Key Facts
- •Christopher Purkiss, as liquidator of Ethos Solutions Limited, sought permission to re-amend an application to challenge approximately £9 million in payments made by the company to 62 respondents via a business benefit trust.
- •The re-amendment sought to add the company as a second applicant and plead alternative claims in unjust enrichment based on mistake of law and payment under compulsion of law.
- •The original application was based on section 423 of the Insolvency Act 1986, alleging payments were made without consideration or at an undervalue.
- •The company operated a business benefit trust scheme from 2008 to 2012, paying respondents modest salaries and the balance through discretionary loans from an offshore trust.
- •HMRC's actions and changing case law regarding tax avoidance schemes significantly impacted the company's financial situation, leading to its liquidation.
- •Previous court judgments, including [2021] EWHC 142 (Ch) and [2022] EWHC 784 (Ch), and the Supreme Court's decision in the Rangers case shaped the legal context.
Legal Principles
Section 423 of the Insolvency Act 1986 allows challenges to transactions defrauding creditors.
Insolvency Act 1986
Unjust enrichment requires enrichment of the defendant, at the claimant's expense, and unjustly.
Case law (Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221)
Mistake of law can ground a claim in restitution.
Case law (Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349)
Payment under compulsion of law can allow reimbursement for discharging another's liability.
Case law (McCarthy v McCarthy & Stone Plc [2007] EWCA Civ 664)
The rule in Henderson v Henderson prevents relitigating matters that could have been raised in earlier proceedings.
Henderson v Henderson (1843) 3 Hare 100
CPR 17 governs amendments to statements of case, while CPR 19 addresses adding parties.
Civil Procedure Rules
Section 35 of the Limitation Act 1980 deals with new claims in existing actions.
Limitation Act 1980
Outcomes
Permission to re-amend was denied.
The proposed unjust enrichment claims lacked real prospects of success due to insufficiently particularized pleadings and evidence, particularly regarding enrichment 'at the company's expense' and the unjust nature of the enrichment. The claims were also likely statute-barred. The proposed declaration was deemed hypothetical and unnecessary.
The Company's joinder as a second applicant was dismissed.
The proposed hypothetical declaration served no useful purpose, and the amendment would be disproportionately expensive and complicated.