London Capital & Finance Plc (In Administration) v Michael Andrew Thomson

Declaratory relief is discretionary. It may properly be granted where it will serve a useful purpose in future enforcement or related proceedings, even if it substantially records findings already made in the judgment.

Under section 246 ZA of the Insolvency Act 1986, fraudulent-trading contributions are compensatory, not punitive. The court must assess each defendant’s culpability and the loss connected with the fraudulent trading. Joint and several liability is discretionary, and there is no presumption that all defendants must contribute the same amount.

For dishonest assistance, the court identifies the breach assisted and asks what loss resulted from that breach. The assistance itself need not be the direct cause of the loss.

The judgment concerned consequential issues arising from the court’s principal judgment in the same proceedings, [2024] EWHC 2894 (Ch). The court considered whether proposed declarations properly reflected its findings, the contributions payable by defendants found knowingly to have participated in fraudulent trading, and equitable compensation payable by defendants liable for breaches of duty or dishonest assistance.

The court also addressed whether further contribution orders could be made, the effect of administration on the assessment of loss, the disclosure of assets and bank statements, and the interaction between disclosure obligations, confidentiality and data-protection requirements.

1. Declarations. The court adopted the discretionary approach stated in Office Depot International (UK) Limited v UBS Asset Management (UK) Limited [2018] EWHC 1494 (TCC), drawing on Financial Services Authority v Rourke [2001] EWHC 704 (Ch). Relevant considerations included justice to the claimant and defendant, whether the declaration would serve a useful purpose, and any special reasons for or against relief. The declarations were appropriate because they would assist future enforcement and related hearings. Differences in wording between the judgment and the formal declarations did not invalidate them.
2. Fraudulent-trading contributions. Section 246 ZA of the Insolvency Act 1986 requires a nexus between the loss caused to creditors by the fraudulent trading and the contribution ordered. The jurisdiction is compensatory rather than punitive: Morphitis v Bernasconi [2003] Ch 552. Each defendant’s position must be assessed separately, although joint and several liability may be ordered. There is no presumption that every defendant is liable for the same amount: Re: Overnight Limited [2010] BCC 796.
3. The court rejected a sliding-scale approach beginning with the person considered most responsible for the fraud. The relevant defendant’s own culpability, role, knowledge and participation must be assessed. The first defendant was liable for the full contribution. The fifth, sixth, seventh and ninth defendants were liable for 75 per cent, reflecting their important but less central roles.
4. The court ordered contributions based at that stage on principal sums, subject to credit for realisations. Further orders concerning interest remained available. The power under section 246 ZA, including section 246 ZA(2), permitted further awards, and the order could alternatively be made under Part 25 of the Civil Procedure Rules 1998.
5. Dishonest assistance. Following Grupo Torras SA v Al-Sabah [1999] CLC 1469, the court must identify the breach of fiduciary duty assisted and determine the loss resulting from that breach. It is unnecessary to show that the assistance itself caused the loss. The administration did not break the chain of causation where liabilities had been incurred through promises that could not reasonably be met. An interim payment of approximately £211 million was ordered.
6. For asset disclosure, a party uncertain whether an asset exceeded the threshold should generally include it or obtain a valuation. Bank statements had to identify incoming payers. The court’s disclosure order overrode inconsistent duties of confidence and data-protection requirements, subject to the ordinary rules governing use of disclosed documents.

The judgment dealt with consequential orders following the court’s principal judgment in the same proceedings, [2024] EWHC 2894 (Ch). No appeal history was stated.