UK: Insolvency Practitioners Should Strike Early To Strike Out

Last Updated: 5 December 2006
Article by Richard Curd

Following a liquidation or other insolvency procedure, insolvency practitioners may find themselves in the line of fire from disappointed claimants. As a result IPs, are often the targets for complaints and subsequently, litigation; in many respects this goes with the territory. Defending such litigation is, however, demanding of resources which could be deployed more usefully elsewhere. Two recent judgments which demonstrate the potential value of an early strike out application will, therefore, be welcomed.

To view the article in full, please see below:

Full Article

Following a liquidation or other insolvency procedure, insolvency practitioners may find themselves in the line of fire from disappointed claimants. As a result IPs, are often the targets for complaints and subsequently, litigation; in many respects this goes with the territory. Defending such litigation is, however, demanding of resources which could be deployed more usefully elsewhere. Two recent judgments which demonstrate the potential value of an early strike out application will, therefore, be welcomed.

In Re International Championship Management Ltd, Cohen .v Davis & Others [2006] EWHC 768(CH), the liquidator commenced proceedings against two corporate hospitality companies which had sold packages for the World Cup in France in 1998 but, in the event, had been unable to supply tickets. The liquidator brought a claim against the directors and alleged shadow directors of the companies.

Tan & Co, a firm of accountants had been retained by the companies (and the directors) on the day before the World Cup kicked off when it became clear that there was a problem with the proposed source of supply of match tickets. Tan & Co advised that the companies could continue trading if the directors believed that they could find tickets elsewhere. Twelve days later it emerged that no tickets could be found and Tan & Co advised that the companies should stop trading. Shortly thereafter, the companies went in to voluntary liquidation. IPs from Tan & Co and another firm were appointed as joint liquidators.

Disqualification proceedings against the directors followed which concluded in them giving disqualification undertakings in 2003. The following year - just 2 days before the relevant limitation period was to expire - the then sole liquidator of the companies commenced proceedings against the directors under

Section 214 Insolvency Act 1986 -

for wrongful trading on the grounds that they should have realised by 10 June 1998 (when the World Cup started) that the companies would be unable to avoid insolvent liquidation.

Section 238 / Section 239 -

in respect of alleged transactions at an undervalue/voidable preferences in respect of certain transactions on 6 May 1998 (i.e. before Tan & Co were retained)

Section 212 -

for misfeasance in respect of £3 million of payments made between March and June 1998 (i.e. both before and after Tan & Co had been retained to advise)

Part 20 proceedings were commenced against Tan & Co by the directors/shadow directors in 2005 (i.e. after the primary period of limitation had expired and, possibly, for this reason the claim against Tan & Co was confined to a claim for contribution within the Contribution Act 1978); Tan & Co could therefore only be liable to make a contribution if they had a common liability to the companies themselves for the same loss as alleged to have been caused by the directors/shadow directors.

Tan & Co applied to strike out the claims and were substantially successful; as to the claims under Section 214, 238 and 239 brought by the liquidator against the directors/shadow directors, these could not be treated as claims by the companies (by whom Tan & Co had been retained) and, therefore, Tan & Co could not be liable to contribute; this was because the ability to make such claims was conferred by statute on the liquidator and

  • in respect of Section 214 (voidable trading) could be made by a liquidator against a director or a shadow director (i.e not against Tan & Co);
  • in respect of Section 238 (transactions at an undervalue)Tan & Co was not a person with whom the companies had entered into the relevant transactions for the purposes of making such a claim;
  • in respect of Section 239(wrongful preferences) Tan & Co was not a creditor of the companies, or the surety or guarantor of the companies’ debts, for the purposes of a claim under that provision.

As to Section 212 (misfeasance) the position was not as straight forward; the Court accepted that a professional advisor could be liable for the same damage as the directors if a company entered into a loss making transaction following advice from the professional.

That said, the claim for contribution against Tan & Co in relation to alleged misfeasance by the directors prior to 10 June 1998 (when Tan & Co had first advised) was, unsurprisingly, struck out; in relation to the alleged misfeasance by the directors after that date, the Court thought that it was conceivable that such a claim could be properly pleaded although it expressed scepticism that it could be in this case on the basis of the materials which were available. Whether or not such a claim would be permitted to go forward would be determined in the event that the directors made an application for permission to amend and decided to have another go.

In Bezant .v Cork [2006] All ER (D) 19 (Aug) the claim against the experienced insolvency practitioner in question was struck out in its entirety.

The Claimant, Dr Bezant had been an employee and was (at least at the outset of the proceedings) a creditor of Tertiary Enterprises Limited (in liquidation) in respect of a sex discrimination claim. She applied for an order under Section 212 that the liquidator (who had closed the liquidation and been released from office) should contribute to the assets of the company. The application followed numerous complaints made during the course of the liquidation in respect of which the Court struck a welcome chord and recognised that the liquidator had shown "considerable restraint when dealing with the persistent accusations of the complainants and that this should be commended".

Part of the application under Section 212 was almost immediately summarily dismissed and the liquidator subsequently applied to strike out the rest; the application succeeded on the grounds(as had emerged shortly before the application was heard) that Dr Bezant, although a creditor at the outset, had had her claim settled by a third party, Professor Hans Rausing, following other proceedings which she had commenced to which the liquidator was not a party; as the Court made clear, the ability to make an application under Section 212 is dependent not only on the applicant being a creditor at the time the application is made, but also throughout the proceedings until the application was heard. The Court made clear that this is not a mere technicality given that if the applicant is not a creditor, he or she has suffered no loss.

Although strictly and not necessary to do so, the Court went on to make it clear that Dr Bezant’s claim would have been struck out in any event on grounds which included numerous defects in the attempts which she had made to particularise her claim but also with a re-statement of principle with regard to a liquidators’ obligations to recover assets from others which may well be helpful to other IPs faced with such claims.

Dr Bezant had argued that the liquidator had failed to recover assets from the directors and others concerned with Tertiary Enterprises Limited who, so she alleged, were guilty of various forms of misconduct including false representations to creditors (Section 211), fraudulent trading (Section 213), wrongful trading (Section 214), transactions at an undervalue (Section 238) and unlawful preferences (Section 239).

In essence, the complaint was that the liquidator failed in his duty to take every possible step to pursue those parties to make a recovery; the Court made clear that this characterisation of the duty was going too far and found as follows:

"Any decision to take proceedings against directors or others must be rooted in the Liquidator’s duty to take reasonable care and skill; exercising his discretion whether or not take proceedings, and the Court will not lightly interfere with the Liquidator in the exercise of his discretion. Insofar as Dr Bezant’s application is based on absolute duty on the part of the Liquidator to take every possible step to recover assets and to take proceedings against directors and others, it is obviously unsustainable".


These decisions are welcome news for IPs and the lessons are that:

  • the Court will recognise the often difficult reality of the context in which they work; and
  • IPs should review carefully and promptly any proceedings which are commenced against them to establish the extent to which an early strike out application may be sustainable; and
  • consideration must be given to the impact of possible limitation issues; and
  • that the Court will be prepared to deal with such claims quickly and robustly saving both time and resources.

CMS Cameron McKenna acted for the liquidator in Bezant v. Cork

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 05/12/2006.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions