Barrowfen Properties Ltd v Patel & Ors

On an interlocutory strike-out application, the court must not conduct a mini-trial where material facts are disputed. Fraud allegations should proceed where the pleaded primary facts make dishonesty more likely than innocence or negligence and provide a proper evidential basis for the allegation.

An illegality defence requires a real and sufficiently close connection between the alleged illegality and the claim. A remote and unproved connection with alleged criminal property is insufficient. The without-prejudice exception for unambiguous impropriety is exceptional and requires clear evidence leaving no scope for dispute. A good arguable case is insufficient.

Permission to amend granted in connection with a privilege application extends only to matters arising from that application and the documents within its scope.

The claimant brought proceedings concerning alleged breaches of duty and misconduct involving its former director and its solicitors. The solicitors amended their defence to plead alleged fraud, conspiracies to pervert the course of justice, criminal property, illegality and an undocumented arrangement to attribute liability to them.

The claimant applied under CPR Part 3.4 to strike out the challenged paragraphs. The application followed earlier procedural orders concerning amendments, privilege and disclosure, including judgments in the same litigation at [2020] EWHC 1145 (Ch) and [2020] EWHC 2536. The issues were whether the allegations had a real prospect of success, whether the supporting communications were admissible, and whether permission had been given to make the amendments.

1. Fraud allegations. The court applied the approach in JSC Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm). Where facts are disputed, the court must not conduct a mini-trial. The pleaded primary facts need not be consistent only with dishonesty, but must justify an inference that dishonesty is more likely than innocence or negligence. The Aumkar allegations and supporting documents crossed that threshold and could not be struck out under CPR Part 3.4(2)(a).
2. Illegality and criminal property. The solicitors had no real prospect of proving that Bedford received criminal property within the meaning of section 340 of the Proceeds of Crime Act 2002. The evidence did not establish that Bedford received the relevant proceeds or that any transfer resulted from criminal conduct. The alleged conduct was also temporally and legally remote from the claim. There was no real or inextricable link between the alleged Aumkar fraud and the claimant’s claim, and the illegality defence therefore had no real prospect of success.
3. The court considered the policy approach in Grondona v Stoffel & Co [2020] 3 WLR 1156 and Patel v Mirza [2017] AC 467, but held that a full policy analysis was unnecessary once the factual and causative connection had failed.
4. Without prejudice communications. Applying Motorola Solutions Inc v Hytera Communications Corp Ltd [2021] EWCA Civ 11, the court held that the unambiguous impropriety exception requires clear evidence and no scope for dispute about what was said or meant. A good arguable case that communications were admissible was insufficient. The communications relied on did not establish an unambiguous agreement to pervert the proceedings and were inadmissible.
5. Permission to amend. Permission granted in connection with the privilege application permitted amendments arising from the determination of that application. It did not permit unrelated allegations based on documents outside the order’s scope. The challenged paragraphs did not arise from the privileged documents ordered to be disclosed.
6. The challenged paragraphs were struck out under CPR Part 3.4(2)(c), and also under CPR Part 3.4(2)(a) insofar as the undocumented-arrangement and related illegality allegations had no real prospect of success. The ruling did not prevent cross-examination on the 4 October 2013 email or other admissible material where relevant to credit.

This was a first-instance interlocutory decision. The judgment records earlier procedural decisions in the same proceedings, including the judgment of Birss J at [2020] EWHC 1145 (Ch) and the privilege judgment at [2020] EWHC 2536.