Barrowfen Properties Ltd v Patel & Ors

On a strike-out application concerning allegations of fraud or dishonesty, the court asks whether the pleaded primary facts make dishonesty more likely than innocence or negligence. The claimant need not plead facts consistent only with dishonesty. A solicitor who owes no other duty to the claimant remains subject to the ordinary duty not to practise deceit. A literally true statement may constitute deceit if its context makes it a knowingly misleading half-truth. However, silence or omission does not automatically convert an accurate statement into a misrepresentation. At the interlocutory stage, the court should not conduct a mini-trial where a pleaded inference is reasonably arguable. Directly misleading answers to specific questions may properly proceed to trial.

The claimant brought claims against Stevens & Bolton LLP arising from the administration of Barrowfen Properties Limited. The claims alleged dishonest assistance, deceit and unlawful means conspiracy in connection with a plan allegedly devised by the first defendant to enforce a loan and debenture through administration and acquire the company’s principal property.

Stevens & Bolton applied to strike out the relevant allegations and opposed amendments. The central issues were whether the pleaded facts supported an inference of dishonesty, whether the statements made in correspondence and at a meeting could amount to deceitful half-truths, and whether the claims disclosed reasonable grounds or a real prospect of success.

1. Application partly allowed. The allegations based on the 4 December 2015 letter were struck out. The allegations based on statements made at the 9 December 2015 meeting were permitted to proceed to trial, and the relevant amendments were allowed subject to further revision.
2. The governing strike-out principles were familiar. Fraud and dishonesty require particular care and must be specifically pleaded. The claimant must plead primary facts giving sufficient notice of the case. At the interlocutory stage, the question is whether those facts disclose a reasonable prima facie case. The claimant need not plead facts consistent only with dishonesty; the pleaded facts must make dishonesty more likely than innocence or negligence.
3. The allegations concerning conflicts of interest, assistance with the proposed administration and the assignment of the loan provided context, but did not by themselves make dishonesty more likely. The critical allegations concerned the 4 December letter and the 9 December meeting.
4. A person cannot avoid liability for deceit by asserting that no other duty was owed to the victim. The ordinary duty not deliberately to make a false representation, intending reliance to the victim’s detriment, applies equally to lawyers.
5. A half-truth may constitute deceit where a partial statement, viewed in context, is intended to suggest a falsehood. The 4 December letter was literally accurate and, in its particular commercial and legal context, did not more likely than not convey an implicit representation about what Barrowfen II would do. The 9 December answer was different. A direct question about the assignment was met with an answer that there was nothing in particular to tell, although the solicitor allegedly knew of the plan to enforce the loan through administration. That was sufficiently capable of amounting to deliberate misleading conduct.
6. The court declined to resolve disputed reliance, privilege, causation and factual credibility issues by mini-trial. The judgment made no concluded findings of fact and was purely interim.