Linda Riley v John Aidiniantz & Anor

A claim under Insolvency Act 1986, section 423, is a claim on a specialty and is not a claim to recover money recoverable under statute. The applicable limitation period is therefore twelve years, subject to the statutory framework.

Claims involving the purpose of asset transfers or the retention of beneficial ownership ordinarily require a full investigation of surrounding circumstances and intention. They are rarely suitable for summary judgment where realistic competing inferences arise. A settlement agreement bars later claims only if, properly construed in context, it clearly extends to them. Security for costs should not ordinarily be ordered against an unpaid judgment creditor pursuing assets to satisfy the judgment debt, particularly where the proposed security is speculative or unquantified.

The claimant sought relief concerning transfers of shares in Rollerteam Limited, the company owning the Sherlock Holmes Museum. She alleged that the transfers were transactions at an undervalue intended to put assets beyond the reach of creditors, contrary to section 423 of the Insolvency Act 1986. Alternatively, she alleged that the transfers were nominal and that the first defendant retained the beneficial ownership.

The defendants applied for strike out and summary judgment, relying on limitation, a 2013 Tomlin Order, issue estoppel, abuse of process and the alleged effect of an earlier security order. They also sought a civil restraint order and security for costs. The central questions were whether the claims were legally barred or had no realistic prospect of success, and whether security should be ordered.

1. Limitation. The section 423 claim was not time-barred. It was a claim on a specialty within section 8 of the Limitation Act 1980, but it was not a claim to recover money recoverable under statute for the purposes of section 9. The twelve-year period therefore applied. The court followed the analysis in Hill v Spread Trustee Ltd [2007] 1 WLR 2404. Any claim to enforce a costs judgment under section 24 was also in time, because unquantified costs were not enforceable by action until quantified: Times Newspapers v Chohan [2001] BPIR 943.
2. Settlement and estoppel. The 2013 settlement agreement was construed holistically, by reference to its language, context and purpose. Applying the cautionary principle in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, clear words would have been required to bar claims of which the parties could not have been aware. The agreement barred challenges to the ownership of Rollerteam shares, but did not bar claims founded upon the defendants’ ownership and alleged transfers of those shares. The earlier decision concerning Stephen Riley involved different parties and a different issue, so it created no issue estoppel. The principle in Cohen v Jonesco [1926] 1 KB 119 did not assist because the settlement agreement was not itself a consent order.
3. Abuse of process. Applying the approach in Henderson v Henderson (1843) 3 Hare 100, as developed in Johnson v Gore-Wood & Co [2002] 2 AC 1, the present claims were new claims and did not improperly vex the defendants twice in the same matter.
4. Summary judgment. Under CPR Part 24, summary dismissal required the claims to have no realistic prospect of success. The court could not conduct a mini-trial. The issues of purpose and beneficial ownership depended on intention and surrounding circumstances. The evidence disclosed realistic, triable issues, and the presumption of advancement could potentially be rebutted.
5. Security for costs. Neither relied-on gateway under CPR 25.27 was established. In any event, security would not have been just or appropriate. The claimant was pursuing assets to recover substantial unpaid costs, the defendants’ own costs liability afforded some protection by set-off, and the proposed security was speculative and unquantified.
6. The applications for strike out, summary judgment, a civil restraint order and security for costs were dismissed. The first defendant was required to file and serve a defence so that the claims could proceed to trial.