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Liquidators Pay £50 Million Price of Inefficiency

Litigation is often expensive and time-consuming, but judges are growing ever more intolerant of avoidable delays and inefficiency by litigants. Their increasingly tough stance was strikingly illustrated by a case in which liquidators acting on behalf of HM Revenue and Customs (HMRC) had a £50 million claim struck out due to their repeated failure to comply with court directions.

The liquidators had brought proceedings under the Insolvency Act 1986 against the former director and company secretary of companies which were said to have gone bust owing large amounts of unpaid tax. The liquidators were acting almost exclusively for the benefit of HMRC, which had funded the proceedings.

The case had a tortuous history but had not proceeded beyond the disclosure of evidence stage. The liquidators were ultimately formally warned by a judge that unless certain disclosure requirements were met by a deadline, their claim – which was valued at about £50 million – would be struck out.

In making good on that threat, the High Court found that there had been serial and lamentable failings in the disclosure process and that the defaults were both serious and significant. Noting that the proceedings were taxpayer funded and primarily brought for the benefit of the Crown, the Court found that they had not been pursued efficiently or at proportionate cost.

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Partner Note

Smailes and Another v McNally and Another [2015] EWHC 1755.