Official Receiver v Deuss

This is the first reported decision on costs relating to an application under s.133 of the Insolvency Act 1986 and is of relevance to creditors considering making a request under s.133, and to liquidators of companies which are the subject of a s.133 application.

Mr Deuss was CEO and beneficial owner of First Curacao International Bank N.V and the beneficial owner of TWPS. Both companies are implicated in MTIC fraud in the UK which has caused very substantial losses to HMRC.

TWPS went into liquidation in September 2014. The de jure directors were unable to provide information about the company but cited Mr Deuss as someone who could. A request for information from Mr Deuss went unanswered.

The creditors of Transworld Payments Solutions (“TWPS”) made a request for a public examination of Mr Deuss under s.133 Insolvency Act 1986. The request was made by Owl Ltd (“Owl”), one of TWPS’ creditors. Mr Hunt was the liquidator of both Owl and TWPS.

Mr Deuss successfully resisted an order for public examination on the application brought by the Official Receiver (see the judgment at [2020] EWHC 3441 (Ch)). During the course of the proceedings, Mr Hunt, as liquidator of TWPS, was directed to and did provide evidence as to topics that might be the subject of questions under s.133.

Following the dismissal of the application, Mr Deuss sought a third-party costs order against Mr Hunt personally on the basis that the request was made to gather information for the purposes of litigation brought by TWPS, and from which Mr Hunt stood to benefit as its liquidator.

The Court noted that there was no authority on how third party costs orders should be determined in the context of a s.133 application and so the usual principles set out in in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39.

The Court also noted the distinction between a liquidator (or director) who caused proceedings to be brought from which he may benefit and a liquidator (or director) who causes proceedings to be brought, funds and/or controls them in order to benefit from them.

The key question for the Court to determine was who was the ‘real party’ to the litigation.

In this case, it was important that:

  1. Mr Hunt did not fund or control the litigation;
  2. It was not Mr Hunt but Owl which made the request for public examination;
  3. Mr Hunt had no role in the proceedings until giving evidence, under direction, on behalf of TWPS as to topics for questioning in the examination. That did not amount to control of the proceedings;
  4. The fact that Mr Hunt would benefit from separate proceedings brought against Mr Deuss and FCIB did not mean that he had instigated the request by Owl for his own benefit.
  5. No impropriety was alleged on the part of Mr Hunt.

Mr Hunt was not the ‘real party’ to the proceedings. Mr Deuss’ application was dismissed.

A link to the judgment can be found here.