Lygoe & Ors

In insolvency proceedings begun by application notice and witness statement, the court may direct formal pleadings where a disputed dishonesty claim is inadequately particularised, rather than striking it out prematurely. For limitation purposes, the application notice and accompanying witness statement may be read together where the notice uses shorthand references that depend on the supporting evidence. A proposed new claim arises out of the same or substantially the same facts where it concerns a transaction forming part of the factual package already relied on for existing claims, even if that transaction is not itself separately pleaded. Sufficiently indicated facts may justify permission to amend, with proper particulars to follow.

The trustee in bankruptcy of Jeffrey Peter Lygoe brought proceedings concerning transfers and payments allegedly intended to defraud creditors, including payments involving Lexoco Ltd and Maplehorn Ltd. Nicholas Lygoe, a director of Lexoco, was accused of dishonest assistance and was also said to be liable in conspiracy.

District Judge Matthews refused Nicholas’s application to strike out the dishonesty allegations, directing that the claims be pleaded formally. He also allowed amendments adding claims concerning the Maplehorn payment without determining limitation issues. The appeal concerned the adequacy of the dishonesty case and whether the proposed amendments arose from the same or substantially the same facts under CPR 17.4.

1. Strike-out application. The appeal against the refusal to strike out the dishonesty allegations failed. It was open to the district judge to treat the claim as not yet fully formulated and to direct formal pleadings. Dishonesty must be clearly alleged with proper particulars, but the initial application notice and evidence were not necessarily exhaustive. The trustee was entitled to develop the case through pleadings.
2. Construction of the originating documents. The application notice used expressions such as the transfer of Victoria House and the payment to Lexoco which had no sufficient meaning by themselves. It therefore had to be read with the accompanying witness statement. That combined material identified the facts relevant to the CPR 17.4 inquiry.
3. Same or substantially the same facts. The proposed conspiracy claim concerning the payment to Lexoco arose from substantially the same facts as the existing claims. The Maplehorn payment was also part of the factual package relied on to show a pattern of dishonest conduct and to support the claims concerning earlier payments. The proposed dishonest assistance and conspiracy claims therefore fell within rule 17.4(2).
4. The fact that the evidence did not yet contain a fully particularised claim did not prevent amendment. There were sufficient facts to identify the proposed claims. They were to be properly particularised in formal pleadings.
5. The district judge had erred by allowing the amendment without deciding the limitation issue. Since the material and arguments were before the High Court, it was appropriate to determine the matter itself rather than remit it. The amendments were allowed.

• High Court (Chancery Division): The appeal from the decision of District Judge Matthews was allowed in part. The refusal to strike out the dishonesty allegations was upheld. The amendment issue was reconsidered and the amendments were allowed.
• County Court at Peterborough: On 28 September 2018, District Judge Matthews refused Nicholas Lygoe’s strike-out application and allowed amendments without determining the limitation issues.