Suing to recover fees-a liquidator’s abuse of process?

In Ward (as liquidator of Brady Property Developments Ltd) v Hutt and Anor [2018] EWHC 77 (Ch), the liquidator sued to recover a preference of ￡160,000. The respondents brought an application to strike out the liquidator’s claim on a number of bases, including abuse of process. The litigation between the parties had had a protracted and somewhat unfortunate history and possibly that may have influenced the Court in making a strike-out order on several bases, including abuse of process. The Court said at [57] that:

“I accept that the applicant is seeking to pursue his statutory duties. But I cannot ignore the fact that, even if he does pursue them, the only economic benefit, so far as I can see, likely to accrue will accrue to the applicant himself. This is because, if the claim is successful against the three respondents, and, even assuming that there were no outstanding costs and fees to be deducted from the sum so recovered by the applicant liquidator as the monies passed through his hands, the monies so recovered would be paid back to the three respondents, in part as to a repayment of the debt owed to the third respondent, but subject to that to the three respondents as members of the company.”

On its face at least, this approach is different to the position in Australia where the courts have taken a more robust view of the public interest aspect of a liquidator pursing claims even when it is apparent that the creditors will not receive a dividend, or where the pursuit of litigation will serve, on a practical level at least, only to reimburse the liquidator for his or her own fees and expenses: see, for example Macks v Viscariello [2017] SASCFC 172 at [509] referencing Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99 at paras 124-157; Pegulan Floor Coverings v Carter (1997) 24 ACSR 651.

There may be a difference between these cases where there is no return to creditors expected from a liquidator’s successful recovery action (but only a payment towards the liquidator’s fees and expenses) and the English case. In the English case, it would seem that there may have been a recovery of the preference if the litigation were allowed to continue (it does not seem to be suggested otherwise), but after deducting the liquidator’s fees and expenses, the dividend would be paid to the very respondents the liquidator was suing. 

The difference may be more apparent than real, but it is worth keeping in mind when representing particular respondents.