Andrew Anderson Kelsall and Lee Anthony Grant v Biljana Stajic

Hearing dates: 4 and 5 July 2023

Introduction

This is the judgment of the Respondents' application to strike out/ seek summary judgment (‘strike out/SJ’) in relation to one part of the pleading, being the claim of dishonest assistance pursuant to section 212 of the Insolvency Act 1986 set out in the Applicants' Points of Claim against the Second Respondent. The second issues which I had to determine relates to the costs of the aborted part of the strike out/SJ application as well as the costs of the Applicants' amendment application which is no longer opposed by the Respondents. I confirm that I gave permission for the Applicants to amend their Points of Claim in accordance with the amendments set out in the attached draft amended Points of Claim to the amendment application.

Brief background and relevant chronology

I set out below a procedural chronology which is relevant to issue of costs which I need to determine. I concentrate in this first section on the background relevant to the dishonest assistance claim which I need to determine. Gamenation (UK) Ltd (the Company) was incorporated on 3 October 2014 and was acquired, ‘off the shelf’ around October 2015. Ms Biljana Stajic, the First Respondent, was appointed sole director and shareholder of the Company. The Applicants assert in their amended pleading that Ms Jelena Tomic Filipovic, the Second Respondent was a de facto director. However, the original pleaded case against the Second Respondent relied upon her involvement in the Company and raised a claim against her based on dishonest assistance. Shortly after the appointment of the First Respondent as director, the Company began to operate gaming subscription services which were available to mobile phones users who were charged a premium rate for using the service via their mobile phone bills. The Company was therefore subject to the regulation of Phone-paid Services Authority Limited (PSA) as being a provider of a ‘premium rate service’ within the meaning of the Communications Act 2003. The PSA has a Code of Practice approved by Ofcom and which must be complied with by those providing premium rate services. The PSA is empowered to conduct tribunal proceedings and to impose both financial and non-financial sanctions on the relevant service providers who breach the code.

As is set out in the Points of Claims, from about early December 2015, the PSA started receiving complaints about the Company's services. It opened an investigation into the Company's operations, making an informal request for information from the Company on 5 April 2016. A formal request for information followed on 3 June 2016. It is alleged that the Company failed to reply to these requests. Thereafter, the Respondents sought to place the Company into administration. The Applicants question and challenge the payment made by the company to Love Limited, trading as VZX Consultancy £31,200 for unregulated insolvency advice. On or around 17 August 2016, the First Respondent instructed Southern Counties Valuers, a company connected to VZX, to value the Company's assets for the purposes of purchasing the assets out of an administration on a pre pack basis. The valuation fee of £3,000 was paid by the Company. On 2 September 2016, administrators were appointed. The statutory moratorium was lifted upon the application of the PSA who thereafter commenced tribunal proceedings. On 21 December 2016, the PSA Tribunal upheld the alleged breaches of the Code and fined the Company £200,000 with an order for the company to pay the PSA's administrative expenses in the sum of £9,462.45. The Company was placed into a creditors' voluntary liquidation on 4 September 2017. On 23 May 2019, the Applicants were appointed as Joint Liquidators with the dissolution of the Company having been deferred.

I have taken from Ms Julian's skeleton the broad summary of the Applicants' claims, being:-

a. In causing or allowing the Third Party Payments / the Advice Fee / the Valuation Fee to be made, R1 breached her duties to the Company, and caused the Company loss in a like sum (being £397,790.91).

b. In causing or allowing the Company to operate in breach of the Code, R1 breached her duties to the Company and caused the Company loss in the sum of £209,462.45 (being the total of the PSA fine, and the administrative charges).

c. In causing or allowing the Third Party Payments / the Advice Fee / the Valuation Fee to be made, R2 dishonestly assisted in R1's breach of trust, and therefore became accountable for the Company's money or property in the sum of £397,790.91.

