Permission to discontinue proceedings—entitlement to object—interest in relief sought (Barons Finance Ltd (in liquidation) v Barons Bridging Finance 1 Ltd (in liquidation))

Permission to discontinue proceedings—entitlement to object—interest in relief sought (Barons Finance Ltd (in liquidation) v Barons Bridging Finance 1 Ltd (in liquidation))

The Court of Appeal held that the appellant had no genuine interest in the claims being pursued by the claimant against the two respondent companies for a declaration regarding the validity of a deed of assignment and claims pursuant to sections 238 and 423 of the Insolvency Act 1986 (IA 1986). Therefore, he had no entitlement to oppose the claimant’s application for permission to discontinue pursuant to CPR 38. As a consequence, the judge at first instance was entitled to refuse the appellant’s request for an adjournment and as he was no longer a party to the proceedings, to proceed with the hearing in his absence. One of the fundamental findings was that the appellant did not have an interest arising from the assignment because it had been executed after the issue of winding-up petitions against the claimant and the respondent companies and was therefore void pursuant to IA 1986, s 127. Furthermore, a claim to be entitled to seek validation was also rejected by the appeal court on the basis that ten months had passed between the date of the winding-up orders and original hearing of the claimant’s case and no application had been made by the appellant. Written by David Oliver, consultant with Isadore Goldman.

 

Barons Finance Ltd (in liquidation) v Barons Bridging Finance 1 Ltd (in liquidation) and others [2019] EWCA Civ 2074

What are the practical implications of this case?

In the author’s view, this case illustrates that it will always be difficult to succeed with an application for a discontinuance to be set aside pursuant to CPR 38.4 unless there are good grounds and good reasons—for example, an abuse of the court process and a material benefit to the defendant if they succeed. Each situation must be judged on its merits.

What was the background?

The appellant, Mr Gopee, was a party to proceedings brought by Barons Finance Ltd because he had custody of its books and records. The discontinuance arose because of a subsequent Crown Court restraint order, documents being seized by the Financial Conduct Authority and the liquidation of the two respondent companies, both of which had had winding up orders made against them since the issue of proceedings (their records having passed to the official receiver).

Mr Gopee appealed the judgment of Mr David Stone, sitting as a deputy High Court judge, in which he refused an adjournment, proceeded in his absence and found that Mr Gopee had no interest in the relief sought. The Court of Appeal upheld the judge’s decision and findings.

What did the court decide?

Discontinuance is dealt with under CPR 38. Unless there are good grounds for departing from them, there are two basic principles:

  • a claimant may discontinue at any time

  • a claimant who discontinues will be liable for the defendant’s costs

An application to the court is unnecessary unless, for instance, the claimant seeks to avoid an order for costs. In this case, such an application was made coupled with an order that Mr Gopee take no further part in the proceedings. Notwithstanding the circumstances, the trial judge had ordered Barons Finance Ltd to pay Mr Gopee’s costs.

What was the benefit Mr Goppe would have gained had the discontinuance been rejected? He claimed, albeit belatedly, that he had the benefit of the Barons Finance Ltd loan book which had passed to him personally under a deed of assignment prior to the liquidation of Barons Finance Ltd.

Why then did the judge not find that Mr Gopee had an interest in the relief sought and extend his time for his amended defence? This turned on a number of fundamental findings, namely:

  • loss of control of the two respondent companies on winding-up orders being made and therefore a loss of the right to speak on their behalf

  • a finding that a deed of assignment of the assets of Barons Finance Ltd was void in accordance with IA 1986, s 127, and a breach of the restraint order

  • no application for a validation order

Unfortunately, the Court of Appeal did not provide guidance on when the court might be willing to find in favour of a defendant who objects to discontinuance.

Case details

  • Court: Court of Appeal, Civil Division  
  • Judge: David Richards and Newey LJJ  
  • Date of judgment: 26 November 2019

David Oliver is a consultant with Isadore Goldman. If you have any questions about membership of LexisPSL’s Case Analysis Expert Panels, please contact caseanalysis@lexisnexis.co.uk.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.