Property Alliance Group Ltd v The Royal Bank of Scotland Plc

Fraud and dishonesty allegations require specific and properly supported pleading. The court must assess both the form of the plea and the substance of the material relied on. An amendment should be permitted where the pleaded facts provide a properly arguable basis for inferring dishonesty, even though further detail may later be required. Case-management decisions must accommodate information asymmetry where relevant evidence is substantially within the defendant’s possession. Disclosure may properly extend to focused classes of documents held by senior custodians, including a complete electronic dataset where review by the disclosing party would be disproportionate and the receiving party accepts the burden of searching it.

The claimant, a property developer, brought proceedings against its former bank concerning the alleged mis-selling of interest-rate swaps, the transfer of its relationship to the bank’s restructuring division, and representations concerning LIBOR. Following disclosure, the claimant sought to amend its Particulars of Claim to add detailed allegations that the LIBOR representations had been made fraudulently or dishonestly. It also sought further disclosure from senior bank personnel and communications with the Bank of England.

The defendant opposed the fraud amendment, sought amendments to its Defence, and objected to the further disclosure. The central issues were whether the claimant had sufficient material to plead fraud at that stage, whether the defendant’s proposed amendments should be allowed, the effect of proposed amendments on privilege, and the appropriate scope and form of disclosure.

1. Claimant’s amendment. PAG was permitted to amend its Particulars of Claim. Allegations of fraud and dishonesty require particular care, but the court’s scrutiny is directed to preventing unfounded allegations rather than preventing soundly based claims. The pleaded material, considered as a whole, provided ample prima facie support for an inference of fraud and dishonesty involving senior RBS personnel (paras [37]-[43], [56]-[62]).
2. The court applied the principle from Three Rivers v Bank of England [2001] UKHL 16 that the substance of the facts relied on must support the inference alleged. Individually equivocal matters could, taken together, provide a properly arguable case. At this stage PAG was not required to identify every relevant individual or currency, although the case would need to be focused after RBS responded and further disclosure was given (paras [56]-[63]).
3. Defendant’s amendment. RBS’s proposed amendments were refused. The GRG amendments, considered alone, would have been acceptable because they explained the denial. The proposed LIBOR amendments were too little and too late and did not properly respond to the Amended Particulars of Claim. RBS was required instead to respond to the amended pleading (paras [64]-[66]).
4. A party may decide not to rely on privileged material and amend its pleading accordingly. If the amendment were permitted, the earlier waiver arising from the pleading would not remain. However, the court rejected PAG’s submission that privilege had additionally been waived through the interlocutory case-management hearings. The earlier orders for inspection would therefore be set aside if the consequential amended Defence took the proposed form (paras [67]-[73], [88]).
5. Disclosure. RBS was ordered to disclose communications with the Bank of England and relevant board minutes and papers. It was also ordered to produce electronically the class of documents already collated from senior custodians, subject to a seven-day opportunity to agree narrower search terms. PAG accepted the burden of searching the material, and production of the complete electronic set was proportionate in the circumstances (paras [76]-[87]).