Court permits amendments in Joint Liquidators’ misfeasance and breach of fiduciary duty claim against former directors

In the recent High Court decision of Ley and another v Suttle and another [2025] EWHC 796 (Ch), Joint Liquidators successfully obtained permission from the Court to amend pleadings in circumstances where the originating Insolvency Act application was issued on a protective basis to preserve limitation.

The Court’s decision provides helpful guidance to insolvency practitioners on the ability to amend Particulars of Claim and the grounds upon which amendments to pleadings can be sought, especially where it is necessary to issue a claim on a protective basis and officeholder investigations are continuing.

Background 

CL Realisations 2020 Limited formerly known as Callimedia Limited (“the Company”) was incorporated in July 1996 and specialised in print management and offline marketing. 

The claim relates to a series of transactions following the 2017 sale of the business of the Company to Marlixia Limited (“Marlixia”), a newly incorporated entity owned by one of the former directors. The Company funded Marlixia’s purchase of its own shares through a £1.085 million unsecured, interest-free loan, followed by three further loans totalling over £300,000. 

The loans were never repaid and Marlixia was dissolved in October 2021. The Company subsequently entered administration in February 2020 and creditors voluntary liquidation in July 2020.

The Joint Liquidators issued a claim against two of the former directors pursuant to section 212 of the Insolvency Act 1986 alleging misfeasance and breach of fiduciary duty (“the Claim”). 

With a view to preserving limitation, the originating Insolvency Act application notice was filed protectively in July 2023 on the basis that a substantive witness statement in support would follow. The supporting witness statement was subsequently filed in November 2023.

The Claim was stayed to allow the possibility of ADR and to further support pre-action correspondence. In February 2024, the Joint Liquidators filed an application to amend the Points of Claim to include further particularity, further allegations of breach of fiduciary duty and an unlawful distribution of capital claim (“the Amendment Application”). The Amendment Application was heavily opposed by the respondents.

The Outcome

The Court considered the 4-stage test in Mulalley & Co Ltd v Martlet Homes Ltd [2022] EWCA Civ 32:

1. Is it reasonably arguable that the amendments are outside the limitation period?
2. Do the amendments seek to add or substitute a new cause of action?
3. Does the new cause of action arise out of the same or substantially the same facts as the existing claim?
4. Should the Court exercise its discretion to allow the amendment?

The Court refused amendments to the Claim alleging unlawful distributions of capital as the amendments introduced a new cause of action outside the applicable limitation period.  However, importantly the Court granted the Joint Liquidators permission to amend in relation to the misfeasance and breach of fiduciary duty aspects of the Claim. The Court held that these amendments did not introduce new causes of action and arose out of substantially the same facts as particularised in the protective originating Insolvency Act application. 

Key Takeaways

Insolvency practitioners often find themselves in the position where the only option is to issue a protective claim, followed by supporting evidence at a later date. The judgment helpfully confirms the Court’s approach to allowing amendments to a claim once evidence has been gathered, even after a limitation period has expired.

Kunal Gadhvi and Alice Court of Irwin Mitchell LLP represented the Joint Liquidators.