Kiril Klaturov & Anor v Revetas Capital Advisors LLP & Anor

Permission to amend pleadings should be granted where the proposed amendment has a real prospect of success, carries sufficient conviction in law and fact, and is coherent and properly particularised. The court should apply the overriding objective and should not conduct a mini-trial.

Contractual terms are implied only where necessary for practical and commercial coherence, or where obvious, precise, reasonable and consistent with the express terms. The court identifies what the contract always meant; it does not improve the bargain. In an expert valuation clause prioritising swift finality, honest co-operation may be implied, but wider duties concerning fairness, independence or accuracy require a sufficiently convincing case.

The claimants sought permission to re-amend their particulars concerning the valuation of their interest in a limited liability partnership after they left as good leavers. The LLP Agreement required a recognised accountancy firm to determine the LLP’s value at the leaving date.

The claimants challenged the valuation process, alleging an agreement governing the procedure and proposing implied terms concerning the defendants’ conduct and the accuracy of information supplied to the valuer. The application concerned whether those amendments had a real prospect of success and whether any implied obligations could arise.

1. Amendments. Applying CPR 17.1 and the overriding objective, the court permitted amendments with a real prospect of success. The threshold was higher than bare arguability but did not require the court to decide whether success was more likely than failure. The court could consider the objections then advanced, while leaving justified later applications open.
2. Agreed valuation protocol. The claim that the parties had agreed a valuation protocol had a real prospect of success. The solicitors’ letter was a considered response to a request for confirmation of agreement to a detailed procedure. References to reserving rights and using reasonable endeavours were capable of indicating an obligation, notwithstanding the statement that the defendant was not obliged to perform every step.
3. Expert determination. Clause 21.4 placed emphasis on speed and finality. The recognised accountancy firm was to determine value, rather than provide an advisory or provisional opinion. The parties accepted some risk of error by entrusting the determination to an expert. The valuation had to remain the accountants’ determination, but the agreement did not require additional contractual qualities of fairness, independence or propriety.
4. Implied terms. The court applied the necessity and obviousness principles. Terms requiring the first defendant to ensure that inputs were objectively fair and reasonable, or that information was accurate, complete and non-misleading, were too onerous and would undermine finality. They were refused. A narrower obligation requiring the first defendant to take reasonable care when supplying information, assumptions and forecasts had a real prospect of success and was permitted for trial. At least an obligation not knowingly or recklessly to provide false information existed.
5. Second defendant. The proposed personal duty to supervise the first defendant’s information was neither necessary nor obvious. It imposed personal liability beyond the express obligation to appoint accountants and was refused. Permission was granted for the fallback terms only against the first defendant. The court made no order for costs on the amendment application; amendment-related costs were reserved to the trial judge.