Josette Ann Prevost & Anor. v Timothy Edward McCarthy

On an application to strike out or obtain summary judgment, the applicant must show that the claim is bound to fail or has no real prospect of success and that no other compelling reason requires a trial. The court should not isolate a legal or factual issue where deciding it would not determine a claim or substantial part of the proceedings. Novel or fact-sensitive questions are generally better decided on the evidence at trial.

An amendment should be permitted where the proposed case is arguable and has a real prospect of success. A relationship of influence may be established through vulnerability or dependence without formal diagnosis, and earlier transactions may evidence the relationship even if they were not themselves procured by undue influence.

The claimants sought payment allegedly due under a 2015 share purchase agreement concerning shares in Rainham Industrial Services Limited. The defendant contended that a 2016 share purchase agreement superseded the earlier arrangements and extinguished any liability.

The defendant applied under CPR 3.4(2)(a) and CPR 24.2 to strike out or obtain summary judgment. The claimants cross-applied to re-amend their pleadings to rely on presumed undue influence, mistake, misrepresentation, lack of consideration and defects concerning execution and completion. The central questions were whether the proposed amendments had a real prospect of success and whether any pleaded issues should be determined summarily.

1. Applications. The defendant’s application did not justify striking out or summarily determining the claims. The claimants were permitted to amend their pleadings, including to advance the case of presumed undue influence and the related issues concerning the validity of the 2016 agreement.
2. Amendments. The relevant test under CPR 17.1(2)(b) was whether the proposed case was arguable and had a real prospect of success. The proposed undue-influence case was supported by the longstanding friendship, the claimants’ reliance on the defendant in relation to the shares, alleged vulnerability and the circumstances of the transaction.
3. A relationship of influence could be established by evidence of vulnerability or dependence. The absence of a formal diagnosis was not fatal. Earlier transactions could be relied on as evidence of the relationship, even if those transactions were not themselves affected by undue influence.
4. The 2016 agreement called for explanation against the background of the materially more favourable 2015 agreement. The defendant’s asserted deterioration in the company’s financial position did not, on the evidence presently available, explain why the claimants would freely have entered the later agreement.
5. Summary determination. The court should not determine isolated issues where doing so would leave the validity of the 2016 agreement to be tried. The claims concerning signatures, mistake and misrepresentation therefore should proceed to trial, notwithstanding the judge’s doubts about their prospects. The construction of clause 9 was not decided because it would fall away if the undue-influence case succeeded.
6. If the 2016 agreement was executed as a deed, lack of consideration would prima facie be irrelevant. Nevertheless, the lack-of-consideration amendments were allowed because the circumstances of execution and the alternative contractual and mistake cases required examination at trial.