On 14 January 2025, the High Court dismissed a claim for professional negligence and misconduct brought against KPMG LLP and one of its partners. This was the court’s response to KPMG’s application to strike out the claim on grounds of abuse of process and lack of merit.

The claim was valued at over £1.2 billion and the High Court agreed definitively with KPMG, concluding that the claim was an attempt to re-litigate previously decided issues. This case demonstrates the court reluctance to entertain abusive litigation.

Background

Mr Bashar Bin Mahmood, a property developer, was a director, shareholder and guarantor of various insolvent companies for which KPMG was appointed as administrators. In 2023, Mr Mahmood brought a claim in the Central London County Court against KPMG and partner Mr Costley-Wood, alleging professional negligence and misconduct in the administration of several of the insolvent companies.

The first claim was struck out in July 2023, with the Court finding it to be without merit.

In response, Mr Mahmood decided to initiate fresh proceedings in the High Court, in January 2024, making the same allegations. KPMG applied for strike out and summary judgment of the claim (i.e. a dismissal of the claim without the need for trial, on the basis that it is either an abuse of process or the prospects are so low that the claimant had no real prospect of success).

Why did the claim fail?

There are a number of elements that a claimant needs to establish in order to be successful in a professional negligence claim, none of which were present in Mr Mahmood’s claim. The court concluded that, on the basis that these elements were not present, the claim had no real prospect of success and therefore, in conjunction with a number of other considerations, the court had no choice but to dismiss the claim.

The reasons that the court gave for dismissing the claim, are as follows:

1. There was no duty of care established. The court found that KMPG had no special responsibility towards Mr Mahood sufficient to establish a duty of care. Their duty was owed primarily to the creditors of the insolvent companies.
2. Mr Mahmood failed to set out what breach of duty was involved.
3. Mr Mahmood failed to demonstrate how KPMG’s alleged breach of duty resulted in any loss to him.
4. There was no independent or credible evidence which supported the alleged £1.2 billion losses apparently suffered by Mr Mahmood.
5. The claim was brought out of time. In the first claim brought by Mr Mahmood, the trial judge held that the claim was time barred as the cause of action arose (at the latest) in May 2011. That would have made the final date at which a claim can be brought, May 2017. The claim was already out of time in 2023, let alone when brought again in 2024.
6. There was no standing to sue. Mr Mahmood had been declared bankrupt in 2009, when the causes of action arose. So, even if there were any causes of action which could have been pursued, these would have vested in the trustee for bankruptcy. Therefore Mr Mahmood had no legal right to bring a claim in his own name (notwithstanding the earlier issues noted above).
7. The second claim was an abuse of process and totally without merit. The court concluded that, the issues having already received judicial consideration and determination, this second claim was an attempt to relitigate those issues and therefore an abuse of process. Moreover, given the lack of standing to sue, the court ruled that the claim was “totally without merit” and dismissed it.

What does this mean?

The court’s ruling in this case was definitive and clear. It is a helpful illustration of how the courts deal with claims which are not genuine and / or which are baseless. More specifically, it provides for the following lessons:

1. Re-litigation is not tolerated, nor permitted – the court process brings about finality. If a court has decided issues, it is not open to a claimant to issue a new claim in an effort to obtain a different decision.
2. To be successful in a claim, a claimant must prove all of the elements of that claim. In professional negligence, the burden on claimants is high and the claimant must have evidence of (a) duty (b) breach of duty (c) causation and (d) loss caused by the breach of duty.
3. Limitation periods are not guidelines, they are rules. Even if a claimant has a genuine case, it must be brought within the legal time limit to avoid being statute barred from bringing that claim.
4. Standing to sue is crucial. A claim cannot be pursued by an individual who has no legal right to bring that claim.

There are many different rules in litigation, procedural and legal. It is easy to get things wrong and you should therefore always consider obtaining legal advice at the outset of a legal dispute. Our team at Thomson Snell & Passmore is here to help.

Contract wording is essential: EE Limited v Virgin Mobile Telecoms Ltd

In February 2025, the Court of Appeal dismissed an appeal made by EE Limited following the High Court’s dismissal of its claim in 2023.

In its claim, EE alleged breach of contract against Virgin Mobile, and at the centre of the case was the interpretation of an exclusion clause.

Background

Pursuant to an agreement for services entered into by the parties, EE agreed to provide Virgin Mobile with access to EE’s mobile network, providing it with 2G to 4G (but not 5G) services.

