Cooke, Young & Keidan LLP v Laurence Howard Davis & Anor [2026] EWHC 2093 (Ch)

[2026] EWHC 2093 (Ch)Case No BL 2022 000943
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Venue Royal Courts of Justice, The Rolls Building, Fetter LaneDate 5 August 2026
London
EC4A 1NL
Before
HHJ JOHNS KCSitting as a Judge of the High Court
Between
COOKE, YOUNG & KEIDAN LLPClaimant(1) LAURENCE HOWARD DAVISDefendant(2) JOHN CHRISTOPHER BAKERDefendantCOOKE, YOUNG & KEIDAN LLPDefendants
MS HELEN EVANS KC & MR ANDREW BROWN (instructed by Clyde & Co LLP) for ClaimantMR FRANCIS MORAES (instructed by W Legal Limited) for Defendants
Hearing Hearing dates: 23 & 24 June 2026APPROVED JUDGMENTThis judgment is handed down by email to the parties’ representatives and release to The National Archives at 2pm on Wednesday 5 August 2026

HHJ JOHNS KC:

[1]This is my judgment following an application hearing on 23 and 24 June 2026. There are multiple applications. But they all involve considering, in one way or another, the effect on these proceedings of the bankruptcy of Mr John Baker. Mr Baker and Mr Laurence Davis are the Defendants to this claim for solicitors’ fees in the sum of £194,137.72. They make a counterclaim, which they value in a sum of around £20 million, for professional negligence against the Claimant, Cooke, Young & Keidan LLP (CYK). Mr Baker was declared bankrupt on 5 June 2023.[2]The applications to be determined are these:2.1 An application dated 23 July 2025 by CYK to strike out the counterclaim given Mr Baker’s bankruptcy (the Strike Out Application).2.2 An application dated 26 November 2025 by the Defendants intended (as is common ground) to be for joinder of the Official Receiver, though wrongly naming an individual (the Joinder Application).2.3 A further application by CYK to strike out the counterclaim, but this time on the basis of warehousing of the counterclaim, made by application notice dated 27 November 2025 (the Warehousing Application).2.4 An application by the Defendants dated 27 January 2026 for the trial of a preliminary issue, that issue being “the basis on which title to the counterclaim is held by the Defendants” (the Preliminary Issue Application). The draft order with the application raises the question, among others, whether the counterclaim is a partnership asset of the Defendants.2.5 Finally, a further application by the Defendants for permission to withdraw possible admissions in witness statements in these proceedings (the Admissions Application). It had been accepted in those statements that Mr Baker had no standing to pursue the counterclaim absent a transfer of the right to do so from the Official Receiver. It was said by the evidence in support of this application notice dated 13 April 2026 that such acceptance wrongly ignored Mr Baker’s “equitable interests and rights in the counterclaim.” Factual background[3]The fees claimed in these proceedings, issued on 22 July 2021, arise out of CYK acting for the Defendants in proceedings brought by them against Irish Bank Resolution Corporation Limited (IBRC). Those proceedings (the IBRC proceedings) complained of misrepresentations, and breaches of duty said to be owed to the Defendants, by IBRC’s predecessor, Anglo Irish Bank Corporation plc (AIB), in relation to a failed joint venture project from 2005/2006 dubbed “Project Magic”. Project Magic was a plan to buy and develop a large site in Skegness, Lincolnshire which included a leisure attraction known as “Fantasy Island”. A joint venture company, Conduit Skegness Limited, was incorporated and purchased the site with the help of a loan in the sum of £58.5m from AIB. An initial plan for AIB to be a 40 percent shareholder, with the Defendants holding the remaining shares, was later revised so that a subsidiary of AIB took a 40 percent share warrant with the vast majority of the shares being issued to each of the Defendants in equal proportions in the meantime. The misrepresentations and failures alleged by the Defendants concerned a valuer at DTZ Debenture Tie Leung Limited, a Mr Wordley. He was said to have overvalued the site by over £15m causing the Defendants losses of over £19m. The IBRC proceedings were issued on 28 October 2020; it being thought that the Defendants only became aware of AIB’s concerns about Mr Wordley at a meeting on 30 October 2014 so that the proceedings were understood to be brought within the limitation period as postponed by s.32 of the Limitation Act 1980.[4]The IBRC proceedings followed successful proceedings by the Defendants to set aside statutory demands served on them by LSREF III Wight Limited as assignee of guarantees given by the Defendants to AIB in connection with Project Magic. They relied on the same points as later made in the IBRC proceedings. Chief Registrar Baister decided by a judgment given on 16 February 2016 that those points meant that the guarantee debt was disputed on substantial grounds.[5]To continue the IBRC proceedings, it was necessary by reason of IBRC’s liquidation to obtain permission in Ireland. There was evidence in the permission proceedings that the Defendants had become aware of AIB’s concerns about Mr Wordley very much earlier, namely in November 2012. If correct, that may mean that the IBRC proceedings were limitation barred. The Defendants discontinued the IBRC proceedings on 9 April 2021 and counterclaimed in these proceedings for their lost opportunity to pursue the IBRC proceedings; contending that, if properly advised, they would have brought the IBRC proceedings before expiry of the limitation period.[6]Following directions questionnaires, by email of 19 December 2022, the Defendants’ then solicitors, Edwin Coe, provided CYK’s solicitors, Clyde & Co, with dates to avoid for the fixing of a costs and case management conference (CCMC); concluding their email with, “We should be grateful if you would please include these in your update to the court”. But it seems those dates were never sent on to the court by CYK’s solicitors and no CCMC was then fixed. It was not until years later, on 31 March 2025, that Clyde & Co asked the court to fix a CCMC.