Court dismisses applications to strike-out defence

The Court dismissed both parties’ applications for strike out on the basis the disputed facts and matters required consideration at trial.

Frencheye (Stratford) Limited was incorporated to lease and operate a shop at Westfield Stratford under the trading name “Frencheye”. 

The liquidator brought a misfeasance claim against the three directors alleging that the directors of the company caused c£3.8 million to be diverted to a separate entity, Elegant Clothing Ltd, and that the directors applied significant sums for non-company purposes.

Part of the liquidator’s case was that Frencheye had traded from the Westfield shop. The directors argued that Frencheye operated under a franchise model – they argued that the company remained dormant without trading from the location and that it sub-licensed the premises for other companies to trade. 

In earlier proceedings the Magistrates Court rejected Frencheye’s contention that it did not trade or occupy the premises and held that Frencheye directly operated the Westfield shop. 

The liquidators applied to strike out parts of the defence and the directors applied to strike out parts of the claim. 

The liquidator submitted that relitigating arguments addressed by the Magistrates Court would be manifestly unjust and bring the administration of justice into disrepute. The directors argued that the magistrates did not determine the central issue regarding trading receipts and liability which required consideration at trial.

The Court noted that whilst the magistrates determined rateable occupation of the Westfield shop, they did not conclusively determine issues around trading receipts or beneficiaries. The Court therefore dismissed both parties’ applications on the basis the liquidator’s allegations of misconduct in relation to diverted trading receipts required full consideration at trial. 

Nicholson v Masood [2025] EWHC 2314 (Ch)