Musst Holdings Ltd v Astra Asset Management UK Ltd & Anor

On an application to amend pleadings which is not late or very late, permission should be granted where the proposed case has a real prospect of success, is coherent and adequately particularises the cause of action. The court should not finally determine disputed construction issues or require the claimant to plead its whole evidential case.

Rectification for common mistake requires a common continuing intention and an outward expression of accord existing when the contract was made. The claimant must identify precisely both the mistake and the form of the rectified agreement. Estoppel by convention instead concerns post-contract conduct and requires a communicated common assumption on which both parties acted.

Two related claims concerned Musst’s entitlement to management and performance fees under an Introduction Agreement concerning investments in managed accounts. Musst applied to amend its particulars of claim and its reply to address Astra’s case that the investments had ceased to qualify because the managed accounts no longer followed the contractual investment strategy.

The proposed amendments raised contractual construction, rectification for common mistake, estoppel by convention, declaratory relief concerning performance fees, and a declaration concerning Astra UK’s liability to Astra LLP under a deed of transfer. The central issue was whether the proposed amendments were coherent, adequately particularised and had a real prospect of success.

1. Permission to amend. The court applied the principles summarised by Asplin LJ in Elite Property Holdings Ltd and another v Barclays Bank plc [2019] EWCA Civ 204. The overriding objective required a fair and just determination at proportionate cost. A proposed amendment needed a real, rather than fanciful, prospect of success. The court could reject a case that was implausible, self-contradictory or unsupported by contemporaneous documents, but the application was not a mini-trial.

2. Where construction was disputed, the court was not to reach a concluded construction without the full trial context. The relevant question was whether Musst’s construction was more than merely arguable and had a real prospect of success. The proposed construction that an investment could remain eligible despite a later change of strategy met that threshold.

3. Rectification. Applying the Court of Appeal’s analysis in FSHC Group Holdings Ltd v Glas Trust Corporation Ltd [2019] EWCA Civ 1361, rectification for common mistake required either a prior concluded contract or a common intention on a particular matter which the written contract failed accurately to record. In the latter case there had to be an outward expression of accord, and it had to exist when the contract was executed. Post-contract payments, conversations and emails could not establish the required pre-contract outward expression. Permission was therefore refused for the rectification claim.

4. Rectification also required precision. The claimant had to identify both the mistake and the contractual wording that should replace the defective wording. A general assertion that the parties intended different contractual rights was insufficient.

5. Estoppel by convention. The proposed case had to show a common assumption which was communicated across the parties and on which both acted. Unlike rectification, the assumption did not have to arise before the contract was made. The relevant focus was the parties’ post-contract conduct. The pleaded conversations were capable of satisfying the communication requirement, so the claim had a real prospect of success.

6. The proposed claims for declarations concerning performance fees and Astra UK’s potential indemnity liability were sufficiently clear and had a real prospect of success. Whether declaratory relief should ultimately be granted was for the trial judge, with the full factual and contextual material available.

7. Permission was granted to amend the particulars of claim and the reply and defence to counterclaim in accordance with the final drafts, except for the new rectification claim, for which permission was refused.