A £20m professional negligence counterclaim against City disputes firm Cooke, Young & Keidan LLP (CYK) has survived a strike-out application alleging warehousing a counterclaim is an abuse of process, in what appears to be the first decision to consider striking out a counterclaim alone on that ground. His Honour Judge Johns KC handed down judgment in Cooke, Young & Keidan LLP v Davis [2026] EWHC 2093 (Ch) on 5 August 2026, refusing the application against one defendant while striking out his bankrupt co-defendant’s counterclaim.
What was the dispute about?
CYK is suing Laurence Davis and John Baker for unpaid fees of £194,137.72. The two men were partners in a failed joint venture from 2005/2006 known as Project Magic, a plan to buy and develop a large site in Skegness funded by a £58.5m loan from Anglo Irish Bank Corporation, a predecessor of the Irish Bank Resolution Corporation (IBRC). CYK acted for the pair when they sued IBRC in October 2020 for misrepresentation and breach of duty, but after evidence emerged that those proceedings could be time-barred, the claims were discontinued in April 2021. Facing CYK’s fee claim, the defendants counterclaimed in negligence for the lost opportunity to pursue IBRC, valuing that claim at around £20m.
The proceedings then went quiet for years. In late 2022 the defendants’ then solicitors provided dates to avoid for a costs and case management conference, but the judge found it seems those dates were never sent on to the court by CYK’s solicitors, and no hearing was fixed until CYK’s solicitors finally asked the court to list one on 31 March 2025. Mr Baker had been made bankrupt on 5 June 2023. In the run-up to the CCMC, CYK made a series of applications: to strike out the counterclaim because of the bankruptcy in July 2025, and then in November 2025 to strike it out as an abuse of process on the basis it had been warehoused.
When does warehousing a counterclaim justify strike-out?
The judge refused the warehousing application against Mr Davis. While there had been a significant period of inactivity, he was not prepared to infer a unilateral decision by Mr Davis not to progress the proceedings, because the initial inactivity was principally the fault of CYK and the court rather than of the defendants. Even had warehousing been made out, he would have exercised the discretion against striking out, since the application came late and it would be unjust to deprive Mr Davis of what might be a valuable counterclaim while preserving for CYK’s benefit its own claim for fees.
One observation will carry beyond this case. The judge noted that he had been shown no decided case in which a counterclaim only has been struck out for warehousing, which he suggested reflects the difficulty of characterising a counterclaimant’s conduct as abusive where the claimant is itself inactive, or of concluding that killing the counterclaim while the claim stands would be just. CYK had also argued that the defendants’ failure to disclose the bankruptcy breached the overriding objective, but the judge held that little or no prejudice flowed from it, given that CYK did nothing to progress the claim during the bankruptcy and then delayed for months once it learned of it.
What happens when a counterclaimant goes bankrupt?
Mr Baker’s counterclaim was struck out. On his bankruptcy the cause of action vested in his trustee under section 306 of the Insolvency Act 1986, so he ceased to have a sufficient interest in the counterclaim to continue it unless it was a partnership asset giving him an interest in a winding-up surplus. The judge found there was no arguable case to that effect. Earlier pleadings had consistently asserted that IBRC was itself a partner in the joint venture, and the evidence did not show a separate partnership between the two men alone. Partnership-asset arguments, in other words, will be tested against what the parties themselves pleaded when nothing turned on it.
Only the strike-out applications have been determined. The negligence counterclaim remains entirely unproven, no findings have been made on its merits, and the case now proceeds in the Chancery Division, which becomes the Business and Property Division on 1 October 2026.
A firm suing for its fees can find that its own delay preserves the counterclaim against it: the court weighed who caused the inactivity, not just its length, and refused a late strike-out that would have kept the claim alive while killing the counterclaim. Fee recovery proceedings need the same case-progression discipline as any other claim, particularly where a professional negligence counterclaim dwarfs the fees at stake.
The judgment is available on BAILII. Practitioners tracking the wider reorganisation of the Chancery lists ahead of October will find our Business and Property Division tracker useful alongside this decision.