Denaxe Limited v Paul Cooper & Anor

The Court of Appeal considered the extent to which a court's approval of a receivership transaction can bar subsequent claims against the receivers. The court emphasised that there is no blanket "immunity": the protective effect of an approval depends on the nature of the approval hearing, the issues actually decided there, and the identity and participation of the parties. Where an approving court determines an issue, issue estoppel may bar relitigation of that same issue; alternatively, a subsequent claim may be barred as an abuse of process under Henderson v Henderson if it raises matters that could and should have been advanced at the earlier approval hearing.

Applying those principles, the Court of Appeal dismissed the appeal and upheld the strike out of Denaxe's negligence claim against the receivers because Denaxe had had a clear opportunity at the sanction hearing to advance the only pleaded complaint (that the property assets should have been marketed and sold separately) but had not done so; the claim was therefore an abuse of process. The court also explained that whether approval gives substantive protection against negligence claims is a fact-sensitive question and depends on what issues were decided or could have been decided at the approval hearing.

Background and parties:

• Denaxe (formerly Blackpool Football Club (Properties) Limited) owned the majority of shares in Blackpool Football Club Limited and various related real property assets (the "Footballing Assets"). VB Football Assets obtained a buy-out order; following non-payment, VB sought equitable execution and court-appointed receivers were appointed over, inter alia, Denaxe's Footballing Assets and certain shares.
• The receivers marketed the Footballing Assets and sought the court's approval to sell the assets together with VB's minority shareholding to a particular purchaser, Mr Simon Sadler, on the basis that a going-concern sale would maximise value.

Procedural history: The receivers applied for sanction of the composite sale before Marcus Smith J, who granted sanction and an order permitting sale to Mr Sadler; the sale completed. Denaxe later issued a negligence claim alleging the receivers sold the assets at an undervalue and should have marketed and sold the real property assets separately (relying on earlier Colliers valuations). Mr Cooper and Mr Rubin (the receivers) obtained a strike-out order from Fancourt J; Denaxe appealed to the Court of Appeal.

Nature of the claim and relief sought: Denaxe sought damages for alleged breaches by the receivers of duties to exercise reasonable skill, care and diligence in marketing and realising the Footballing Assets, quantified as the difference between the price obtained and what should have been obtained if assets had been sold separately.

Issues before the Court of Appeal:

• Whether the Sanction Order and the approval hearing conferred "immunity" on the receivers against Denaxe's negligence claim (and relatedly whether issue estoppel applied);
• Whether Denaxe's claim was an abuse of process on Henderson v Henderson grounds because it raised matters that could and should have been raised at the sanction hearing;
• Ancillary points about whether a receiver's duty is equitable or common-law in origin and the relevant scope of judicial review on approval applications.

Court's reasoning:

• The court analysed authorities on approval applications (e.g. Richard v Mackay, Public Trustee v Cooper, MF Global, Nortel, Cotton) and concluded there is no universal principle that court approval provides blanket immunity against all subsequent claims. The protective effect depends on (a) the scope of the issues the court was asked to decide and did decide at the approval hearing, and (b) who was before the court and the opportunity they had to litigate those issues.
• It was unnecessary to decide in this appeal whether a receiver's duty of care is strictly equitable or common law; what matters is the content of the duty and whether the same issue was determined or could and should have been determined at the sanction hearing.
• On the facts, even if the sanction did not itself create an issue estoppel, Denaxe had a full and obvious opportunity at the sanction hearing to complain that the receivers had failed to market and sell the property assets separately; Denaxe (and its controller Mr Oyston) did not do so. The Court of Appeal held that bringing the present negligence claim was an abuse of process under Henderson v Henderson and therefore properly struck out.

Appeal dismissed. The Court of Appeal held that whether a court's approval of a trusteeship/receivership transaction confers protection against subsequent claims depends on the issues actually decided (or which could and should have been decided) at the approval hearing and on which parties were present. On the facts, Denaxe had a clear opportunity to raise the sole pleaded complaint at the sanction hearing and did not; the negligence claim was therefore an abuse of process and was properly struck out.

Appeal from a strike-out judgment of Mr Justice Fancourt in the High Court, Business and Property Courts in Manchester: [2022] EWHC 764 (Ch). The sanction of the receivers' sale was made by Marcus Smith J (Cooper v VB Football Assets) [2019] EWHC 1599 (Ch). There was an earlier related High Court ruling on the receivers' release point: Blackpool Football Club (Properties) Ltd v Cooper and Rubin [2021] EWHC 910 (Ch). The present appeal was determined in the Court of Appeal, [2023] EWCA Civ 752.