Dispute Resolution analysis: An application for reverse summary judgment in claims brought against the directors of a fashion company in liquidation has failed. On a proper analysis of the various claims, they were not suitable for summary determination and a trial of the claims was required.
Akkurate Limited (in liquidation) and others v Richmond and Schofield  EWHC 2392 (Ch)
What are the practical implications of this case?
This case highlights the challenge faced in claims such as this in obtaining reverse summary judgment. The applicants had pursued a strategy in which an analogy was drawn with an onion in which the layers could be peeled away to reveal that there was nothing left at its core which was worthy of a trial. This strategy somewhat undermined the core objective of an application for summary judgment due to the weight of evidence required to make good such a submission. It is also a case which highlights the extent to which a director can continue to owe duties to a company after their appointment has terminated. This is an issue which arose here and in other cases where the company enters liquidation and the post liquidation conduct of the director comes under scrutiny. Finally, it highlights the approach which Courts will take to settlement agreements which compromise earlier claims of a similar character to those which have now been brought. The court will interpret the settlement agreement in accordance with ordinary principles of contractual interpretation in order to ascertain whether the claims brought subsequently have been compromised.
What was the background?
Akkurate Limited (the "Company") was a company which owned a number of fashion brand trademarks which had been created by John Richmond. In 2015, the Company entered compulsory liquidation. The liquidators sold the Company's trademarks to Mark Schofield. In 2018, the Company's liquidators issued proceedings against Mr Richmond, alleging fraudulent conduct during his time as a director prior to the liquidation. The claim was brought in the sum of £10 million. However, on the basis of Mr Richmond's apparently limited resources, the claim was settled for significantly less than the sum claimed. The liquidators then brought further proceedings, in which they argued that Mr Schofield was really just a front for Mr Richmond at the time the trademarks were purchased. They argued that he had secretly acquired the trademarks for his own personal benefit. They also argued that they had been induced to enter into the earlier settlement of the first proceedings as a result of misrepresentations made by Mr Richmond about his means. Mr Richmond and Mr Schofield applied for reverse summary judgment, arguing that the settlement agreement reached in respect of the first proceedings had compromised the more recent breach of duty claims.
What did the court decide?
The application was dismissed. The Court observed that the application was listed for five days and had resulted in the service of a very large quantity of evidence. This in itself tended to undermine the applicants' assertions that the issues were suitable for summary disposal. The applicants argued that the case was analogous to an onion and that peeling off the various layers of it would ultimately reveal that the issues were unworthy of a trial. This initial observation did not itself justify the dismissal of the application, however, the Court did not accept the analogy with layers of an onion. There was a realistic prospect that the liquidators could show at a trial that the breach of duty claims pleaded in the second set of proceedings had not been compromised. The settlement agreement referred to 'all claims in the proceedings' being compromised. The claims brought in the second proceedings had not been pleaded in the first claim. Although Mr Richmond was no longer a director of the Company at the time the trademarks were sold, there were sufficient facts and legal principles to justify the proposition that his duties to the Company had subsisted at this time and that the matter required a trial to determine. The misrepresentation claims imposed on Mr Richmond an evidential presumption that the liquidators would have been induced to enter into the settlement agreement on the basis of fraudulent misrepresentations. There was reason to doubt that Mr Richmond would be able to discharge this evidential burden and, therefore, it was right for this matter to go to trial.
- Court: High Court of Justice, Business and Property Courts
- Judge: Mr Justice Freedman
- Date of judgment: 19 September 2023
Originally Published by LexisNexis
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