[7]In the meantime, Mr Baker had been made bankrupt on 5 June 2023. His solicitors, Edwin Coe, wrote to him on 23 June 2023 to inform him that, “as a consequence of your bankruptcy, whatever entitlement you have against CYK now vests in your trustee in bankruptcy. In other words, you have no legal standing to pursue the claim or receive any proceeds if the claim is successful”, and that, “As you may be aware as a consequence of your bankruptcy the Official Receiver (OR) is appointed as your trustee. In due course, they may give consideration to appointing a licenced insolvency practitioner to act as your trustee. Either way, whether it is the OR or a trustee, I will need to deal with them to ascertain their intentions regarding the claim.” Mr Baker’s solicitors then provided documents from these proceedings to, and at the request of, the Official Receiver; those solicitors noting by an email of 8 August 2023 that, “The parties are currently awaiting a hearing date from the High Court.”[8]Following limited without prejudice correspondence in 2024, CYK’s solicitors wrote on 10 December 2024 to the Defendants’ solicitors summarising the parties’ positions in the litigation and indicating that, “Absent a response within 14 days, we anticipate receiving instructions to seek a CCMC listing without further recourse to your firm and/or your clients.” A request was, as already noted, only made months later. A CCMC was eventually fixed for 31 July 2025. In May 2025, the Defendants instructed their new solicitors, W Legal, to act for them in preparation for that CCMC.[9]In the run up to that CCMC, it seems CYK finally woke up to the challenge presented by Mr Baker’s bankruptcy to the making of directions for the resolution of the proceedings. Its solicitors wrote to the Defendants’ solicitors on 17 July 2025, “Having reflected upon the current position, we are concerned that we are not in a position to determine what (if any) directions ought to apply in this matter, until the outstanding question has been dealt with as to Mr Baker’s solvency issues.”[10]The Strike Out Application was made, and the CCMC adjourned by consent. The other applications followed and were ultimately listed for hearing before me commencing on 23 June 2026 with a time estimate of three days.[11]I received valuable assistance at the hearing from Mr Moraes for the Defendants, and Ms Evans KC and Mr Brown for CYK. I thank them for that assistance. The Strike Out Application and the Preliminary Issue Application[12]It is convenient to start with, and take together, the Strike Out Application as against Mr Baker and the Preliminary Issue Application.[13]As against Mr Baker, the Strike Out Application is, says CYK, straightforward. Mr Baker is no longer able to pursue the counterclaim. It is one of his assets forming part of the bankrupt’s estate under s.283 of the Insolvency Act 1986 which has therefore vested in the Official Receiver as his trustee in bankruptcy by the operation of s.306 of the 1986 Act.[14]For Mr Baker, it is argued that the removal of Mr Baker as a party is disproportionate and ignores his real and substantial interest in the counterclaim.[15]Mr Moraes submits that the Defendants’ pleaded case in these proceedings is that they are partners. He relies for this purpose on the Defence at [9]. “The case of Mr Davis and Mr Baker in the First Action [being the proceedings to set aside the statutory demands] was that any rights LSREF III Wight Limited had in the said guarantees were subject to the equities arising, amongst other matters, from claims against AIB that during negotiations in 2005 and 2006 in respect of Project Magic to acquire and further develop as partners and/or joint venturers a 41-acre freehold site and business known as ‘Fantasy Island’ in Ingoldmells, near Skegness, Lincolnshire (‘the Site’), AIB:(a) dishonestly made misrepresentations to Mr Davis and Mr Baker concerning the suitability/reliability of the valuer, DTZ Debenture Tie Leung Limited (‘DTZ’), to be used for assessing the viability and price to be paid for the Site; and/or(b) dishonestly and/or culpably breached its fiduciary duties of good faith and disclosure owed to Mr Davis and Mr Baker by withholding material information concerning the suitability and reliability of DTZ as a valuer”.[16]He then submits that that gives Mr Baker an interest in these proceedings in this way. The counterclaim is a partnership asset so that Mr Davis, as the non-bankrupt partner, can pursue the entirety of the counterclaim as part of winding up the partnership and is then obliged to account to the Official Receiver for Mr Baker’s share of the partnership. The Official Receiver will be obliged, in turn, to account to Mr Baker for a surplus arising once his creditors have been paid from that share. And Mr Baker has a present interest in that surplus which justifies his continued involvement in these proceedings. Mr Moraes relied, for that last step in his chain of reasoning, on the decision of Peter Smith J in Phillips v Symes[2005] EWHC 2867 (Ch).[17]His position, for the purposes of the application hearing, is that directions should be given to determine this question of partnership, it being a question on which the Defendants have at least a real prospect of success.[18]For this analysis to begin to work, what must be alleged is a partnership between the two Defendants only. The counterclaim is one for damages for lost litigation, namely the IBRC proceedings. That lost litigation, and so the counterclaim, cannot be a partnership asset of any partnership involving IBRC. IBRC was the defendant to the IBRC proceedings. Mr Moraes made clear, in response to a question from the court, that a partnership just between Mr Davis and Mr Baker is indeed what he was asserting. He submitted there was a proper pleading of such a partnership in the Defence at [9] which had a real prospect of success. Indeed, that case had, he said, already been accepted by CYK in its evidence. As to the evidence, he took me to a witness statement of a solicitor for CYK dated 23 July 2025 at [57]:
“… if Mr Davis can show he is severally entitled to pursue his part of the counterclaim, his remedy should be confined to that part of the damages in the IBRC claim that he can say he would have enjoyed. Since he and Mr Baker were purportedly equal partners in a joint venture, that would have the effect of halving the claim.”
