Phaestos Ltd. & Anor v Ho

Amendments to pleadings should generally be allowed where they enable the real dispute to be decided and any prejudice can be compensated in costs, but the court must also consider fairness, proportionality, efficient administration and the effect on the trial timetable. An amendment must disclose a properly arguable claim with a real, rather than fanciful, prospect of success. A statistical loss model does not adequately plead causation merely by asserting that loss would not have occurred but for the alleged breaches. Where the proposed claim requires investigation of investor departures, disclosure may properly include unredacted investor identities. A late amendment may be refused where it is inadequately pleaded, requires substantial further disclosure and expert evidence, and threatens the fixed trial date.

These consolidated Technology and Construction Court proceedings concerned claims by Phaestos Limited, Mindimaxnox LLP and Ikos CIF Limited against Peter Ho and Tobin Maxwell Gover. The claimants applied for an extension of time to complete disclosure and for permission to amend their quantum case.

The proposed amendment replaced claims based on identified investor losses with a statistical case alleging that better performance would have produced more investors and higher fees. The defendants opposed the amendment on causation, disclosure and delay grounds. The central issues were whether the amendment had a real prospect of success, whether it was sufficiently pleaded, and whether its consequences for disclosure and the January 2013 trial made permission unjust or disproportionate.

1. Disclosure. The claimants’ failure to plan and progress the extensive electronic and hard-copy disclosure exercise justified a final extension, but not the period sought. They were ordered to complete disclosure by 4pm on 3 August 2012. Failure by 4pm on 10 August 2012 would result in their claims and defences to the counterclaims being struck out, with the defendants at liberty to enter judgment in the full amount of the counterclaims.
2. Amendment principles. Under CPR Part 17, permission was required. Applying the overriding objective in CPR Part 1, amendments should generally be allowed so that the real dispute can be adjudicated, provided prejudice can be compensated in costs and the efficient administration of justice is not significantly harmed. The approach in Cobbold v London Borough of Greenwich (unreported, 9 August 1999) was adopted. The court could also consider the effect on the trial programme and the lateness of the application.
3. Real prospect of success. The threshold was the same as under CPR Part 24: the amended claim had to be properly arguable and possess a real, not fanciful, prospect of success. The court applied the approach identified in Three Rivers DC v Bank of England (No 3) ([2001] 2 All ER 513).
4. The proposed statistical claim was inadequately pleaded. It did not sufficiently connect the pleaded breaches to the statistically estimated reduction in performance, assets or investor numbers. The claim also required investigation of why particular investors had left, so disclosure of investor identities was a legitimate line of enquiry. The claimants’ refusal to provide such information created an additional practical obstacle.
5. The amendment was substantially out of time, would require further disclosure and specialist expert evidence, and was likely to disrupt the trial timetable and cause serious prejudice to the defendants. Permission to amend was therefore refused. The court did not decide that the statistical approach could never support a claim, but held that the proposed pleading was inadequate in its present form.
6. The costs of both applications were ordered on the indemnity basis, payable within 14 days, with 90 per cent of the defendants’ summary costs bill to be paid.