Rigby v Decorating Den Systems Ltd

A fraud pleading can survive strike-out where it clearly alleges the representations, falsity, reliance and actual knowledge, even without particulars explaining how that knowledge was acquired. Rules of the Supreme Court Order 18 distinguishes particulars of fraud from particulars of knowledge, while permitting the court to order knowledge particulars later. A rolled-up allegation that a person knew or ought to have known the relevant matters requires particularisation. A disputed representation should proceed to trial where the documents provide material for cross-examination and the factual issue is not indisputable.

This was an appeal by Decorating Den Systems Ltd and its managing director, Sarah Bell, against Salford County Court’s refusal on 5 November 1998 to strike out Nicola Rigby’s amended particulars of claim. Mrs Rigby alleged that fraudulent representations induced her to enter a ten-year franchise agreement, including representations about first-year profit and turnover.

The appeal concerned whether the fraud allegation required particulars explaining how Mrs Bell acquired actual knowledge of falsity, and whether the profit and turnover allegation was contradicted by contemporaneous documents.

Appeal dismissed unanimously. Lord Justice Peter Gibson delivered the judgment, and Mrs Justice Hale agreed.

1. On a strike-out application, the pleaded facts are assumed to be true. Primary facts must nevertheless justify an allegation of personal dishonesty. The issue here was whether an unequivocal allegation of actual knowledge had to be accompanied by particulars explaining how that knowledge was acquired.
2. Rules of the Supreme Court Order 18 rule 12(1)(a) requires particulars of the fraud relied on. Rule 12(1)(b) requires particulars of facts supporting conditions of mind, but expressly excepts knowledge. Accordingly, actual knowledge need not be particularised at the pleading stage. Rule 12(4) permits the court subsequently to order particulars of the facts relied on to establish knowledge, and non-compliance may later attract a sanction.
3. The court followed the principle in Davy v Garrett [1878] 7 Ch D 473 that a direct plea of representations, falsity and knowledge is sufficient. The observations in Re Continental Assurance Company of London plc (No 2) [1998] 1 BCLC 583 suggesting that knowledge must be particularised in a fraud pleading were obiter, wrong and inconsistent with the rule. The broader approach in Kok v Peachey was not followed. Brown v Bennett [1999] BCC 91 was confined to accessory liability, where pleading knowledge of dishonesty may be insufficient without facts establishing dishonesty. A rolled-up plea that a person knew or ought to have known the relevant matters must be particularised, as illustrated by Belmont Finance Corporation Limited v Williams Furniture Limited [1979] Ch 250.
4. The documents concerning the alleged profit and turnover representation provided strong material for cross-examination, but the explanation was contestable. The judge was entitled to allow the allegation to proceed to trial and had not erred in the exercise of his discretion.

The appeal was dismissed. There was no order as to costs in the court below or on the appeal up to 11 February 1999. Thereafter, the defendants were ordered to pay the plaintiff’s costs on the standard basis, to be taxed and paid forthwith.

• Court of Appeal (Civil Division) — The appeal from Salford County Court was dismissed unanimously: [1999] EWCA Civ 986.
• Salford County Court — His Honour Judge Hardy, sitting as a deputy circuit judge, dismissed the defendants’ application on 5 November 1998 to strike out the amended particulars of claim.