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||Neutral Citation Number:  EWHC 1812 (Ch)
||Case No: 0671 of 2012
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Fetter Lane, London,
||20 July 2016
B e f o r e :
MR. JUSTICE SNOWDEN
|| IN THE MATTER OF RALLS BUILDERS LIMITED (IN LIQUIDATION) AND IN THE MATTER OF THE INSOLVENCY ACT 1986
||(1) STEPHEN PAUL GRANT
(2) JAMES RICHARD TICKELL
(Joint Liquidators of Ralls Builders Limited)
||(1) WILLIAM RALPH RALLS
(2) NICHOLAS LEE RALLS
(3) GARY CHRISTOPHER HAILSTONES
Ms. Angharad Start (instructed by Pinsent Masons LLP) for the Applicants
Mr. Christopher Boardman and Mr. Christopher Lloyd (instructed by Verisona Law) for the Respondents
Hearing date: 3-4 March 2016
HTML VERSION OF JUDGMENT
Crown Copyright ©
MR. JUSTICE SNOWDEN :
- On 11 February 2016 I handed down a judgment on the main issues arising in this wrongful trading claim under section 214 of the Insolvency Act 1986:  EWHC 243 (Ch). The claim was brought by the joint liquidators of Ralls Builders Limited against the three former directors of the company. I shall use the same abbreviations in this judgment as in that main judgment.
- In the main judgment, I held that by 31 August 2010 the Directors ought to have concluded that there was no reasonable prospect of the Company avoiding insolvent liquidation. I rejected the contention that the Directors ought to have reached that conclusion by the earlier date of 31 July 2010. I also held that the Directors were not able to avail themselves of the defence under section 214(3) of the 1986 Act that they had taken every step after 31 August 2010 as they ought to have taken with a view to minimising the potential loss to creditors, because they had permitted new credit to be incurred which was not paid. However, I decided not to make a declaration under section 214(1) that the Directors should make a contribution to the assets of the Company in respect of any losses caused to the Company during the period after 31 August 2010 because I did not find it proven that the net deficiency of the Company increased during that period.
- At the end of the main judgment I indicated that I would hear further argument upon two points that I had left outstanding during the trial until the issues arising in the main claim had been determined. The first point was the final element of the Joint Liquidators' claim under section 214, namely whether a contribution should be ordered to be made by the Directors to the assets of the Company in respect of the amount by which the costs and expenses of the administration and liquidation of the Company had been unnecessarily increased by the continued trading after 31 August 2010. The second point was whether, if I ordered a contribution to be made, I should also make a disqualification order under section 10 of the Company Directors Disqualification Act 1986.
The claim in respect of costs and expenses
- As I recorded in paragraphs 281-282 of the main judgment, the Joint Liquidators originally claimed that in addition to any increase in the net deficiency of the Company attributable to the trading between 31 August 2010 and 13 October 2010 when the Company went into administration, the entirety of the costs and expenses of the administration and subsequent liquidation of the Company should be ordered to be contributed by the Directors to the assets of the Company. These costs and expenses, which were initially said to amount to £287,071, were claimed in addition to any costs of the proceedings that might be ordered to be paid by the Directors in the usual way under CPR Part 44 et seq.
- However, at the commencement of the trial, and no doubt appreciating that this claim was too wide because it included costs and expenses that would have been incurred in the insolvency of the Company in any event, Ms. Start, who appeared for the Joint Liquidators, indicated that she wished to amend the pleadings to make a claim only for the amount by which the costs and expenses of the administration and liquidation had been unnecessarily increased by the continued trading after either 31 July 2010 or 31 August 2010.
- The difficulty for the Joint Liquidators was that although the figure for the total costs and expenses of the administration and liquidation had been pleaded, no evidence had been adduced and no disclosure given of any of the underlying materials from which any determination could be made of the amount by which the costs and expenses had been unnecessarily increased by the continued trading after either date alleged. Further, although Ms. Start indicated that the Joint Liquidators could produce at the trial a box (or several boxes) of the documents from which she asserted that such matters could be investigated, that was a wholly impracticable suggestion for dealing with the matter. There was simply no time for appropriate disclosure to be given and assimilated, for the matters in dispute to be identified, witness statements to be filed dealing with any contentious items, and for cross-examination at the trial. As it was, the time allocated for the trial was barely adequate to resolve the main issues.
- Ms. Start therefore suggested that if I was to find that there had been a period of wrongful trading, I could order a contribution to be made to the Company's assets equal to the unnecessary increase in the costs and expenses of the administration and liquidation caused thereby, and could direct an inquiry into the amount of such contribution to be heard by the Registrar.
