Johns: Businessman not to blame for delay in progressing case
A businessman can continue with a £20m counterclaim for negligence against a City law firm suing for fees of £194,000, but his bankrupt business partner cannot, the High Court has ruled.
His Honour Judge Johns KC held that the counterclaim by Laurence Howard Davis against boutique litigation firm Cooke Young & Keidan (CYK) had not “abused the process of the court” by being warehoused and, if that was wrong, he would in any case exercise his discretion not to strike out.
However, HHJ Johns did strike out the counterclaim by John Christopher Baker, Mr Davis’s business partner in a failed seaside development project, on the grounds that Mr Baker’s bankruptcy meant that he “ceased to have a sufficient interest in the counterclaim to continue it”.
On the question of warehousing, the judge said: “While there has been a significant period of inactivity in these proceedings, the circumstances of this case mean that I am not prepared to draw the inference that there was a unilateral decision by Mr Davis not to progress the proceedings.
“The initial period of inactivity was the fault of CYK and the court, at least principally, rather than of Mr Davis or his co-defendant Mr Baker.”
The High Court heard that Mr Davis and Mr Baker were involved in a “failed joint venture project from 2005/2006 dubbed ‘Project Magic’”, a plan to buy and develop a large site in Skegness, Lincolnshire.
A joint venture company was set up and bought the site, with the help of a £58.5m loan from Anglo Irish Bank Corporation, a predecessor of the Irish Bank Resolution Corporation (IBRC).
CYK later acted for Mr Davis and Mr Baker, who sued IBRC in October 2020 for misrepresentation and breaches of duty.
IBRC later went into liquidation and evidence emerged that the proceedings against the bank could be time-barred. The businessmen responded by discontinuing in April 2021 and, facing a claim from CYK for unpaid fees of £194,140, instead counterclaimed for the “lost opportunity” to pursue those proceedings.
HHJ Johns said that following directions questionnaires, in late 2022 the businessmen’s then solicitors provided the solicitors for CYK, Clyde & Co, with dates to avoid for the fixing of a costs and case management conference (CCMC).
“But it seems those dates were never sent on to the court by CYK’s solicitors and no CCMC was then fixed. It was not until years later, on 31 March 2025, that Clyde & Co asked the court to fix a CCMC.”
Mr Baker was made bankrupt in 2023. HHJ Johns said that “in the run-up” to the CCMC, CYK “finally woke up to the challenge presented by Mr Baker’s bankruptcy”, making “multiple applications”.
HHJ Johns said Mr Baker’s counterclaim fell to be struck out unless it was a partnership asset, which would give him an interest in the litigation.
There was “no arguable case” that the counterclaim was a partnership asset, however. Earlier pleadings had consistently claimed that IBRC was also a partner in the joint venture and the evidence did not show there was a separate partnership between just the two men.
On Mr Davis’s counterclaim and the warehousing application, the judge said “much of the fault for the lack of progress lies with CYK, as well as some with the court”.
Further, the application came late and it would be “unjust… to deprive Mr Davis of what might be a valuable counterclaim, particularly while preserving for the benefit of CYK its own claim”.
He added: “I would observe that I was not shown any decided case in which a counterclaim only has been struck out for warehousing.
“That perhaps reflects the difficulty in characterising the conduct of a counterclaimant as abusive in circumstances where there is an inactive claimant, else of concluding that a strike out of the counterclaim only, leaving the claim to stand, is just in those circumstances.”
The application was made on the basis that Mr Davis had not informed the law firm of Mr Baker’s bankruptcy, which CYK said was a failure to comply with the overriding objective.
HHJ Johns said: “In circumstances where CYK did nothing to progress the claim in the period of Mr Baker’s bankruptcy, and delayed for months in doing so once it did learn of it, there has been little or no prejudice flowing from such failure and it would be entirely disproportionate now to deprive Mr Davis of his counterclaim.”
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