Thomas Roe KC and Charles Sorensen instructed by Duffield Harrison LLP for the Claimants
INTRODUCTION
1. This is a reserved Judgment following the hearing of an Application by the First Defendant (‘Rayner Essex’) issued on 20 December 2022. By the Application Rayner Essex seek the following relief:
“That the Claimants do pay the First Defendant’s costs of responding to a letter of claim dated 30 June 2021 on the indemnity basis because the allegations made in that letter of claim were baseless and abandoned when challenged. Further or alternatively the First Defendant seeks its costs as identified by and under CPR r.38.6(1) and (2), the Claimant having discontinued various claims advanced against it, and seeks an order under r.28.6(2)(b) that those costs be assessed forthwith; and there be a payment on account of those costs in such amount as this court thinks fit. Further the First Defendant seeks its costs on the indemnity basis.”
2. Before me the Claimants were represented by Mr Thomas Roe KC and Mr Charles Sorenson, and Rayner Essex by Mr Thomas Grant KC and Mr James Kinman. Counsel for both parties produced detailed Skeleton Arguments which were supplemented by oral submissions, for which I am most grateful. It is not possible, without over-extending this Judgment, to record all the points dealt with in the Skeleton Arguments and submissions, but I have considered all matters put before me in reaching my conclusion. If any specific point is not mentioned, it should not be assumed that I have failed to consider it in reaching my Decision.
BACKGROUND
3. The First Claimant (‘SML’) runs a fruit and vegetable business. It is owned by members of two families: the Difrancescos and the Turones (albeit in the case of two of the latter, by their trustees in bankruptcy). The Second to Eighth Claimants are some of those family members.
4. The present Claim, issued on 8 March 2022, arises out of a transaction entered into by SML on 1 April 2016 (‘the Transaction’). At that time, the directors of SML were five individuals named (a) Wayne Smith; (b) Pietro Turone; (c) Salvatore Turone; (d) Salvatore Michele Difrancesco (who is a Part 20 Defendant/the Third Party in these proceedings); and (e) Salvatore Difrancesco. At the time of the Transaction, Rayner Essex acted as accountant, auditor and business advisor to SML. One Mr Heyes was the primary point of contact between Rayner Essex and SML.
5. By the Transaction, SML sold most of its business and assets (including a substantial property, the ‘WX Hub’) to companies named Stubbins Food Partnerships Limited (‘SFP’) and Stubbins Growing Partnerships Limited (“SGP”). SFP and SGP were substantially owned by Wayne Smith, Pietro Turone, Salvatore Turone and Salvatore Michele Difrancesco. It was intended that, after the Transaction had completed, SML’s business would largely or exclusively consist of leasing two valuable nurseries (which remained in its ownership) to SFP and SGP.
6. SML subsequently issued a Claim (“the First Claim”) against, amongst others, SFP, SGP, Wayne Smith, Pietro Turone, and Salvatore Turone, alleging (among other things) that the Transaction had not been properly authorised in accordance with the terms of section 190 of the Companies Act 2006, and that SFP, SGP, Wayne Smith, Pietro Turone and Salvatore Turone were liable to indemnify SML against any loss or damage suffered by it as a result of the Transaction.
7. There was a Trial of the First Claim heard by Mr Justice Trower in November and December 2019. On 19 May 2020, in a long (168 page) Judgment, he found substantially in favour of SML (it is reported as Stubbins Marketing Limited v Stubbins Food Partnerships Limited & Ors [2020] EWHC 1266 (Ch). Neither Rayner Essex nor Mr Heyes were parties to the First Claim, although Mr Heyes gave evidence for the Defendants.
8. For present purposes it is not necessary to go into detail about the facts as found by Mr Justice Trower, and, indeed, there remain, it appears, many facts that are contested as between the present Claimants and Rayner Essex.
9. The initial Claim Form (which was issued on 8 March 2022 but not served in its original form) summarised the Claim in the ‘Brief details of claim’ as follows:
“Several directors of the First Claimant company (C1) unlawfully and in breach of duty caused C1 loss by (1) disposing of its business and most assets for an undervalue to their personal companies, (2) disposing of its shares in another company for £100 and (3) giving a debenture to another personal company to secure a supposed claim against C1. The First Defendant firm (D1) were C1’s accountants and business advisers, but in practice assisted the malfeasant directors. The Second Defendant firm (D2) acted for the malfeasant directors’ companies during (1) above making false representations to C1’s shareholders to secure consent to the disposition, and acted for C1 during (2) and (3) above, but in practise assisted the malfeasant directors.
The facts have been set out in much more detail under the Pre-action Protocol.
Without prejudice to C1’s right to rely (in their Particulars of Claim when these fall to be filed) on all such causes of action in law as arise from the facts briefly summarised above, Cs intend to claim in (i) deceit (ii) breach of contract, (iii) negligence, (iv) breach of fiduciary duty (v) dishonest assistance in breach of fiduciary duty and (vi) unlawful means conspiracy.
The Second to Eighth Claimants sue as shareholders in C1 because D2 has contended that the representations were made to the shareholders and that C1 itself therefore has no cause of action.”
10. The passages quoted above in bold were crossed out in the Claim Form on 20 April 2022 (as is permitted pursuant to CPR Rule 17.1(1)) before the Claim Form, as so amended, was served. The Particulars of Claim, dated 6 June 2022, contains 207 paragraphs, but has a short prayer where the Claimants claim:
“1. Damages and/or equitable compensation with interest;
2. Contribution pursuant to section1 of the Civil Liability (Contribution) Act 1978.
3. Further or other relief.
4. Costs.”
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