KL Capital Limited v Kenneth Townsley & Ors [2025] EWHC 2162 (Comm)

[2025] EWHC 2162 (Comm)Case No CL-2024-000271
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING’S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 15/08/2025
Before
CHRISTOPHER HANCOCK KCSITTING AS A JUDGE OF THE HIGH COURT
Between
KL CAPITAL LIMITEDClaimant(1) MR KENNETH TOWNSLEYDefendants(2) MR STEPHEN BACONDefendant(3) MR KEVIN PHILBINDefendant(4) BY CORPORATE LLPDefendant
Edward Bennion-Pedley (instructed by BDB Pitmans LLP) for ClaimantSri Carmichael (instructed by Freeths LLP) for Third DefendantHearing Hearing dates: 14 and 15 May 2025
Approved JudgmentThis judgment was handed down remotely at 10.30am on 15 August 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................CHRISTOPHER HANCOCK KC SITTING AS A JUDGE OF THE HIGH COURT

Christopher Hancock KC :

[1]Thomas Cook Group Plc (“TCGP”) was from June 2009 the ultimate parent undertaking of(i) Thomas Cook Investment 3 Limited (“TCI”), a company incorporated in Jersey, which was dissolved on 12 October 2015,(ii) Thomas Cook Retail Limited (“TCR”) (now in compulsory liquidation), and(iii) numerous other ‘Thomas Cook’ companies that are now in compulsory liquidation or dissolved following the much-publicised collapse of the Thomas Cook travel business in 2019.[2]The nub of the claim in this matter is that it is alleged that there was a fraudulent conspiracy between the Defendants to overinflate the value of the shareholding in a company called Gold Medal International Limited (or “GMI”), in order to induce TCGP and/or its subsidiaries to purchaseGMI, and subsequently shares in TCI, at an overvalue. I consider the relevant TCGP entities below, along with the exact details of that transaction. The current applications.[3]The hearing before me was to determine the Third Defendant’s application to strike out the Claimant’s Claim Form and Particulars of Claim (including the proposed Amended Particulars of Claim) or to grant summary judgment against the Claimant on the entirety of the Claimant’s claim, as proposed to be amended. The relevant legal principles Strike out

The relevant legal principles

[4]A Claim Form or Particulars of Claim may be struck out if it appears to the court that it discloses no reasonable grounds for bringing the claim: CPR 3.4(2)(a).[5]This ground covers statements of case which are obviously ill-founded and unwinnable (White Book 2025, §3.4.1) including those where the claim is bound to fail because of a point of law (including the construction of a document) (CPR PD3A, para. 1.5; White Book 2025, §3.4.21).[6]Any allegation of fraud must be pleaded with sufficient particularity to allow the defendant to understand the case he needs to meet: Three Rivers DC v Bank of England (No.3) [2003] 2 A.C 1, at [183] - [186], per Lord Millett; CPR PD 16, para.8.2(1); the Commercial Court Guide at C1.3(i(i), which provides that “full and specific details should be given of any allegation of fraud, dishonesty, malice or illegality”.[7]An unreasonably vague and incoherent statement of case which is likely to obstruct the just disposal of the case is also liable to be struck out under CPR 3.4(2)(b): Towler v Wills [2010] EWHC 1209 (Comm) at [16] – [19], per Teare J.[8]Subject to the above, the parties were in agreement, however, that on an application to strike out a claim the facts must be taken to be as pleaded in the statement of claim.

Summary judgment

[9]CPR 24.3 provides that:
“The court may give summary judgment against a claimant or defendant on the whole claim or an issue if: (a) it considers that the party has no real prospect of succeeding on the claim, defence or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at trial.”
