Trustee And Officeholder Approval Applications: Res Judicata And Protection From Future Claims

• Published date: 08 August 2023
• Law Firm: Mayer Brown
• Author: Ms Devi Shah, Stuart Pickford, Stephen Moi and Alexandra Wood

Summary

Trustees and officeholders (such as administrators, receivers and liquidators) can ask the Court to approve steps that they propose to take in the administration of their estate (such as the sale of an asset or settlement of a claim).

In a recent case¹, the English Court of Appeal held that the Court's prior approval of a trustee or officeholder's proposed course of action does not afford the trustee/officeholder blanket protection from future claims. Instead, in applying res judicata principles, the Court held that the extent of any protection will depend upon:

• the nature of the approval sought;
• the issues which the Court was required to consider in order to reach its approval decision; and
• the parties which were before the Court on the approval application.

If the Court which heard the approval application determined a particular issue, a party to that application will be prevented from seeking to relitigate that issue in a subsequent claim against the trustees or officeholders. Conversely, where beneficiaries or creditors were not joined as parties to the approval application (whether directly or by the appointment of representative respondents), the trustees or officeholders will not obtain "immunity" in any substantive sense from subsequent claims by those beneficiaries or creditors.

However, it is possible that a subsequent claim by beneficiaries or creditors may still be struck out as an abuse of process even if they were not parties to the approval application. Trustees and officeholders who advertise their intention to seek approval, so that beneficiaries or creditors have the opportunity to attend and be heard, will undoubtedly have a better prospect of persuading the Court that a subsequent claim by a beneficiary or creditor would be an abuse of process.

Approval orders should contain a clear statement identifying the issues which have been decided and the type of future claims which would (or would not) be barred. It will be important for trustees and officeholders to structure any approval application accordingly and to give careful consideration to joining potentially interested beneficiaries/creditors to the application.

Background

The Receivers were appointed by the Court as receivers of (among other things) the assets of Denaxe Limited (the Company), including its shareholding in a football club and real estate assets used in the operation of the football club (including the stadium and training ground) (together, the...