St Vincent General Partner v Robinson

The court decided at first instance that the claimant, St Vincent, had no real prospect of success and entered summary judgment for the existing defendants. Key legal principles applied were the test for summary judgment under CPR 24.2, the established law on redemption and tender by a mortgagor, and the rule against recovery of "reflective loss" (as explained in Prudential and Johnson v Gore-Wood). The court held that St Vincent had not made an unconditional tender or paid into court and that its pleaded loss was the diminution in value of its interest in HHL and therefore reflective of losses properly recoverable by HHL or HDP. The court concluded that St Vincent could not rely on the Giles v Rhind exception to defeat the reflective-loss rule and so had no real prospect of proving its principal causes of action. The application to re-amend the pleadings and to add further defendants was refused for multiple additional reasons including a reasonably arguable limitation defence, lack of evidence for alleged undervalue and bribery, lateness and prejudice to the proposed defendants, and practical difficulties preparing for trial.

Background and parties:

• St Vincent, an Isle of Man investment company, acquired HHL which owned HDP, the owner of the Cross Point Development in Poland.
• The Creditors (including Mr Robinson) held security (the Shares Pledge) over St Vincent’s shares in HHL after St Vincent defaulted; Winterbourne Pte acquired the legal title to HHL shares on enforcement.

Procedural posture and relief sought:

• There were three applications: (1) strike out/summary judgment applications by the Robinson defendants; (2) strike out/summary judgment by the Nicholson defendants; and (3) the claimant’s application to re-amend its Particulars of Claim and to add five new defendants. The underlying action alleged, among other heads, wrongful refusal to accept a tender to redeem, breaches of implied duties of the pledgees, dishonest assistance, conspiracy and unjust enrichment arising from transfers in 2011 and the later sale of HDP assets to KFTP.

Issues framed by the court:

• whether St Vincent had made an unconditional tender or otherwise established a right to be treated as having redeemed the pledged shares;
• whether pleaded implied terms or duties obligated the pledgees to cooperate so as to waive or obviate actual tender;
• whether the claimant’s losses were barred as reflective loss and, if so, whether the Giles v Rhind exception applied;
• whether new defendants should be added by late amendment, including issues of limitation, sufficiency of evidence (undervalue and alleged bribery), prejudice and trial readiness.

Court’s reasoning and outcome:

• On tender and redemption the court found no unconditional offer to pay or any payment into court; communications were commercial negotiations and did not constitute valid tender. The remedies available to a mortgagor (including payment into court and a redemption action) meant there was no basis to treat the pledge as redeemed without proper payment.
• On the asset-stripping and post-2011 sale complaints, the court applied the rule against recovery of reflective loss: St Vincent’s pleaded loss was diminution in value of its equity in HHL and so reflected losses suffered by HHL and HDP, which were the proper claimants. The Giles v Rhind exception (disapplication of the reflective-loss rule where the wrongdoer has disabled the company from suing) was not available on the pleaded facts because St Vincent had not shown why HHL or HDP could not pursue derivative or direct claims and had itself brought actions in Cyprus without bringing derivative claims.
• The proposed re-amendment and joinder were refused because of an arguable limitation defence, absence of satisfactory evidence for the alleged undervalue and bribery, lateness, potential prejudice and practical difficulties in preparing new defendants for the scheduled trial.

At first instance the court entered summary judgment for the existing defendants and refused the claimant’s application to re-amend and to add new defendants. The judge held that St Vincent had no real prospect of proving an unconditional tender or that the pledge was extinguished, and that its principal losses were barred as reflective loss; the Giles v Rhind exception did not apply. The proposed late joinder failed for limitation, evidential insufficiency, lateness and prejudice.

Prior related interlocutory decisions: Phillips J set aside St Vincent’s worldwide freezing order in a judgment of 15 December 2017 ([2017] EWHC 3267 (Comm)). Permission to appeal that order was refused by Flaux LJ on 9 January 2018 (refused).