MSD Cash and Carry - Case Update

The Court of Appeal has dismissed an appeal brought by a company’s former directors, aptly describing the appeal as a final attempt to avoid the cost consequences of “a disastrous piece of litigation”.

The issue arose in the liquidation of MSD Cash and Carry PLC, which previously traded as a wholesale alcohol cash and carry business. In 2015, David Ingram (previously of Grant Thornton, now at David Ingram Advisory) as liquidator of MSD commenced proceedings against certain directors and others concerned with the running of the company, alleging that they had sought (through void dispositions, a false credit note and other illegitimate means) to diminish the assets available to the liquidator.

The Court found against the directors, describing them as “untruthful and dishonest witnesses”. The Court subsequently ordered the directors to pay the liquidator’s costs on an indemnity basis because their conduct before and during the proceedings had been “so far outside the norm of commercial litigation”.

The assessment of costs was highly contentious. Numerous issues were heard before the Costs Judge, including whether a Conditional Fee Agreement (CFA) between the liquidator and his solicitors Boyes Turner had retrospective effect. The CFA in question was signed on March 24, 2015, but covered work dating back to March 30, 2012. The Costs Judge, followed by the High Court, held that the CFA was indeed retrospective, based on the language of the agreement and the working history between the liquidator and his solicitors. The directors appealed, arguing that the CFA lacked an express term on retrospectivity and that the relevant clauses were ambiguous.

The Court of Appeal firmly rejected the appeal. The Court focussed on the CFA’s wording, particularly its definition of “the Claim,” and found that it clearly encompassed work done since 2012. The Court also dismissed the argument that retrospectivity must be expressly stated, noting that CFAs can apply retrospectively if that’s what the parties intended.

The decision can be accessed HERE.

Professionals involved:

• Andrew Warnock KC & Gurion Taussig of Deka Chambers (instructed by Boyes Turner) for David Ingram as liquidator

• Robin Dunne & Priya Gopal of Gatehouse Chambers (instructed by Rainer Hughes) for the directors