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DWF successfully defends Mishcon de Reya and secures indemnity costs in substantial civil fraud claim found to have been “speculative and weak, and in large part opportunistic

Mr Justice Morgan has recently handed down his judgments in Instant Access Properties Limited (in Liquidation) -v- Rosser & Ors [2018] EWHC 756 (Ch); [2018] EWHC 1145 (Ch). DWF’s Michael Robin, Chris Lewis and Sarah Cahill acted for Mishcon de Reya.

Background

The claim was brought by the liquidators of Instant Access, both in their own right and on behalf of the company, against the individuals who effectively owned and controlled the company and their professional advisers. It concerned very serious allegations, including dishonest breaches of fiduciary and directors’ duties, dishonest assistance, unlawful means conspiracy, dishonest tax evasion and fraudulent trading under the Insolvency Act 1986.  The essence of the claim was that the defendants had dishonestly conspired to defraud both creditors and HMRC by unlawfully diverting revenue to which the company was entitled into offshore companies.  Damages were sought in excess of £34 million. 

 

Decision – Indemnity Costs Awarded

Following a five-week trial late last year, Mr Justice Morgan has dismissed all those claims in their entirety.  In his judgment on consequential matters, Mr Justice Morgan granted indemnity costs in favour of five of the seven defendants, noting that the claimants had taken a high risk in pursuing the claim, which “did not fail for a single reason, [but] for several reasons, any one of which, on its own, would have sufficed to defeat the claim.”   The Judge found that it was “entirely right” that Mishcon de Reya should have taken all steps to defend itself and that the claimants had, by their behaviour and conduct of the action, forfeited their entitlement to have proportionality brought to bear on these costs. 

Comment

The decision serves as a reminder to would-be-claimants of the considerable risks of pursuing litigation in circumstances where they do not have reliable evidence to support the allegations they intend to put forward.  Mr Justice Morgan was extremely critical of the claimants for advancing such serious allegations without any material evidence.  He found that the documents that had raised the claimants’ suspicions, and had very much taken centre stage at trial, were “largely, if not entirely, collateral to the matters in the litigation and the matters to be decided at trial.”  Notwithstanding this difficulty, the claimants had pursued the litigation extremely firmly, Mr Justice Morgan noting that “the claimants pressed the pressure button to the fullest possible extent.” 

Parallels may be drawn with Mortgage Agency Services Number One Ltd v Cripps Harries LLP [2016] EWHC 2483 (Ch), where Mr Justice Mann, entirely dismissing a raft of allegations of fraud against solicitors, observed that the claimant appeared to have “donned its fraud detection googles, turned the sensitivity up to High and attributed a dishonest motive to every interesting feature in the landscape”.  Claimants ought to heed these decisions and be mindful of the heavy costs sanctions that are likely to follow where they press on with serious allegations without convincing, probative, evidence in support. 

Contact

For more information please contact Michael Robin Partner Michael.Robin@dwf.law

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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