First Curaçao International Bank and John Deuss defeat claim by liquidators of Transworld Payment Solutions

Bankim Thanki KC, leading Saul Lemer (One Essex Court) and Paul Fradley (South Square), acted for the Second Defendant – John Deuss – in successfully defeating a claim brought by the liquidators of Transworld Payment Solutions against him and the Bank (FCIB) following a significant trial heard by Leech J between March-May this year. The judgment is available here.

Mr Deuss was accused of dishonestly seeking to capture for FCIB (which he owned) the business of traders engaged in MTIC fraud practised on HMRC and dishonestly causing a UK based marketing entity (Transworld) to assist in capturing that business. The Claimants sought over £280m from Mr Deuss. Leech J dismissed these allegations entirely, considering the case “obscure”, “speculative”, “highly artificial” and “an attempt to elevate an allegation of negligence into dishonesty”. Liability turned entirely on Mr Deuss’ alleged dishonesty.

The Judge made a number of important findings in his 430-page judgment:

• He rejected the core allegation of dishonesty against Mr Deuss.

• He found that the Claimants had failed to make out their case on large parts of the quantum claimed. He was critical of the failure to call expert evidence to explain and justify the quantum and felt bound to record that this failure had increased the time taken to produce the judgment considerably.

• He rejected the Claimants’ case that the Liquidators’ decision not to take a limitation defence in respect of inbound claims into Transworld’s estate was determinative. He held this decision was res inter alios acta and not legally relevant and that it was not reasonable for the Court to rely on that decision. In coming to this conclusion Leech J noted that the Liquidator’s funding arrangement was “by any standards extraordinary”. Leech J noted that, while the claims were ostensibly brought for HMRC’s ultimate benefit, HMRC would see almost none of the proceeds in the event the claims were successful, and the claims were primarily brought for the benefit of the Liquidator and his partners.

• He held that large parts of the claim were time-barred and rejected the Claimants’ reliance on section 32 of the Limitation Act. He held that a reasonably diligent liquidator would by 2007 have had sufficient information to plead a fraud claim against the Defendants.

• He also held that the General Rolling Stock principle (that a limitation period ceases to run against a company in liquidation) has no application to companies in a foreign insolvency process. He also rejected the Claimants’ argument that provisions of the Limitation Act could be disapplied by virtue of the principle of modified universalism.

• He held that the Claimants had failed to make out their case that Mr Deuss was a de facto or shadow director of Transworld. The allegation that Mr Deuss was a shadow director was not properly pleaded and the allegation that he was a de facto director was not supported by the evidence.

• He held that the claims would, in any event, have been barred by the Curaçao law principle of forfeiture of rights. He held that, given settlement agreements entered into in Curaçao and the negotiations around them, the Claimants were acting in a manner which could not be reconciled according to standards of reasonableness and fairness in bringing the claims.