Scott & Ors v Singh

The claim concerned alleged misrepresentations and breaches of warranty in share sale agreements and related allegations of director misconduct. The court considered a late application by the claimants to amend their particulars of claim and applied established principles for late amendment: the proposed pleading must be comprehensible and properly particularised; any new cause of action must have a real prospect of success; and very late amendments that would jeopardise a trial date face a heavy burden. The court held that the form of the proposed pleading (splitting core allegations into a body and extensive schedules) was untidy and ordered that permitted material be combined into a single document.

Key rulings included: (i) the pleading of fraud in the schedules was adequate under the Three Rivers principles; (ii) a new claim in negligent misstatement was refused because no realistic duty of care was pleaded (distinguishing the present facts from Esso Petroleum v Mardon); (iii) the novel contention that a party adopts and makes a representation by allowing a draft warranty proposed by the other side to remain in a draft agreement was rejected; (iv) amendments asserting wide new financial representations were refused because they raised a new case lacking sufficient strength to justify loss of the trial date; (v) amendments based on newly discovered insurer indebtedness and a related warranty breach were permitted; and (vi) specific amendments concerning the Maritime and Fowler Welch customer representations, the Bison/Roadways legality representations (save for allegations based solely on unchallenged draft warranties) and a Global profitability representation (limited) were permitted.

Background and procedural posture.

The claim arises from the sale by the defendant of his controlling shareholdings in haulage companies (Bison and Roadways) and related sales involving Global. The claimants commenced proceedings alleging misrepresentation, breach of warranty and related causes of action, seeking rescission/repudiation declarations, damages and specific sums. The defendant counterclaimed. The claimants applied for permission to amend their particulars of claim on 20 March 2020; the defendant applied to strike out or for summary judgment and judgment on his counterclaim. The court heard the amendment application first and adjourned the defendant's application to consider it in the light of the amendment decision.

Nature of the application and relief sought.

• The claimants sought permission to file an amended particulars of claim and extensive schedules, expanding and reformulating allegations of misrepresentation (including fraud and negligent misstatement), breaches of express and implied contractual terms, and breaches of directors' duties, and introducing a schedule of loss and damage.
• The defendant sought to resist amendment, arguing many elements were new, inadequately particularised, without real prospect of success, would prejudice him and would jeopardise the existing trial timetable.

Issues framed by the court.

1. Whether the proposed amendments were properly formulated and particularised.
2. Whether parts of the proposed amendment disclosed new causes of action and, if so, whether those new causes of action had a real prospect of success.
3. Whether any permitted amendment would be so late as to justify refusing permission because it would necessitate loss of the existing trial date and because the claimants had no good reason for the delay.
4. Subsidiary questions including the adequacy of pleading fraud, the availability of a negligent misstatement cause of action, and the legal effect of not objecting to draft warranties.

Court's reasoning and dispositive conclusions.

• The court applied the established test for late amendment: clarity and adequate pleading; where a new cause of action is raised it must have a real prospect of success; and very late amendments that would require vacating a trial date require the claimant to show that justice requires allowing the amendment. The standard for assessing 'real prospect' is modest and akin to the summary judgment test.
• The court held the schedule-based format was unwieldy and ordered that permitted elements be combined into a single pleading when effected. However, the schedule form was adequate to plead fraud: it identified representations, particulars of falsity and particulars of knowledge consistent with Three Rivers.
• The negligent misstatement claim was refused because the pleaded facts did not show a 'special relationship' or special skill such as would found a duty of care akin to Esso Petroleum v Mardon; the judge concluded there was no real prospect that such a duty could be established on the pleaded facts.
• The novel argument that a representor makes a representation merely by allowing another party's draft warranty to remain in a draft agreement was rejected as having no real prospect of success.
• The court refused permission for a substantial expansion of alleged financial representations (nine new representations) because those elements introduced a new case, would materially increase disclosure, witness and expert preparation and would jeopardise the listed trial; the claimants offered no adequate explanation for their late advance of that new case and the new case was not of such strength as to justify loss of the trial date.
• The court permitted specified amendments: the claim based on the insurance premium indebtedness (insurance situation) to the extent that it supported a warranty breach claim; the Bison claim arising from alleged breaches of directors' duties (to be assigned so that Bison could be removed as a claimant); the Maritime and Fowler Welch customer relationship allegations (subject to adequate particularisation of oral instances); the Bison/Roadways legality representations other than those alleged solely to arise from unchallenged draft warranties; and a limited Global profit representation in respect of specific emailed and oral statements (while disallowing vague references to 'immense contingent liability').

Wider context. The judgment emphasises that late, detailed amendments that raise new causes of action are constrained by the need to protect trial timetables and to avoid prejudice; the court balanced the modest summary-judgment-style threshold for real prospects against the heavy burden for very late amendments that would displace an existing trial date.

The court allowed the amendment application in part and refused other parts. The judge authorised a number of targeted amendments (including certain legality, customer relationship and insurer-related warranty amendments, and a Bison directors' duties claim to be assigned to the purchasers) but refused permission for a negligent misstatement claim (no real prospect of duty), for the novel contention that unchallenged draft warranties constitute representations, and for an extensive late expansion of financial representations because those new allegations lacked sufficient strength to justify vacating the trial date. The fraud pleadings in the schedules were held to be adequately pleaded; permitted amendments must be consolidated into a single pleading and the trial timetable preserved where practicable.