The Stax Claimants Claimants v Bank of Novia Scotia Channel Islands Ltd & Ors

At the amendment stage, the court should not determine whether a pleaded case will succeed. An amendment should generally be allowed where the proposed case has a real prospect of success and can be fairly tried. Whether a duty of care arises in relation to alleged negligent misrepresentations and due diligence is highly fact dependent, including what was said and whether a special relationship was created. A defendant may plead arguable credits reflecting the tax consequences of the counterfactual transaction and may plead mitigation by suitable pension contributions, but such matters must be formulated with proper limits. Case-management decisions must balance the need for a representative trial against prejudice, disruption and proportionality.

The judgment determined several interlocutory applications in selected claims concerning the Stax Scheme. The claimants sought amendments alleging, among other matters, that Bank of Nova Scotia had represented that Stax was insured and had carried out adequate due diligence. The bank sought amendments concerning credits for pension benefits, the valuation of tax effects, administration charges and mitigation by pension contributions. A further issue concerned whether the Ersser claims should be added as a selected case to encourage evidence from a bank officer. The central questions were whether the opposed amendments had a real prospect of success and whether adding Ersser would assist a manageable and fair trial without disproportionate prejudice.

1. Claimants’ amendments. The amendments concerning alleged insurance representations, investigation of the policy and related breaches of duty were allowed. At this stage the court was not required to decide whether the duty existed or whether the allegations were probably correct. The proposed case was fact dependent and had a real prospect of success. The possibility that the relevant contract was with Stax Consultancy Ltd, or that the policy had lapsed or was affected by fraud, did not make the claim incapable of succeeding.
2. Defences on quantum. The bank was permitted to plead that credit should be given for the tax-bearing benefits which would have been obtained had the assets remained in the claimant’s pension scheme. The precise valuation remained open. The court noted competing possible approaches, including valuing the cost of replacing the net income rather than simply reducing the fund by the claimant’s marginal tax rate. The proposed pleading and expert report nevertheless disclosed an arguable case.
3. The bank was also permitted to plead that comparable pension-scheme administration charges would have been incurred in the counterfactual position. Amendments concerning mitigation by pension contributions were allowed, subject to an express acknowledgment that any such duty could not continue indefinitely and, if it existed, would last only for a reasonable period. The court considered that the proposed mitigation argument had a real prospect of success where the investment vehicle closely matched the pension arrangement, but not in relation to unrelated tax-relieved investments.
4. Expert evidence. One paragraph of the report of Mr Parry, which expressed conclusions outside his expertise and addressed questions for the court, was struck out. The remainder of the report’s summary of materials was retained because it identified the material relevant to his opinion.
5. Ersser selected case. The court declined, at that stage, to add the Ersser claims merely to put pressure on the bank to call Mr Le Scelleur. The possibility remained open at the next case-management conference, depending on the burden of preparation, disclosure, additional evidence and whether the bank would call him. The parties were directed to address those matters promptly.

First-instance interlocutory judgment. No prior appellate decision is stated in the judgment.