- For the Directors, whilst obviously welcoming the indication that the original claim for all of the costs and expenses was not being pursued against his clients at the trial, Mr. Boardman objected root and branch to this course. He protested that I should not entertain an amended claim, because it had been raised far too late to be included in the trial and that the claim was in any event misconceived in law.
- Having regard to the practicalities, and since on any view the question of whether there could or should be a contribution in respect of any part of the costs and expenses of the administration and liquidation would depend (at least) upon whether I found that there was a date at which the Directors ought to have concluded that an insolvent liquidation could not be avoided, (and if so, what date), I decided not to deal with these questions until after I had decided the main issues.
- After I had provided my main judgment to the parties in draft, the Joint Liquidators issued an application to adduce a witness statement of Mr. Grant which stated that the additional costs and expenses incurred by the Joint Liquidators in dealing with the wrongful trading claim amounted to £256,160.75. This was said to exclude any time costs and expenses that would have been incurred in the administration and liquidation in any event, and also to exclude any legal costs incurred.
- Mr. Grant's witness statement was accompanied by a breakdown of the time costs of the two firms of accountants to which the two Joint Liquidators belonged (Wilkins Kennedy and Portland) and supporting schedules of those time costs. The total of £256,160.75 was divided up by the time periods from the date of liquidation as follows (the figures reading down each column are cumulative):
|Liquidation to [date]
||% of total
|08.07.11 (pre-action letter of claim)
|19.01.12 (liquidation committee sanction)
|08.06.15 (start of trial)
|30 06.15 (end of trial)
*The total includes £16,785.00 that was incurred by Portland in keeping the case open after the liquidation committee gave its sanction for the proceedings to be brought. The claim was commenced on 19 December 2012.
- It is, I think, readily apparent from these numbers that in broad terms, the overwhelming majority of the costs and expenses claimed do not relate to the initial investigation by Wilkins Kennedy. That investigation must have been largely concluded by the time sanction was sought from the liquidation committee for the claim to be brought. Until then, only about 18% of the total costs had been incurred. The bulk of the costs relate to the involvement of the Joint Liquidators' firms in the conduct of the claim until trial (54%) and during the trial (28%).
- Mr. Grant did not seek to break down the costs further to differentiate, say, between the costs incurred in relation to the allegation that the Directors ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation by 31 July 2010 (which failed); the same allegation in relation to 31 August 2010 (which succeeded); and the attempt to show that the Company sustained a loss (an increase in its net deficiency) for either period (which failed).
- On the renewed application, the Joint Liquidators contended that as I had found that there was a date (31 August 2010) after which the Directors ought to have concluded that there was no reasonable prospect of avoiding an insolvent, I had the power to make an order in respect of their additional costs and expenses of investigating and pursuing the claim under section 214. They contended that because I had made a finding that trading had continued beyond 31 August 2010, there had been "wrongful trading" and that this gave me the power to order the costs incurred to be paid by the Directors under section 214 so as to avoid them increasing the net deficiency of the Company to the detriment of the unsecured creditors.
- The Directors rejected these contentions and submitted that the sums claimed could not be ordered to be contributed as a matter of principle. On their behalf, Mr. Boardman submitted that as a general rule, expenses incurred by or on behalf of a litigant in investigating and bringing a claim are not recoverable by way of damages and that a claim under section 214 should be governed by the same rule. Mr. Boardman also contended that the costs of investigation of the Directors' conduct by the Joint Liquidators could not be said to have been caused by the trading after 31 August 2010 so as to justify an order under section 214. He observed, and Ms Start did not dispute, that there was no reported case in which any order of the type sought by the Joint Liquidators had ever been made.
- In addition, Mr. Boardman contended on the particular facts of the instant case that it would be unjust and not in accordance with the overriding objective for the Joint Liquidators to be given relief from sanctions to enable them to advance their amended claim in further proceedings after the end of a lengthy trial at which they had failed to be ready to advance such a case; and that there were a number of deficiencies in the materials provided by Mr. Grant which (among other things) included the costs of other work done by the Joint Liquidators which was unrelated to the claim under section 214.