[19]At least if the counterclaim is not such a partnership asset, it is clear, in my judgment, that Mr Baker’s counterclaim should be struck out.[20]In the well-known case of Heath v Tang[1993] 1 WLR 1421 two bankrupts sought leave to appeal against the judgments upon which their bankruptcy orders were founded. It was held that they could not pursue those appeals. Hoffman LJ (as he was then) explained why, having first framed the question:
“By section 306 of the Insolvency Act 1986 the bankrupt's estate vests in his trustee when appointed and by section 285(3) no creditor has after the making of a bankruptcy order any remedy against the property or person of the bankrupt in respect of any debt provable in the bankruptcy. The effect is that the bankrupt ceases to have an interest in either his assets or his liabilities except in so far as there may be a surplus to be returned to him upon his discharge. What effect does this have upon legal proceedings to which he is a party? We shall consider the position first when the bankrupt is plaintiff and secondly when he is defendant. The bankrupt as plaintiff The property which vests in the trustee includes ‘things in action:’ see section 436. Despite the breadth of this definition, there are certain causes of action personal to the bankrupt which do not vest in his trustee. These include cases in which ‘the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property:’ see Beckham v. Dale (1849) 2 H.L.Cas. 579, 604, per Erie J. and Wilson v. United Counties Bank Ltd. [1920] A.C. 102. Actions for defamation and assault are obvious examples. The bankruptcy does not affect his ability to litigate such claims. But all other causes of action which were vested in the bankrupt at the commencement of the bankruptcy, whether for liquidated sums or unliquidated damages, vest in his trustee. The bankrupt cannot commence any proceedings based upon such a cause of action and if the proceedings have already been commenced, he ceases to have sufficient interest to continue them. Under the old system of pleadings, the defendant was entitled to plead the plaintiff’s supervening bankruptcy as a plea in abatement. Since the Supreme Court of Judicature Act 1875 (38 & 39 Vict. c.77), the cause of action does not abate but the action will be stayed or dismissed unless the trustee is willing to be substituted as plaintiff: see Jackson v North Eastern Railway Co. (1877) 5 Ch D 844… The bankrupt as defendant In cases in which the bankrupt is defendant, there is of course usually no question of the cause of action having vested in the trustee. Unless the defence is set-off (a situation to which we shall return later) the bankrupt will not be asserting by way of defence any cause of action of his own. But in cases in which the plaintiff is claiming an interest in some property of the bankrupt, that property will have vested in the trustee. And in claims for debt or damages, the only assets out of which the claim can be satisfied will have likewise vested. It will therefore be equally true to say that the bankrupt has no interest in the proceedings. As we have seen, section 285(3) deprives the plaintiff of any remedy against the bankrupt's person or property and confines him to his right to prove. On the other hand, there are actions seeking relief such as injunctions against the bankrupt personally which do not directly concern his estate. They can still be maintained against the bankrupt himself and he is entitled to defend them and, if the judgment is adverse, to appeal.”
The bankrupt as plaintiff

The bankrupt as defendant

[21]Hoffman LJ went on to make clear that a contractual claim relied upon as a set-off would undoubtedly have vested in the trustee in bankruptcy and so no longer be available to the bankrupt. It would instead fall to be set off for the purposes of proof under s.323 of the 1986 Act.[22]Those principles were applied more recently by the Court of Appeal in James v Rutherford-Hodge[2005] EWCA Civ 1580; Chadwick LJ spelling out at [17], “that Hoffman LJ – and the other members of the court – had well in mind that a bankrupt could not be allowed to pursue a claim in his own name notwithstanding that, if successful, he would recover sufficient to pay his creditors and have the bankruptcy annulled on that ground.”[23]It follows in my judgment that Mr Baker’s counterclaim in this case falls to be struck out, provided at least it is not, or not arguably, a partnership asset. It is not among those limited categories of personal claims which do not vest in the trustee and so, by reason of his supervening bankruptcy, Mr Baker has ceased to have a sufficient interest in the counterclaim to continue it. That is so notwithstanding that, were it successful in full, it could be expected to produce sufficient recovery to pay all his creditors. Further, it was made clear for the Official Receiver at the hearing of the applications that the Official Receiver did not wish to be substituted as counterclaimant for Mr Baker or otherwise be party to the proceedings.[24]Is there, though, an arguable case that the counterclaim is a partnership asset such that Mr Baker should remain party to the proceedings? The basis of the Preliminary Issue Application is that there is such a case with at least a real prospect of success.[25]I have decided that there is no such arguable case. Such a case is not open to the Defendants on the statements of case, and would anyway have no real prospects of success.[26]First, it is not the case made in the Defence at [9]. As is apparent from the opening words of that paragraph, “The case of Mr Davis and Mr Baker in the First Action was …”, it contains only a description of the case made by the Defendants in the proceedings to set aside the statutory demands. As is apparent from the closing words of [9], “(‘the AIB Claims’)”, and from [10], “The AIB Claims are more particularly set out in the claim form (‘the AIB Claim Form’) and Particulars of Claim (‘the AIB POC’) in claim number FL-2020-000037 between Mr Davis and Mr Baker and IBRC (‘the AIB Action’)”, that same description also applies to the case made in the IBRC proceedings. The Defendants’ case was consistent in those two sets of proceedings.[27]That consistent case was of a tripartite partnership with IBRC. Not a two-man partnership between the Defendants only. That can be seen from the Defendants’ own clarification of their case made in the proceedings to set aside the statutory demand, recorded in the judgment of Chief Registrar Baister at [29]:
“29. Before the long adjournment on the first hearing day I asked Mr Davies to produce a short note summarising his clients’ case on the nature of relationship(s) he was asserting to have existed and what flowed from it or them. Mr Davies provided this the following morning: ‘Legal Relations: 1 Debtor/creditor AIB and the JV Company had a formal, documented relationship of debtor and creditor. 2 Suretyship The applicants and AIB had a formal, documented relationship evidenced by the original guarantee (as subsequently replaced). 3 Partnership/joint venture – Project Magic The applicants and AIB agreed to participate in a joint venture – called by them ‘Project Magic’ – the terms of which they had intended to record in a shareholders’ agreement (stipulated as a condition precedent in the terms which had been agreed by AIB’s credit committee [2/21/103 cl.13(c)]) but, due to a last-minute switch by AIB in around early May 2006 to conceal its agreed participation in the share capital [Davis 2 para 11 [1/5/16], was not formalised. The resulting informal arrangements (made necessary by AIB’s desire to conceal its involvement as a joint venturer), described by Mr Davis in paragraph 21 of his 2nd w/s as a ‘living breathing joint venture’ [2/5/19], amounted to: (1) a partnership within the meaning of the Partnership Act 1890; or (2) a joint venture between the applicants and AIB having fiduciary characteristics to pursue the development based on mutual trust and confidence (sharing de facto control of the joint venture vehicle with a view to sharing profits); or (3) a joint venture between the applicants and AIB with no fiduciary characteristics to pursue the development. Pending disclosure, the applicants allege that each of the above was contractual in nature, partly in writing, partly oral and partly by conduct and, in 1 above, partly by statute.’”
