Stubbins Marketing Ltd v Rayner Essex LLP
| Jurisdiction | England & Wales |
| Judge | Master Nurse |
| Judgment Date | 16 March 2023 |
| Neutral Citation | [2023] EWHC 515 (Ch) |
| Docket Number | Claim No. BL-2022-000390 |
| Court | Chancery Division |
and
[2023] EWHC 515 (Ch)
Claim No. BL-2022-000390
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Thomas Roe KC and Charles Sorensen instructed by Duffield Harrison LLP for the Claimants
Thomas Grant KC and James Kinman instructed by Reynolds Porter Chamberlain LLP for the First Defendant
Hearing dates: 27 February and 16 March 2023
Deputy Master Nurse
INTRODUCTION
This is a reserved Judgment following the hearing of an Application by the First Defendant (‘Rayner Essex’) issued on 20 December 2022. By the Application Rayner Essex seek the following relief:
“That the Claimants do pay the First Defendant's costs of responding to a letter of claim dated 30 June 2021 on the indemnity basis because the allegations made in that letter of claim were baseless and abandoned when challenged. Further or alternatively the First Defendant seeks its costs as identified by and under CPR r.38.6(1) and (2), the Claimant having discontinued various claims advanced against it, and seeks an order under r.28.6(2)(b) that those costs be assessed forthwith; and there be a payment on account of those costs in such amount as this court thinks fit. Further the First Defendant seeks its costs on the indemnity basis.”
Before me the Claimants were represented by Mr Thomas Roe KC and Mr Charles Sorenson, and Rayner Essex by Mr Thomas Grant KC and Mr James Kinman. Counsel for both parties produced detailed Skeleton Arguments which were supplemented by oral submissions, for which I am most grateful. It is not possible, without over-extending this Judgment, to record all the points dealt with in the Skeleton Arguments and submissions, but I have considered all matters put before me in reaching my conclusion. If any specific point is not mentioned, it should not be assumed that I have failed to consider it in reaching my Decision.
BACKGROUND
The First Claimant (‘SML’) runs a fruit and vegetable business. It is owned by members of two families: the Difrancescos and the Turones (albeit in the case of two of the latter, by their trustees in bankruptcy). The Second to Eighth Claimants are some of those family members.
The present Claim, issued on 8 March 2022, arises out of a transaction entered into by SML on 1 April 2016 (‘the Transaction’). At that time, the directors of SML were five individuals named (a) Wayne Smith; (b) Pietro Turone; (c) Salvatore Turone; (d) Salvatore Michele Difrancesco (who is a Part 20 Defendant/the Third Party in these proceedings); and (e) Salvatore Difrancesco. At the time of the Transaction, Rayner Essex acted as accountant, auditor and business advisor to SML. One Mr Heyes was the primary point of contact between Rayner Essex and SML.
By the Transaction, SML sold most of its business and assets (including a substantial property, the ‘WX Hub’) to companies named Stubbins Food Partnerships Limited (‘SFP’) and Stubbins Growing Partnerships Limited (“SGP”). SFP and SGP were substantially owned by Wayne Smith, Pietro Turone, Salvatore Turone and Salvatore Michele Difrancesco. It was intended that, after the Transaction had completed, SML's business would largely or exclusively consist of leasing two valuable nurseries (which remained in its ownership) to SFP and SGP.
SML subsequently issued a Claim (“the First Claim”) against, amongst others, SFP, SGP, Wayne Smith, Pietro Turone, and Salvatore Turone, alleging (among other things) that the Transaction had not been properly authorised in accordance with the terms of section 190 of the Companies Act 2006, and that SFP, SGP, Wayne Smith, Pietro Turone and Salvatore Turone were liable to indemnify SML against any loss or damage suffered by it as a result of the Transaction.
There was a Trial of the First Claim heard by Mr Justice Trower in November and December 2019. On 19 May 2020, in a long (168 page) Judgment, he found substantially in favour of SML (it is reported as Stubbins Marketing Limited v Stubbins Food Partnerships Limited & Ors [2020] EWHC 1266 (Ch). Neither Rayner Essex nor Mr Heyes were parties to the First Claim, although Mr Heyes gave evidence for the Defendants.
For present purposes it is not necessary to go into detail about the facts as found by Mr Justice Trower, and, indeed, there remain, it appears, many facts that are contested as between the present Claimants and Rayner Essex.
