Isis Investments Ltd v Oscatello Investments Ltd & Ors

Permission to amend pleadings should be granted where the proposed case has a realistic prospect of success. The court may examine the evidence sufficiently to decide whether the case is fanciful, but should not conduct a mini-trial or resolve disputed questions of fact. The later the amendment, the more it may need to commend itself, although the overriding objective ordinarily favours allowing a party to advance its actual case. A pleading must allege the material facts supporting the cause of action, but need not identify all the evidence. A compromise release is not necessarily a general release of unknown claims; its scope depends on the causes of action, facts and relief covered by its terms.

Isis Investments Limited, acting through its liquidator, sought permission to amend its particulars of claim concerning clause 6 of a Framework Agreement governing the Violet Economic Return from the sale of Somerfield assets. The proposed amendments alleged sham consideration, unlawful return of capital, breach of fiduciary duty, lack of authority, conspiracy, illegality and an unenforceable equitable charge.

Oscatello Investments Limited and Kaupthing Bank hf opposed the amendment. They argued that the pleading lacked essential averments, that the evidence did not support the case, and that the claims had been released by a compromise agreement arising from related proceedings. The court also considered whether a representative defendant should remain a party.

1. Amendment permitted. The existing evidence disclosed a triable defence to the counterclaim. The proposed case therefore had a realistic prospect of success. The court was not required to decide disputed factual questions, such as whether payments shown in bank statements had in fact been made, on an amendment application.
2. The function of a pleading is to allege the material facts necessary to support the case, not to identify all the evidence. The pleading required clarification and further particulars, but its central allegations were sufficiently apparent. Conversely, a pleading lacking a material averment is liable to be struck out and should not be permitted merely to provoke a strike-out application.
3. The allegation that clause 6 involved a sham was adequately arguable because the pleading identified the substance of the alleged circular transactions and the alleged intention that the promised consideration would not be paid. The allegation of unlawful return of capital was also arguable. Substance governs, so an asset transferred to Oscatello could realistically be characterised as a distribution to Kaupthing where Kaupthing’s known priority position meant that the money would immediately be forfeited to it.
4. The allegations of breach of fiduciary duty, want of authority, conspiracy and illegality required further particularisation, including the relevant acts, knowledge and participation. They nevertheless had a realistic prospect of success. The proposed equitable-charge argument was not shown to be unarguable.
5. The court declined to determine conclusively whether the compromise agreement released the proposed claims. The pleaded facts and relief differed materially from those in the earlier proceedings, so it was properly arguable that the release did not apply. The seventh defendant’s continued presence was not undesirable under CPR 19.2(3).
6. Permission to amend was granted subject to the condition that the liquidator should not simultaneously pursue judgment debts on the profit participation loans while alleging that those loans were invalid, unless the proof was made contingent on failure of the invalidity case.