Baturina v Chistyakov

On an application to amend, the court applies the same threshold as on summary judgment: a proposed plea should be refused only where it has no real prospect of success. The assessment may require consideration both of the pleading as a whole and of particular amended pleas. Where disputed facts are central, the court should avoid conducting a mini-trial.

A claim based on reflective loss may proceed where its legal recoverability is closely connected with unresolved factual issues. However, an account or restitutionary remedy requires a proper legal and factual basis. Separate corporate personality prevents recovery from an individual of money received only by a company merely because the individual controls or beneficially owns it.

The claimant alleged that the defendant had induced her to enter an English-law agreement concerning Moroccan property projects and had caused funds advanced by her company, Inteco, to be misappropriated. The Court of Appeal had previously allowed her appeal against a stay in favour of Russia, holding that her claim as pleaded was unsustainable because Inteco, rather than the claimant, had made the loans and had been made whole by their assignment to her: [2014] EWCA Civ 1134.

After remittal, the claimant sought permission to amend her Particulars of Claim to advance alternative claims for direct loss, reflective loss, expectation loss, an account, restitution and restitutionary damages. The defendant opposed the disputed amendments and sought summary judgment or strike out. The central questions were whether the proposed claims had a real prospect of success and whether the defendant could reserve a further forum non conveniens application.

1. Forum non conveniens application. The Court of Appeal had envisaged any stay application and amendment application being considered together. The defendant knew the proposed amended case and had access to expert Russian evidence. As a matter of principle, a party must advance its arguments at the same time rather than in stages. The defendant therefore could not reserve a further stay application after the amendment hearing.
2. Amendment threshold. An amendment should not be allowed where the point has no real prospect of success. The test is the same as on summary judgment. Both the proposed pleading as a whole and the specific pleas advanced by the amendments may be relevant. Factual disputes central to the alleged loss could not properly be resolved at this stage.
3. Loss claims. The proposed direct-loss claim and the claim based on diminution in the value of the claimant’s interest in Inteco were not shown to be hopeless. The court rejected the contention that the value of shares could only be affected once an alleged fraud was discovered. The legal issues concerning reflective loss were bound up with factual issues requiring trial. The proposed contractual claims for alleged returns were permitted after the claimant accepted that the inflated figure would be deleted and the claim limited to €71,282,500.
4. Gain-based and restitutionary remedies. The proposed account and restitutionary damages claims based on gains allegedly made by Sylmord had no proper factual basis and did not fall within the exceptional category recognised in Attorney-General v Blake [2001] 1 AC 268. Similar claims in tort were not available. Restitution was also inadequately pleaded because the defendant had not received the money. His alleged control or beneficial ownership of Sylmord did not displace the company’s separate legal personality, consistently with Prest v Petrodel Resources Ltd [2013] 2 AC 415.
5. The disputed amendments concerning direct loss, reflective loss and limited contractual claims were allowed. The account, restitution and restitutionary-damages amendments were refused. The summary judgment and strike-out applications were not pursued once a viable amended claim was permitted. An extension of time to serve the related protective claim was granted. Costs were ordered in accordance with the judgment.

• Court of Appeal. The claimant’s appeal against the stay was allowed and the proceedings were remitted to the Commercial Court: [2014] EWCA Civ 1134.
• High Court (Commercial Court). On remittal, Blair J determined the amendment, summary judgment/strike-out, costs and protective-claim applications.