Andrew Anderson Kelsall & Anor (as joint liquidators of Gamenation (UK) Limited) v Biljana Stajic & Anor

The court determined that a pleaded claim for dishonest assistance can fall within section 212 of the Insolvency Act 1986. The respondents' strike out/summary judgment application in respect of the dishonest assistance allegation was dismissed. The judge held that section 212 is expressed in alternatives (misapplied/retained/become accountable for money or property; misfeasance; breach of fiduciary or other duty) and is not limited to primary fiduciary misconduct by the defendant; accessory liability such as dishonest assistance may be captured by the first limb concerning misapplication or accountability for company property. The court granted permission to amend the Points of Claim.

The judge also decided the allocation of costs: the respondents are entitled to the costs occasioned by the amendments, and to their costs of the amendment application up to the CCMC on 12 October 2022; the applicants are entitled to costs in relation to the amendment application after that date; and there is no order for costs in respect of the remainder of the aborted strike out/summary judgment application.

Background and parties: The applicants are the joint liquidators of Gamenation (UK) Limited. The first respondent was the company's sole director and shareholder; the second respondent was alleged to have been a de facto director and was sued for dishonest assistance in relation to payments and fees paid by the company and regulatory breaches that resulted in losses and fines.

Nature of the application: The respondents applied to strike out and/or seek summary judgment in respect of part of the pleading — specifically the dishonest assistance claim (pleaded under section 212 of the Insolvency Act 1986) against the second respondent. The applicants sought permission to amend their Points of Claim; the respondents ultimately ceased to oppose most of the proposed amendments and preserved the strike out point on dishonest assistance and costs.

Issues framed:

• Whether a claim for dishonest assistance falls within the scope of section 212 Insolvency Act 1986.
• Whether the second respondent's pleaded dishonest assistance should be struck out or summary judgment entered.
• Allocation of costs arising from the aborted parts of the strike out/summary judgment application and the amendment application.

Court's reasoning on substantive point: The judge analysed the wording of section 212 and concluded it contains alternative heads of liability. The first limb (misapplied/retained/become accountable for company money or property) can cover misappropriation and accessory liability such as knowing receipt or dishonest assistance by a person "concerned in the promotion, formation or management" of the company. The judge rejected the narrower construction urged by the respondents which would confine section 212 to those who themselves owed and breached duties to the company. The judge applied and discussed authorities on the elements and remedies for dishonest assistance (including the requirement of a trust or fiduciary obligation of the principal, breach by the principal, contribution/assistance by the third party, and the Ivey test for dishonesty), and concluded that the remedies available for dishonest assistance (personal equitable liability to account and compensation) are consistent with the remedies provided by section 212(3).

Court's reasoning on costs: Procedural history and correspondence showed the respondents issued the strike out/summary judgment application relatively early and without adequate time for the applicants to consider pleadings; proposed amendments were served in September 2022. The judge held that the general rule is that the party seeking amendment bears the other party's costs, so the respondents are entitled to their costs occasioned by the amendments. The respondents are entitled to costs of the amendment application up to the CCMC on 12 October 2022; the applicants are entitled to costs of the amendment application after that date because the respondents unreasonably delayed consenting to the amendments. No order as to costs was made in respect of the remainder of the aborted strike out/summary judgment application.

The respondents' strike out/summary judgment application in respect of the dishonest assistance claim is dismissed. The judge held that dishonest assistance can fall within section 212 Insolvency Act 1986 because the section’s alternatives include misapplication or accountability for company money or property, which can capture accessory liability. Permission to amend the Points of Claim was granted. Costs were apportioned: respondents entitled to costs occasioned by the amendments and to costs of the amendment application up to the CCMC (12 October 2022); applicants entitled to costs of the amendment application after that date; and no order for costs in respect of the remainder of the aborted strike out/SJ application.