[10]An applicant for summary judgment must show that the respondent’s case has a “fanciful” as opposed to “realistic” prospect of success: Swain v Hillman [2000] P.I.Q.R. P51, at P52 – P53, per Lord Woolf. A realistic claim is one that carries some degree of conviction and is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472, at [8], per Potter LJ.[11]The parties were helpfully agreed that the law in relation to summary judgment was accurately set out in the well known passage of the judgment of Lewison J (as he then was) in Easyair Limited (t/a Openair) v Opal Telecom Limited [2009] EWHC 339 (Ch), in which he said:
“The correct approach on applications by defendants is, in my judgment, as follows: (i) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 2 All ER 91; (ii) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]; (iii) In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman; (iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10] (v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550; (vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63; (vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the claimant's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”
Permission to amend a statement of case 12. On an application for permission to amend a statement of case, including where the matter is raised in the context of an application to strike out under CPR 3.4 or for summary judgment under CPR Part 24, a court will not allow a party to pursue a case which has no real prospect of success “because to do so is unfair to the other party and leads to nothing but a waste of costs and valuable court time”: Habibsons Bank Ltd v Standard Chartered Bank (Hong Kong) Ltd [2010] EWCA Civ 1335, at [12], per Moore-Bick LJ. With whom Rix LJ agreed. 13. Again, in this respect, the parties helpfully agreed that I should consider the current application on the basis of the draft amended Particulars of Claim, since if the amended case was viable, I should grant permission to amend and allow the claim to proceed, whereas if I took the view that the amended claim was hopeless, I should strike it out or give reverse summary judgment. The transaction in more detail. 14. I turn then to a description of the transaction in more detail, which I take from the Particulars of Claim, which, as I have indicated, must be taken to be true for the purposes of this application. 15. Mr Philbin is a former solicitor. He acted as solicitor for GMI and for GMI’s sole shareholder, a Mr Kenneth Townsley, the First Defendant to the claim. Mr Philbin was also a director of GMI and of the special purpose vehicle incorporated as a vehicle for the acquisition, which was TCI. 16. The allegations made against Mr Philbin and his co-conspirators are broadly as follows: a. Between 2006 and 2009, the Defendants artificially inflated the profits of the Gold Medal group of companies by using around £8,959,068 of previously declared dividend income to pay operating and other expenses ‘off the books’ on order to give a false picture of the group’s profitability; b. They did that using Mr Philbin’s firm’s client account and using a trust structure in Gibraltar in order to reimburse those that had paid those expenses and to help conceal the fraud.[17]TCI was incorporated on 3 December 2008. At that stage, its two shares were held by nominee shareholders. By 1 January 2009, those shares were held by TCR. There was no direct evidence of when that share transfer took place. I was asked to infer that it must have been prior to the date of the share sale agreement (namely 18 December 2008), principally because it was argued that TCI would not have agreed to take on the obligation to purchase the shares in GMI unless it was by then backed by TCR. Alternatively, it was argued that TCI must have been confident by the date of the agreement that it would be backed by TCR.[18]The share purchase agreement was entered into between Mr Townsley (as seller) and TCI (as buyer) on 18 December 2008 (GMI SPA). That agreement contained the following material terms:a. TCI acquired Gold Medal’s shares.b. TCI agreed (amongst other things) to pay consideration of £24,920,000.c. TCI further agreed to allot and issue 4,999 of 10,000 ordinary shares in TCI (‘The Seller Consideration Shares’) to Mr Townsley.[19]In more detail, the material terms of the GMI SPA were as follows:
“Clause 1 “Completion”
Completion of the sale and purchase of the Shares in accordance with clause 6 “Completion date” the fifth Business Day after the last in time of the Conditions is waived or satisfied or any other date agreed in writing by the Seller and the Buyer “Conditions” the conditions set out in clause 2.1 “Consideration” the consideration to be paid and issued to the Seller as at Completion pursuant to clause 4 “Options” the Call Option, Deadlock Option, Default Option, Drag-Along Option, Put Option and Tag-Along Option, each as defined in the Shareholders’ Agreement “Seller Consideration Shares” means 4999 new ordinary shares of £1 each in the capital of the Buyer Clause 2: Conditions. 2.1 Completion of the sale and purchase of the Shares under this Agreement is, in all respects, conditional upon the following: 2.1.1 the European Commission having issued a decision under Article 6(1)(b) or Article 6(2) of Council Regulation (EC) 139/2004 (the Merger Regulation) (or being deemed to have done so under Article 10(6) of the Merger Regulation), on terms satisfactory to the Buyer, declaring the purchase of the Target [SC Company] by the Buyer compatible with the common market; 2.1.2 the sale or distribution of the Preston Property to the Seller; 2.1.3 following the completion of clause 2.1.2, the surrender of the Preston Leaseholds to the Seller; and 2.1.4 following the completion of clause 2.1.3, the grant of the Preston Lease in the agreed form. 2.2 If the Conditions are not satisfied or waived by 5.00 p.m. on 30 April 2009, clause 2.1 of this Agreement shall (unless the parties agree in writing to an extension) cease to have effect immediately after that date and time, except for the provisions set out in clause 2.3. 