[28]That reflected some of Mr Davis’s evidence in those proceedings, quoted in the judgment at [7]:
“‘I came to see the proposed structure as a partnership between the 3 of us…I saw our mutual rights and obligations…as going beyond merely being shareholders in the same business.’”
[29]And it formed the basis of the Chief Registrar’s decision to set aside the statutory demands. He said at [35] it was “… plain to me that it is arguable that a partnership arose. The parties appear to have carried on the development (a business) together (in common) with a view to profit (the very purpose of the whole enterprise from the applicants’ point of view, a lucrative prospect from AIB’s).”[30]This consistent case can also be seen clearly in the Particulars of Claim in the IBRC proceedings. Paragraph 18 was in these terms:
“18. However, from the outset AIB expressed a settled intention to participate in the Venture not merely as lender but also as a commercial enterprise. During the ensuing discussions, AIB made it clear that it intended to be a partner and/or a joint venturer with the Claimants (‘Partner(s)’): 18.1 each Partner holding a percentage beneficial interest in the Venture, represented by percentage equity interests in the JV Company; 18.2 with a view to sharing profit; and 18.3 on that basis that the policy of the JV Company was a matter for joint decision between the Partners.”
[31]It is later made plain that this was not merely an intended partnership. Rather, a partnership between the three came about, giving rise to the duties relied on in the IBRC proceedings. Paragraph 57 is one clear example. “57. In the premises, from and during the negotiations, as prospective Partners, and thereafter as Partners:57.1 the Claimants necessarily placed trust and confidence in AIB to act in their best interests, giving rise to AIB owing to the Claimants fiduciary duties of good faith … and/or57.2 AIB owed the Claimants a duty to place them in possession of all material facts and not to conceal from the Claimants any matters which were within the exclusive knowledge of AIB …”.[32]Accordingly, the Defence in these proceedings at [9] cannot bear the weight Mr Moraes seeks to place on it. It does refer to the Defendants as partners. But it cannot be understood fairly as making an allegation of a partnership between the Defendants only. It is, instead, merely a description of the case made in other proceedings, namely in the proceedings to set aside the statutory demands and the IBRC proceedings. And the case made consistently in those other two sets of proceedings was not of a partnership between the Defendants only, but rather a tripartite partnership including IBRC.[33]Second, there is no application to amend the Defence and Counterclaim in these proceedings to allege the different partnership now relied on in argument. Nor are any particulars of this different partnership offered in evidence or submissions which might form the basis of such an amendment.[34]Third, even if a case of that different partnership were open to the Defendants on the statements of case, it would, in my judgment, have no real prospects of success. Four points in that regard underline the lack of any conviction besetting such a case.[35]One, there is no evidence at all of the common indicia of a partnership, such as a written agreement, partnership accounts, or identification of the firm as an entity.[36]Two, reflecting the position in the other two sets of proceedings, the partnership referred to in correspondence and the evidence in the current proceedings is a partnership with IBRC. A letter from the Defendants’ solicitors dated 23 December 2025 disputes the analysis that Mr Baker’s interest in the counterclaim vested in the Official Receiver in this way:
“We do not agree. Our clients were partners / joint venturers with Anglo Irish Bank Corporation Limited in Project Magic. It was on that basis that they: (i) successfully set aside LSREF III Wight Limited’s statutory demands; (ii) pleaded their claim against Irish Bank Resolution Corporation Limited (In Special Liquidation); and (iii) have pleaded their Defence and Counterclaim in these proceedings. The Counterclaim is a partnership / trust asset and title in it remains vested in the partnership / trust; it did not vest in the OR upon Mr Baker’s bankruptcy.”
[37]A witness statement of Mr Cohen of W Legal, the Defendants’ solicitors, dated 27 January 2026 is in like terms:
“42. … if the Defendants’ relationship with each other and AIB was that of partners or joint venturers, then their claim against IBRC was on that basis (as, indeed, they pleaded it). In turn, it means their cause of action against the Claimant in these Proceedings is held on that same basis.”
