraph 5A prevented the Fund bringing these assigned claims in the Fund's name; (ii) whether assignments of FSMA-based claims to a non-private person contravened the Rights of Action Regulations 2001 or public policy; (iii) whether the Fund (an English limited partnership in winding up) or its liquidators had authority to accept the assignments and bring proceedings; and (iv) subsidiary contentions about name of partnership and nullity of proceedings.

Court's reasoning:

• On CPR PD 7A(5A), the judge emphasised that the provision is procedural and must be interpreted consistently with the overriding objective; it was not to be read restrictively so as to frustrate legitimate assignments and litigation by a firm in dissolution acting through its liquidators.
• On statutory causes of action under FSMA, the court held that the phrase "at the suit of" did not imply an unexpressed prohibition on assignment. The Rights of Action Regulations 2001 (reg. 6(3)(c)) treat representative or fiduciary suits as exceptions but do not generally bar assignments; a transferee assignee is not, without more, acting in a representative or fiduciary capacity. The court considered authorities and practical consequences (including the FSCS practice) and concluded assignment was not unlawful or contrary to public policy here.
• On liquidator powers, the judge held that the Insolvency Act 1986 provisions (as applied to partnerships by the Insolvent Partnerships Order 1994) and Schedule 4 paragraphs (notably paras 4, 7 and 13) permit liquidators to bring or defend proceedings and to do acts necessary for winding up. Accepting gratuitous assignments which may benefit creditors can be "highly expedient" or commercially necessary and is a judgment for the liquidators; the court will not lightly interfere.

Result: The claimant's application succeeded: the Fund may bring the claims on the basis of the assignments.

The Claimant succeeds: the Fund, acting by its liquidators, may bring the claims against the defendants on the basis of the assignments. The court held that CPR Practice Direction 7A paragraph 5A does not bar the proceedings, assignment of FSMA causes of action to the Fund is not invalid under the Rights of Action Regulations 2001 or public policy, and the liquidators had power under the Insolvency Act Schedule provisions to accept the assignments and pursue the claims as "necessary" or commercially expedient for the winding up.