Ruskin Private Hire Ltd 1167 of 2014: Liquidators pay indemnity costs for not keeping open minds

This case should serve as a salutary reminder to liquidators that they should be concerned with establishing the truth of what has happened rather than building a case to support a convenient theory. The joint liquidators sued Miss Hughes (the former financial controller) of the Company for sums in excess of £1m alleging that she had been party to a dishonest scheme to divert Company monies. The existence of that account and the payments into it became known to the liquidators in about April 2014 but although Miss Hughes was assisting the liquidators at that time, she was not asked about it until February 2015 that Miss Hughes was asked about it. In the intervening period, in September 2014 the director/shareholder had been asked about it. He had denied that the monies paid into it had been for work done by the Company and asked the liquidators to call him. They did not. In cross-examination neither the failure to respond to this invitation nor the failure to raise the matter with Miss Hughes were explained

 

When the liquidators did raise the matter with Miss Hughes in February 2015 she sent an e-mail in which she both denied any wrongdoing and offered to answer any questions in writing or to meet them after her new employer’s year end in late April). The liquidators did not respond to this e-mail. Instead, in July their solicitors wrote asserting that she had “failed to [agree to meet] or to provide any dates for a meeting” and demanded full payment of the sums allegedly diverted. Miss Hughes responded disputing her liability and the characterisation of her e-mail but the liquidators proceeded to issue, in August 2015, an application for a freezing order (based upon the fact that her house was for sale). As the Registrar found, the evidence presented to the Judge was inaccurate and unfair.     

 

Shortly after the freezing order was obtained the director provided to the liquidators a file of information and documents which set out his account of how the monies that had allegedly been diverted had in fact been used to pay Company debts. He offered to answer any queries about that information but the liquidators did not approach him.

 

Miss Hughes’ case was that the liquidators had wholly failed to make any proper investigations into the information provided to them by her and by the director. The application was heard over 6 days before Registrar Barber after which she dismissed all the claims and awarded Ms Hughes her costs on the indemnity basis. The Registrar’s judgments both on the application and as to costs criticised the approach of the joint liquidators to their task. She was particularly critical of the liquidators’ failure to seek to establish the true position rather than seeking to prove their initial theory (of a dishonest scheme of diversions). There was a failure to properly evaluate the evidence as the investigation progressed and new information was provided. This “results driven” approach led (so the Registrar found) tainted the liquidator’s written evidence and statements of case. The inaccuracies appeared to the Registrar, on a number of occasions, to be self-serving. On other occasions the liquidator gave evidence on material matters which, when pressed upon, turned out to be pure speculation. The Registrar concluded that it was obvious that the liquidator’s witness statement had been signed without proper steps having been taken to ensure that it was fair and accurate.

 

The Registrar also identified a series of deficiencies in the manner in which the application was pursued up to and including before her, including the levelling of allegation of document falsification made without then calling direct evidence to support it, and the making in cross-examination of allegations directly contrary to the pleaded case.    

 

Given that the liquidators knew from very shortly after obtaining the freezing order that Miss Hughes’ only net asset was the equity in her home (against which she had to borrow to fund her defence) and were only prepared to settle on terms that would have required her to give up that equity in its entirety, the conduct of the liquidators was particular unattractive and merited a costs order on the indemnity basis with an interim payment on account of 70% of the bills presented. The Registrar also awarded interest on Miss Hughes’ costs before judgment given that she had had to borrow the majority of those costs at a rate far above usual rates.

 

William McCormick QC was instructed by Demetris Dionissiou and Elena Chrysostomou of DWFM Beckman on behalf of Miss Hughes.