I set out below the relevant passages in the Points of Claim (unamended) in relation to the both the alleged breaches of duties of the First Respondent and the dishonest assistance claim against the Second Respondent.

‘57. At all material times from her appointment on 20 October 2015, R1 owed the following duties (fiduciary or otherwise) to the Company, pursuant to common law and/or sections 171 to 175 CA 2006:

a. A duty to act in accordance with the Company's constitution and only exercise powers for the purposes for which they were conferred;

b. A duty to act in the way she considers, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole. Further, where she knows or should know that the Company is or is likely to become insolvent, a duty to consider or act in the interests of the Company's creditors.

c. A duty to exercise independent judgment;

d. A duty to exercise reasonable care, skill, and diligence; and

e. A duty to avoid conflicts of interest.

58. It is further averred that R1 was at all material times from 20 October 2015 trustee of such of the Company's assets and property as were in her possession or control.

59.Paragraphs 14 to 31 above are repeated. In causing, effecting, permitting, or otherwise allowing the Third Party Payments to be made, R1 is guilty of misfeasance and/or has breached her duties to the Company, and/or has misapplied the Company's assets and or has committed a breach of trust. In so doing, R1 has caused the Company loss.’

60. Further, or in the alternative, insofar as R1 delegated her duties, roles, and functions to R2 or alternatively another third party, R1 failed to act with reasonable care and skill and/or failed to exercise independent judgment in causing, effecting, permitting, or otherwise allowing (whether by a failure of oversight or otherwise) the Third Party Payments to be made. R1 is therefore guilty of misfeasance and/or has breached her duties to the Company, and/or has committed a breach of trust. In so doing, R1 has caused the Company loss.

61.Paragraphs 39 to 45 above are repeated. In causing, effecting, permitting, or otherwise allowing the Advice Fee and/or the Valuation Fee to be paid by the Company, R1 is guilty of misfeasance and/or has breached her duties to the Company, and/or has misapplied the Company's assets and/or has committed a breach of trust. In so doing, R1 has caused the Company loss.

62. Further, or in the alternative, insofar as R1 delegated her duties, roles, and functions to R2 or alternatively another third party, R1 failed to act with reasonable care and skill and/or failed to exercise independent judgment in causing, effecting, permitting, or otherwise allowing (whether by a failure of oversight or otherwise) the Advice Fee and/or the Valuation Fee to be paid by the Company. R1 is therefore guilty of misfeasance and/or has breached her duties to the Company, and/or has committed a breach of trust. In so doing, R1 has caused the Company loss.

63. In the premises, and pursuant to section 212 IA 1986, the Applicants seek declarations to that effect, and an order that R1 contribute the value of the Third Party Payments, the Advice Fee and/or the Valuation Fee (being £397,790.91 £607,253.36) to the Company's assets. Further, or in the alternative, the Applicants seek an order that R1 contribute to the Company's assets the difference in value between the services provided to the Company in exchange for the Third Party Payments, the Advice Fee and/or the Valuation Fee, and the price paid by the Company. Further, or in the alternative, the Applicants seek an order that R1 make such contribution, compensation, payment, or otherwise, in such other sum as the Court thinks fit.

64.Paragraphs 4 to 11, 32 to 38, and 47 to 52 above are repeated. In causing and/or allowing the Company to breach the Code as particularised in the Warning Notice, and/or failing to ensure that the Company complied with the Code and/or its regulatory obligations, and/or failing to put systems in place to ensure compliance with the Code, R1 is guilty of misfeasance, and/or has breached her duties to the Company, in particular but without limitation her duty to promote the success of the Company, and her duty to exercise reasonable care, skill and diligence. In so doing, R1 has caused the Company loss.

65. Further, or in the alternative, insofar as R1 delegated her duties, roles, and functions to R2 or alternatively another third party, R1 failed to act with reasonable care and skill and/or failed to exercise independent judgment in failing to retain oversight in respect of the...