LBI HF v Stanford

An application to amend pleadings after a pre-trial review is ordinarily a late amendment. The court must strike a fair balance, having regard to the amendment’s history and explanation, the prejudice to each party, and the clarity and particularity of the proposed pleading. Loss of a fixed trial date is substantial prejudice, particularly where the amendment introduces a serious new allegation requiring investigation. The court may dismiss the amendment application while accepting an undertaking that preserves any genuinely available claim in another forum, thereby avoiding disruption to the trial.

The proceedings concerned loans made to Kevin Stanford by Landsbanki Luxembourg SA, secured over property in London. Following an assignment of the loan book, LBI HF became claimant. Mr Stanford sought permission to re-re-amend his defence and counterclaim to plead fraud against LBI, shortly after a pre-trial review and shortly before the listed trial.

The proposed amendment relied principally on material said to support a fraud claim and raised issues concerning whether the claim remained available under Icelandic insolvency law. LBI opposed the amendment, particularly because it would disrupt the trial timetable. LBI offered an undertaking preserving the possibility of pursuing any maintainable claim in Iceland.

1. Application dismissed. The proposed fraud amendment was late. An application made after the pre-trial review, especially one likely to disrupt the trial, should be treated as late for the purposes of the amendment principles.
2. The court adopted the principles summarised by Hamblen J in Brown v InnovatorOne plc [2011] EWHC 3221 (Comm). The relevant considerations were the history and explanation for the delay, the prejudice to the applicant if amendment were refused, the prejudice to the opposing party if it were allowed, and whether the pleading was clear and sufficiently particularised.
3. The explanation for the delay was inadequate. The possibility of pleading fraud had been raised for a considerable period, and the principal supporting material had been available through the defendant’s Icelandic lawyers since 2012. The decision to seek a stay and, after that failed, to advance the fraud amendment suggested a tactical manoeuvre.
4. The court considered the competing prejudice. Refusal might deprive Mr Stanford of an English counterclaim if the claim remained viable. Allowing the amendment would almost inevitably cause loss of the fixed trial date, substantial additional costs and the need for careful investigation of a serious fraud allegation.
5. The court accepted the principles in Medcalf v Mardell [2003] 1 AC 120 concerning the difficult professional judgment involved in pleading fraud, including the need for clear instructions and reasonably credible material establishing a prima facie case. Those principles did not adequately explain the timing of this application.
6. The undertaking offered by LBI preserved any claim which remained maintainable in Iceland and avoided prejudice caused by derailing the English trial. It was preferable for the cancellation issue under Article 100 of the Icelandic insolvency law to be determined authoritatively by an Icelandic court rather than as a question of foreign law in England.
7. The defendant was the unsuccessful party and was ordered to pay LBI’s costs of the application, including the costs reserved by Warren J.