2.3 The following provisions shall continue to have effect, notwithstanding termination of this Agreement: clauses 1, 2.2 and 2.3, 13, 15, 16, 17, 19 and 20. 2.7 The Buyer may, to such extent as it thinks fit and is legally entitled to do so, waive the Conditions by written notice to the Seller. 3. SALE AND PURCHASE. 2.1 Completion of the sale and purchase of the Shares under this Agreement is, in all respects, conditional upon the following: 2.1.1 the European Commission having issued a decision under Article 6(1)(b) or Article 6(2) of Council Regulation (EC) 139/2004 (the Merger Regulation) (or being deemed to have done so under Article 10(6) of the Merger Regulation), on terms satisfactory to the Buyer, declaring the purchase of the Target [SC Company] by the Buyer compatible with the common market; 2.1.2 the sale or distribution of the Preston Property to the Seller; 2.1.3 following the completion of clause 2.1.2, the surrender of the Preston Leaseholds to the Seller; and 2.1.4 following the completion of clause 2.1.3, the grant of the Preston Lease in the agreed form. 2.2 If the Conditions are not satisfied or waived by 5.00 p.m. on 30 April 2009, clause 2.1 of this Agreement shall (unless the parties agree in writing to an extension) cease to have effect immediately after that date and time, except for the provisions set out in clause 2.3. 2.3 The following provisions shall continue to have effect, notwithstanding termination of this Agreement: clauses 1, 2.2 and 2.3, 13, 15, 16, 17, 19 and 20. 2.7 The Buyer may, to such extent as it thinks fit and is legally entitled to do so, waive the Conditions by written notice to the Seller. 3.1 Subject to the terms and conditions of this Agreement, the seller shall sell with full title guarantee and the Buyer shall purchase the Shares on and with effect from Completion free from any and all Security Interests together with all accrued benefits and rights attaching or accruing to the Shares. 3.2 The Seller shall procure that all rights of pre-emption (if any) over the Shares to which any person may be entitled under the Articles of Association of the Target or otherwise in relation to the sale and purchase of the Shares pursuant to this Agreement are waived by the persons entitled to such rights. 4. CONSIDERATION 4.1 The consideration for the purchase of the Shares shall be: (a) the payment to the Seller of the sum of £10,500,000 (together with any notional interest amount payable) in accordance with clause 6 (Completion); (b) the payment to the Seller of the sum of £14,420,000 (together with any notional interest amount payable) in accordance with clause 6 (Completion); and (c) the allotment and issue by the Buyer to the Seller of the Seller Consideration Shares. (a) the payment to the Seller of the sum of £10,500,000 (together with any notional interest amount payable) in accordance with clause 6 (Completion); (b) the payment to the Seller of the sum of £14,420,000 (together with any notional interest amount payable) in accordance with clause 6 (Completion); and (c) the allotment and issue by the Buyer to the Seller of the Seller Consideration Shares. 6. COMPLETION. 6.1. Completion shall take place at the offices of the Seller’s Solicitors on the Completion Date when each of the events set out in clauses 6.2 to 6.5 shall occur. 6.2 At Completion, the Seller shall deliver to the Buyer or the Buyer’s Solicitors: (a) duly completed and executed transfers of the Shares in favour of the Buyer; (b) the certificates for the Shares;… 6.5 Upon completion of all of the matters specified in clauses 6.2 to 6.4 the Buyer shall: (a) pay the aggregate of the sum of £10,500,000 and £14,420,000 by telegraphic transfer to the Seller’s Solicitors (for and on behalf of the Seller) together with an amount equivalent to interest on the aggregate of such sums at a rate of 1% above LIBOR for the period commencing on 1 February 2009 up to and including the Completion Date (any such notional interest amount to be paid by way of, and treated as, additional consideration for the Shares); (b) deliver to the Seller or the Seller’s Solicitors: (i) a share certificate for the Seller Consideration Shares in the name of the Seller…”[20]On 6 April 2009, TCR acquired an interest in TCI for £21,919,000. The Conditions in clause 2 of the SPA were satisfied at about this time and Completion under the GMI SPA subsequently took place on or after 6 April 2009.[21]On or after 6 April 2009, TCI, TCR and Mr Townsley entered into a shareholders’ agreement in respect of TCI (“TCI SHA”), which (as indicated in the GMI SPA) included:a. A put option granting Mr Townsley the unconditional right, if exercised on or after 1 April 2011, to require TCR to acquire the Seller Consideration Shares from him for at least £15,863,000 and for no more than £61,763,000; andb. a call option granting TCR the right to call upon Mr Townsley to sell the Seller Consideration Shares to TCR on or after 1 April 2010 for at least £15,863,000 and for no more than £61,763,000 calculated by underlying multiples of underlying EBITDA.[22]Following completion of the GMI SPA and the entering into of the TCI SHA, it is alleged that the Defendants continued the fraud, using around £1,041,000 of further dividend income and around £6,300,000 of sums paid in cash in respect the acquisition of the GMI shares to continue to ‘manage profit’ in order to cause the acceleration of the acquisition by TCR of Mr Townsley’s Seller Consideration Shares in TCI. The acceleration was, it was alleged, induced by reason of TCR’s belief that the longer that it waited to complete the purchase, the more it would pay.[23]Because of this, it is alleged that TCR was induced to purchase Mr Townsley’s remaining shares in TCI. This purchase was not in fact pursuant to an exercise of the option in the TCI SHA, but was pursuant to an independent agreement.