Fraser & Ors v Oystertec Plc & Ors

Permission to amend pleadings should generally be granted where the amendment enables the real dispute to be determined, provided prejudice can be compensated in costs and the efficient administration of justice is not significantly harmed. Permission should be refused where the proposed claim has no real prospect of success. In a derivative claim, permission to continue proceedings is limited to the claim authorised and may require reconsideration after a material change of circumstances. Where a trial is imminent, an arguable issue may exceptionally be left for determination at trial if deciding it immediately risks the trial date. A late amendment may be allowed conditionally upon payment into court to secure the additional costs.

The claimants sought amendments to proceedings concerning patents allegedly transferred by company directors to Oystertec Plc. They applied to add Mr Warburton as a defendant and to plead additional proprietary and knowing-receipt claims against Oystertec.

The application was made shortly before a fixed trial. Earlier summary judgments had determined issues concerning the Oystertec Converter, including that title had not passed from Easyrad and that Easyrad was entitled to equitable compensation. The issues before the court concerned joinder, the scope of the derivative authority, the viability of the proposed amendments, imputation of knowledge, and appropriate conditions as to costs.

1. The application to join Mr Warburton was refused. The proposed allegations were serious, the application was very late, and joining him would inevitably have caused the fixed trial date to be lost. The claimants remained free to pursue him separately.

2. Applying the principles stated by Peter Gibson LJ in Cobbold v London Borough of Greenwich (9th August 1999 CA), amendments should generally be allowed where they enable the real dispute to be adjudicated, unless prejudice cannot be compensated in costs or the efficient administration of justice would be significantly harmed. Permission should not be given to a claim having no real prospect of success.

3. The permission previously granted for the derivative proceedings was limited to the claim then pleaded. Under Civil Procedure Rules 1998 rule 19.9, further or materially amended claims required further permission. The court also had to reconsider whether the conditions supporting the derivative claim continued, since Mr Davidson no longer controlled his shares and Easyrad had already obtained substantial relief. This followed the principles stated in Barrett v Duckett [1995] 1 BCLC 243.

4. Easyrad could not at this stage add a knowing-receipt claim concerning the Oystertec Converter. It had elected to obtain summary judgment and full and final relief in respect of that patent. The issue whether knowing receipt could affect the assessment of equitable compensation was left to the judge assessing that compensation. The court also expressed, without deciding, the view that knowing receipt could not arise if title had never passed and no trusteeship existed.

5. The objections based on imputation of knowledge raised arguable issues concerning the directors and solicitor, including the fraud exception discussed in PCW Syndicates v PCW Insurers [1996] 1 WLR 1136 and Halifax Mortgage Services v Stepsky [1996] Ch 1. Those issues were left for trial with full evidence and argument.

6. The proposed amendments were allowed in part. The amendments concerning paragraph 7 and the imputation of notice and knowledge were permitted, subject to payment into court of £35,000, comprising £25,000 for Oystertec and £10,000 for Mr Binney. Easyrad’s amendments were disallowed at that stage. The parties were directed to settle a minute of order.