Towler v Wills

A statement of case may be struck out under CPR 3.4 where it is so vague or incoherent that the opposing party cannot identify, plead to, disclose documents for, or fairly defend the case alleged. A party must state concisely and clearly the material facts and transactions relied upon. Further information cannot properly introduce unpleaded claims or obscure the pleaded case with evidential material.

A shareholder cannot recover loss reflecting loss suffered by the company where the company has its own remedy. The exception for wrongdoing which disables the company from suing must be specifically pleaded. Serious allegations involving undisclosed conflicts and knowingly detrimental transactions require clear and adequate particulars.

The claimant, a shareholder in Cambridge Online Learning Ltd, claimed about £2.5 million in damages from the defendant for alleged breaches of a shareholders’ agreement. He alleged that the defendant acted under undisclosed conflicts of interest when the company acquired assets, made payments and undertook other transactions.

The defendant applied to strike out the amended claim. He contended that the pleading and the claimant’s Part 18 further information were vague and incoherent, and that most claimed losses were reflective of loss suffered by the company. After the hearing, the claimant sought permission to serve re-amended particulars. The issues were whether the existing claim should be struck out and whether the proposed amendment stated a sufficiently clear and particularised case.

1. The defendant’s strike-out application was granted. The amended particulars and further information were unreasonably vague and incoherent. They did not clearly identify the transactions said to constitute breaches, the defendant’s alleged conduct in relation to them, or the losses caused. This prevented the defendant from knowing the case to meet and risked unnecessary expense and an unfair trial. The court therefore exercised its CPR 3.4 power to strike out the claim.

2. The court applied the reflective-loss principle explained in Johnson v Gore Wood [2000] 2 AC 1. The first three heads of loss—loss in share value, dividends and director’s earnings—reflected loss which the company could recover from its director for breach of fiduciary duty. They were not recoverable by the claimant personally.

3. The exception in Giles v Rhind [2003] Ch. 618, where the wrongdoer’s conduct makes it impossible for the company to pursue its remedy, could not assist the claimant. It was necessary to plead that the defendant’s wrongdoing, rather than the liquidator’s choice, caused the company’s inability to sue. No such allegation appeared in the amended particulars.

4. The fourth head of loss was also defective. It was vague and appeared to concern expenditure incurred by a company which was not a party to the proceedings.

5. Permission to re-amend was refused. The proposed pleading made serious allegations akin to dishonesty but did not plead or particularise the defendant’s knowledge of the allegedly unauthorised £100,000 payment or the alleged lack of value in the acquired asset. Other allegations were unclear or disclosed no intelligible contractual breach. Applying Three Rivers [2003] 2 AC 1, fairness required adequate particulars of such serious allegations.

6. The claimant was ordered to pay the defendant’s costs on the indemnity basis, subject to detailed assessment, with £30,000 payable on account within 21 days.

not stated in the judgment.