[24]In summary, as a result of this alleged conspiracy and deceit, various things happened:a. Thomas Cook Group Plc and/or its subsidiaries was or were induced to enter into the various related agreements identified in paragraph 14 of the Amended Particulars of Claim and to incorporate TCI in order to consummate the GMI SPA.b. TCI was induced to enter into the GMI SPA, which in obliged TCI to pay money and allot shares in TCI to Mr Townsley in return for the GMI shares.c. TCR was induced to inject funds into TCI in order to enable TCI to make the cash payment required under the GMI SPA.d. TCI allotted and issued shares to Mr Townsley.e. In due course, because of the continuance of the deceit, TCR was induced to agree to pay money to Mr Townsley to acquire the remaining shares in TCI which Mr Townsley held.f. Overall, TCGP, and in particular TCR, was induced to pay monies which it would not otherwise have paid, for a company which was not worth the amount which it was said to be worth.[25]On 23 January 2024, there was an assignment by TCGP of claims that it and its subsidiaries might have in relation to the purchase of the shares and assets of GMI (“First DoA”). One key issue raised by Mr Philbin concerned the standing of the special managers of the TCGP to assign on behalf of all of Thomas Cook Group Plc’s subsidiaries. In this regard, a key subsidiary in this case was TCR because it was that subsidiary that (on the Claimant’s case) was induced(i) to acquire shares in the special purpose vehicle (TCI) incorporated by Thomas Cook Group Plc and/or its subsidiaries for the purpose of TCI undertaking the GMI acquisition, and(ii) to enter into option agreements within the TCI SHA to acquire the rest of TCI’s shares from Mr Townsley, and then to accelerate that acquisition of the rest of TCI’s shares.[26]The Claimant now accepts that Mr Philbin was quite correct in asserting that the effect of the First DoA could never have been to assign causes of action on behalf of TCR. This was because (unknown, it was said, to the Claimant when it entered into the First DoA) the special managers of TCGP and TCR were different, such that TCGP’s special managers had no power to assign any claims held by TCR.[27]Because of this, the Claimant has had to acquire a deed of assignment from TCR’s special managers, which was done on 4 February 2025 (‘the second DoA’). The Claimant asked the Court for permission to amend its particulars in order to plead reliance upon that second DoA.[28]As I have already indicated, the parties agreed that I should consider this application on the basis of the Amended Particulars of Claim, with its reference to the Second DoA. The issues.[29]In my judgment, the issues on this application can most helpfully be broken down as follows:a. First, what viable claims would TCR have had against the Defendants, looked at at each stage of the transaction?b. Secondly, have those claims been validly assigned to the current Claimant pursuant to the Second DoA? There was a suggestion at the hearing that there might be claims vested in companies other than TCR, which would be comprehended within the First DoA.As I read the pleading, no such claims are currently pleaded, and no argument was addressed to me on any such claims.Accordingly any such claims would have to be the subject of an application to amend which is not before me.I do not consider such claims further in this judgment.[30]I will take these issues in turn. TCR’s claims: stage 1.[31]TCR’s pleaded claims have been divided into two temporal periods.a. The first concerns the claims which TCR had as a result of funding TCI’s initial purchase of GMI’s shares.b. The second is the claims which TCR had as a result of entering into the accelerated agreement to purchase Mr Townsley’s shares in TCI.[32]As the parties have done, I will look at each stage in turn, starting with the first period.[33]The Third Defendant argued that any loss suffered by TCR in relation to this first stage of the transaction was irrecoverable by virtue of the rule against reflective loss.[34]I start with the law on this topic. As explained by Lord Reed in Sevilleja v Marex at [79-84], there is a distinction to be drawn between two types of cases:
“79. Summarising the discussion to this point, it is necessary to distinguish between (1) cases where claims are brought by a shareholder in respect of loss which he has suffered in that capacity, in the form of a diminution in share value or in distributions, which is the consequence of loss sustained by the company, in respect of which the company has a cause of action against the same wrongdoer, and (2) cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss. 80. In cases of the first kind, the shareholder cannot bring proceedings in respect of the company's loss, since he has no legal or equitable interest in the company's assets: Macaura and Short v Treasury Comrs . It is only the company which has a cause of action in respect of its loss: Foss v Harbottle . However, depending on the circumstances, it is possible that the company's loss may result (or, at least, may be claimed to result) in a fall in the value of its shares. Its shareholders may therefore claim to have suffered a loss as a consequence of the company's loss. Depending on the circumstances, the company's recovery of its loss may have the effect of restoring the value of the shares. In such circumstances, the only remedy which the law requires to provide, in order to achieve its remedial objectives of compensating both the company and its shareholders, is an award of damages to the company. 81. There may, however, be circumstances where the company's right of action is not sufficient to ensure that the value of the shares is fully replenished. One example is where the market's valuation of the shares is not a simple reflection of the company's net assets, as discussed at para 32 above. Another is where the company fails to pursue a right of action which, in the opinion of a shareholder, ought to have been pursued, or compromises its claim for an amount which, in the opinion of a shareholder, is less than its full value. But the effect of the rule in Foss v Harbottle is that the shareholder has entrusted the management of the company's right of action to its decision-making organs, including, ultimately, the majority of members voting in general meeting. If such a decision is taken otherwise than in the proper exercise of the relevant powers, then the law provides the shareholder with a number of remedies, including a derivative action, and equitable relief from unfairly prejudicial conduct. 