DOMINIC LEONARD MARK CHANDLER v ANTHONY JOHN WRIGHT & Ors

In substantial and complex proceedings, a claim under section 214 of the Insolvency Act 1986 should not leave the knowledge date at large across an extended period. Alternative dates may be pleaded, but the claimant must identify the case advanced for each date.

Causation and quantum are essential elements of a wrongful-trading claim and must be pleaded by reference to each alternative knowledge date. The pleading need not necessarily contain a separate detailed calculation for every date at that stage, particularly where expert evidence is directed to the issue. A claim under section 212 likewise requires loss and causation where the alleged breach is a common-law or fiduciary duty. Defective pleadings may ordinarily be amended before the relevant parts are struck out.

The appellant was a director of companies formerly within the BHS group. The respondents, being the companies’ liquidators and the companies themselves, brought claims under sections 212 and 214 of the Insolvency Act 1986.

The respondents pleaded 17 April 2015 as the principal knowledge and cessation date, but also referred to five later alternative dates and to an overarching case leaving the relevant date open during the intervening period. They did not plead separate causation and quantum cases for those alternatives.

The Deputy ICC Judge dismissed the appellant’s strike-out application: [2021] EWHC 3501; [2022] BCC 457. The central issues on appeal were whether the alternative cases disclosed reasonable grounds and whether the pleadings adequately identified the loss and causation alleged.

1. Appeal allowed. Permission to appeal was granted on all four grounds. The decision dismissing the strike-out application was set aside.
2. Claims under section 214 of the Insolvency Act 1986 require proof of loss caused by the continuation of trading. Causation and quantum are therefore essential elements which must be pleaded. Where several knowledge dates are relied upon, the pleading must identify the causation and quantum case for each date. It is not enough that the defendant may infer the case from other material or that the methodology might be obvious.
3. In a complex and substantial case, the knowledge date cannot be left at large across the entire specified period. The same applies to the date on which directors are alleged to have caused the companies to cease trading for the purposes of the section 212 claim. This conclusion was case-specific and did not establish an inflexible rule that every section 214 claim must identify one date.
4. The court distinguished the flexibility available to a trial judge when deciding whether the knowledge condition was satisfied near a pleaded date from the pleading obligation itself. Trial-stage flexibility did not cure the failure to plead the alternative cases.
5. Where the section 212 claim alleged breaches of common-law or fiduciary duties, loss and causation also had to be demonstrated. The existing pleading did not explain what loss would have been avoided if trading had ceased on any later cessation date.
6. The defects meant that the relevant alternative-date and open-ended claims disclosed no reasonable grounds under CPR rule 3.4(2)(a). However, the respondents were given an opportunity to apply to amend. The relevant parts of the statements of case were to be struck out unless an application for permission to amend was made, and permission was thereafter granted. The court contemplated a period of no longer than 28 days.

• High Court, Chancery Division: Deputy ICC Judge Schaffer dismissed the strike-out application on 9 December 2021: [2021] EWHC 3501; [2022] BCC 457.
• Chancery Appeals: The appeal was allowed. The order dismissing the strike-out application was set aside, with an unless-order mechanism permitting amendment.