Summary
Fraud and conspiracy claims must plead the primary facts relied on to support dishonesty. The pleaded facts must make an inference of dishonesty more likely than innocence or negligence, although the court should adopt a generous approach because fraudulent conduct may be concealed. Conclusions and speculation are insufficient. Where the pleaded case lacks that foundation, the claim may be struck out. Summary judgment may also be granted where the underlying allegations have no realistic prospect of success. For limitation purposes, Limitation Act 1980, section 32 postpones time only where fraud or deliberate concealment concerns an essential element of the cause of action and was not discoverable with reasonable diligence. A fraudulent breach of fiduciary duty may be subject to section 21, but that does not save an inadequately pleaded claim.
Factual background
The claimant, a former majority shareholder in Allerton Group Ltd, brought claims against three former directors, Bank of Scotland plc and Ernst & Young. He claimed personally and as assignee of claims belonging to Allerton Group. The claims alleged unlawful conspiracy, fraudulent misrepresentation, breaches of duty and losses arising from the group’s administration and sale of its business and assets in 2009.
The defendants applied to strike out the claims or obtain summary judgment. The principal issues were whether the allegations of fraud and conspiracy were adequately particularised, whether they had any realistic prospect of success, and whether the claims were time-barred under the Limitation Act 1980.
Held
- Strike-out. The claims against all defendants were struck out because the Particulars of Claim stated conclusions but did not plead primary facts from which it could rationally be inferred that the defendants had participated in a deliberate and unlawful conspiracy or fraudulent misrepresentation. The court applied the principles discussed in Portland Stone Firms Ltd v Barclays Bank [2018] EWHC 2341 (QB) and JSC Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm).
- Although fraud allegations should receive a generous pleading approach, the pleaded facts had to make dishonesty more likely than innocence or negligence. The alleged under-invoicing, withholding of CID payments, non-reporting in the independent business review, referral to Sterling, board minutes, forecasts and order book did not satisfy that test. The court considered the allegations speculative and unsupported by pleaded facts.
- Summary judgment. Alternatively, summary judgment was granted. The claimant’s calculations concerning under-invoicing and withheld CID payments were too simplistic to carry conviction and therefore gave the conspiracy allegations no realistic prospect of success. The court applied Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch).
- Limitation. The claims were time-barred under section 32 of the Limitation Act 1980, except for the claim against the directors alleging fraudulent breach of fiduciary duty. Fraud had to be an essential element of the cause of action for section 32(1)(a) to apply. Under section 32(1)(b), the concealed fact also had to be an essential element. The claimant had not shown that the relevant frauds or facts could not have been discovered with reasonable diligence.
- The burden of proving reasonable diligence lay on the claimant. The question was whether the fraud could have been discovered, not merely whether it should have been discovered sooner. The relevant standard was fact-sensitive and required consideration of what an ordinarily prudent person in the circumstances would have done.
- Section 21 of the Limitation Act 1980 removed the limitation defence for a claim alleging fraudulent breach of fiduciary duty by the directors. That point could not assist the claimant because the allegations had already been struck out. The court did not decide the reflective-loss issue.
The court’s approach to earlier authorities
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Key cases cited
17 authorities cited.
- Cave v. Robinson Jarvis & Rolf (A Firm) [2002] UKHL 18
- Gresport Finance Ltd v Battaglia [2018] EWCA Civ 540
- First Subsea Ltd v Balltec Ltd & Ors [2017] EWCA Civ 186
- Grace & Anor v Black Horse Ltd [2014] EWCA Civ 1413
- Allison & Anor v Horner [2014] EWCA Civ 117
- Williams v Lishman, Sidwell, Campbell & Price Ltd [2010] EWCA Civ 418
- Barnstaple Boat Company Ltd v Jones [2007] EWCA Civ 727
- Jafari-Fini v Skillglass Ltd & Ors [2007] EWCA Civ 261
- The Law Society v Sephton & Co & Ors [2004] EWCA Civ 1627
- Chagos Islanders v Attorney Generall & Anor [2004] EWCA Civ 997
- Regent Leisuretime Ltd. v Natwest Finance Ltd. [2003] EWCA Civ 391
- Paragon Finance Plc v D B Thakerar & Co (A Firm); Thimbleby & Co v Paragon Finance Plc [1998] EWCA Civ 1249
- Portland Stone Firms Ltd & Ors v Barclays Bank Plc & Ors [2018] EWHC 2341 (QB)
- JSC Bank of Moscow v Kekhman & Ors [2015] EWHC 3073 (Comm)
- Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch)
- Roache v News Group Newspapers Ltd [1998] EMLR 161
- Peco Arts Inc v Hazlitt Gallery Ltd [1983] 1 WLR 1315
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Cases citing this case
10 later cases · 7 positive · 2 neutral · 1 caution
Most senior citing decisions:
- Mark William Taylor & Anor v Bank Of Scotland Plc [2023] EWHC 3185 (Ch) applied
- Baroness Lawrence of Clarendon OBE v Associated Newspapers Limited [2023] EWHC 2789 (KB) considered
- Harrington and Charles Trading Company Limited (in liquidation) & Ors. v Jatin Rajnikant Mehta & Ors. [2022] EWHC 2960 (Ch) applied
- Bilta (UK) Limited (in liquidation) & Ors v SVS Securities plc [2022] EWHC 723 (Ch)
- ALLIANZ GLOBAL INVESTORS GmbH & Ors. v RSA INSURANCE GROUP LIMITED [2021] EWHC 2950 (Ch)
- Boyse (International) Ltd v Natwest Markets Plc & Anor [2021] EWHC 1387 (Ch)
- Arani & Ors v Cordic Group Ltd [2021] EWHC 829 (Comm)
- Boyse (International) Ltd v Natwest Markets Plc & Anor [2020] EWHC 1264 (Ch)
- Raja v McMIllan [2020] EWHC 951 (Ch)
- Grove Park Properties Ltd v The Royal Bank of Scotland Plc [2018] EWHC 3521 (Comm)
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