82. As explained at paras 34-37 above, the company's control over its own cause of action would be compromised, and the rule in Foss v Harbottle could be circumvented, if the shareholder could bring a personal action for a fall in share value consequent on the company's loss, where the company had a concurrent right of action in respect of its loss. The same arguments apply to distributions which a shareholder might have received from the company if it had not sustained the loss (such as the pension contributions in Johnson ). 83. The critical point is that the shareholder has not suffered a loss which is regarded by the law as being separate and distinct from the company's loss, and therefore has no claim to recover it. As a shareholder (and unlike a creditor or an employee), he does, however, have a variety of other rights which may be relevant in a context of this kind, including the right to bring a derivative claim to enforce the company's rights if the relevant conditions are met, and the right to seek relief in respect of unfairly prejudicial conduct of the company's affairs. 84. The position is different in cases of the second kind. One can take as an example cases where claims are brought in respect of loss suffered in the capacity of a creditor of the company. The arguments which arise in the case of a shareholder have no application. There is no analogous relationship between a creditor and the company. There is no correlation between the value of the company's assets or profits and the “value” of the creditor's debt, analogous to the relationship on which a shareholder bases his claim for a fall in share value. The inverted commas around the word “value”, when applied to a debt, reflect the fact that it is a different kind of entity from a share.”
[35]I was also referred in this context to the discussion of the rule in Premio Fund v Bank of Bermuda [2021] UKPC 22 which reiterated the law as set out in Marex.[36]Building on this, the Third Defendant submitted as follows:a. The earliest time at which loss could have been suffered by TCI was when it entered into the GMI SPA, i.e. 18 December 2008. It was submitted, as I have noted, that I should infer that by this time TCR had acquired the entire issued share capital in TCI, namely 2 paid up shares. Certainly, it was said, I was in as good a position as any trial judge to determine this since there would be no further material available at trial. Accordingly, if TCI suffered loss as at that date, because it was committed to purchasing shares in GMI which were not worth what it was obliged to pay for them, then TCR was already the sole shareholder in TCI and their loss mirrored, or reflected, that of TCI.b. In fact, said the Third Defendant, neither TCI nor TCR suffered loss upon TCI entering into the GMI SPA, because the GMI SPA was subject to conditions, many of which were within the control of third parties. It was only, said the Third Defendant, when the conditions were all satisfied (or waived) and the contract became unconditional, that the loss was suffered. Before that, there was no definite loss and no accrued cause of action: see Sephton v Law Society [2006] UKHL 22. By that time, following the injection of the further cash in April 2009, TCR had clearly become the sole shareholder of TCI. Indeed, it is because that cash was injected, that TCI was in a position to proceed with the purchase of the GMI shares.c. Therefore, TCR was already the sole shareholder of TCI before TCI suffered loss as a result of the Defendants’ alleged deceit – whether that loss was suffered on 18 December 2008 when the GMI SPA was entered into, or on or around 6 April 2009 when the conditions of the GMI SPA required to be met for its completion were met. As such, TCR had already committed to following the fortunes of TCI as its sole shareholder by the time TCI suffered loss as a result of the Defendants’ alleged deceit, whether that was on 18 December 2008 or on or around 6 April 2009.[37]For its part, the Claimant submitted as follows:a. TCR suffered damage when it: i. Entered into the Option agreement on 18 December 2008 to acquire the Seller Consideration Shares for a sum not less than £15,863,000; and ii. Acquired its interest in TCI on 6 April 2009 for the sum of £21,919,000.b. At neither of those stages was TCR a shareholder of TCI - in both instances TCR was either becoming a shareholder or contracting to become a shareholder. For the avoidance of doubt, the fact that TCR became a shareholder of TCI later does not engage the rule against reflective loss retrospectively.[38]Neither are TCR’s losses merely reflective of the diminution in the value of TCI’s shares. On the pleaded case, had it known the truth TCR would not have entered into those transactions or entered into them on much reduced terms. Paying more for shares than they are worth is not a diminution in the value of those shares but an immediate, separate and distinct loss.[39]Finally, the fact that TCI would undoubtedly have had its own causes of action against the Defendants (and that such causes of action might well have involved substantially similar losses) is immaterial.[40]That merely requires the Court to manage recovery to ensure no double recovery (not relevant here given TCI’s liquidation) and is the second category of case in Lord Reed’s analysis in Marex.