Susan May King v Bar Mutual Indemnity Fund
| Jurisdiction | England & Wales |
| Judge | Kelly |
| Judgment Date | 09 June 2023 |
| Neutral Citation | [2023] EWHC 1408 (Ch) |
| Court | Chancery Division |
| Docket Number | Case Nos: BR-2021-LDS-000011 BR-2021-LDS-000014 |
[2023] EWHC 1408 (Ch)
Her Honour Judge Kelly sitting as a Judge of the High Court
Case Nos: BR-2021-LDS-000011
BR-2021-LDS-000012
BR-2021-LDS-000014
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
INSOLVENCY AND COMPANIES LIST (ChD)
The Court House
Oxford Row
Leeds LS1 3BG
Mr Christopher Newman instructed directly by the Applicants
Mr Martin Ouwehand (instructed by DAC Beachcroft) for the Respondent
Hearing dates: 4, 5 and 8 August 2022
Date draft circulated to the Parties: 4 June 2023
Date handed down: 9 June 2023
APPROVED JUDGMENT
This judgment was handed down by the Judge by circulation to the parties and the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10.30am on Friday 9 June 2023.
Her Honour Judge Kelly
This judgment follows the hearing of the applications by Susan May King, James Patrick King and Anthony Douglas King (collectively, ‘the Kings’) to set aside statutory demands dated 7 October 2021 (collectively, ‘the Statutory Demand’) for £219,700.00 (‘the Statutory Demand Debt’) issued against them by the Bar Mutual Indemnity Fund (‘BMIF’), pursuant to s 268(1)(a) Insolvency Act 1986 (‘IA 1986’) (‘the Set-Aside Application’).
The Applicants were represented by counsel Mr Christopher Newman. The Respondent was represented by counsel Mr Martin Ouwehand. I had the benefit of skeleton arguments from both counsel.
The Statutory Demand Debt represents the sum payable under a costs order dated 10 June 2021 made against the Kings by Cockerill J (‘Costs Order’). The Costs Order followed a strike out judgment in conspiracy proceedings against the Kings in Anthony King & 2 Ors. v Barry Stiefel & 9 Ors. [2021] EWHC 1045 (Comm) (“the Conspiracy Proceedings”) heard by Cockerill J. That case in turn arose out of proceedings concerning misrepresentation (“the Misrepresentation Proceedings”) before Marcus Smith J. There are two other ongoing sets of proceedings that are relevant to this case arising from alleged professional negligence and unfair prejudice (“the Professional Negligence Proceedings” and “the Unfair Prejudice Proceedings”).
As that short summary shows, this case has had some history in the courts and some background is necessary to understand the context of the present application.
Background
The Kings operated a family business called Kings Solution Group Ltd (‘KSG’). In 2013 they got into financial difficulty and explored external investment from some private equity investors who set up Primekings Holdings Limited (“Primekings”) as a Special Purpose Vehicle (“SPV”) for this purpose.
In December 2013, the Kings sold their shares in KSG to Primekings. They alleged that they did so on the terms agreed only because of a representation by Primekings that KSG's main credit provider, GE Money (“GE”), told Primekings that:
(1) the KSG company accounts were frozen;
(2) GE had lost faith in the KSG management; and
(3) GE would no longer support and finance KSG.
The Kings say they later found out that none of this was true and, as a result of these misrepresentations, agreed to a less advantageous deal.
The Kings therefore brought the Misrepresentation Proceedings before Marcus Smith J against Primekings seeking, amongst other things, a rescission of the share transfer. The trial began on 27 April 2017. The Kings' solicitors were DWF. Their barristers were Mr Hall Taylor and Mr Morcos. Primekings solicitors were Teacher Stern LLP. Their barristers were Paul Downes QC and Joseph Sullivan.
It seems that Primekings' main defence was that the statements were true and/or that they believed them to be true. On the morning of day 10 of the trial, and following advice from their legal team, the Kings withdrew allegations against Primekings and filed a notice of discontinuance. The Kings were ordered to pay Primekings' costs of approximately £1.7m. The £1.7m was eventually paid on behalf of the Kings by the professional indemnity insurers of their solicitors, DWF.
The subsequent proceedings, all initiated by the Kings, arise out of those failed Misrepresentation Proceedings.