- In support of his first proposition, Mr. Boardman referred to the authorities that demonstrate that in general, a litigant cannot recover expenses which he incurs in connection with litigation other than by way of an order for costs. Such sums cannot, for example, be recovered by way of damages for breach of contract or tort. This principle was considered by Newey J in Avrahami v Biran  EWHC 1776 (Ch) at paras 294-298. The relevant part of the claim was for damages to cover "management or consultancy fees" and expenses of a director of the claimant company in investigating the alleged fraud of the defendant. Newey J considered the relevant authorities including Cockburn v Edwards (1881) 18 Ch D 449, Aerospace Publishing v Thames Water Utilities  EWCA Civ 3, and Al-Rawas v Pegasus Energy  EWHC 617 (QB) and concluded that such fees and expenses were not recoverable as damages.
- In Cockburn v Edwards, Brett LJ stated, at page 462,
"[T]he damages in an action of tort must have been incurred when the action is brought, except in some cases where they include everything up to the time of trial, and they cannot include any expenses incurred in the action itself. The law considers the extra costs which are disallowed on taxation between party and party as a luxury for which the other party ought in no case to be liable, and they cannot be allowed by way of damages".
- In Al-Rawas v Pegasus at para 24, Jack J. stated,
"I accept that management time spent on preparing a claim for damages for breach of contract is not recoverable as damages. I also accept that it is not recoverable as costs, and so is irrecoverable. That is the law".
- Although a claim under section 214 is not a claim in tort or for breach of contract, given that the essence of section 214 is to provide a remedy for loss caused to a company by continued trading after the directors ought to have concluded that insolvent liquidation was unavoidable, I cannot see that there is any obvious basis upon which to distinguish a claim under this section from claims for loss caused by a tort or by a breach of contract of the type considered in Cockburn or Al-Rawas. In particular, I do not think that the fact that such a claim is brought by a liquidator (or an administrator) for the ultimate benefit of creditors is a basis for such a distinction. A claim under section 214 is simply one of the statutory tools available to a liquidator or administrator to seek to restore the value of the insolvent estate for distribution to creditors, and wrongful trading claims are often made together with or as an alternative to, a claim brought in the name of the company itself for damages for breach of a director's duty of care or breach of his fiduciary duty in connection with transactions entered into prior to insolvency. Such claims all fall to be investigated and to be instituted by the office-holders in fulfilment of their statutory duties, and it would be illogical if different principles as to the recovery of costs and expenses applied to such claims, especially if brought together as part of the same case.
- As such, even if the Joint Liquidators had succeeded obtaining an order for a contribution to be made to the assets of the Company on the basis that continued trading between 31 August 2010 and the administration of the Company had caused loss to the Company, I do not think that they would have been able to claim a contribution under section 214 in respect of the costs incurred in the liquidation of investigating and preparing such a claim or of their own involvement in the conduct of that claim. Self-evidently, in this case the Joint Liquidators can be in no better position having failed to obtain a contribution in respect of the trading in the period prior to administration.
- In Avrahami, Newey J distinguished the decision of David Richards J in 4 Eng Ltd v Harper  EWHC 915 (Ch). David Richards J had permitted the recovery of investigatory costs in a fraud case, but as Newey J observed,
"The work for which damages were awarded [in 4 Eng] had been completed three or four years before the claimant even issued proceedings. There was no question of it having been undertaken in the context of pending litigation."
- In my judgment, and for the same reason, 4 Eng provides no basis for the recovery of the Joint Liquidators' costs by way of a contribution under section 214 in the instant case. The possibility of a claim under section 214 was mooted at the outset of the liquidation of the Company, and this was the very reason that Mr. Grant was brought in as Joint Liquidator. All of his work was done in the context of potential or pending litigation.
- Mr. Boardman's second proposition was that in the same way as corporate litigants cannot generally recover for the costs of the time that their own employees and agents spend in investigating claims and dealing with litigation, the time costs and expenses of insolvency office-holders appointed to a company in respect of litigation are not generally recoverable as costs in the litigation. He suggested that this was the explanation of why the Joint Liquidators were trying to recover their costs by way of a contribution under section 214, but submitted that nothing in the cases on this area suggested that there should be any exception to the general rule discussed in Avrahami to cater for costs incurred in relation to litigation by insolvency office-holders.
- The question of whether the time costs of insolvency office-holders can be recovered as costs in litigation was the subject of extended analysis by Warren J in SISU Capital Fund v Tucker  BCC 463 at 577 et seq. Warren J held that insolvency office-holders cannot recover an order for costs for their own time spent in assisting in the conduct of litigation, except in so far as they might be able to bring themselves within what was referred to as "the Nossen principle". That was a reference to Re Nossen's Letter Patent  1 WLR 638 in which it had been held that as an exception to the general rule, a corporate party might be able to recover for the direct costs of its own specialist employees if they had been the most suitable or convenient experts to employ in a matter requiring expert evidence.