[38]Three, Mr Moraes had no real explanation for how a partnership between Mr Baker and Mr Davis alone could co-exist with the partnership between the three joint venturers which was said in the IBRC proceedings to have arisen.[39]Four, Mr Moraes was also unable to tell me the terms of the partnership.[40]As to the evidence for CYK quoted at [18] above, in context the partnership and joint venture being referred to are those with AIB alleged in the IBRC proceedings. The Defendants were indeed said in those proceedings to be equal partners as between themselves; the plan being for them both to take a 30 percent stake in the joint venture company. That it is the IBRC proceedings being referred to is underlined by use of the word “purportedly”, for which Mr Moraes had no other explanation. The response of Mr Davis to this evidence, contained in his witness statement dated 4 September 2025 at [7], is accordingly likewise to be read as referring to a partnership and joint venture with AIB.[41]It follows from all I have said that the counterclaim by Mr Baker will be struck out.[42]I make clear, however, that even had I been persuaded that a case that the counterclaim was a partnership asset of Mr Baker and Mr Davis was open to them on the statements of case and the evidence, I would not have been satisfied that Mr Baker should remain a party to these proceedings.[43]The last step in Mr Moraes’s chain of reasoning, which began with the counterclaim being a partnership asset, was that Mr Baker has a present interest in the hoped-for surplus which may result from success on the counterclaim and which justifies his continued involvement in these proceedings.[44]In my judgment, however, he does not have any such interest in a surplus. A clear statement to that effect can be found in the judgment of Arden LJ (as she was then) in Ram v Ram (No.2)[2004] EWCA Civ 1684. Having referred to the speech of Lord Diplock in Ayerst v C&K (Construction) Ltd[1976] AC 167, she said at [43], “In my judgment, it was an essential part of Lord Diplock’s reasoning that the beneficial ownership of property of a bankrupt is neither in the bankrupt nor in the creditor of the bankruptcy while the assets still remain unadministered. No interest in that property can accrue until it can be said with certainty what the creditors are entitled to receive. Assuming that the bankruptcy is being properly administered, that will rarely be until immediately prior to distribution. Lord Diplock does not specifically deal with the position of the bankrupt himself. However, … it would be touching on absurdity if you could say that a bankrupt has an interest in the surplus while the creditors have no such interest.” Thorpe LJ was of the same view. He said at [27] that, “… the extent of the husband’s potential interest had to await the completion of the process of insolvency and the determination of whether or not there was any surplus. Such an interest could not properly be described as a present beneficial interest either in possession or reversion.” Neuberger LJ agreed.[45]Mr Moraes relies, though, on Philips v Symes. In that case, a charging order was sought over any surplus arising in the bankruptcy of Mr Symes. The position of the trustees in bankruptcy, as described by the judge, Peter Smith J, was that there was no interest capable of being charged. Any surplus was not yet ascertained. The judge said that was misconceived. He made a charging order. “The starting point is s.330(5) of the Insolvency Act 1986, which enshrines the principle which has long been in the insolvency law of a bankrupt individual, that if there is a surplus after payment in full and with interest of all the bankrupt’s creditors, and the payment of the expenses of the bankruptcy, the bankrupt is entitled to the surplus. It is long established and acknowledged that the trustee in bankruptcy holds the surplus upon trust to give effect to that provision. It might be that when the final account is taken that there is nothing, but it does not, in my view, lead to the conclusion that until there is an ascertainment that there is nothing or there is something, there is nothing that is property for the purposes of the Charging Orders Act 1979.” I am unable to see how that result and reasoning can fit with Ram v Ram (No.2), and no reference was made in Philips v Symes (decided on 3 October 2005) to that then very recent authority (decided on 16 November 2004).[46]The Preliminary Issue Application must be dismissed. As already concluded, a case that the counterclaim is a partnership asset is not open to the Defendants on the statements of case or the evidence. There is therefore no such issue to put forward as a preliminary issue.[47]I would add that, even if that case had been open to the Defendants so that the question of whether the counterclaim was a partnership asset was an issue in these proceedings, I would have exercised any discretion against directing it be tried as a preliminary issue. It would have gone only to the quantum of the counterclaim, not liability, and represent only one quantum issue. It would not therefore hold the key to the case. And could be expected to delay the trial of those other issues in the case which are central. By creating two trials, a direction for a preliminary issue could also be expected to add to the overall costs of the litigation. And, if the counterclaim was unsuccessful, the preliminary issue would turn out to have been irrelevant and the extra costs generated by a separate trial of that issue would have been incurred in a case which was, in the end, only worth the £200,000 or so represented by CYK’s claimed fees. All these are significant factors under the principles on whether a preliminary issue is appropriate as set out in Steele v Steele [2001] CP Rep 106 and summarised in Wentworth v Lomas[2017] EWHC 3158 (Ch) by Hildyard J at [32]. They point firmly to it not being in the interests of justice to direct the determination of a preliminary issue in this case.[48]Before moving on, I should record that, as an alternative to the argument that the counterclaim is a partnership asset, the Defendants submitted that they were joint venturers, with like results. But it was not suggested in oral argument that this submission added anything in the sense it could meet the objections to the partnership case in the event those were valid. It follows that this alternative fails for like reasons as already discussed in relation to the partnership argument.