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A Liquidator’s Successful Strike Out

The factual circumstances behind this news article are relatively straight-forward:

A company traded as a restaurant and had one director but the company was in financial difficulty. The director of the company found two individuals prepared to purchase the company (and its restaurant business) but the director required a £5,000 purchase deposit. Unfortunately, the two purchasers didn’t have the financial resources to pay the deposit and so they persuaded a third party investor to pay it. The third party investor duly paid the £5,000 deposit to the company but shortly after he made that payment, the company went into liquidation and a liquidator was appointed.

Unsurprisingly, the third party investor was upset by the fact that he was unlikely to recover his investment from the insolvent company (or the two individuals who persuaded him to invest in it) and so the investor took the unusual step of commencing legal proceedings against the liquidator for the recovery of his £5,000 investment.

Richard Moss Solicitors was instructed by the liquidator to defend the claim brought by the investor.

Although our liquidator client had excellent prospects of successfully defending the investor’s claim, that claim would inevitably be allocated to the Court’s ‘Small Claims Track’ in which the ‘no costs rule’ applies. In other words, our liquidator client would almost certainly need to pay more than £5,000 in legal costs in defending the investor’s claim but he would be unable to recover such costs from the investor even in the event of success due to the ‘no costs rule’ that applies in the ‘Small Claim Track’. 

In the circumstances, Richard Moss advised the liquidator to make a very quick application to the Court for an order striking out the investor’s claim before it was allocated to the Small Claims Track. The liquidator accepted Richard’s advice and, on 3 June 2014, Warrington County Court struck out the investor’s claim – the liquidator client was spared both the inconvenience of dealing with the investor’s claim and the need to pay £5,000 compensation to the investor.

Even further (and because the investor’s claim had not been allocated to the Small Claims Track at that time), our liquidator client also obtained a Court order that the investor pays the costs of making the application!