- In SISU v Tucker, Warren J concluded, (emphasis added)
"38. Now, it is clear that, prior to the introduction of the litigant in person costs provisions, a litigant in person who did not carry on a profession could not recover costs in respect of his time: that, indeed, was precisely why the litigant in person provisions were introduced. The decision of the Court of Appeal in Jonathan Alexander Ltd v Proctor  1 WLR 518 identified a similar problem in relation to a company represented by a director: it was not possible to recover for time spent because the court had no power to make such an award. CPR Pt 48 now deals with litigants in person: special provision is made for solicitors under CPR r 48.6(6) read with 48PD 52.5. There is no similar provision in the case of other professionals. CPR, r.48.6 and 48PD 52.5 draw no distinction between a litigant who happens to be a professional other than a solicitor (or other person entitled to conduct litigation) and an ordinary litigant in person; they reflect the approach that the London Scottish Benefit Society case (1883-1884) LR 12 QBD 452, (1883-1884) LR 13 QBD 872 (CA) is restricted in its operation to solicitors. In my judgment, that is a correct approach: and it would be an inadmissible extension of that case to treat the principle established by it to other professionals.
39. I reach the same conclusion by another route also. The reasoning in the London Scottish Benefit Society case (see the first three elements discussed by Chadwick L.J. in Malkinson v Trim  1 WLR 463 (CA)) shows that a solicitor acting in person can only recover for certain costs which he would have been able to recover had he instructed an independent solicitor. It would seem to me that another professional (such as an accountant) should similarly be able to recover as a litigant in person at most for items which he would have been able to recover had he instructed an independent professional (accountant). Whilst he would be able to recover for the cost of any expert advice given by that independent professional, he would not be entitled to recover for the cost of general assistance in the conduct of the litigation. The litigant in person, even if a professional, cannot recover in respect of his time spent other than on matters within his own professional expertise and requiring the attention of an expert.
40. Further, the position of an office-holder is, in my judgment, no different. It may be the case that, in the fulfilment of his duties as an office-holder, he has to bring or defend litigation. The fact that he does so does not mean that it is part of his profession to conduct litigation in the way that it is part of the profession of a solicitor to do so. An office-holder in not unique in this respect: trustees of family trusts or of pension funds have fiduciary duties, the fulfilment of which may require them to bring or defend proceedings. That sort of duty on the part of an office-holder or other fiduciary does not, in my judgment, afford any basis for a difference in treatment, vis-à-vis the payment of costs by an opposing party, from any other litigant.
41. Nor, in my judgment, does the fact that an office-holder's remuneration is ultimately under the control of the insolvency court make any different to the result. The real reason he cannot recover is, I consider, because he is not a professional seeking to recover costs for time spent in respect of his own area of expertise."
- SISU v Tucker concerned an application by bondholders for the revocation of a company voluntary arrangement and the removal and replacement of administrators from office on the grounds that the administrators had conflicts of interest, had moved value away from the bondholders when they proposed the CVA, and had thereby acted unfairly prejudicially towards the bondholders. That case was therefore not factually comparable to the instant case, but again I cannot see any logical basis upon which to distinguish Warren J's conclusions as to the principle involved. In particular, Warren J considered that the principle applied equally to claims brought by or against an insolvency office-holder and that it applied to claims brought by the office-holder in fulfilment of his duties. Accordingly, it seems to me that the decision in SISU v Tucker does support Mr. Boardman's submission that there is no special rule for insolvency cases. For completeness I should add that in the instant case both sides had their own expert witness who gave evidence at the trial, and accordingly there is no basis upon which the Nossen exception could be applied to any of the time costs and expenses claimed by the Joint Liquidators.
- I also think that my conclusion that the Joint Liquidators cannot recover their costs and expenses by way of an order for contribution under section 214 derives further support from the point made by Mr. Boardman on causation.
- In paragraphs 241-242 of the main judgment, I accepted the proposition, based upon the authorities, that the correct approach for determination of whether directors should be liable to make a contribution to the assets of a company under section 214 was to ask whether the company in question had suffered loss which was caused by the continuation of trading after the relevant date. I therefore held that losses that the company would have sustained as a consequence of going into a formal insolvency process in any event should not be laid at the door of the directors under section 214.
