Close Asset Finance is being sued by liquidators of one of the
lessors’ former clients for providing equipment that was allegedly
unfit for purpose.
Meanwhile, Close, which is being jointly sued with the supplier
of the alleged faulty equipment, is counter-suing its former lessee
client for alleged non-payment of rentals.
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Also, in a recent ruling just published, heard at an early stage
of the substantive trial of Lobster Group v Heidelberg Graphic
Equipment and Close Asset Finance, the High Court in London
rejected an application by Close Asset Finance for security of
costs.
The lessee, a commercial printing firm, claims a printing
machine, worth £1m when supplied on lease, was not fit for the
purpose as represented by the supplier.
Jack Rabinowicz, a partner at the law firm Teacher Stern Selby,
which is acting for Close, said the lessee is seeking to make the
lessor and supplier jointly liable for damages for the supplier’s
alleged misrepresentation on fitness for purpose. He added that the
main trial is due to be heard in December 2008.
In this case, the lessor acquired title direct from the supplier
– rather than via sale and leaseback – and transparently acted at
arm’s length, not through any “badged” agreement bearing the
supplier’s name.
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By GlobalDataThe supplier argues that the benefit of its warranty did not
transfer directly to the lessee, while the lessee challenges the
enforceability of the lessor’s standard exclusion clause on fitness
for purpose.
In English civil litigation, where a corporate claimant faces
solvency issues, defendants can seek security for costs before the
case proceeds to a full trial. This protects the defendants from
being unable to recover the costs that would be awarded to them if
the substantive case against them eventually fails.
In this case, Close Asset, as lessor, successfully sought
security for costs incurred from the start of the proceedings up to
the exchange of witness statements.
Heidelberg, as supplier, however, sought to go further and
obtain security for pre-action costs. These arose over a long
period and covered an unsuccessful attempt at mediation between
supplier and lessee.
In a ruling on March 6, Justice Coulson rejected this wider
application for security. He noted that, in the mediation process,
the parties had initially each agreed to bear their own
costs.
“Mediation costs were unlikely to be recoverable in the
subsequent proceedings and, even if they were, they should not form
part of the security ordered. [That] would be draconian [in view
of] the prolonged… pre-action period,” the judge held.
Rabinowicz said: “We feel we have a watertight case. Unsecured
creditors of the lessee seem unlikely to get much out of the
liquidation, especially if it loses this case. So security for
costs was important and, for our part, we got what we asked
for.”
