{"id":295844,"date":"2023-07-03T14:00:52","date_gmt":"2023-07-03T08:30:52","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=295844"},"modified":"2023-07-03T14:10:36","modified_gmt":"2023-07-03T08:40:36","slug":"high-court-of-justice-strikes-out-breach-of-duty-claim-against-yzma-director-legal-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/07\/03\/high-court-of-justice-strikes-out-breach-of-duty-claim-against-yzma-director-legal-news\/","title":{"rendered":"England and Wales High Court of Justice strikes out Breach of Duty Claim against YZMA Director"},"content":{"rendered":"
\n

England and Wales High Court of Justice:<\/b> In an application filed by Watford Control Instruments Ltd. (‘Claimant’) seeking to amend the Particulars of the Claim against the defendant, and to add a new party to the claim, the Master Pester, J., of the Business and Property Courts of England and Wales High Court of Justice, refused to allow the application to amend the Particulars of Claim and to add YZMA as a new party.<\/p>\n

Background<\/b><\/p>\n

The Claimant was incorporated on 18-05-2016 to acquire the goodwill, assets and debts of a company now known known as YZMA 00434553 Limited (‘YZMA’), which was in liquidation. YZMA was previously known as “Watford Control Instruments Ltd”, that is, the same name as the current claimant. The defendant was the director of YMZA until 15-11-2016. The YZMA went into administration in May 2016, having been in financial difficulties for a number of years, a Sale and Purchase Agreement dated 18-05-2016, between the Claimant, YMZA, and YMZA’s administrators, YZMA agreed to sell ‘the Business’ to the Claimant. The Defendant was the director of YMZA until 15-11-2016. In broad terms, the Claimant contended that the defendant had acted in breach of fiduciary duty and in breach of trust, in that he knowingly and dishonestly appropriated YZMA monies for his own purposes. It was alleged that the defendant had used the company credit card without authorisation for personal expenditure and made unauthorised drawings from one of YZMA’s bank accounts and used YZMA funds to fund his pension and health insurance. Therefore, the Claimant sought £350,000 plus interest and an inquiry. The Claimant and YZMA by its administrators, had entered into a further agreement, a ‘Deed of Declaration alternatively of Rectification’ dated 09-10-2022. The Claimant had based their claim against the defendant on the basis of the said assignment.<\/p>\n

It was contended by the defendant that the Claimant would only have the right to sue the defendant in its own name only if the assignment was a legal assignment under section 136 of the Law of Property Act 1925. An assignment under Section 136 only takes effect on the date when notice is given to the debtor, not on the date when the assignment is entered into and in the present case no notice was given to the defendant prior to the date when the proceedings were commenced.<\/p>\n

The Claimant had subsequently filed an application to amend its Particulars of Claim and add YMZA as the second claimant and to plead the October 2022 assignment. The defendant had contended that the joinder and amendment sought was barred by section 35(3) of the Limitation Act, 1980 (‘the Act’). It was also contended that if it were held that there was no limitation defence, then the application would in any event be dismissed either because it did not satisfy the requirements of the Rules 19.2(2), 19.4(4) and 17.4(2) of the Civil Procedure Rules, 1998, or in the exercise of the Court’s discretion.<\/p>\n

Court’s Decision<\/b><\/p>\n

In the previous Judgment of the Court, the Court had found the Claimant guilty of abuse of process, in respect of its failure to prosecute its claim following the CMC held in July 2019. However, the Court had declined the Defendant’s application to strike out the Claimant’s claim against them. Instead, the Court considered it more appropriate to Order a sanction, that the Claimant would provide security for the defendant’s costs of defending the claim, and to disallow the Claimant from recovering any costs incurred in the period September 2019 to September 2022. The Court had also held that if the Deed of Declaration was to operate as a valid assignment, in circumstances where no notice was given to the defendant before the commencement of the present action, it could only operate as an equitable assignment. The Court had also indicated that, to pursue the present action further, the Claimant should issue an application to amend so as to plead that assignment. To bring such an application, the assignors would probably need to be joined to the action.<\/p>\n

The Court noted that the allegations against the defendant related to breach of fiduciary duty, trust and statutory duties he owed as director of YZMA. The Court said that it was not disputed that those causes of action were subject to a primary limitation period of six years, pursuant to section 21(3) of the Act. These were subject to other provisions, namely sections 21(1)(a), 21(1)(b) and 32, that is, fraudulent breach of trust, receipt of trust property and fraud and deliberate concealment respectively. The Court also said that where there is fraud, or a fraudulent breach of trust, to which the trustee was a party or privy, or an action to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, no period of limitation is prescribed under the Act.<\/p>\n

Further, the Court noted that the Particulars of Claim against the defendant were in respect of the following acts:<\/p>\n

i. use of the company credit card for personal expenses in the period December 2009 to April 2016;<\/p>\n

ii. drawing cheques on YZMA’s bank account for his own purposes in July 2009 to October 2014, and<\/p>\n

iii. Certain transactions in defendant’s loan account between 2009 and 2014.<\/p>\n

The Court said that the proceedings of the present case started by claim form dated 15-06-2018. By the proposed amendment, in the subsequent application, the allegations against the defendant were significantly expanded, and extend the period in which the claims were made all the way back to 2004. Thus, the Court said that all the claims made were now time-barred under section 21(3) of the Act. The Court viewed that Civil Procedure Rules, 1998 Rules 19.5 was undeniably engaged which provides for ‘Special provisions about adding or substituting a party after the expiry of the relevant limitation period’.<\/p>\n