[49]With the question of strike out as against Mr Baker and the Preliminary Issue Application determined, it will be helpful to take stock of the implications of that decision before dealing shortly, as is now possible, with the Joinder Application and the Admissions Application, and then turning to decide whether to strike out the counterclaim by Mr Davis, under either the Strike Out Application or the Warehousing Application. Taking stock, the Joinder Application and the Admissions Application[50]What remains by way of counterclaim following the strike out of Mr Baker’s counterclaim and the dismissal of the Preliminary Issue Application is a counterclaim by Mr Davis for his own alleged losses. There may need to be some amendment to spell out those losses and distinguish them from those of Mr Baker. I note that in the IBRC proceedings, the starting point for the losses claimed was a hypothetical value for each of the Defendants’ shareholdings in the joint venture company. What Mr Baker would appear to have lost is the chance to pursue his claim against AIB for the value, in the appropriate counterfactual world, of his shareholding. Subject to hearing further from CYK, I also anticipate it will either be necessary to amend the claim so that it is pursued against Mr Davis only or to stay the claim as against Mr Baker; a further consequence of Mr Baker’s bankruptcy being that CYK must now prove in the bankruptcy for its fees payable by him, rather than continuing a claim against him for those fees.[51]The answers to the Joinder Application and the Admissions Application are clear. The Joinder Application falls to be dismissed. Mr Baker’s counterclaim having been struck out, including on the basis that the Official Receiver did not wish to be joined in order to pursue it, with only the claim against Mr Davis and his personal counterclaim continuing, there is no issue in the proceedings involving Mr Baker’s estate. There is therefore no real foundation for making the Official Receiver a party. The Admissions Application also falls to be dismissed. The admissions that Mr Baker has no standing to bring the counterclaim are correct, as has been determined on the Strike Out Application and the Preliminary Issue Application, and Mr Baker’s counterclaim is now at an end. There is therefore no basis for, nor any purpose served by, their withdrawal. The Strike Out Application revisited and the Warehousing Application[52]It is convenient to tackle the Strike Out Application so far as it is directed at Mr Davis and the Warehousing Application together.[53]As against Mr Davis, the basis of the Strike Out Application appears from the draft order accompanying the application. It is that, in view of Mr Baker’s bankruptcy, he has failed to join the proper parties; the draft order at [4] being, “The First Defendant’s counterclaim is struck out under CPR 3.4(2)(a) to (c) for breach of CPR 19.3.” I would observe that this appears to be the explanation for the Joinder Application; that is, it was made in response to this threat.[54]But I do not consider it represents any real threat. The counterclaim as advanced by Mr Davis should not be struck out on this basis. It is now known, given all that I have said above, that there has been no failure to join the necessary parties. The counterclaim is for Mr Davis’s losses and it is now accepted by CYK that he can bring that without joining the Official Receiver. It was explained in the skeleton argument for CYK for the application hearing that an earlier analysis for CYK that the counterclaim was only properly constituted if Mr Baker’s trustee in bankruptcy was joined no longer represented CYK’s position.[55]The strike out under the Strike Out Application will therefore be of Mr Baker’s counterclaim only. Not that made by Mr Davis. He may continue his counterclaim for his own alleged losses.[56]The Warehousing Application requires more careful consideration. I start with the principles to be applied. They can be gathered from Asturian Foundation v Alibrahim[2020] EWCA Civ 32.[57]This was a claim to recover a valuable property on the basis it had been transferred to the defendant without authority. Proceedings were issued on 10 April 2015 but never reached the stage of directions being given or even a case management conference being listed. The defendant applied on 11 December 2017 to strike out the claim for an abuse of process, namely the “warehousing” of the claim by the claimant. A Deputy Master struck out the claim. That decision was reversed on appeal by Judge David Cooke sitting as a High Court Judge. A further appeal to the Court of Appeal was dismissed. Arnold LJ began his consideration of the correct approach at [47] with the starting point:
“In considering these submissions, the starting point is that it is well established that mere delay in pursuing a claim, however inordinate and inexcusable, does not without more constitute an abuse of process: see Icebird Ltd v Winegardner [2009] UKPC 24 at [7] (Lord Scott of Foscote delivering the judgment of the Privy Council).”
[58]After a review of the authorities he stated the correct approach to be gleaned from them as follows at [61]:
“In my judgment the decisions in Grovit, Arbuthnot, Realkredit and Braunstein show that a unilateral decision by a claimant not to pursue its claim for a substantial period of time, while maintaining an intention to pursue it at a later juncture, may well constitute an abuse of process, but does not necessarily do so. It depends on the reason why the claimant decided to put the proceedings on hold, and on the strength of that reason, objectively considered, having regard to the length of the period in question. A claimant who wishes to obtain a stay of proceedings for a period of time should seek the defendant’s consent or, failing that, apply to the court; but it is not the law that a failure to obtain the consent of the other party or the approval of the court to putting the claim on hold automatically renders the claimant’s conduct abusive no matter how good its reason may be or the length of the delay.”
[59]Latterly, Arnold LJ gave useful guidance as to the stages of analysis for an application to strike out for warehousing; deciding at [64] that an application to strike out a claim on the ground of abuse of process falls to be analysed in two stages. First, the court should determine whether the claimant’s conduct was an abuse of process. Secondly, if an abuse of process is found, the court should exercise its discretion as to whether to strike out the claim.[60]One further point may be of significance for this case. Arnold LJ accepted that the Deputy Master was wrong to treat the claimant as solely responsible for the lack of progress. He said at [73], “In my view the procedural history demonstrates that both parties were slow to progress the claim down to 24 November 2016. Moreover, the Master failed to take into account the court’s oversight in failing either to make an order for directions or to list the CMC. He also ignored the fact that it took Ms Alibrahim 3 ½ months from 23 August 2017 to issue her strike-out application.”[61]Before turning to apply those principles to the present case, I should resolve two disagreements about the law.