- In relation to the question of causation under section 214, in Continental Assurance  BPIR 733 Park J observed, at paras 378-380,
"378. My general point is that, before a court will be prepared to impose liability on directors in a case where there has been an unjustified decision to carry on trading, it is not enough for a liquidator claimant merely to say that, if the company had not still been trading, a particular loss would not have been suffered by the company. There must, in my view, be more than a mere 'but for' nexus of that type to connect the wrongfulness of the directors' conduct with the company's losses which the liquidator wishes to recover from them. In many cases the connection will be obvious and may not require any discussion. If the company's business was inherently loss-making, and the directors ought to have known that but unjustifiably turned a blind eye to it, it is plainly appropriate to use the section to seek recovery from them of continued trading losses of precisely the kind which they ought to have known would result if the company carried on with its trading operations.
379. However, not every loss which a company may sustain after the directors have reached a wrongful decision to trade on (or wrongfully failed to consider at all the question of whether to trade on or not) is like that. One of the previous cases under section 214 which was cited to me was re Brian D Pierson (Contractors) Ltd  BCC 26. The judge (Hazel Williamson QC, sitting as a High Court judge) held that the directors were in principle liable under the section, but, from the amounts which she considered that they ought to be required to pay to the company, she sought to exclude the element of worsening of the company's position which was attributable to particularly bad weather conditions of 1994-95. The company's business was to construct and maintain golf courses, so it was vulnerable to bad weather entirely independently of whether the directors took justifiable or unjustifiable decisions about trading on or closing down instead.
380. The well-known decision of the House of Lords in South Australia Asset Management Corporation v York Montague Ltd and associated cases,  AC 191, was not concerned with section 214 but rather with common law principles about damages for negligent valuations, but I am struck by one short sentence in the important speech of Lord Hoffmann (at page 213): 'Normally the law limits liability to those consequences which are attributable to that which made the act wrongful'. I believe that a similar principle has an important role to play in section 214."
- I agree with Park J that section 214 requires something more than just a "but for" test of causation. A director's conduct is not wrongful for the purposes of section 214 simply because there is a relevant date at which he actually concluded or ought to have concluded that insolvent liquidation was inevitable. Nor is it wrongful per se for a director not to put the company into administration or liquidation once that relevant date has been reached. This much seems clear from the fact that the terms of section 214 do not simply require directors to cease trading and put the company into administration or liquidation as soon as the relevant date is reached; and it also appears from section 214(3), which provides that the court cannot make any order under section 214(1) even if the company does not go into administration or liquidation at the relevant date, provided that the directors take every step thereafter that they ought to take with a view to minimising the potential loss to creditors.
- Accordingly, I cannot see that merely establishing that there was a relevant date beyond which the Directors did not immediately place the Company into administration in this case provides any basis for characterising their behaviour as "wrongful" for the purposes of section 214, or that of itself it provides a basis for ordering them to pay for the fees and costs subsequently incurred by the Joint Liquidators in investigating or pursuing litigation to establish when the relevant date occurred in this case. That is especially so since I did not accept the primary argument advanced by the Joint Liquidators as to when the relevant date occurred (i.e. 31 July 2010 as opposed to 31 August 2010).
- Still less can I see why the fact the Directors traded the Company beyond 31 August 2010 means that I should characterise their behaviour as "wrongful" for the purposes of section 214 so as to justify ordering them to pay for the fees and costs subsequently incurred by the Joint Liquidators in investigating or litigating whether or not there was an increase in the net deficiency of the Company after the relevant date. I found that the continued trading did not result in any increase in the net deficiency so as to justify making an order under section 214. It would, I think, be illogical to decline to make any order in respect of the direct consequences of the Directors' decision to continue trading after 31 August 2010 because there was no increase in the net deficiency, but nevertheless to order them to pay for the additional fees and costs incurred by the Joint Liquidators in investigating and unsuccessfully trying to prove that some loss was sustained.
- Hence I think that Mr. Boardman is correct that having found that the main claim for a contribution under section 214 failed, it would not be appropriate to make the Directors pay a contribution to the assets of the Company in respect of the fees and expenses of the Joint Liquidators in investigating and pursuing that unsuccessful claim.
- I also accept Mr. Boardman's further submission that in any event it would not be appropriate to permit the Joint Liquidators to amend their pleadings, give late disclosure and adduce further evidence to enable the issue of the quantum of the additional costs and expenses to be determined at another hearing.
- The approach to late applications to amend pleadings was discussed by Mrs. Justice Carr in Quah Su-Ling v Goldman Sachs International  EWHC 759 (Comm) in the following terms,
"36. An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment under CPR Part 24. Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or is not supported by contemporaneous documentation.
