Too late to file dishonesty charges against company director who witnessed in earlier action

Goldtrail Travel Ltd (in liquidation) v Malcolm Grumbridge [2021] EWHC 1713 (Ch)

On June 24, 2021, dismissing an appeal by the Chief Master of the Chancery Division, Adam Johnson J delivered a insightful judgment in which he refused to apply Section 32 of the Limitation Act, 1980 to extend the statute of limitations for a period sufficient to allow the claim form to be issued in time. The judge concluded that the plaintiff knew enough facts to be able to plead an action against the defendant in an earlier fraud action he had brought several years earlier.

The court held that the subsequent discovery of a handful of new documents did not affect whether the plaintiff could have submitted his claim sooner. The appellate judgment is a stark example of the court cutting through a mass of factual complexity to identify the few facts relevant to answering the question when the plaintiff could have, with due diligence, have met the test of ” declaration of the request”.

The judgment makes it clear that a claimant wishing to invoke Article 32 must clearly set out at an early stage the facts that he do know at the relevant time(s) and why they were insufficient to plead a case. A focus on the facts that he made not knowledge was misplaced.

The Original Goldtrail Litigation

The dispute follows the famous Goldtrail litigation. Goldtrail was a travel agency which, in 2010, was placed under administration. In 2012, its creditors filed a lawsuit alleging fraud in which they argued, among other things, that Goldtrail’s sole director breached his fiduciary duties and misappropriated company funds. At trial in 2014, Rose J (as she then was) ruled in favor of creditors. There were subsequent appeals, including to the Supreme Court.

The defendant was not a defendant in the original litigation. But he was called as a witness at trial, where Rose J considered him “truthful”.

Current claims

At the level of execution, there was a recovery deficit both with regard to the judicial debt and the costs. In an attempt to recover this deficit, Goldtrail, in 2019, more than seven years after the original litigation began, Goldtrail commenced its new action against the defendant.

Goldtrail sought to justify the late action by saying that it was unable to plead a dishonest request for assistance against the defendant until it came into possession of some documents which it said clearly showed for the first time his involvement in the initial fraud. . The defendant requested that Goldtrail’s claim against him be struck or that summary judgment be entered in his favor on the basis that the claims were statute-barred.

Chief Master’s decision

In 2020, Chief Master Marsh granted summary judgment for the defendant. He considered that Goldtrail had no real chance of success: the primary limitation period had expired and Goldtrail had no real chance of success in arguing that it should be extended because it had been able to litigate a claim much earlier.

The Chief Master admitted that new documents had become available in 2018. Nevertheless, he felt that Goldtrail had not explained why the information it had when it filed its request in the original litigation in 2012 did not were not sufficient for her to plead a dishonest request for assistance against the defendant at that time.

Extension of the limitation period

On appeal, Adam Johnson J upheld the Chief Master’s judgment, finding that the Chief Master had applied the correct legal test when granting summary judgment. He held that where an earlier fraud complaint is filed against a number of actors and a subsequent complaint is filed against another actor allegedly involved in the same dishonesty, the onus is on the claimant to explain why that party had not been included in the original claim. Goldtrail had given no such explanation.

The critical issue was that while in 2012 Goldtrail had enough information to argue a lawsuit against the defendant, it chose not to pursue that lawsuit at that time. In these circumstances, the relevant question is what Goldtrail knew during the term of the primary statute of limitations – and in particular when it initiated the original litigation in 2012 – and not the additional information it claimed to have discovered in 2018. .

Regarding the issue of concealment under section 32(1), Judge Adam Johnson held that the tests under section 32(1)(a) and section 32(1 ) (b) of the Limitation Act operated in parallel. He stated that they are just”different ways of compartmentalizing the same facts in terms of legal analysis.” The judge held that if, for the purposes of s. 32(1)(b), Goldtrail had sufficient facts to support a dishonest assistance claim against the defendant in 2012 when it initiated the original litigation, then “it must follow” that, for the purposes of paragraph 31(1)(a), the defendant’s alleged fraud must already have been discovered at that time.

Read the judgment