Ivy Technology Ltd v Martin & Ors

Permission to amend a pleading should be granted where the proposed claim has a real, rather than fanciful, prospect of success and carries some degree of conviction. The court should not conduct a mini-trial. It should consider evidence reasonably expected to be available at trial and should hesitate to determine an issue finally where fuller factual investigation may affect the outcome.

Whether a contract excludes the liability of an undisclosed or disclosed principal depends on the agreement read in its factual matrix and, where relevant, the wider evidential mix. Identifying the contractual parties and including an entire agreement or third-party rights clause may be cogent evidence, but is not necessarily conclusive. A warranty is a contractual promise, not ordinarily a representation of fact. Election requires a truly unequivocal act and is generally a question of fact.

The claimant sought permission to amend its Particulars of Claim in proceedings arising from a share sale agreement concerning an online gambling business. It sought to allege that the second defendant, although not named in the agreement, was the disclosed or undisclosed principal of the first defendant and was therefore liable for breach of contract.

The application also concerned alleged estoppel, election, the characterisation of contractual warranties as representations, and the clarity of proposed pleading amendments. The central questions were whether the contractual and factual issues had a real prospect of success and whether they should be resolved before trial.

1. Amendment and real prospect of success. The proposed claim that the second defendant was liable as principal was not fanciful. The real prospect test requires more than an arguable case and some degree of conviction, but does not permit a mini-trial. The court must consider evidence already available and evidence reasonably expected at trial. The claim should proceed where fuller investigation may add to or alter the evidence and affect the outcome, applying the principles collected in Elite Property Holdings v Barclays Bank [2019] EWCA Civ 204, Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) and the authorities there cited.
2. Exclusion of principal’s liability. A person not named as a contractual party cannot be sued as a disclosed or undisclosed principal if the agreement expressly or impliedly excludes that liability. Whether it does so is assessed by construing the agreement in its factual matrix and, where appropriate, by considering the wider evidential mix. The description of the parties, recitals, warranties and a third-party rights clause were cogent indications against liability, but could not be treated as conclusive before the reasons for the contractual form were known. Permission was therefore granted on this issue.
3. Estoppel and election. The meaning and effect of the beneficial ownership statements could not properly be determined before trial. Election requires a truly unequivocal act involving abandonment of the relevant alternative. Commencing proceedings against the agent may be strong evidence, but the issue remains fact-sensitive and the claimant had not had a proper opportunity to adduce evidence. It was therefore reserved for trial.
4. Warranties. Following Idemitsu Kosan v Sumitomo [2016] EWHC 1090 (Comm), a warranty is a contractual promise rather than a statement of fact. The agreement’s provision concerning untrue statements and omissions did not convert warranties into representations. Permission to amend on that point was refused.
5. Pleading clarity. The allegation concerning the second defendant’s true or joint ownership was sufficiently intelligible at this stage because the uncertainty reflected the state of the evidence. A separate allegation referring to documents without identifying the representation was defective and had to be removed or particularised. The parties were invited to agree an order giving effect to the decisions.