The initial Claim Form (which was issued on 8 March 2022 but not served in its original form) summarised the Claim in the ‘Brief details of claim’ as follows:
“Several directors of the First Claimant company (C1) unlawfully and in breach of duty caused C1 loss by (1) disposing of its business and most assets for an undervalue to their personal companies, (2) disposing of its shares in another company for £100 and (3) giving a debenture to another personal company to secure a supposed claim against C1. The First Defendant firm (D1) were C1's accountants and business advisers, but in practice assisted the malfeasant directors. The Second Defendant firm (D2) acted for the malfeasant directors' companies during (1) above making false representations to C1's shareholders to secure consent to the disposition, and acted for C1 during (2) and (3) above, but in practise assisted the malfeasant directors. The facts have been set out in much more detail under the Pre-action Protocol.
Without prejudice to C1's right to rely (in their Particulars of Claim when these fall to be filed) on all such causes of action in law as arise from the facts briefly summarised above, Cs intend to claim in (i) deceit (ii) breach of contract, (iii) negligence, (iv) breach of fiduciary duty (v) dishonest assistance in breach of fiduciary duty and (vi) unlawful means conspiracy.
The Second to Eighth Claimants sue as shareholders in C1 because D2 has contended that the representations were made to the shareholders and that C1 itself therefore has no cause of action.”
The passages quoted above in bold were crossed out in the Claim Form on 20 April 2022 (as is permitted pursuant to CPR Rule 17.1(1)) before the Claim Form, as so amended, was served. The Particulars of Claim, dated 6 June 2022, contains 207 paragraphs, but has a short prayer where the Claimants claim:
“1. Damages and/or equitable compensation with interest;
2. Contribution pursuant to section1 of the Civil Liability (Contribution) Act 1978.
3. Further or other relief. 4. Costs.”
PRIMARY CHRONOLOGY
The following dates are, in my view, of primary relevance:
16 July 2015 The date when Rayner Essex was first retained by SML
1 April 2016 the Transaction
19 May 2020 Judgment in the First Claim
30 June 2021 SML's pre-action ‘Letter of Claim’ in the present Claim, which included a request for a ‘Standstill Agreement’ to remove the necessity to issue the Claim before the expiration of the first of any possible limitation periods in July 2021
24 January 2022 Rayner Essex's ‘Response Letter’, which included a final extension of the Standstill Agreement to 11 March 2022. This had previously been extended to 28 February 2022
8 March 2022. Claim Form issued
20 April 2022 Amended Claim Form
6 June 2022 Particulars of Claim
29 July 2022 Rayner Essex Defence
22 November 2022 SML's Reply and service of Voluntary Particulars
20 December 2022 This Application
LEGAL AND PROCEDURAL FRAMEWORK
Mr Roe and Mr Grant took me to various statutory and procedural provisions. Before referring in more detail to the facts, and the arguments of the parties, I shall quote from the primary statutory and procedural sources, but refer in more detail in due course to some of the reported authorities in which they have been considered and applied.
The present Application is primarily concerned with liability for the costs of litigation, and in particular costs incurred before the issue of the relevant Claim Form.
The primary provision is Section 51 of the Senior Courts Act 1981 (‘Section 51’):
“(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in —
(a) The civil division of the Court of Appeal;
(b) the High Court, and
(ba) the family court;
(c) the county court
shall be in the discretion of the court.”
The Civil Procedure Rules (‘CPR’), and in particular Part 38, are of especial relevance in the present case. Rule 38.1 is as follows:
“(1) The rules in this Part set out the procedure by which a claimant may discontinue all or part of a claim.
(2) A claimant who—
(a) claims more than one remedy; and
(b) subsequently abandons his claim to one or more of the remedies
but continues with his claim for the other remedies, is not treated as discontinuing all or part of a claim for the purposes of this Part. (The procedure for amending a statement of case, set out in Part 17, applies where a claimant abandons a claim for a particular remedy but wishes to continue with his claim for other remedies.)”
Rule 38.2(1) provides that a Claimant may discontinue all or part of a claim at any time. Rule 38.3 provides that:
“(1) To discontinue a claim or part of a claim, a claimant must—
(a) file a notice of discontinuance; and
(b) serve a copy of it on every other party to the proceedings.”
Rule 38.6 provides that:
“(1) Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant.
(2) If...
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