37. Beyond that, the relevant principles applying to very late applications to amend are well known. I have been referred to a number of authorities: Swain-Mason v Mills & Reeve  1 WLR 2735 (at paras. 69 to 72, 85 and 106); Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835] 2 December 1988 ; Hague Plant Limited v Hague  EWCA Civ 1609 (at paras. 27 to 33); Dany Lions Ltd v Bristol Cars Ltd  EWHC 928 (QB) (at paras. 4 to 7 and 29); Durley House Ltd v Firmdale Hotels plc  EWHC 2608 (Ch) (at paras. 31 and 32); Mitchell v News Group Newspapers  EWCA Civ 1537.
38. Drawing these authorities together, the relevant principles can be stated simply as follows:
a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;
b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;
c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;
d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;
e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;
f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;
g) a much stricter view is taken nowadays of non-compliance with the CPR and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so."
- Applying those principles, I observe, first, that the application by the Joint Liquidators to amend was made very late indeed. As I have explained, the issues which the amendment raised were not ready to be tried and could not have been accommodated at the trial that had been fixed. If ordered to be tried together with the main issues they would have caused the trial date to be lost, which would have resulted in a substantial waste of the money, time and resources that had been devoted to preparation for the scheduled trial. These factors were doubtless the reason for the suggestion for a second further hearing that was put forward by the Joint Liquidators. But either outcome would be contrary to the legitimate expectations of the Directors that the trial of all allegations against them would take place on the date that had been fixed.
- Secondly, even a relatively brief examination of the schedules of the time costs and other expenses claimed by the Joint Liquidators to have been referable to investigation and pursuit of the wrongful trading claim showed that there would be a substantial dispute over the items claimed, and hence a significant amount of further work to be done in preparing that matter for a further hearing. For example, as I have indicated above, the Joint Liquidators claimed all of the costs related to the wrongful trading claim and did not seek to break them down by reference to the issues in the case. There were also a number of items in the schedule that did not, at first glance, appear to be related to the wrongful trading case at all, e.g. the costs of Wilkins Kennedy in considering whether there had been an unlawful distribution by the Company, and the costs of Portland in considering and liaising with the Insolvency Service over the submission of "D" reports upon the Directors. It is thus readily apparent that preparing for and conducting the further hearing suggested by the Joint Liquidators would not be a short or limited exercise.
- Thirdly, the Joint Liquidators' suggested course would inevitably lead to further substantial costs being duplicated as the parties would have had to gear up again after a lapse of several months to enable the necessary processes of disclosure and exchange of witness statements to take place. Moreover, given the likely duration of the further hearing, in order that it should take place within a reasonable period of the main trial so as to preserve some continuity, it would likely also have been necessary to order the hearing to take place on a moderately accelerated basis, jumping some of the queue of other cases awaiting trial and diverting significant judicial resources from those other cases. By their nature, these points could not entirely be addressed by the payment of costs, and these factors tell heavily against the exercise of discretion to permit the late amendment sought.
- Fourthly, no "good explanation" was offered for the lateness of the amendment. The proposed amendments were not caused by any late developments in disclosure or evidence from the Directors, or developments in the law that could not have been foreseen at a much earlier stage by the Joint Liquidators or their legal team. Instead, as Ms. Start candidly acknowledged, the proposed amendments were based entirely upon a reassessment of the Joint Liquidators' pleaded case as a matter of law after she had been instructed in place of previous counsel. The changes also related entirely to facts within the Joint Liquidators' own knowledge concerning the sums expended by them in the liquidation. In the context of an application to make a very late amendment, I do not think that it is a good explanation that the lawyers acting for a party have reassessed the case and belatedly realised that the pleaded case is not sustainable as a matter of law.
- Accordingly, even if I had been of the opinion that the proposed amendments were sustainable as a matter of law, I would not have been minded to grant permission for the amendments to be made.
The Company Directors' Disqualification Act 1986
- On the basis that I have not made any order for a contribution to be made to the assets of the Company under section 214, the jurisdiction to make a disqualification order under the Company Directors' Disqualification Act 1986 does not arise. I therefore propose to say no more about this, other than to indicate that I would in any event have adjourned a decision on whether to make a disqualification order so as to give the Secretary of State the opportunity to make any submissions as might be thought appropriate (with copies to the parties): see e.g. Re Idessa (UK) Limited  EWHC 804 (Ch).
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