Robert Nicholas Jason Schofield v Matthew David Smith
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Arnold,Lord Justice Warby |
| Judgment Date | 21 June 2022 |
| Neutral Citation | [2022] EWCA Civ 824 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case Nos: CA-2021-000215 CA-2021-000345 |
[2022] EWCA Civ 824
Lord Justice Newey
Lord Justice Arnold
and
Lord Justice Warby
Case Nos: CA-2021-000215
CA-2021-000213
CA-2021-000345
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
His Honour Judge Davis-White QC (sitting as a Judge of the High Court)
[2021] EWHC 2533 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Davies QC and Neil Levy (instructed by Horwich Farrelly Limited) for Mr Schofield, Rhino Enterprises Holdings Limited, Rhino Enterprises Properties Limited and Askwith Investments Limited
Tom Smith QC and Hannah Thornley (instructed by Faegre Drinker Biddle & Reath LLP) for Mr Smith and Ms Boardman
Joseph Curl QC and Faith Julian (instructed by DAC Beachcroft LLP) for Clyde & Co LLP
Hearing dates: 17 & 18 May 2022
Approved Judgment
These appeals concern a group of companies ultimately owned and controlled by Mr Jason Schofield. The group includes Rhino Enterprises Holdings Limited (“Holdings”), Rhino Enterprises Properties Limited (“Properties”), Rhino Enterprises Limited (“REL”) and Askwith Investments Limited (“Askwith”).
In 2007, the group was reorganised, adopting what has been called the “Opco/Propco Structure”. At the same stage, Barclays Bank plc (“Barclays”) provided Properties with a £16 million loan facility and the two companies entered into an interest rate hedging agreement. In the following year, Barclays agreed to lend Askwith £8.56 million and a further interest rate hedging agreement was concluded between those companies. Both the hedging agreements (“the Swaps”) were referenced to London Inter-bank Offered Rate (or “LIBOR”).
In 2013, Barclays demanded payment from Properties, Askwith and (as guarantor) REL. The demands not having been met, on 14 August 2013 Barclays appointed Mr Matthew Smith and Ms Clare Boardman (“the JAs”), who were partners in Deloitte LLP, as joint administrators of REL, Properties and Askwith. The JAs in turn instructed Clyde & Co LLP (“Clyde & Co”) to review claims (“the Swap Claims”) which Properties and Askwith had advanced to rescind the Swaps and recover compensation from Barclays on the grounds of mis-selling and manipulation of LIBOR.
Early in 2014, the JAs sold various properties belonging to Properties and Askwith and used the proceeds to discharge debts thought to be owing to Barclays and other creditors. Thereafter, company voluntary arrangements were approved in respect of REL, Properties and Askwith, with the JAs as the supervisors, pursuant to which control of the companies reverted to their boards in August 2014. The administrations came to an end on 13 February 2015 and the JAs were discharged pursuant to paragraph 98 of schedule B1 to the Insolvency Act 1986 (“the 1986 Act”).
By then, REL, Properties and Askwith, at the instance of Mr Schofield, had issued a claim against Barclays. Among other things, allegations were made in relation to advice on the Opco/Propco Structure, that the Swaps had been mis-sold and that Barclays had made dishonest representations about LIBOR.
The Barclays litigation was settled following a mediation by an agreement dated 1 December 2015. The parties to the settlement agreement (“the Settlement Agreement”) were REL, Properties, Askwith and Barclays, but clause 8 provided for the “Parties' Affiliates” to be able to enforce the terms of clauses 2 and 3 of the agreement in accordance with the Contracts (Rights of Third Parties) Act 1999.
The proceedings which are the subject of the present appeals were issued on 5 July 2019. In the first place, Mr Schofield and Holdings bring proceedings against the JAs as contributories of, respectively, Properties and Askwith pursuant to paragraph 75 of schedule B1 to the 1986 Act. The JAs are said to have been wrong both to accept appointment as administrators and to have conducted the administrations as they did. Among other things, the JAs are criticised for failing to pursue the Swap Claims.
Secondly, Properties and Askwith bring proceedings against Clyde & Co. In broad terms, it is alleged that Clyde & Co ought not to have accepted instructions and that they breached fiduciary or other duties in their assessment of the Swap Claims and views they expressed in relation to them.
