Denaxe Limited v Paul Cooper & Anor

Court approval of a transaction proposed by a trustee or office-holder creates no automatic or blanket immunity from later claims. Any protection ordinarily arises through issue estoppel. Its scope depends on the precise issues decided and whether the later claimant was a party or privy to the approval proceedings.

A later claim may nevertheless be a Henderson v Henderson abuse where its central allegation could and should have been raised during the approval application. The court must make a broad, merits-based assessment of whether allowing the issue to be raised later would misuse its process or cause manifest injustice.

Court-appointed receivers sold a football club’s shares, stadium and associated property together as a going concern after Marcus Smith J approved the transaction. The appellant later alleged that the receivers had negligently failed to consider selling the properties separately and had therefore sold at an undervalue.

Fancourt J struck out the claim in [2022] EWHC 764 (Ch). He held that approval conferred immunity from the negligence claim and, alternatively, that the claim was a Henderson v Henderson abuse of process.

The central questions were whether court approval automatically protected the receivers from the later claim and whether the appellant could pursue an allegation which it had not raised when given an opportunity to oppose the proposed composite sale.

1. Appeal dismissed. The High Court was correct to strike out the negligence claim as a Henderson v Henderson abuse of process, although its analysis of immunity as a separate doctrine was not accepted.

2. English business and property law contains no discrete doctrine of immunity applicable to approved transactions. The protection ordinarily associated with approval is shorthand for the bar produced by issue estoppel. The court must identify the issues actually determined on the approval application, identify the parties or privies bound by that decision, and compare those matters with the necessary ingredients of the later claim. The juridical source of the asserted duty, whether common law, equitable or statutory, is not decisive.

3. Approval of a specific transaction with an identified counterparty at a specified price does not confer blanket protection against every later complaint concerning that transaction. The approving court may undertake only a limited review of power, honesty, rationality, proper purpose and conflicts. It will not necessarily decide whether an office-holder exercised all reasonable care or obtained the best price reasonably achievable. The scope of protection is therefore fact-sensitive and depends on precisely what the court decided and who was before it.

4. It was unnecessary to decide whether Marcus Smith J’s approval created an issue estoppel concerning the decision to sell the footballing assets together. The approval application proceeded on the fundamental and disclosed assumption that a composite sale would preserve the club and maximise value. The appellant, its directors and its controlling shareholder had the relevant valuations and the clearest opportunity to challenge that assumption, but did not do so.

5. The allegation subsequently pleaded was the very objection which could with reasonable diligence and should have been advanced at the approval hearing. Permitting it to proceed would be manifestly unjust to the receivers and would misuse the court’s resources. The claim was therefore barred as an abuse of process.

6. As prospective guidance, courts determining approval applications should identify as clearly as possible the issues being decided. Where practicable, they should also identify the types of later claim which the decision will or will not bar.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously. The court rejected the High Court’s treatment of immunity as an independent doctrine but upheld the strike-out because the claim was a Henderson v Henderson abuse of process: [2023] EWCA Civ 752.
2. High Court, Business and Property Courts in Manchester: Fancourt J struck out the negligence claim, holding that the receivers had immunity following court approval and, alternatively, that the claim was an abuse of process: [2022] EWHC 764 (Ch), [2022] 4 WLR 52.