McKillen v Misland (Cyprus) Investments Ltd

The petitioner/claimant sought extensive late amendments to a s.994 petition and associated Part 7 Particulars of Claim asserting, inter alia, that the Barclay Brothers were de facto or shadow directors, that shareholders owed fiduciary duties to one another, and various breaches of clause 8.5 of the shareholders' agreement. The judge applied the modern test for late amendments (as in Worldwide and Swain‑Mason), considered the CPR Part 24 / summary judgment style test for whether the new case was arguable, and analysed the law of de facto and shadow directors (including Hydrodam, Deverill and HMRC v Holland) and the law on fiduciary obligations (Peskin; Mothew).

The court refused to refuse the amendments for lateness because most arose from late disclosure, but permitted only a limited set of amendments: permission was given to plead that Sir David Barclay was a shadow director in respect of particular matters on which he gave instructions, but not to plead him as a de facto director nor to plead that Sir Frederick Barclay was a shadow or de facto director. Permission to plead shareholders' fiduciary duties was refused. Various specific proposed amendments against Mr Quinlan and the Barclay‑appointed directors were permitted in part and refused in part (notably, conspiracy and some pleaded breaches were refused). The claimant was ordered to re‑draft the petition and Particulars of Claim in a clearer, consolidated form and to provide limited further information to Mr Quinlan about loans/events of default affecting shares since 1 April 2010.

This was a first instance interlocutory judgment dealing with extensive applications by the petitioner/claimant, Patrick McKillen, for leave to amend his s.994 petition and associated Part 7 Particulars of Claim shortly before a fixed, expedited trial. The pleadings advanced a wide-ranging case: that the Barclay Brothers had pursued a plan to obtain control and ownership of Coroin Limited, that certain persons appointed to the board acted to further the Barclays' interests, that the Barclays were de facto and/or shadow directors, and that shareholders owed fiduciary duties to one another and had breached clause 8.5 of the shareholders' agreement. The Part 7 claim alleged a conspiracy to injure the claimant by unlawful means, dependent on the petition.

Nature of the application: permission to make extensive and late amendments to the Petition and Particulars of Claim; and a Part 18 / further information application by Mr Quinlan.

Issues framed by the court:

• Whether the amendments were too late and should be refused (applying the approach in Worldwide Corporation and Swain‑Mason);
• Whether the proposed new matters disclosed an arguable case such that they should be permitted (applying the summary judgment/CPR Part 24 test);
• The legal tests for de facto and shadow directorship and their application to the pleaded facts;
• Whether shareholders could be said to owe fiduciary duties to one another on these facts;
• Whether the Particulars of Claim were sufficiently particularised as to knowledge and procurement; and
• Whether the claimant should be ordered to provide further information about loans/events of default affecting shares.

Court's reasoning and conclusions: The court held that, because many of the proposed amendments derived from very recent disclosure, lateness alone did not justify refusal. However, the extensive nature of the amendments required careful examination on the arguability test. The judge analysed authorities on shadow and de facto directors and concluded that while there was insufficient material to support a case that either Barclay was a de facto director or that Sir Frederick Barclay was a shadow director, there was arguable material to plead that Sir David Barclay was a shadow director in respect of particular matters where he gave instructions. The judge refused permission to plead shareholders' fiduciary duties as unsustainable in law: the relationship of shareholders (absent features like agency or partnership) does not ordinarily give rise to fiduciary duties and the contractual good faith provision (clause 8.5) did not convert that relationship into one imposing the full range of fiduciary obligations.

The judge permitted some, but not all, of the proposed additions to pleadings against Mr Quinlan (including a permitted case that certain payments were linked to his support, but refusing an added conspiracy pleading and certain other paragraphs). The Particulars of Claim were to be re‑drafted in light of the permitted changes and to particularise knowledge where necessary. Finally, the court ordered Mr McKillen to provide limited further information to Mr Quinlan concerning loans secured on his shares or loan stock and any actual or potential event of default since 1 April 2010, reasoning it would be unconscionable for the claimant to rely on a contractual construction and require others to comply with it while refusing disclosure of potentially reciprocal events.

At first instance the court allowed the amendment applications in part and refused them in part. The judge refused to refuse permission on grounds of lateness because many amendments derived from recent disclosure, but applied the summary judgment/CPR Part 24 test and permitted only a limited, defined set of amendments: permission to plead that Sir David Barclay was a shadow director in relation to particular instructions was granted; permission to plead de facto directorship or to plead that Sir Frederick Barclay was a shadow director was refused; permission to plead fiduciary duties between shareholders was refused as unsustainable in law; various specific proposed amendments against Mr Quinlan and the Barclay‑appointed directors were permitted or refused as set out in the reasons. The claimant was ordered to re‑draft the petition and Particulars of Claim in consolidated form and to provide limited further information to Mr Quinlan regarding loans/events of default affecting shares since 1 April 2010.