Properly particularised claims and strike out: Re Mobigo Ltd

Introduction

Mobigo Ltd had been subject to a large fine issued by the Phone-paid Services Authority Ltd (PSA) for automatic subscriptions to the company’s online services. The company failed to pay the fine and the PSA petitioned for the company to be wound up and a liquidator was appointed.

Facts of the case

The liquidator brought a claim for breach of directors’ duties against the directors of Mobigo. At a prior hearing, the liquidator was asked to revise their particulars of claim to be more specific as to which duties under sections 171-177 Companies Act 2006 had allegedly been breached.

After the statement had been revised, the directors sought to strike out the entire application on the following bases:

1. They claimed reliance on the claim by PSA was an abuse of process by virtue of the fact, they claimed, that trying to enforce the fine on the directors in their personal capacities would be to pierce the corporate veil;
2. Even if that was not found to be the case, their actions had been approved by one of them and ratified (under the Duomatic principle), so there was no breach of duty;
3. With reference to the liquidator’s claim of misappropriated funds, they claimed those transactions had been explained and related to legitimate transactions which predated the PSA’s fine;
4. If the court would not strike out the whole claim, they invited part of the claim to be struck out;
5. They claimed some allegations were repetitive and/or did not cause loss to the company.

Decision

The Court considered the relevant Civil Procedure Rules (Part 3.4 and Practice Direction 3A) regarding strike out, plus the two-stage test from Alibrahim v Asturion Foundation [2020] EWCA Civ 32 regarding abuse of process.

It was highlighted that the power of the Court to strike out on an application for summary judgment was discretionary. The judge rejected the allegation that the liquidator was attempting to pierce the corporate veil by indirectly enforcing the fine as the claims were separate and between different parties (i.e. between the liquidator and the directors vs between PSA and the company).

The Court clarified that a mini-trial should not be conducted, and so most of the issues could not be determined fully and were matters for trial.

In particular, relating to point three above and analysis of the liquidator’s claim for various transactions, the Judge concluded that proper particulars of the breach needed to be given. The revised particulars in line with the directions at the previous hearing were specific, and further analysis was also not suitable for summary determination as with the other issues.

Conclusion

Ultimately, the strike out application was dismissed because the Court determined that the points raised in the application needed to be considered with the full factual picture at trial. This case highlights the high bar that needs to be overcome in order to strike out an application and that the Court will be reluctant to strike out where the questions of law and fact are complex and/or require analysis.

This case also brings into focus, for those bringing actions, the importance of properly particularising claims so as to ensure the action is not at risk of being challenged via strike out which will draw out proceedings and increase costs.