LITIGATION, DELAY AND THE DOCTRINE OF LACHES: IT WOULD BE “UNCONSCIONABLE FOR THE COURT TO GRANT THE APPLICANT ANY RELIEF”

September 24, 2021 · by · in Applications, Civil Procedure, Conduct, Limitation

The judgment of ICC Judge Barber in  CSB 123 Ltd, Re [2021] EWHC 2506 (Ch)is interesting for a large number of reasons.  Not least the total failure of the applicant to establish major (if not all) parts of its case, the judge’s dismissal of the claimant’s experts valuation of a company and the amount of documents the applicant appeared to have lost.  However it is also interesting because the judge held that the case (if it had been established) would have been barred under the doctrine of laches.

 

THE CASE

The applicant liquidator sought an order under s.212 of the Insolvency Act 1986 that the respondent transferred company business and assets for no consideration.  The application was unsuccessful, the applicant failing to establish key elements of its case and the judge finding the respondent to have acted reasonably “and with the greatest integrity”.

LACHES

The judge found that, even if the evidence had established a claim, the applicant would have been unable to recover under the doctrine of laches on those parts of the case that were not statute barred.

Laches
    1. To the extent that the Applicant pursues the Respondent as a trustee, I am satisfied that his claims should in any event be barred under the doctrine of laches: Patel v Shah [2005] EWCA Civ 157 at 32; Re Loftus (deceased); Green v Gaul [2006] EWCA Civ 1124 at 41 and 42. The Applicant and his solicitors engaged with the Respondent on a highly sporadic basis over a number of years. The Applicant has provided the court with no satisfactory explanation for his delay in bringing these proceedings. Key events happened over 8 years ago. Memories of all the relevant witnesses have faded given the considerable lapse of time, placing an unreasonably high burden on the Respondent in defending the Application. The Respondent has been seriously prejudiced in defending this claim by the delay, the loss of documentation and by the obstructive approach adopted by the Applicant in allowing access to documents recovered from GL’s premises in his possession. It was not until 4 November 2019 that the Applicant informed the Respondent that all of the data served on GL’s servers had been lost. He had known since 2016. The data lost included data relating to SC1 and SC2. Had the Applicant informed the Respondent of the lost data at an earlier stage, the Respondent would have had a far better chance of reconstructing the missing data from third party sources. As it was, the Applicant even obstructed and delayed the Respondent’s attempts to reconstruct missing documentation from third party sources. Her ability to account on a line by line basis for payments or transactions which took place so many years ago has been seriously prejudiced by such conduct. This has been compounded by the Applicant’s failure to plead his case clearly and fairly. In this regard I repeat paragraphs 556 and 557 of this judgment. Overall, I am satisfied that the circumstances of this case render it unconscionable for the court to grant the Applicant any relief.
Limitation
    1. To the extent that the Applicant pursues the Respondent otherwise than as trustee, in my judgment his application is statute-barred by virtue of section 2 of the Limitation Act 1980 (claims in tort) and section 36 LA (claims analogous to claims in tort) which applies to breach of duty claims: Re Eurocruit Europe Ltd [2007] BCC 916. The Application was issued on 9 September 2019 and amended on 17 June 2020 to raise new allegations. The Application was therefore issued more than six years after the cause of action accrued (and also amended more than six years after the course of action accrued), whether one treats the cause of action as accruing on 31 January 2013 (the time of incorporation of SC2), or April 2013 (cesser of trading of SC1 and commencement of trading of SC2), or a range of other possible dates in between.
  1. The Applicant sought to rely upon s.21(1)(b) Limitation Act 1980 and Burnden Holdings v Fielding [2018] UKSC 14. The case of Burnden Holdings v Fielding [2018] UKSC 14, however, only applies to the disposal of pre-existing corporate assets in limited circumstances and not to other breaches of duty, for which the time limit remains six years: see Davies v Ford [2020] EWHC 686 (Ch) at 312-319. The reality in this case is that there were no pre-existing corporate assets which were transferred for nil consideration or otherwise misappropriated. The Respondent owned the goodwill and, as I have found, all SC1 property transferred has been properly accounted for and applied for proper purposes of SC1, including the payment of SC1’s tax liabilities.
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