Issuing proceedings without owning the cause of action—Eaton v Mitchells & Butler

Issuing proceedings without owning the cause of action—Eaton v Mitchells & Butler

In Eaton v Mitchells & Butler plc, the court was asked to strike out proceedings commenced by a discharged bankrupt in circumstances where the underlying cause of action was, and remained to be, vested in the claimant’s trustee in bankruptcy.

Original news

Eaton v Mitchells & Butler plc [2015] Lexis Citation 173, [2015] All ER (D) 103 (Aug)

A claimant issued personal injury proceedings, and won the trial on liability. Prior to the trial on damages came the realisation that the accident—and therefore the underlying cause of action—vested in the claimant’s trustee in bankruptcy, where a bankruptcy order had been made following the accident. The County Court was asked to strike out the proceedings as a nullity, or alternatively that it was an abuse of process for the proceedings to continue. The judge dismissed the application, giving the claimant three months in which to regularise the situation.

Briefly, what were the facts of the case?

Mr Eaton commenced proceedings against Mitchells & Butler plc (M&B) in respect of serious injuries he suffered in an accident. The trial of liability occurred five years after the accident, resulting in judgment being entered in Mr Eaton’s favour, with the amount of damages to be subsequently decided by the court. Mr Eaton valued his claim at £3m, whereas M&B valued it in the region of £500,000.

It was disclosed during the proceedings that, three months after his accident, and before the proceedings were issued, Mr Eaton had been adjudged bankrupt on his own petition. However, despite this disclosure, no one involved in the case appreciated its effect—that the cause of action (being a hybrid claim as it sought damages for both personal injuries and consequential losses) had vested in the official receiver as Mr Eaton’s trustee in bankruptcy (trustee) under section 306 of the Insolvency Act 1986 (IA 1986). The cause of action had neither been assigned by the official receiver

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.