CR-2023-001309 - [2025] EWHC 2314 (Ch)

The respondents make a cross-application to strike out certain paragraphs of the points of claim and/or for reverse summary judgment upon the Main Application. Insofar as the strike out element of the Application is concerned, this is again based on abuse of process under CPR 3.4(2)(b), rather than rule 3.4(2)(a), which empowers the court to strike out on the ground that the pleading discloses no reasonable grounds for bringing a claim.

First, they seek to strike out paragraph 11 of the points of claim, which is:

“Between 1 November 2013 and 31 March 2016, the Company operated the Business from the Premises.”

“The Business” is defined in paragraph 7 as follows:

“Between 1 July 2011 and 1 November 2013, Riotsi operated a clothing retail business (“the Business”) from premises at Unit SU0048a, 59 The Arcade, Westfield Stratford City, Montfichet Road, Olympic Park, London E20 1EH (“the Premises”) using the trading name ‘Frencheye’.”

Paragraph 11 is said to be a bald assertion, unsupported by anything other than the judgment in the Set Aside Application.

Similarly, the respondents seek to strike out paragraphs 20 to 24. These provide:

“20.

On or around 1 November 2013, Riotsi assigned the Lease to the Company. Thereafter, the Company took over the operation of the Business at the Premises.

21.

As stated in paragraph 12 above, the Company did not operate a bank account. Instead, all monies payable to the Company in respect of the Business were paid into the ECL Account.

22.

Following his appointment as the liquidator of the Company, the Applicant has analysed the bank statements for the ECL Account and has identified that in the Relevant Period trading receipts in the total sum of £3,834,769.57 were paid into the ECL Account, as particularised in Schedule 1 hereto (“the Trading Receipts”).

23.

The Applicant has further identified payments from the ECL Account in the Relevant Period in the total sum of £1,670,098.52 which he is prepared to accept relate to legitimate expenditure in respect of the Business, as particularised in Schedule 2 hereto (“the Expenditure Payments”).

24.

There is no obvious explanation for the remainder of the payments made from the ECL Account in the Relevant Period, which do not appear to relate to the Business. In the premises, the Applicant infers that the balance of the Trading Receipts in the total sum of £2,164,671.05 was applied by ECL otherwise than for the benefit of the Company.”

These are again said to be predicated on an unparticularised assertion as to the carrying on of the business by the Company and simply constitute no more than a statement of the Liquidator’s opinion. Consequently, the respondents seek an order that the allegations of breach in paragraphs 32 to 37 of the points of claim be struck out too.

Mr Willetts says that the lack of particularisation is rendered all the more acute given that the Liquidator’s claim as now pleaded is at odds with his case as set out in pre-action correspondence. In a letter before action dated 10^th February 2020, the solicitor for the Liquidator said as follows:

“Investigations into the Company’s trading has found that the Company was established to ‘hold’ a lease in respect of premises which it then sought to allegedly sublet/ licence to various other companies. This was despite the fact that the terms of the lease did not allow the sub-letting of the premises. The leasehold premises was: Unit SU0048a, Lower Ground Floor, 59 The Arcade, Westfield Stratford City, Monfichet Road, Olympic Park, London E20 1EH (‘the Premises’). It is understood that the Company granted licenses to connected companies to purportedly trade from the Premises.

Further, the Company filed dormant accounts for the years ending 30 September 2013 and 2014 respectively and filed small company accounts for the year ending 30 September 2015. The Company also did not operate a bank account. As a result, the Company was never in a position to receive income to meet its liabilities.”

The letter complains that, despite its liabilities, the Company made payments to the directors and connected persons. It is stated that the Company was incorporated for the sole purpose of entering into the lease; it was not intended that it should trade and did not trade and so was unable to meet the liabilities under the lease.

In his skeleton argument, Mr Willetts also points to what he describes as an inconsistency between the points of claim and the points of reply. The latter contains a non-admission in respect of the points of defence’s contention that monies paid into the ECL bank account were not all generated by trading at the premises or were generated as set out in the tables accompanying the points of defence.

He therefore submits that the Liquidator has not provided any credible positive evidence of trading by the Company at the Premises and there is no real prospect of the Main Application succeeding.

There does not seem to me to be anything in these points. The points of claim plead the carrying on of business by the Company and particularise what appear to be the receipts from that business, which were paid into ECL’s account. If, as is alleged, the Company did trade and the respondents were each directors of the Company at the relevant times, then, as fiduciaries, they must account for their dealings with the receipts from that trading. The nature of the Liquidator’s case thus appears to me to be sufficiently particularised and there is nothing objectionable in the Liquidator, at this early stage, not being able to admit or deny the respondents’ alternative explanation for the source of the receipts into the ECL account. On the face of it, there is a Company which took a lease of trading premises from a connected company, Riotsi, a matter of months before Riotsi went into creditors’ voluntary liquidation, and was, as a matter of fact, held to be in rateable occupation of those premises thereafter. Its very name suggests that trading at the Stratford premises under the style “Frencheye” was carried on by it. It is possible to draw the inference from the pleaded facts that it was carrying on the retail business at the Premises. Nonetheless, no revenue has been paid into an account in the name of the Company but several millions of pounds have been paid to the account of a connected dormant company. The response to that is that the Company did not in fact trade. That plainly, in my view, gives rise to a triable issue. It is not difficult to imagine the evidence that will be relied upon in due course. Much of it will be the same evidence, or lack of evidence, that failed to find favour before the district judge. It does not appear to me that the Liquidator need set out any further indication of the evidence that might be available at trial.

The fact that an alternative case was set out in correspondence some three years before the Main Application was issued does not alter that position. As has often been observed, a liquidator comes to a company as a stranger and his or her understanding of its affairs is only as good as the information provided. That understanding may well be erroneous and change over the course of time.

In my judgment the Main Application is adequately pleaded, and the basis of the Liquidator’s case is clear. It cannot be said, in the circumstances that I have described, that the prospects of success on the Main Application are no more than fanciful. The Respondents’ Application must also fail.