In its claim, EE alleged that Virgin had breached an obligation of exclusivity owed under the contract between the parties. EE said that, because Virgin had migrated customers to services on a different network , EE had suffered a loss, that loss being the sums which Virgin would have been obliged to pay under the contract, had they not migrated those customers.

Virgin denied the claim, including on grounds that there had been no exclusivity breach. Virgin said that only 5G customers had been migrated (which was permissible) but in any event the claim was precluded by an exclusion clause providing that neither party could claim for “anticipated profits”. EE however said that it was not claiming for “anticipated profits”, rather “charges unlawfully avoided”.

At first instance and at appeal, the courts found that the exclusion clause did prevent EE from bringing its claim.

What was the basis of the appeal?

The core issue was whether a claim in respect of anticipated profits meant, on the true interpretation of the exclusion clause, a claim for loss of profit other than expectation loss.

Showing the importance of carefully drafted contracts and the differing interpretations that can be offered, the court of appeal made their decision 2:1 with Lord Justice Phillips giving a dissenting judgment (i.e. one which goes against the decision).

The court held that EE’s claim was excluded by the terms of the contract. It was held that “charges unlawfully avoided” could only be a claim for loss of profit and there was no distinction.

What does this mean?

When considering exclusion clauses, the starting point is that the court will try to hold the parties to the contract, as neither party enters a contract with an intention to depart from the terms. In EE v Virgin Mobile, the exclusion clause was clear and unambiguous, which in a case where the contract was carefully negotiated between two parties of similar bargaining power, showed that the parties did not intent to abandon their claims for loss of profit.

One of the biggest takeaways of this case, which should not be a surprise to anyone, is that the clauses negotiated in your contracts all have meaning. Exclusion clauses are especially important as they determine what can and cannot be claimed from the counterparty in the event of a breach of contract.

If you are in any doubt about the terms of your existing contracts, or new ones which you contemplate entering, you should seek specialist legal advice before doing so.

Time does not stop: Contract Natural Gas Ltd v ZOG Energy Ltd

The recent High Court decision in Contract Natural Gas Ltd v ZOG Energy Ltd clarifies that the limitation period for claims against a company does not pause when the company enters administration. This ruling reaffirms the distinction between administration and liquidation in insolvency proceedings.

Background

Contract Natural Gas Ltd sought to recover outstanding payments from ZOG Energy Ltd under a Master Sales Agreement for gas supply. The Master Sales Agreement included a 12-month contractual limitation period for bringing claims.

Both parties entered liquidation in 2021, with ZOG Energy Ltd previously in administration. ZOG Energy Ltd argued that Contract Natural Gas Ltd.’s claims were now time-barred under the Master Sales Agreement.

Contract Natural Gas Ltd put forward the argument that as ZOG Natural Energy Ltd had entered into administration before the 12-month period, the time should stop running and therefore they were not time barred from bringing a claim.

What was the issue?

While it is well established that liquidation creates a statutory trust, it was unclear whether administration had the same effect.

Prior to the Enterprise Act 2002, during administration, it was accepted practice that time did not stop running on claims against a company when it went into administration. It was unclear if this had changed with the 2002 Enterprise Act which granted administrators new powers to make distributions to creditors.

What happened?

It is worth noting that prior to this case, the question of whether entering into administration should stop the limitation period from running had not been considered since the Enterprise Act came into force in 2002.  In assisting, the court looked at the 2001 case of Re Maxwell Fleet and Facilities Management Ltd. In this case it was held that administration did not give rise to a statutory trust, therefore the limitation period did not stop running.

The court held that the Enterprise Act 2002 did not alter the initial position regarding limitation periods. As a result, the limitation period for Contract Natural Gas Ltd.’s claim did not stop running when ZOG Energy Ltd went into administration, reflecting the procedure in place prior to the Enterprise Act 2002. Consequently, Contract Natural Gas Ltd was unable to recover its funds from ZOG Energy Ltd.

What is the significance?

This ruling provides crucial clarity on limitation periods in administration, confirming that:

• Time does not stop running on claims against a company in administration.
• The distinction between administration and liquidation remains significant.
• Businesses should be mindful of contractual limitation periods and act promptly when pursuing claims against financially distressed entities.
• This case underscores the importance of timely enforcement of contractual rights, particularly in insolvency scenarios.