In 2020–21 the Kings sued Primekings, their solicitors Teacher Stern LLP and barrister Mr Downes QC alleging unlawful means conspiracy in the Conspiracy Proceedings. The defendants in turn applied for strike out and/ or summary judgment to be entered into in their favour. The case was heard by Cockerill J in February 2021 who struck out the Kings' action and made the Costs Order against them.
The Kings have also commenced proceedings against their own solicitors DWF and counsel Mr Hall Taylor and Mr Morcos (collectively, ‘the Misrepresentation Team’) for professional negligence in their conduct of the Misrepresentation Proceedings — the Professional Negligence Proceedings. The Kings say that these claims are due to be heard in 2023. They also say that these claims are significantly valuable, worth around £58m.
The Kings also have another claim against Primekings and others on the KSG board for unfair prejudice — the Unfair Prejudice Claim. These proceedings commenced in March 2018. This claim arises out of conduct following the Misrepresentation Proceedings. The Kings say that these claims are worth between £5m and £20m.
The Conspiracy Proceedings
There were two allegations of conspiracy made against Primekings and their legal team. First, that they conspired to provide false and inflated costs information to improperly pressure the Kings into settling the dispute and, in the event, to obtain more costs in the order than they deserved.
Second, that the Defendants in the Misrepresentation Proceedings identified mistakes made by the Misrepresentation Team during those Misrepresentation Proceedings and threatened to “expose the full extent of the legal team's negligence to the Kings and the Court if the legal team did not cause the Kings to discontinue the case on terms specified by Primekings” – see paragraph 180 of the judgment of Cockerill J (“the Strike Out Judgment”). Cockerill J said this was the unpleaded threat which she called “the Threat” and which was “the heart of the Kings' case”. Those mistakes are the subject of the Professional Negligence Proceedings.
Cockerill J struck out the Kings' conspiracy claim because “no complete cause of action is currently pleaded or could be pleaded”. In brief the reasons for her judgment were:
(1) The costs fraud was accepted by counsel for the Kings not to have caused the discontinuance of proceedings.
(2) With regard to the Threat, it was never pleaded by the claimants that the defendants had knowledge of the asserted Misrepresentation Team's negligence. Therefore, this claim was fundamentally flawed and could not succeed.
(3) In any event, the defendants submitted that the Threat did not cause the Discontinuance because the Kings themselves say (in the Professional Negligence Proceedings) that it was the Misrepresentation Team's grossly negligent advice that led to the Discontinuance.
(4) Further, the Kings' action constituted an abuse of process and/ or a breach of CPR 38.7, which provides that:
“A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if –
(a) he discontinued the claim after the defendant filed a defence; and
(b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim”.
For the conspiracy claims to succeed, the Kings would have had to show that the Misrepresentation Claim before Marcus Smith J would have succeeded but for the conspiracy. In other words, the Kings would have to prove the merits of that claim and, in effect, seek to go behind the discontinuance. It was therefore abusive for the Kings to bring this claim without permission of the court.
The Kings applied for permission to appeal. Permission was refused by Males LJ in a paper application dated 26 July 2021.
In addition to the issued proceedings, proceedings have also been intimated, but not yet commenced, against Mr Downes in respect of representations made by Mr Downes, through his counsel, to Cockerill J during the Conspiracy Proceedings. Those representations are alleged to be untrue and to have had the effect of positively misleading the judge. Although proceedings have not been commenced, the alleged cross-claim has been raised in correspondence before action as part of the pre-action protocol. Mr Downes asserts that he has immunity as an advocate in respect of what he said to Cockerill J through his counsel. The Kings argue that there would be no need for the assertion of an immunity defence unless it was recognised that there was an arguable case to answer.
The Costs Order and Statutory Demand
Following the strike-out, Cockerill J made the Costs Order dated 10 June 2021. It recited that the claim in the Conspiracy Proceedings was totally without merit and that “[t]he Claim against all of the Defendants be struck out and judgment hereby entered against the Claimants”.
It also ordered that “[t]he Claimants do pay the Defendants' costs of the Defendants' Applications, the Claimants' Unless Order Application and the Claim, such costs to be subject to detailed assessment on the indemnity basis if not agreed”. The payment of “£219,700 to the 9 th Defendant”, Mr Downes, was due by no later than 4pm on 24 June 2021. The Kings failed to pay the sum on time.
Mr Downes' right in respect of the £219,700 in the Costs Order was assigned to his insurer, BMIF, the Defendant in these proceedings, on 30 September...
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