[62]The first disagreement was as to the need for direct evidence of a decision not to pursue the proceedings. Mr Moraes pointed to the statement of Picken J in Grenda Investments Ltd v Barton[2017] EWHC 2371 (Comm) at [34] of his judgment. “In short, I am not satisfied in the present case that there has been significant delay, which can only be explained by a clear intention, supported by evidence, not to pursue the proceedings against Mr Barton and, accordingly, that Grenda's inactivity is capable of amounting to an abuse of process. I am not able, in the circumstances, to draw the inference that the inactivity was consistent, and only consistent, with a decision not to pursue the Grenda proceedings.” He submitted this meant that, for abuse of process by warehousing to be established, there must be direct evidence of a decision not to pursue the proceedings. For her part, Ms Evans argued that there would be abusive warehousing if there were a long period of inactivity which was unexplained. She pointed to Alfozan v Quastel Midgen LLP[2022] EWHC 66 (Comm). In that case, absent an explanation for the inactivity, the inference was drawn of an intention for a prolonged period not to pursue the claim. HHJ Pierce said at [41], “This history cries out for some explanation if the court is not to infer from it that the Claimant issued this case with no real intention of pursuing it. If the true reason for what has gone on here is that the Claimant has been diverted from pursuing this claim by the need to give attention to other matters, one would expect to have seen an explanation of that. Such an explanation might persuade the court that this was not a case of warehousing at all and that the Claimant had merely neglected to pursue the litigation with appropriate dispatch rather than held an intention not to pursue the claim at all (at least for some time)”. And at [43], “Absent any explanation for the prolonged period of inactivity until the Claimant was spurred into some kind of action by the Defendants’ applications to strike out the claim, the most obvious inference is that the Claimant did not for a prolonged period of time intend to pursue this claim.”[63]These two positions represent, in my judgment, twin dangers. I consider the true position lies between them. Something more than mere inactivity must be shown. There must be a conclusion, on the evidence, that there has been an intention not to pursue the proceedings for a time. So much is, in my judgment, clear from the principles set out in Alibrahim and already quoted. But that conclusion may be a matter of inference from all the circumstances. In that regard, while Picken J referred to an “intention, supported by evidence”, he also made clear the question was one of the right inference. I do not therefore read his judgment as requiring direct evidence of an intention. Further, it would unduly restrict this category of abuse if there were such a requirement. There is typically no disclosure on applications to strike out for abuse of process, and inactive claimants may volunteer little evidence in response to such applications. That cannot be expected to denude the important control of the court’s process represented by this category of abuse of process of any real effect. Yet further, I see no reason for circumscribing the material from which a court may decide this question of fact more tightly than with other questions of fact it decides. Questions of fact are generally decided on all the evidence, including the absence of alternative explanations which might be expected to be made if they applied. I note also that Grenda was one of the cases cited in argument in Alibrahim but not referred to in the judgment. Had it been read by the Court of Appeal as saying something so different from what can be gathered from the judgment of Arnold LJ in Alibrahim, the Court of Appeal is likely to have said so.[64]The second disagreement about the law is whether, to establish warehousing as an abuse of process, it is necessary to show as a further requirement conduct which brings the administration of justice into disrepute. Mr Moraes submitted for Mr Davis that there was this further requirement; the well-known statement about abuse of process by Lord Diplock in Hunter v Chief Constable of the West Midlands Police[1982] AC 529 at 536 being of general application in all species of abuse of process. “My Lords, this is a case about abuse of the process of the High Court. It concerns the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people”. Ms Evans disagreed. Her position was that abuse of process by warehousing could be established without the conduct being such as would bring the administration of justice into disrepute.[65]In my judgment, the true answer lies, again, somewhere between these two poles. I consider the right analysis is this. The statement of Lord Diplock in Hunter is a description of the wide doctrine of abuse of process; the power by which the court prevents misuse of its process. There are then established categories of abuse of process. It is in the case law on those established categories that the particular principles to be applied are to be found and the question as to whether there has been an abuse of process in a particular case answered. Those principles within the established categories assist the court in a given case to answer the overall question as to whether the conduct brings the administration of justice into disrepute and is therefore an abuse of process. The bringing of the administration of justice into disrepute is not therefore best seen as an additional requirement (unless it operates as such in the particular category of abuse on the principles for that particular category, as in abuse by collateral attack on a previous decision for example). But nor is it right to say that warehousing can be abusive while not bringing the administration of justice into disrepute. Warehousing is one of the forms of abuse within the umbrella description given by Lord Diplock in Hunter. It is not a separate doctrine operating outside that description. I consider this analysis is borne out by the recent judgment of the Supreme Court in Mueen-Uddin v Secretary of State for the Home Department[2024] UKSC 1. The Court of Appeal had held that the claim in that case was abusive as an example of Hunter abuse (a collateral attack on a final decision) and Jameel abuse (where the game is not worth the candle). The Supreme Court allowed the appeal against that decision. Lord Reed, with whom the other Justices of the Supreme Court agreed, began his discussion of the law on abuse of process with Lord Diplock’s famous statement. It is clear that he treated it as a description of the wide doctrine of abuse of process; observing at [39] that, “The primary purpose of the doctrine, in other words, is to preserve public confidence in the administration of justice.” He then continued at [40]:
“The law in relation to abuse of process has developed in the manner characteristic of the common law. Relevant principles have emerged as the courts have considered the circumstances of cases in which the issue has arisen in different contexts. As Lord Diplock indicated in Hunter, p 536, it would be unwise to confine the concept of an abuse of process to fixed categories. Nevertheless, a number of categories have become well established. Examples include the unfair or oppressive treatment of an accused, the rule in Henderson v Henderson (1843) 3 Hare 100 that requires a party to bring its whole case in a single set of proceedings, and the power to stay or dismiss proceedings which are frivolous or vexatious.”