Further, the Court said that it was one of the relatively unusual features of the present case that, at the time when the proceedings were started, some of the alleged causes of action against the defendant were already more than six years old, that is, all the instances of alleged misappropriation which predated 16-06-2012. Therefore, the Court viewed that there was undoubtedly considerable delay in pursuing the said claim on the part of the Claimant. However, the Court also said that a factor which cannot be ignored was that the Claimant wished to amend to plead what are in substance, in many respects, new claims.<\/p>\n

The Court also said that at an interim hearing, it could not be decided that the defendant had no defence based on limitation. Therefore, the Court said that the effect of granting the amendments sought by the Claimant would be, to deprive the defendant of a limitation defence which would otherwise be available to him, because the amendments would relate back to the time when the proceedings were begun, that is, June 2018. Thus, the Court refused to allow the amendment and joinder as a matter of discretion. The Court also referred to American Leisure Group Ltd v Olswang LLP1<\/sup><\/a>, wherein it was held that the loss of a limitation defence is prejudice that is undoubtedly relevant to the exercise of the discretion.<\/p>\n

Therefore, the Court refused to allow the Claimant’s application to amend the Particulars of Claim and to add YZMA as a new party.<\/p>\n

[Watford Control Instruments Limited v. Colin Brown, [2023] EWHC 1501 (Ch)<\/a>, Decided on 23-06-2023<\/span>]<\/p>\n\n

Advocates who appeared in this case :<\/p>\n

For the Claimant: Barrister Richard Colbey;<\/p>\n

For the Defendant: Barrister Niranjan Venkatesan.<\/p>\n<\/div>\n\n

1.<\/a> [2015] PNLR 21.<\/p>\n","protected":false},"excerpt":{"rendered":"

The allegations against the defendant related to breach of fiduciary duty, trust and statutory duties he owed as director of YZMA.<\/i><\/p>\n","protected":false},"author":67011,"featured_media":295838,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,12],"tags":[58961,58964,51936,24144,39215,58963,58962],"class_list":["post-295844","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-foreigncourts","tag-breach-of-duty-claim","tag-civil-procedure-rules","tag-high-court-of-justice","tag-limitation-act","tag-uk","tag-watford-control-instruments-ltd","tag-yzma-director"],"yoast_head":"\nHigh Court of Justice strikes out Breach of Duty Claim against YZMA Director | SCC Blog<\/title>\n<meta name=\"description\" content=\"High Court of Justice strikes out Breach of Duty Claim against YZMA 00434553 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Gajjar, AJ., under Rule 28(4) of the Uniform Rules of Courts by which the applicant seeks to amend its particulars of claim pursuant to a notice of objection filed by the respondent. 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the Bench of Justice Joanna Smith, DBE, termed the DRP in question to be \"unusual and surprising\" and observed that\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Children's Ark","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-88-1-1.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-88-1-1.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-88-1-1.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-88-1-1.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-88-1-1.png?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":320212,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/04\/17\/prince-harry-ordered-by-the-uk-hc-to-pay-90-legal-costs-to-the-home-dept\/","url_meta":{"origin":295844,"position":3},"title":"[Downgrading of Prince Harry\u2019s Security] | UK HC directs the Duke of Sussex to pay 90% of reasonable costs to the Home Department for the legal expenses incurred","author":"Editor","date":"April 17, 2024","format":false,"excerpt":"The instant costs order is in addition to successive series of orders passed by the English courts in the matter of Prince Harry, Duke of Sussex, who had stepped down from being a senior royal; thereby having his public-funded security downgraded whilst visiting the UK.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Duke of Sussex award of costs Megxit","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/Duke-of-Sussex-award-of-costs-Megxit.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/Duke-of-Sussex-award-of-costs-Megxit.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/Duke-of-Sussex-award-of-costs-Megxit.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/04\/Duke-of-Sussex-award-of-costs-Megxit.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":87231,"url":"https:\/\/www.scconline.com\/blog\/post\/2016\/11\/22\/issues-regarding-status-of-decisions-by-judicial-committee-of-privy-council-in-courts-of-england-and-wales-clarified\/","url_meta":{"origin":295844,"position":4},"title":"Courts in England and Wales, not bound by Privy Council decisions","author":"Saba","date":"November 22, 2016","format":false,"excerpt":"Supreme Court of United Kingdom: Considering the issue regarding the status of decisions by the Judicial Committee of the Privy Council (JCPC) in the courts of England and Wales, a nine-Judge Bench headed by Lord Neuberger (President) unanimously specified the circumstances in which the JCPC can decide that the earlier\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/07\/DSC_7472-2-e1476682323502.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/07\/DSC_7472-2-e1476682323502.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/07\/DSC_7472-2-e1476682323502.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/07\/DSC_7472-2-e1476682323502.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/07\/DSC_7472-2-e1476682323502.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":363337,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/10\/10\/ori-hc-cuts-rpf-constables-accident-compensation-to-rs-7-10-lakh\/","url_meta":{"origin":295844,"position":5},"title":"Orissa HC rejects planted vehicle claim; 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