[41]Overall, therefore, the short answer to the Defendant’s point was that, irrespective of the “timing” points, TCR’s claims (which had been assigned to the Claimant) did not come within the first of Lord Reed’s categories in paragraph 79 of Marex. These were not claims made by a shareholder in respect of the diminution in value of its shareholding caused by a wrong in respect of which the company had a cause of action, and which had to be pursued by the company and not the shareholder by reason of the rule in Foss v Harbottle. Instead, these claims fell within the second of Lord Reed’s categories. The nub of the claim was that TCR had been induced to inject money into TCI and buy shares in order to enable TCI to make a purchase of the GMI shares, which injection would never have been made had it not been for the deceit practised on TCR (a deceit which, for the purposes of this application, I must assume was indeed practised).[42]As regards the timing points, these were in reality irrelevant. However, insofar as they were of any relevance:a. TCI’s loss was suffered at the time it became committed to purchase the GMI shares in December 2008. This was so despite the fact that the various conditions might not have been satisfied, because a loss was suffered simply upon the entering into of a potentially onerous transaction: see Forster v Outred [1982] 1 WLR 86.b. At that moment, the principal loss claimed by TCR as at stage 1 (i.e. the further cash injection into TCI in April 2009) had not been suffered. Accordingly, it could not be the case that the causes of action of principal and subsidiary were the same.c. In April 2009, the losses suffered by TCR were due to the continuance of the deceit being practised upon it. Discussion and conclusions.[43]In my judgment, TCR suffered its loss, not because its shares were reduced in value, but because it was induced to purchase those shares in the first place. Its claim is not one for the diminution in value of its shareholding, within the rule against reflected loss as enunciated in Marex.[44]Put another way, TCR’s loss was not suffered in its capacity as a shareholder in TCI, but in its capacity as an investor in TCI.[45]Moreover, TCR did not suffer its loss at a time at which it had committed to following the fortunes of TCI, within the rule in Foss v Harbottle. As noted, TCR was induced to follow the fortunes of TCI by reason of the conduct of the Defendants which, for present purposes, I must assume to have been fraudulent.[46]Overall, therefore, I hold that TCR’s claims in relation to what have been termed the stage 1 losses would not have been barred by the rule against reflected loss.[47]I do not think that the date on which the loss was suffered affects this conclusion one way or the other, although I would accept the submission that the relevant date for these purposes was the date on which the SPA was entered into by TCI. I would have reached this conclusion for the following reasons:a. I start with the decision in Forster v Outred. In that case, the Plaintiff executed a mortgage charging her property as security for a loan made to her son, who subsequently went bankrupt. A claim was made on the security on January 1 1975, and the loan was repaid. The Plaintiff sued the solicitors who advised her in relation to the transaction, with the writ being issued in January 1977. After a defence had been served, no steps in the action were taken by the Plaintiff until December 1979, when a notice of intention to proceed was served. An application to dismiss for want of prosecution was issued by the Defendant, and a second writ was issued by the Plaintiff on March 25 1980. The Court of Appeal decided that the cause of action in tort was not complete until damage was suffered, which was in February 1973, when the mortgage was entered into, rendering the Plaintiff potentially liable for financial loss, even though that liability did not mature until later; and the Court therefore held that the action begun by the second writ was time barred, so that the decision of the judge below to strike out the action begun by the first writ was justifiable.b. I turn then to the decision in Sephton v Law Society. In that case, a solicitor engaged accountants to sign off on his accounts, which the accountants did for a number of years between 1990 and 1996. The accountants had acted negligently, and the solicitor was able to misappropriate £750,000 of client money. The solicitor’s fraud was discovered and he was struck off the roll. Claims were then made against the Solicitors’ Compensation Fund by clients of the solicitor, and various payments out of the Fund were made. The Law Society then sued the accountants in 2002, claiming that it had relied on the accountants’ reports in deciding not to investigate the solicitor. On a preliminary issue, the first instance judge held that the Law Society’s claim was time barred, because the relevant cause of action had accrued when the Law Society was exposed to the risk of a claim, which was when it received and acted on the accountants’ report. The Court of Appeal and House of Lords reversed that decision, holding that a contingent liability did not constitute damage until the contingency occurred.[48]In the second of these two cases, Lord Hoffman explained the difference between Sephton and Forster v Outred by quoting the decision of the Australian High Court in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514:
“17. The High Court said, at pp 529, 531, 532, that Forster v Outred & Co was explicable: “by reference to the immediate effect of the execution of the mortgage on the value of the plaintiff's equity of redemption… It has been contended that the principle underlying the English decisions extends to the point that a plaintiff sustains loss on entry into an agreement notwithstanding that the loss to which the plaintiff is subjected by the agreement is a loss upon a contingency. For our part, we doubt that the decisions travel so far. Rather, it seems to us, the decisions in cases which involve contingent loss were decisions which turned on the plaintiff sustaining measurable loss at an earlier time, quite apart from the contingent loss which threatened at a later date… If… the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred. 18. I say at once that I am in complete agreement with this analysis, which provides the answer to this appeal.”
