Diamantides v JP Morgan Chase Bank & Ors

On an application under C.P.R. rule 3.4(2)(a), pleaded primary facts must be assumed true and the pleading read as a whole. The court may strike out a claim which those facts cannot support, including a claim bound to fail, but only in a clear case. A person who instructs an investment manager for a company may in principle have a separate advisory or fiduciary relationship with the manager. Duties divided between that person and the company require special arrangements defining their scope. Allegations that the company was a wholly owned investment vehicle, that the individual gave instructions and relied on advice, and that he was treated as important did not establish such arrangements. The claim therefore disclosed no reasonable grounds.

Mr Diamantides appealed from an order made by Morison J on 28 January 2005 in the Commercial Court. The order struck out his claim against the Bank in action 2004 Folio 103 and refused permission to amend the pleadings in that action and the Bank’s proceedings against Pollux Holding Ltd in action 2001 Folio 405, with a view to consolidation.

The proposed consolidated pleading alleged that, although Ursa and Pollux were his investment vehicles and the contractual management agreement was with the company, the Bank owed advisory duties to him personally. Alternatively, it alleged duties to the companies. The central issue was whether the pleaded primary facts could support the personal claim.

The appeal was dismissed. The order striking out Mr Diamantides’s claim and refusing permission to amend was upheld.

1. Under C.P.R. rule 3.4(2)(a), the court assumes that pleaded primary facts are true and considers the statement of case as a whole. The expression concerning reasonable grounds is wide enough to include a claim which is bound to fail. Strike-out on that basis should, however, be reserved for the clearest case. A developing area of law does not justify a trial where the pleaded facts provide no ground for success despite any reasonably foreseeable extension of existing principles.
2. A relationship between an investment manager and an investor may arise informally through conduct, without a formal agreement. Whether it arose depends on the facts said to have created it. The authorities on informal fiduciary relationships did not establish that the alleged relationship had arisen in this case. See Groom v Crocker [1939] 1 K.B. 194 and Ratiu v Conway [2005] EWCA Civ 1302.
3. The alleged division of duties was unusual. It would require special arrangements between the personal client, the investment manager and the company defining the scope of their relationships, particularly where the company was to acquire investments on the manager’s recommendations.
4. No such arrangements were pleaded. The management agreement was between the Bank and Ursa and contained no express modification of the ordinary duties arising from that relationship. The Bank was not alleged to have dealt with Mr Diamantides differently from someone giving instructions for the company. The pleaded facts therefore could not support personal-only advisory duties, whether contractual, common-law, equitable, fiduciary or statutory under the Financial Services Act 1986.
5. It was unnecessary to decide the Bank’s alternative argument that Mr Diamantides’s loss was reflective of Pollux’s loss and irrecoverable. That issue was left open.

• Court of Appeal (Civil Division) dismissed the appeal and upheld the order below.
• High Court, Queen’s Bench Division (Commercial Court) (Morison J) struck out the claim form and particulars of claim in action 2004 Folio 103 and refused permission to amend the particulars of claim in both actions to facilitate consolidation.