The Supreme Court went on to discuss the particular principles for Hunter abuse, and Jameel abuse, being the established categories of abuse of process in that case, and to decide that there was, applying those principles, no abuse.[66]The analysis also pays proper regard to how Lord Diplock continued his famous statement, namely with these words. “The circumstances in which abuse of process can arise are very varied.”[67]Turning to apply the principles to this case, it is my judgment that Mr Davis has not abused the process of the court. And that, if that is wrong, any discretion should be exercised against striking out his counterclaim. My reasons are these.[68]While there has been a significant period of inactivity in these proceedings, the circumstances of this case mean that I am not prepared to draw the inference that there was a unilateral decision by Mr Davis not to progress the proceedings. The initial period of inactivity was the fault of CYK and the court, at least principally, rather than of Mr Davis or his co-Defendant Mr Baker. At the end of 2022, by letter dated 19 December 2022, the Defendants’ then solicitors gave CYK’s solicitors dates to avoid so that they could be used for fixing a CCMC. But it appears that CYK’s solicitors failed to contact the court with them so that a hearing at which directions would be given for the progress of the proceedings could be fixed. And the court did not fix one in any event, despite having received directions questionnaires. On the evidence, as at the middle of 2023, the Defendants were, just about understandably, still awaiting a hearing date; their solicitors writing to the Official Receiver by email on 8 August 2023 that, “The parties are currently awaiting a hearing date from the High Court.” In the last period of inactivity, CYK as claimant is again suggesting it will now arrange a CCMC. But it doesn’t. Whereas its solicitors wrote to the Defendants’ then solicitors on 10 December 2024 indicating that they anticipated receiving instructions to seek a listing without further recourse to the Defendants, no such listing was sought until months later on 31 March 2025 and a hearing fixed on 8 April 2025 for 31 July 2025. For the year or so between those two periods which I have highlighted there was a reason for the Defendants’ part in not progressing the proceedings, namely the supervening bankruptcy of Mr Baker. This represented, as CYK’s solicitors later recognised, an obstacle to progressing the proceedings. There would need to be either a transfer of rights by the trustee in bankruptcy or some other decision taken by the trustee as to what was to be done with those rights. There was also some confusion; it being Mr Baker’s (erroneous) view, on the evidence, that any obstacle to him progressing the proceedings would be removed by his discharge from bankruptcy.[69]His evidence about the period following August 2023 when his then solicitors provided documents in these proceedings, including the directions questionnaires, to Ms Paterson of the Official Receiver is this: “17. Ms Paterson subsequently informed me that she was not going to pursue my interest in the counterclaim due to the likely costs involved in doing so. I am not a lawyer, or an insolvency expert. When Ms Paterson told me that she was not going to pursue my counterclaim, I understood that to mean that I was getting back ownership of it. No one told me otherwise and, so far as I am aware, neither Ms Paterson, or anyone else in the Insolvency Service, took the time to inform CYK or the Court that title in my interest in the counterclaim was now vested in the Official Receiver or that that my interest in the counterclaim was not being pursued.” (Mr Baker’s witness statement dated 2 September 2025 at [17]).[70]Confirmation of his 5 June 2024 discharge from bankruptcy came in August 2024. And Mr Baker says it was only much later that he realised he had been in error. “18. It was only after Laurence and I had instructed W Legal, and CYK made their [Strike Out] Application, that I was informed, for the first time, that my understanding was wrong and that the Official Receiver still had title in my interest in the counterclaim. Had I been informed of the position when Ms Paterson told me that she was not going to pursue my counterclaim, I would have asked her to transfer it back to me at that time.” (Mr Baker’s witness statement dated 2 September 2025 at [18]) .[71]Further, in that intervening year or so between the two highlighted periods, it is hard to draw an inference of a unilateral decision by Mr Davis, when it was CYK in the role of claimant in these proceedings, albeit that the Defendants had made a counterclaim. On the evidence, the Defendants even reminded CYK in without prejudice correspondence (which the parties agreed I could take account of on these applications) in August 2024 of CYK’s duty to progress the litigation. It is not suggested for CYK that I should draw any inference that it had warehoused its claim despite CYK’s own failures in that period and in the other two periods of inactivity either side of it.[72]The limited evidence of Mr Baker already referred to at [69] and [70] above is the nearest the evidence from the Defendants comes to an explanation for their inactivity. But, despite the lack of a clear explanation in the evidence, for the reasons already given, I do not consider it is right to infer a unilateral decision not to progress the proceedings. Or to characterise any such decision as an abuse.[73]If I am wrong and the conduct of Mr Davis did amount to an abuse of process, I consider that any discretion should be exercised so as to permit the counterclaim to continue, not strike it out. This is a case where, given its role as claimant and the correspondence, much of the fault for the lack of progress lies with CYK, as well as some with the court. Further, the Warehousing Application came late. It was made only on 27 November 2025, almost a year after CYK had indicated by its solicitors by the letter of 10 December 2024 that there would instead be a CCMC, eight months or so after a request for that hearing was made to the court on 31 March 2025, and around four months after that listed hearing for which the Defendants had made preparations. It would be unjust, in those circumstances, to deprive Mr Davis of what might be a valuable counterclaim, particularly while preserving for the benefit of CYK its own claim. I would observe that I was not shown any decided case in which a counterclaim only has been struck out for warehousing. That perhaps reflects the difficulty in characterising the conduct of a counterclaimant as abusive in circumstances where there is an inactive claimant, else of concluding that a strike out of the counterclaim only, leaving the claim to stand, is just in those circumstances.[74]Finally, I do not ignore that the Warehousing Application is made under CPR 3.4(2)(c) (failure to comply with a rule, practice direction or order) as well as under 3.4(2)(b) (abuse of process). The rule which the Defendants are said to have failed to comply with is the overriding objective. And the failure identified by CYK is the failure to inform CYK of Mr Baker’s bankruptcy. Any such failure does not, however, justify the strike out of the proceedings. In circumstances where CYK did nothing to progress the claim in the period of Mr Baker’s bankruptcy, and delayed for months in doing so once it did learn of it, there has been little or no prejudice flowing from such failure and it would be entirely disproportionate now to deprive Mr Davis of his counterclaim. That is particularly so in circumstances where CYK did not complain of this failure by way of the Warehousing Application until almost a year after learning of it.[75]I have focussed in the above on Mr Davis when considering the Warehousing Application, given that I have decided to strike out Mr Baker’s counterclaim under the Strike Out Application. Had Mr Baker’s counterclaim survived the Strike Out Application, I make clear it would have continued despite the Warehousing Application for like reasons as I have given in relation to Mr Davis. I will therefore dismiss the Warehousing Application generally.