[49]In my judgment, therefore, the first question is whether there was damage at the moment that TCI entered into obligations, albeit obligations which were subject to conditions subsequent, in December 2008, or whether that damage was only suffered when those various conditions were satisfied in early April 2009. It is my view that TCI suffered loss and damage when it became a party to a potentially onerous contract in the form of the SPA in December 2008, even though it might have been released from the obligations in that contract if the various conditions subsequent were not satisfied or waived. TCR (which is the relevant party, as the alleged assignor of the claim to the Claimant) then suffered loss because it was induced to invest in TCI on 1 January 2009 at the latest by reason of the fraud of the Defendants, which must be assumed to have been committed for the purposes of the present application.[50]However, I would reiterate that I take the view that this timing point is really of no relevance. I prefer to base my decision on the fact that TCR’s loss is not reflective within the rule against reflective loss. Events after April 2009.[51]In the light of the discussion above, I can take this relatively briefly.a. The starting point, in relation to the Claimant’s allegation under this head, is that TCR was induced to enter the original option agreement to purchase the Sale Consideration Shares contained within the TCI SHA entered into on or around 6 April 2009 by reason of the conspiracy and deceit practised by the Defendants at the time of the original transaction. The considerations applicable to this part of the claim, had the put option been exercised by Mr Townsley, would have been precisely the same as those applicable to the first stage of the claim.b. In fact, however, a further complication has been introduced by reason of the fact that the claim, as formulated, has been divided into two parts. This second part of the claim is founded on the proposition that the relevant deceit and conspiracy continued after the initial transaction, and led to a further transaction pursuant to which the TCR was induced to accelerate the purchase of the Sale Consideration Shares, and thereby complete the overall transaction.c. In my judgment, this further complication does not affect the overall merit of the claim. Again, the nub of the complaint is that the TCR of the Defendants. The same considerations apply to this limb of the claim as those I have considered in relation to the first limb.[52]To sum up, TCR would have had an arguable claim against the Third Defendant for deceit and/or conspiracy.

Were the claims pleaded assigned by the Second DoA?

[53]The Third Defendant argued that the claims pleaded by the Claimant (both at stage 1 and stage 2) were not assigned by Second DoA.[54]The relevant provision of the second DoA read as follows:
“2. ASSIGNMENT 2.1 The Company (acting by the Office Holders) assigns to the Purchaser, with no title guarantee, such rights, title, interest and benefit in as it may have in and to the Proposed Claims (if any) with effect from the Effective Date (the Assignment).”
[55]The Proposed Claims were then defined in Schedule 1 to the Second DoA as including “Any and all claims (whether in law or equity) that the Company may have in relation to the purchase of the shares and assets of Gold Medal International Limited from 2007 to 2014, against:(i) the former directors and/or shareholders of Gold Medal International Limited and its subsidiaries and associated companies; and/or(ii) Atticus Legal LLP now known as By Corporate LLP, in particular: 1. Mr Kenneth Townley; 2. Mr Stephen Bacon; 3. Mr Terry Steven Fisher; 4. Mr Kevin Philbin; 5. Atticus Legal LLP now known as By Corporate LLP (with company number OC322305); and 6. Mr David Robinson. (each a Potential Defendant and together, the Potential Defendants), and each Potential Defendant’s assigns, connected parties or associates (as defined by sections 249 and 435 of the Insolvency Act 1986). Such claims shall include, but not be limited to, claims for breach of contract, breach of duty at common law, breach of fiduciary, statutory or other or equitable duty, claims in fraud (whether common law or equity), and/or any claim under the Companies Act 2006.”

