Do receivers get “immunity” from future claims when the Court sanctions a sale? (Denaxe Limited v Cooper and Rubin)

12 Jul 2023

Dispute Resolution analysis: The Court of Appeal has confirmed that the concept that receivers are given “immunity” from future claims as a result of having a claimed sanctioned by the Court is no more than an expression of the doctrine of issue estoppel. It is not a freestanding ground for striking out a later claim.

Denaxe Limited v Cooper and Rubin [2023] EWCA Civ 752

What are the practical implications of this case?

This decision of the Court of Appeal offers a helpful analysis and clarification of a number of authorities concerning the circumstances in which a receiver can obtain sanction from the Court for the sale of assets and the consequences of such a sanction. The judgment is interesting, among other reasons, for the fact that Lord Justice Snowden, who gave the lead judgment, was responsible for a number of the authorities cited in the appeal. It clarifies that there is no freestanding concept of “immunity” created by the sanctioning of a sale following an application by receivers. It may, however, generate an issue estoppel which prevents the subsequent challenge of that sale by an aggrieved person. It will, therefore, be necessary to consider both the scope of the matters which fall within the sanction application and also the parties to the application. Where a broad range of persons are joined to the claim and where the application seeks a broad sanction, such as that the trustees/receivers had reached a decision to sell an asset in accordance with their equitable duty of care, the Court should be slow to grant the relief sought, in light of the potentially far-reaching implications of making the order.

What was the background?

The origin of this matter was a shareholder dispute between the majority shareholder of Blackpool Football Club Limited (“BFCL”), Denaxe Limited (“Denaxe”) and a minority shareholder, VB Football Assets (“VB”). Following an unfair prejudice petition brought by VB, a buy-out order was made, pursuant to which Denaxe and its owner/controller, Mr Oyston, were order to by VB’s shares in BFCL for £31.27 million. Denaxe and Mr Oyston paid less than a third of the amount due under the buy-out order and, following failed attempts at enforcement using third party debt orders and charging orders, VB applied for the appointment of receivers by way of equitable execution. The application succeeded in part with the receivers being appointed over Mr Oyston’s shares in Denaxe and Denaxe’s footballing assets (i.e. the stadium and training ground). The order appointing the receivers included a provision that Mr Oyston’s shares in Denaxe could be sold by the receivers only subject to the approval of the Court following the reaching of an agreement in principle with a proposed purchaser or purchasers. It subsequently became apparent that whilst Denaxe and Mr Oyston had not paid the balance due under the buy-out order, there was a possibility that they could do so and acquire a 20% share in BFCL. This deterred a number of possible buyers. The receivers, therefore, applied for an order permitting them to sell the footballing assets in conjunction with VB’s shares in BFCL. In his evidence in relation to that application, Mr Oyston said:

“I understand the present applications to be limited to the issue of being able to include VB’s shareholding in the potential sale as a matter of mechanics. That is why I have not commented on the evidence as to marketing and value, as to which my rights are reserved.”

The receivers challenged this stance at the time and, following a hearing at which leading counsel appeared on both sides, the sale of both the shares and the footballing assets was sanctioned by the Court. The sale proceeded and the receivership order was discharged. Denaxe then issued proceedings against the receivers asserting that they had breached their duties of care and had sold the footballing assets at an undervalue. The receivers applied to strike out the claim and seek summary judgment on four alternative bases. (1) That the receivers had immunity from the claim by reason of the order sanctioning the sale. (2) That an issue estoppel had arisen. (3) By reason of the rule in Henderson v Henderson. (4) That the assertion that the assets could have been sold for a greater sum if sold separately from the shares had no real prospect of success on the merits. Fancourt J struck out the claim on the first ground, indicated that had he not done so he would also have struck out the claim on the third ground but would not have struck out the claim on the second or fourth grounds. Denaxe appealed.

What did the court decide?

The Court of Appeal (and Lord Justice Snowden in particular who gave the most detailed judgment) was critical of the manner in which the Judge below had approached the notion of immunity being granted to receivers when obtaining approval for the sale of assets. After considering a number of authorities in which he had himself given judgment, Snowden LJ explained that the concept of “immunity” flowing from an approval decision is really a judicial shorthand for the bar on subsequent proceedings that results from issue estoppel. The parties were wrong, therefore, to approach the issues of immunity and issue estoppel separately. They are, in fact, the same issue. The relevant question was whether any of the issues decided in sanctioning the sale were the same as those which are a necessary ingredient of the claim now being made by Denaxe. There were powerful competing submissions as to whether an issue estoppel had arisen on the facts of this case, however, it was not necessary for the Court to choose between them as a result of the Court’s conclusion that this was a clear instance of an abuse of process as a result of the principle in Henderson v Henderson. Denaxe was given a clear opportunity to raise at the hearing of the sanction application what is the only pleaded basis for its current claim. Denaxe failed to take that opportunity. The appeal was dismissed and the claim remains struck out.

Case details

  • Court: Court of Appeal, Civil Division
  • Judge: Lady Justice Asplin, Lord Justice Snowden, Lady Justice Falk
  • Date of judgment: 30 June 2023

Article by Phillip Patterson – first published by LexisNexis


Phillip Patterson

Call: 2008


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