Ahmed & Ors v Khan

On an application for permission to appeal against refusal to strike out pleadings, the court must apply the proper pleading test: whether the pleading discloses a reasonable cause of action or is an abuse of process. The overriding objective cannot replace that test. It may, however, justify refusing permission on an otherwise arguable point where pursuing it would be unduly expensive, time-consuming or disproportionate. In family proceedings, the context of family asset-holding arrangements may be relevant when deciding whether allegations of constructive trust are sufficiently clear. Generalities cannot substitute for a pleaded factual basis. The merits of the alleged trust are for trial, not the strike-out application.

Following the breakdown of their marriage, the wife alleged in pending ancillary relief proceedings that the husband was the beneficial owner of assets held by relatives and a family company. The applicants applied to Baron J to strike out the wife’s claims and defence. On 16 November 2009, the judge struck out some claims, including the allegation that the company was the husband’s alter ego, but allowed constructive trust allegations concerning various assets to proceed and refused to discharge the company.

The applicants sought permission to appeal, arguing that the judge had applied an arguable-case test instead of the proper strike-out test. They also relied on an inconsistency concerning the garage plot. The central issues were whether the pleadings disclosed a reasonable cause of action and whether permission should be refused because the procedural point was disproportionate.

1. Permission refused. The Court of Appeal refused all applications for permission to appeal. The question was whether an appeal had a real prospect of success. The surviving claims and defence therefore remained subject to determination below, without any finding on their factual merits.
2. Proper strike-out approach. Under RSC Order 18, rule 19, there is a distinction between a pleading that discloses a reasonable cause of action and an arguable case that ought to be heard, although the distinction may be fine. The overriding objective cannot oust the proper strike-out test. The judge had assessed the pleadings rather than treating the wife’s allegations or factual matrix as established.
3. Constructive trust allegations. Allegations concerning transfers of shares within the family, concealment of true ownership, movement of funds between companies and arrangements for family-held property provided a sufficient factual basis to make the issues clear. The pleaded case was capable of bringing assets within the court’s reach under the Matrimonial Causes Act 1973. Whether a constructive trust existed was a matter for determination after evidence. Family context was relevant, consistently with Stack v Dowden [2007] UKHL 17 at paragraph 42, but third parties still had to understand the case they were required to meet.
4. Garage plot and proportionality. The applicants raised an arguable point because the approved judgment differed from the judge’s oral ruling concerning the garage plot. Nevertheless, an appeal on that point would be disproportionate to the issues in the proceedings. The overriding objective could properly support refusal of permission where resolving a point would be unduly expensive, time-consuming or otherwise disproportionate.

• Court of Appeal (Civil Division): On 23 March 2010, refused the applications for permission to appeal. [2010] EWCA Civ 290
• High Court: On 16 November 2009, Baron J struck out part of the wife’s claims but allowed constructive trust allegations and related matters to proceed.