Gladman Commercial Properties v Fisher Hargreaves Proctor & Ors

A claim for loss caused by alleged misrepresentations must plead a coherent causal case with a real prospect of success. Where loss is said to result from the immobilisation of borrowing capacity, the claimant must explain how that restriction caused the alleged loss and address the availability of alternative finance. Detailed pleading cannot be avoided by suggesting that the defendant should raise the missing matters by defence or seek further information. Material inconsistencies between the proposed case, contemporaneous documents and the claimant’s own evidence may demonstrate that the case is unsustainable at the pleading stage. The court may therefore strike out the claim under Civil Procedure Rules 1998, rule 3.4(2)(a).

The claimant alleged that misrepresentations concerning properties caused the Gladman Group to lose profits from developing alternative student-accommodation sites. It relied on the alleged sterilisation of between £5.4 million and more than £7 million of borrowing headroom under a revolving credit facility.

In an earlier judgment, the court held that paragraph 33 of the draft Amended Particulars of Claim did not adequately plead that the alleged misrepresentations caused the claimed losses, and that the expert report did not cure the defect. The claimant served Further Particulars on causation and loss. The issue was whether those particulars disclosed a coherent case with a real prospect of success, or whether the pleaded case remained defective and inconsistent with the contemporaneous evidence.

1. The Further Particulars did not cure the pleading defect. The claimant’s case was that approximately £30 million of headroom had been allocated for the student-accommodation division. On the pleaded figures, acquiring the Sheffield site would still have left more than £29 million available, or more than £23 million even after the alleged sterilisation of £7 million. The alleged restriction therefore did not prevent the acquisition and development of the initial sites on which the loss calculation was based.
2. The claimant also failed to plead that it had no alternative sources of finance, such as cash, equity or other secured finance. The alleged sterilisation of borrowing headroom could cause the claimed loss only if alternative finance was unavailable. That was an essential part of the causal case and could not be left for the defendants to raise by way of defence.
3. For completeness, the court held that the proposed case was inconsistent with the contemporaneous documents and the claimant’s earlier evidence. The bid document stated that the purchase would be funded from the group’s own resources. Evidence concerning the sale of industrial buildings indicated that cash was available. Earlier witness evidence stated that equity, rather than borrowing headroom, had been set aside for the purchase. Those inconsistencies were not merely matters for cross-examination and confirmed that the case was unsustainable.
4. The Particulars of Claim were accordingly struck out under Civil Procedure Rules 1998, rule 3.4(2)(a), both because the causation and loss case remained incoherent and because the claim constituted an abuse of process.

The court had earlier given a first judgment on 18 January 2013, reported as [2013] EWHC 25 (Ch), leaving issue 4 unresolved. This judgment determined that remaining issue.