Frasers Group Plc v The Official Receiver & Ors

On an application to amend a pleading, the court may consider whether alleged criminal conduct forms part of a civil claim. It may determine the relevant facts by applying the civil standard of proof. A proposed amendment should be permitted where it has a real prospect of success, is coherent and properly particularised, and has an evidential basis sufficient to meet the merits test. The expression “a person” in section 164 of the Insolvency Act 1986 is capable, prima facie, of including any person, not only a qualified insolvency practitioner. The statutory words “with a view to” require examination of the pleaded acts and alleged intention. A possible tripartite transaction and consideration offered through intermediaries may be sufficient to establish a real prospect of success.

Frasers Group plc appealed against ICC Judge Jones’s refusal to permit amendments to its Umbrella Points of Claim. The proposed amendments alleged that GLAS Trust Corporation Ltd and Silver Point Capital LP had committed an offence under section 164 of the Insolvency Act 1986 in connection with the release of security over fixtures and fittings and the associated Claims Release Deed.

The judge below refused permission on the ground that the court could not decide whether a person had committed a criminal offence. The appeal concerned whether that reason was legally correct and whether the amendments nevertheless lacked a real prospect of success because of the meaning of section 164, the alleged consideration, or the pleaded purpose concerning the appointment of a liquidator.

1. Appeal allowed. The judge below was wrong to refuse permission to amend on the basis that the civil court could not determine whether criminal conduct had occurred. Allegations of criminal conduct may form a necessary element of a civil claim, with factual issues determined by the civil standard of proof.
2. The applicable amendment test, stated in Kawasaki Kisen Kaisha v James Kemball Ltd [2021] EWCA Civ 33, was applied: the proposed amendment must have a real prospect of success, carry some degree of conviction, be coherent and properly particularised, and be supported by evidence establishing a sufficiently arguable factual basis.
3. Section 164 of the Insolvency Act 1986 was not definitively construed at this interlocutory stage. Prima facie, “a person” may include any person, including a corporate body, and need not be confined to a person qualified for appointment as liquidator. The section contains three alternative acts—giving, agreeing to give, and offering to give valuable consideration—and three alternative mental elements concerning securing or preventing an appointment or nomination.
4. Frasers had a real prospect of showing that Silver gave consideration under clause 3.3 of the Claims Release Deed, because Silver became a party to that deed and the clause prima facie conferred a benefit on Frasers. The pleaded case against GLAS based on clause 3.3 could not succeed on that basis because GLAS had not acceded to the deed.
5. The pleaded case based on the release of security and transfer of the fixtures and fittings was difficult, since the immediate parties and recipients differed. Nevertheless, the transaction could arguably be analysed as GLAS offering to release the security if Frasers entered into the Claims Release Deed, with intermediaries communicating that position.
6. The allegation that the acts were done with a view to preventing Frasers’s choice of liquidator, thereby clearing the way for the creditors’ nominee, was sufficiently arguable. Permission to amend was granted against Silver and GLAS. The indirect “innocent agency” claim was not decided.

High Court (Insolvency and Companies List): appeal from ICC Judge Jones’s order of 23 May 2022, which refused permission to amend and made a consequential costs order. Permission to appeal was granted by Falk J on 23 June 2022. The appeal was allowed and permission to amend was granted.