and

[56]In this respect, the Claimant argued as follows:a. The meaning of ‘in relation to’ is ‘in the context of or in connection with’ and the only reason why TCR was purchasing the Seller Consideration Shares at all was because that purchase was necessary to complete the acquisition of GMI.b. The temporal scope of the definition (which includes the period through to 2014) can only refer to TCR’s acquisition of the Sale Consideration Shares which took place subsequent to TCI’s initial acquisition of all the shares in GMI. As a matter of fact, no other acquisitions took place post initial completion. That temporal element cannot simply be ignored. The definition must be read as a whole.[57]The Third Defendant, for his part, contended as follows:a. The definition of “Proposed Claims” is the same as under the First DoA, such that the “Stage II” claims alleged were not, as a matter of construction of the Second DoA, assigned, for the same reasons that those claims were not assigned under the First DoA, namely that the definition of ‘Proposed Claims’ does not encompass the alleged “Stage II” claims concerning TCR’s purchase of Mr Townsley’s TCI Sale Consideration Shares.b. TCR had no (actionable) loss, such that TCR had no “Stage I” claims to assign in respect of the “Stage I” conspiracy alleged, in the light of the rule against reflective loss.[58]In my judgment, the second of these points is that with which I have already dealt.[59]The first point raises a question of the construction of the assignment agreement. In oral submissions, the Third Defendant expanded upon his submissions, as follows:a. First, there was the relevant factual matrix, in that the Third Defendant had pointed out that the First DoA did not operate to assign the “Stage II” claims, and yet the Second DoA was couched in exactly the same terms. This militated strongly against the valid transfer of the “Stage II” claims via the second DoA.b. Secondly, the Oxford English Dictionary definition of “in relation to”, namely how one thing was related to another, was relied on. The Defendant argued that, linguistically, this phrase was not broad enough to include the “Stage II” claims.c. Thirdly, the definition of ‘Proposed Claims’ encompasses the GMI share purchase but not the “Stage II” TCI share purchase.d. Lastly, there was no indication that there was any intention to obtain a further Second DoA from TCR, and indeed the terms of the assignment (and in particular clause 3(1)(b)) indicated that the assignor did not wish to be troubled again in relation to this matter.[60]The Claimant, in oral submissions, argued that the important consideration was the wording of the deed, and that the Court must conclude that there was no relevant factual matrix. It reiterated that the only reason for including the period until 2014 was to ensure that the claims in relation to what had been termed stage 2 were indeed validly assigned by reason of the Second DoA. Discussion and conclusions: the construction of the Second DoA.[61]I have concluded that the Claimant’s pleaded claims are, at the very least arguably, assigned by the Second DoA. I have reached this conclusion for the following reasons:a. As regards the factual matrix behind the Second DoA, I take the view that the relevant parties, in this regard, are the assignor (i.e. (TCR (acting by its Special Managers and the Official Receiver)). and the Claimant. There is no evidence as to the information available or reasonably available to the assignor, and so no material in relation to the factual matrix. This would be enough to dispose of the point. However, if the information relied on by the Third Defendant was available to both parties to the assignment, it would, in my view, militate against the Third Defendant’s contention. That is because the reason why it is said that the First DoA was deficient was because the assignor did not have title to the relevant claims and because the definition of “Proposed Claims” did not encompass the Stage II claims concerning the TCI share purchase. There is no question, as I understand it, that the assignor under the Second DoA did have such title. Thus, the second DoA did indeed cure the very problem identified in relation to the First DoA.b. I have concluded that the wording of the Second DoA is indeed broad enough (or arguably so) to assign the claims which the Claimant pleads. The use of the words “in relation to” is, in general, intended to connote a broad level of connection.c. Although the DoA talks in terms of the claims in relation to the GMI sale and purchase, I am satisfied that this, at least arguably, includes the claims now sued upon by the Claimant, which relates to TCR’s claims in relation to the acquisition of GMI by TCI which TCR funded.d. I think that it is irrelevant that there may be no intention to enter into a further assignment. The question is simply whether the current DoA includes the claims now made, and for the reasons set out above, I have concluded that it (at least arguably) does. Summary of conclusions.[62]Overall, therefore, I have concluded that:a. TCR had arguably valid claims against the Third Defendant in respect of the alleged conspiracy between the Defendants and the alleged deceit practised on TCR. Those claims were, at the very least arguably, not barred by the rule against reflective loss.b. TCR’s claims were arguably validly assigned by virtue of the Second DoA to the Claimant.[63]In these circumstances, the application by the Third Defendant to strike out the Claimant’s Claim Form and Particulars of Claim (including the proposed Amended Particulars of Claim) and/or for reverse summary judgment must be dismissed.[64]I would be grateful if the parties would draw up an Order giving effect to this judgment.