Official Receiver Loses A Summary Judgment Application

Official Receiver Loses A Summary Judgment Application Overview

In the case of The Official Receiver & Anor v Haq & Anor [2023] EWHC 3072 (Ch) the Official Receiver loses a summary judgment application (“OR v Haq”). 

This would appear to be a battle lost but not necessarily the war from the perspective of the Liquidator.

This case appears to be one having all the features of a standard claim against a Director for payments from a company that had gone into compulsory liquidation with a Director and or their connected parties being the beneficiaries of the same.

The question is whether the Director and or their connected parties were entitled to the same. It seems the Official Receiver was not satisfied of that position. There was also a small balance claimed in respect of an overdrawn director’s loan account. 

Summary Judgment Application

The claim for summary judgment was set out as follows:

a) £24,005 in respect of “salary” payments made to Mr Haq to which the OR contends Mr Haq had no contractual entitlement (the “Salary Claim”);

b) £137,488.87, or alternatively £74,057.93, in respect of payments claimed to have been made gratuitously from the Company’s bank account to R2 (the “Payments Claims“); and

c) £9,304.75 in respect of a sum claimed to be outstanding on Mr Haq’s director’s loan account with the Company as at the date of liquidation, together with interest thereon at the Official Rate of Interest published by HMRC, that being the applicable rate of interest identified in the Company’s accounts (the “DLA Claim“).

Need To Put Forward A Positive Case

It is not entirely clear from the Court’s decision how matters perambulated to get to an application for summary judgment. However, the result here seems to show the risk of applying for summary judgment in a matter where the claim relies in part at least, on the absence of evidence as opposed to being able to put forward a complete positive case based on the documents circulating. 

Whilst a payment can be shown with reference to a bank statement for example, if there is no response to a letter of claim which explains why the payment was made then the Liquidator applicant might be left with little to say other than in words to the effect of:

‘we have asked about the basis of the payment but our invitation has gone unanswered so we have to now assume such silence is the response’ 

However, that is the negatively pleaded aspect of such a case that may well be unavoidable. It can be a more risky way to plead a case.

Ideally in a summary judgment application, you would want to present the documents without much concern as to what a respondent as a witness could say under cross examination and be able to face the Court with the confidence to say something like:

‘Judge in view of the documents we have presented there is only one conclusion that we submit to be feasible for the Court to come to, so it is our respectful submission that this is a case of game, set and match.’

This is always the difficulty with a case in which the level of engagement between the litigating parties does not quite meet the threshold anticipated by the overriding objective in the Civil Procedure Rules.

Lack Of Engagement

In the OR v Haq whilst the director had not put forward evidence, it seems that arguments sprouted at the hearing that some of the payments related to salary and notwithstanding an absence of a written contract of employment for the Director, that in itself did not dispose of the matter. The Official Receiver abandoned seeking summary judgment on the Salary Claim. 

The fact that this matter resulted in a summary judgment application may have arisen due to the engagement (or perhaps lack of it) on the part of the Director. It is by no means clear if indeed that was the reason but what was clear was that the Director considered it seems that he did not need to respond to the claim:

Pursuant to Insolvency Rule 12.1(1) of the Insolvency (England and Wales) Rules 2016 (“IR2016”), the provisions of the CPR apply to these insolvency proceedings except insofar as they are disapplied by or are inconsistent with IR2016. Despite the Application properly drawing Mr Haq’s attention to CPR 24.5(1), which requires a Respondent who wishes to rely on any written evidence at the hearing of the summary judgment application to file and serve such evidence at least 7 days before the hearing, Mr Haq had not filed or served any such written evidence. However, it became apparent during the course of the hearing that there was much that he wished to say in opposition to the claims made, although, to date, Mr Haq had strongly believed that he should not be compelled to respond to the OR’s claims at all. It was unfortunate that Mr Haq had not sought to engage with the OR more constructively in advance of the hearing. Nevertheless, and notwithstanding his failure to comply with CPR 24.5(1), in accordance with the overriding objective it was appropriate to give Mr Haq the opportunity to respond fully to the Application, for the purposes of determining whether there was no real prospect of him successfully defending the relevant claims at a trial.

An Unsuccessful Application For Summary Judgment

This was an unsuccessful application for summary judgment as demonstrated by the following:

In those circumstances, I cannot conclude (for the purposes of CPR 24.3) that Mr Haq has no real prospect of successfully defending the Salary Claim.

Accordingly, the Salary Claim will need to proceed to be determined at a trial.

…

Accordingly, whilst the OR is understandably frustrated by the lack of formal evidence provided by Mr Haq in response to the Application, this is not a case in which I can conclude that in relation to the Payments Claims falling into the 2 categories identified above that there is no real prospect of them being successfully defended at a trial.

…

Accordingly, without any further evidence in relation to these issues, I cannot be satisfied that Mr Haq has no real prospect of successfully defending the DLA Claim at trial.

What is interesting in this case is what will happen in respect of costs. The usual rule is the unsuccessful party pays the costs of the successful party. Here the winner was the Director who successfully defended the Official Receiver’s summary judgment application. However, the aforementioned suggested lack of engagement could lead to the Court making an order different to the usual position.