Henderson who??? Key FundingSecure case goes to Court of Appeal

A borrower who used the peer-to-peer lending platform Fundingsecure faces his multi-million pound counterclaim against its directors struck out as an abuse of process at the Court of Appeal.

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Fundingsecure were a so-called peer-to-peer lending company who facilitated the crowdfunding of loans between borrowers and often many hundreds or thousands of members of the public. The loans were purportedly secured against property and chattels.

FundingSecure were fully authorised by the FCA and were placed into in administration in October 2019 “partly because the company could not support the costs of ongoing litigation”. 

The litigation referred to is a mind-bogglingly complicated set of cases involving a number of parties across what can be seen as three separate but interlinked claims.

The London claim looks at allegations made against former FundingSecure director Richard Luxmore, 57 of Reading, including that he created false and fraudulent loans on the platform to induce members of the public to invest over £4.2m in properties that didn’t exist.  Mr Luxmore denies that allegation. 

The London Claim also alleges that Mr Mark Damian Clarkson, 61, in conspiracy with Mr Luxmore, fraudulently obtained large sums from FundingSecure and its customers, who were members of the public, by either simply taking money from FundingSecure’s account and/or creating post-event loan agreements to cover unauthorised borrowings.  Mr Clarkson denies any wrong-doing.

The so-called Manchester claim looks at a property dispute over the validity of a £8m loan secured over a 47-acre site in Manchester.  This loan is unconnected with the FundingSecure Platform.

The so-called London counterclaim is an allegation made by Mark Clarkson that certain directors of Fundingsecure entered into a conspiracy against him to obtain a windfall of some £15m.  The existence of such a conspiracy is denied. 

In circumstances where Mr Clarkson has made admissions that he owes some £6.6 to Fundingsecure he pursues his counter-claim only as a set-off to reduce the amount he owes.

Henderson v Henderson

There is one further case that is relevant to understand – In 1832, Elizabeth Henderson commenced legal proceedings in Newfoundland against her former brother-in-law, Bethel Henderson in relation to a dispute over a will.  Bethel lost the case.

In 1843 Bethal, having not paid the judgment debt, sought to relitigate the case in England.  The Judge, Sir James Wigram, refused to allow her to do so stating:

where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter[s] which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.

Source: https://en.wikipedia.org/wiki/Henderson_v_Henderson

To sum it up: you have one chance to bring your case and if you don’t mention something which you could have done you don’t get a second bite of the cherry at a later point.

Present Day

At a hearing before HHJ Hodge QC in February 2021 Asertis Ltd, to whom Fundingsecure had assigned the rights to the litigation following administration, sought to argue this ‘Henderson v Henderson’ issue in order to debar Mr Clarkson from bringing his counter-claim against the directors.

It was said by Mr William Buck, the barrister representing Asertis, that the claim of a conspiracy (ie London Counter Claim) could and should have been made before the court in the Manchester claim in November 2019.

If this argument was successful then Mr Clarkson would have been prevented from bringing his counterclaim.  No doubt bringing a sigh of relief to the members of the public who won’t see their investment returns diminished by potential damages.

However, HHJ Hodge QC, in his extempore judgment of 10^th February 2021 refused the Henderson claim stating:

I am not satisfied that the [counter] claim should have been raised in the Manchester proceedings. I do not consider that it is an abuse on the part of Mr Clarkson to raise the [counter] claim now, even though based on facts which he had already identified by November 2019 but which he had chosen not to pursue as a basis for a challenge to the settlement agreement at a time when he was seeking an adjournment of the application to enforce the terms of the settlement agreement.

The hearing in Manchester in 2019 was simply an application to enforce the terms of the settlement agreement. Mr Clarkson challenged it solely on the basis that it contained what he said were penalties. He was mounting no challenge to have the settlement agreement set aside. That is what he now seeks to maintain by the [counter] claim

Para 81 & 82 Asertis Ltd v Clarkson & Ors [2021] EWHC 1053 (Ch) (10 February 2021)

Following the February 2021 hearing Asertis and the defendants to the counter claim applied for permission to appeal.  In granting that application for Lord Justice Nugee said:

Ground 1 (Henderson v Henderson abuse of process) is arguable, with real prospects of success. The question of when a claim is an abuse of process because it could and should have been advanced in earlier proceedings is often a difficult one, and in the present case merits consideration by the Court of Appeal.

The appeal hearing, with a time estimate of 1.5 days, is expected to begin on Wednesday 9^th February 2022 and be held at the Royal Courts of Justice in Central London. 

Other matters will be discussed at the hearing but due to a lacuna in the civil procedure rules I’m unable to obtain the grounds of appeal without a formal application to the court.  This costs some £528. 

Lord Justice Nugee did grant Asertis permission on two further grounds:

“I have considerably more doubts about Grounds 2 and 3, but since there is to be an appeal anyway am prepared to give the Appellants the benefit of the doubt and give them an opportunity to raise all their arguments about the conspiracy claim on appeal.”

And Lord Justice Nugee also granted Mr Clarkson permission to appeal on the following grounds:

Ground 2: there is a reasonable prospect of success in the point that the explanation in the letter dated 3 February 2021 should have been drawn to the Judge’s attention.

Ground 4: it seems to me well arguable that on default the Default Fee becomes payable at a rate of 0.5% more than the Administration Fee otherwise payable (ie 6%+6%, or 6.24%+6% pa) rather than the Default Fee at this higher rate being payable in addition to the Administration Fee (ie 6%+12%, or 6.24%+12.24%). It is noticeable that although the order refers to the judgment for interest being based on the admission in paragraph 50 of the Amended Defence, there was no admission there of the rates of interest.

Ground 1 is not pursued. Ground 3 is not explained, and in any event if the admission can be withdrawn this is covered by Ground 2, and if it cannot be, I do not see how Ground 3 assists. 

Court of Appeal order ref: A3/2021/0517 dated 05/06/2021

Readers with common sense may find it bizarre I’m entitled to know the outcome of the application but not the application itself.

It is understood Mark Clarkson will be represented by Richard Bowles and Asertis will be represented by William Buck.

The appeals are being held under the following case numbers:
CA-2021-000488
CA-2021-000505
CA-2021-000509

Correction 08/02/2022: The initial version of this article incorrectly stated “It is understood Mr Mark Clarkson will be represented by Stephen Cogley QC“. This was following information received from the Court of Appeals office on Friday 4th February 2022.