Toorani & Ors v Toorani & Ors

When deciding whether to permit amendments introducing dishonesty or fraud, the court considers whether the primary facts pleaded make dishonesty more likely than innocence or negligence. It does not decide whether the evidence will ultimately prove fraud. If the plea is justified on the pleaded facts, the issue should proceed to trial.

A pleader will rarely be criticised for failing to anticipate a defence. Statements of case are not an exercise in stylistic perfection, provided they clearly and concisely identify the case to be met. For sham, the relevant parties must have the necessary common intention, but a company may possess that intention even though one signatory acting for it was innocent or deceived.

The claimants sought to set aside two property transfers under section 423 of the Insolvency Act 1986. The defendants contended that the transfers were made pursuant to an oral agreement and a tax-planning arrangement, rather than as gifts.

The claimants applied to amend their Particulars of Claim to advance alternative cases alleging dishonesty and sham. The defendants objected that the amendments were late, unnecessary, internally inconsistent and insufficiently supported by pleaded facts. The defendants also applied to strike out parts of the Reply.

The central issues were whether the proposed amendments had a real prospect of success, whether dishonesty was properly pleaded, and whether the alleged sham could be maintained despite one corporate signatory allegedly being innocent.

1. Amendments generally. The jurisdiction under CPR 17.1(2)(b) and CPR 17.3 is discretionary. The court must consider all the circumstances and deal with the matter justly and proportionately. Where an amendment introduces a new case, the applicant ordinarily must show some prospect of success. If the court is not persuaded that the amendment has no real prospect of success, it should avoid burdening the trial judge with a preliminary view on the merits. The approach in SPI North Ltd v Swiss Post International (UK) Ltd [2019] EWHC 2004 (Ch) was adopted.
2. Pleading dishonesty. At the interlocutory stage, the court asks whether the primary facts pleaded justify an inference that dishonesty is more likely than innocence or negligence. The claimant need not plead facts consistent only with dishonesty. The court is not deciding whether the trial evidence will establish fraud. If the plea is justified, it should proceed to trial. The guidance in JSC Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm) was applied.
3. The pleaded facts concerning professional tax advice, an arrangement appearing to comply with the scheme, and the alleged recycling of rental payments were sufficient to support the proposed dishonest and sham cases. Whether the defendants were complicit remained a matter for trial.
4. Sham. Following Snook v London and West Riding Investments Ltd [1967] 2 QB 782, a sham requires the relevant parties to share an intention that the document should create different rights and obligations from those it appears to create. However, the innocence or deception of one person signing for a corporate party does not necessarily prevent the company from having the requisite dishonest intention. Whether the corporate lessor had that intention was a trial issue.
5. The court applied the dishonesty approach in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67: the fact-finder first determines the defendant’s actual knowledge or belief, then applies the objective standards of ordinary decent people. The proposed third case was sufficiently pleaded.
6. Permission was granted to file and serve the Re-Re-Amended Particulars of Claim. No order was made on the strike-out application. Permission was also granted to amend the typographical error in the earlier application notice.