The High Court refused to strike out a liquidator’s claims against former directors and other defendants over alleged reckless trading and misfeasance, despite finding that the claims had been brought using the wrong procedure. It stayed the proceedings until the liquidator provided the defendants with supporting documentation not already supplied.
In a judgment delivered on 27 February 2007, Mr Justice T.C. Smyth said applications under the relevant Companies Act provisions should have been brought by motion supported by affidavit, rather than by plenary summons. The defendants argued that the proceedings were a nullity or, alternatively, should be struck out because the procedural choice had prejudiced them.
The judge found that the use of a plenary summons was a conscious choice to stop time running under the Statute of Limitations. However, he found that the choice of procedure itself resulted from oversight, not a deliberate attempt to disadvantage the defendants, and that there was no improper motive in delaying service while the liquidator gathered evidence. He also found that the procedural defect did not affect the court’s jurisdiction.
The underlying claims remain allegations, not findings on liability. The liquidator’s case concerned payments totalling £1,326,100 to Brog Leasing Limited in February and September 2000, in circumstances where the defendants allegedly knew or should have known that Cedarlease Limited might owe VAT to HM Customs & Excise. The judgment records that the company’s VAT avoidance scheme had been challenged and assessments had not been paid.
The defendants said they had not received the reports, affidavits and documents that would have accompanied a motion under the rules, making it difficult to advise on and prepare a defence. The judge accepted that they had not received all the relevant documentation in time, but found that they understood the case against them and that no procedural advantage had accrued to the liquidator.
The court did not determine whether the defendants were liable or grant the substantive relief sought. It ordered the proceedings stayed until the liquidator supplied, within a limited time, the remaining documentation required by the court rules. The judgment does not specify the length of that time limit.