Contract Case: The Situation Explained

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Background

Client A is a respected social entrepreneur with a history of founding innovative ventures. In 2015, he launched an online community, THC, in the City of London, attracting considerable interest from the start.

Contract and Initial Dispute

Two notable individuals – one, the president of a private members’ club in London, and the other, a prominent tech figure and leader of the Scottish Business Network – approached Client A with a proposal. They entered into a contract, promising to sell 10% of Client A’s company shares for £103 million, and to secure an additional 10% through a partnership with Silicon Valley’s Pivotal Labs.

However, these individuals later reneged on the agreement, leading to the contract’s repudiation. Client A responded by initiating legal action in the High Court’s Chancery Division against the two, now defendants.

Complications and Bankruptcy Proceedings

During the litigation process, Client A faced a series of unexpected and complex actions from HMRC, accountants, and bankruptcy courts. Ultimately, after a thorough investigation, it was determined that Client A was not liable for any penalties, and HMRC itself applied to have the case against him dismissed.

Litigation Strategy and Costs

Client A sought expert advice, engaging a barrister from 10 Kings Bench Walk Chambers. The barrister’s written opinion rated the merits of Client A’s case at 80%, leading to a Damages Based Agreement. Further, an experienced accountant prepared a detailed 25-page report, valuing losses at £129 million in the third year.

On counsel’s advice, Client A expanded the litigation, adding three causes of action, including Unlawful Means Conspiracy (TORT), and 25 new defendants, as well as his limited company as a second claimant. Unfortunately, these new actions were dismissed at the case management stage, resulting in a costs order against Client A.

Facing substantial financial losses from both his business and the litigation, Client A was compelled to declare voluntary bankruptcy.

Administration of the Bankruptcy Estate

The Official Receiver took charge of the £103 million claim as an asset of the bankruptcy estate. Client A proactively contacted three litigation funders, aiming to facilitate the claim’s progress, pay creditors, and retain any surplus. He connected the Official Receiver with the funders for potential assignment (sale) of the claim.

Despite receiving all relevant documentation, including counsel’s opinion and quantum report, the Official Receiver ignored the funders’ interest. Instead, the £103 million asset was sold for only £12,500, under a Non-Disclosure Agreement, and the claim was quickly dissolved, possibly by an associate of the defendants. The proceeds appeared to cover only legal fees.

Further Investigations and Discovery

When Client A complained, the Official Receiver threatened to pursue Vexatious Litigant proceedings, effectively shielding themselves from criticism. Unfazed, Client A’s investigators dug deeper, uncovering evidence of a conspiracy involving the defendants. The lead defendant’s MBB company, had a contract with City AM, which had also appropriated Client A’s intellectual property for their own “City AM Club”.

The investigation revealed that the primary defendant had fabricated aspects of his personal history, including his title and birth name, and the second defendant had also misrepresented his identity.

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