Having regard to paragraph 75(6) of the 1986 Act, Mr Schofield and Holdings needed to obtain the Court's permission to pursue the misfeasance proceedings against the JAs. An application for such permission was heard by His Honour Judge Simon Barker QC, sitting as a Judge of the High Court, and, in a judgment dated 3 September 2020 ( [2020] EWHC 2370 (Ch), [2021] BPIR 144), he held that permission should be granted.
A few days later, Clyde & Co obtained a copy of the Settlement Agreement from Barclays, and the JAs were supplied with a copy on 11 November 2020, subject in each case to certain confidentiality conditions. On respectively 18 November 2020 and 27 November 2020, Clyde & Co and the JAs issued applications to strike out the proceedings against them and/or for summary judgment on the ground that any claims against them had been released by the Settlement Agreement.
There was a directions hearing before Insolvency and Companies Court Judge Barber on 4 December 2020 and the strike out/summary judgment applications were heard by His Honour Judge Davis-White QC (“the Judge”), sitting as a Judge of the High Court, in late May 2021. Giving judgment on 22 September 2021, the Judge concluded at paragraph 164 that the Settlement Agreement had served to release all the claims asserted against the JAs in the misfeasance proceedings and that the latter were therefore to be struck out or the subject of summary judgment in favour of the JAs. As regards Clyde & Co, the Judge held at paragraph 165 that they had been released from claims for breach of duty “whilst acting as agents”, but that the proceedings against them could continue “as regards alleged breaches of duty to advise (rather than breaches of acts or omissions vis a vis third parties as agents)”. Orders were accordingly made striking out the misfeasance proceedings in their entirety and striking out the claim against Clyde & Co “insofar as it alleges a breach of duty whilst acting as agents on behalf of [Properties and Askwith]”.
Three appeals have followed and are before us: by Mr Schofield and Holdings, by Properties and Askwith, and by Clyde & Co. Mr Schofield and Holdings challenge the striking out of the misfeasance proceedings; Properties and Askwith dispute the partial striking out of their claims against Clyde & Co; and Clyde & Co contend that the claim against them should have been struck out completely rather than merely “insofar as it alleges a breach of duty whilst acting as agents on behalf of [Properties and Askwith]”. I shall term Mr Schofield, Holdings, Properties and Askwith “the Rhino Appellants” in this judgment.
It is also relevant to mention a recent development. On 20 April 2022, REL, Properties and Askwith issued proceedings for the Settlement Agreement to be rectified by the insertion of words which would make it clear that claims against the JAs and advisors engaged by the JAs were not released. REL, Properties and Askwith had noted in a letter to Barclays dated 31 January 2022 that, were this Court to agree with the Judge's interpretation of the Settlement Agreement, Barclays would need to be made a party to any proceedings to rectify the Settlement Agreement and had invited Barclays to agree a variation to the Settlement Agreement instead. Barclays had, however, rejected this request. It stated in a letter of 25 February 2022 that it “does not consider there to have been any mistake in the Settlement Agreement”.
The Settlement Agreement
Under the Settlement Agreement, Barclays, while not admitting any liability, agreed to pay a specified sum to REL, Properties and Askwith.
Clauses 2 and 3 are of central importance to the present appeals. Clause 2.1 reads:
“This Agreement is made in full and final settlement of all Claims any Party has or may have against any other Party or against any other Released Party.”
Clause 3 provides:
“3.1 Each Party agrees that the Released Parties are released and forever discharged from all Claims.
3.2 Each Party agrees that it will not bring any Proceedings against any Released Party in relation to a Claim or otherwise assert a Claim against any Released Party. Further each Party will take all steps necessary (including, without limitation, by the payment of money) to ensure that none of its Affiliates brings any Proceedings or asserts a Claim against any Released Party.
3.3 Each of the Parties agrees that if it takes Proceedings or asserts a Claim in breach of clause 3.1 above, damages are not an adequate remedy and, accordingly, that injunctive or other similar relief is appropriate to restrain that breach.
3.4 If, contrary to clause 3.2 above, an Affiliate of any Party (the First Party) brings Proceedings in relation to a Claim or otherwise asserts a Claim against another Party (the Second Party) or an Affiliate of the Second Party, the First Party shall pay on demand to the Second Party, or, if requested by the Second Party, to the relevant Affiliate, a sum equal to the costs (including, without limitation, legal costs), losses, liabilities, expenses...
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