Ward (Liquidator of Brady Property Developments Ltd) v Hutt & Ors

The court struck out the liquidator's fresh claim against the first and second respondents. The judge held that CPR r 38.7 applied because the fresh claim arose out of the same or substantially the same facts and was brought against the same legal persons (the partners who were the same individuals previously sued). The fresh proceedings were not a nullity but an irregularity under CPR r 3.10; permission under r 38.7 had not been sought and the court would not grant it. In addition the claim was an abuse of process since any recovery would largely circulate back to the respondents and the only realistic beneficiary appeared to be the liquidator himself; the court drew adverse inferences from the liquidator's failure to disclose his costs. The Henderson v Henderson principle did not bar the claim because the earlier proceedings had been discontinued rather than decided.

This was an application by the first and second respondents to strike out, and alternatively for summary judgment in respect of, a claim brought by the liquidator of Brady Property Developments Ltd. The new claim sought a declaration that a payment of £160,000 made by the company to HLM Properties was a voidable preference and an order for repayment (a claim under section 239 of the Insolvency Act 1986 was pleaded in the particulars of claim).

The factual background was that the liquidator had previously pursued a separate misfeasance/breach of duty claim against the first and second respondents as directors; that earlier claim was discontinued during trial after the claimant accepted that the transactions complained of had caused no loss. The day after discontinuance the liquidator issued the new claim (in a different registry) against the three partners of HLM Properties.

The court was asked to decide (i) whether CPR r 38.7 applied so as to require prior permission before issuing the fresh claim, (ii) whether the fresh claim was barred by the rule in Henderson v Henderson or otherwise amounted to an abuse of process, and (iii) whether summary judgment should be entered for the respondents.

The judge reasoned that: (a) the fresh claim was against the same legal persons because a partnership is not a separate legal person and the partners are the persons sued; (b) the fresh claim arose out of the same or substantially the same facts as the discontinued proceedings; (c) failure to obtain permission under CPR r 38.7 was an irregularity rather than a nullity by virtue of CPR r 3.10 and relevant authorities (Re Saunders and Wilton), but the court would not grant retrospective permission in the circumstances; (d) the Henderson v Henderson principle was not applicable where the earlier proceedings had been discontinued rather than finally decided and the protection intended by rule 38.7 was sufficient; and (e) the fresh claim constituted an abuse of process because any recovery would in practice circulate back to the respondents and the only likely economic beneficiary was the liquidator, a concern reinforced by the liquidator's failure to disclose his costs and likely distribution effects. On that basis the claim was struck out as against the first and second respondents. The alternative application for summary judgment was unnecessary to decide in light of the strike out.

The claim is struck out as against the first and second respondents. The court held that CPR r 38.7 applied and permission to bring the fresh claim had not been obtained; the court refused to grant permission and further held the proceedings were an abuse of process. The Henderson v Henderson rule was not applied because the earlier claim had been discontinued rather than finally decided.