Application to strike out an unquantified wrongful trading claim dismissed (Re BHS Group Ltd)

17 Feb 2022

Dispute Resolution analysis: Deputy ICCJ Schaffer has dismissed an application brought by the Respondents to a claim brought by the Joint Liquidators of BHS Group Ltd for wrongful trading. The failure to plead the relevant quantum of the claim was not a deficiency which merited strike-out.

Re BHS Group Ltd [2021] EWHC 3501 (Ch)

What are the practical implications of this case?

This judgment offers guidance on the requirements of pleading a claim for wrongful trading. The Joint Liquidators issued the application in a form which included an alternative claim that wrongful trading commenced at “some later date prior to 25 April 2016”. On that alternative claim, no quantum was pleaded but a number of different alternative dates were put forward. This provided a framework which would enable the parties’ experts to calculate the relevant increase in net deficit. This was not a defective manner in which to plead a wrongful trading claim.

What was the background?

The Joint Liquidators of BHS Group Ltd (“BHS Group”) issued proceedings against four Respondents. The claim was set out in a Points of Claim. At a hearing on 22 February 2021, ICCJ Barber heard argument on whether further and better information was required on the Points of Claim before Points of Defence were served. Judge Barber directed further and better particulars be provided. This process completed and Points of Defence were served. The claims issued comprised both a misfeasance claim under section 212 of the Insolvency Act 1986 and a wrongful trading claim under section 214. One of the Respondents, supported by two others, applied to strike out the part of the proceedings relating to wrongful trading. The application alleged that the pleadings were deficient in that they failed to allege what loss was suffered by the companies as a result of continuing to trade after each of five alternative dates, whether there was an increased net deficiency after those dates, and, if so by how much, what contribution is being sought against the Respondent concerned and what remedy is being sought. The application alleged that the Respondent did not understand the claims being made against him, could not properly plead to them, could not prepare an adequate witness statement, could not disclose the relevant documents, could not instruct an expert and could not engage in ADR. The Joint Liquidators argued there was no authority to support the proposition that quantum had to be pleaded in a wrongful trading claim. They submitted that the increase in net deficit was a matter for detailed expert evidence and it could thereafter be quantified.

What did the court decide?

The strike out application was dismissed. Eight factors were identified in coming to that decision. (1) The Respondent knew exactly what case they had to answer. This is clear from the Points of Claim and the further information provided subsequently. (2) The points of claim and further information do not provide sufficient information on what may be the relevant increase in net deficit within any of the alternative claims but they will be addressed in due course by the expert evidence. (3) All parties have agreed that the starting point to determine the increased net deficit is 17 April 2015. Following disclosure all experts will have access to the same documents to reach their own determinations of the increased net deficit. (4) The onus of proving any increased net deficit is on the Joint Liquidators. They must identify the relevant periods before the commencement of the winding up when the wrongful trading occurred and they have done so. (5) There is no suggestion that the Respondents will be belatedly and unfairly served with relevant evidence concerning the quantum of the claims against them (6) Asking the Joint Liquidators to amend the claim at this stage would be premature and an entirely arid exercise. (7) The Points of Claim cannot properly be described as vague and unparticularised notwithstanding the lack of a pleaded case on quantum. (8) The pleadings should not be looked at through a prism of perfection when the parties experts will in due course be conducting the requisite analysis required. The Court also expressed some concern about the lateness of the application to strike out in this case.

Case details

Court: Insolvency and Companies Court
Judges: DICCJ Schaffer
Date of judgment: 9 December 2021

This analysis was first published by LexisNexis PSL.


Phillip Patterson

Call: 2008


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