Garden House Software Limited v Timothy John Marsh & Ors

The court allowed the claimant's application to amend its particulars of claim (the APOC) and therefore the defendants' strike out application fell away. The judge applied the established distinction between proposed amendments that introduce a new cause of action (which must have a real prospect of success) and amendments that give further particulars of an existing plea (which are ordinarily a matter for trial).

The court held that most of the contested amendments were clarificatory or further particulars of existing claims arising from the same or substantially the same facts, so the low bar for amendment was met. Where the APOC did introduce new causes of action (for example a de facto director claim and/or dishonest assistance in part), the court concluded those new claims nonetheless arose out of the same or substantially the same facts as existing pleaded claims and were arguable, so amendment was permitted under CPR r.17.4 and s.35 Limitation Act 1980 despite potential limitation defences.

Accordingly the APOC was permitted, including clearer pleadings on claims under s238 and s423 Insolvency Act 1986, directors' duties under ss170–177 Companies Act 2006 (including ss172, 174, 175 and 177), unlawful loans (s197 CA 2006), wrongful trading (s214 IA 1986), preferences (s239 IA 1986), dishonest assistance and exemplary damages. The court emphasised the overlapping factual matrix, early procedural stage and that many issues were fact sensitive and for trial.

Background and parties

The claimant, Garden House Software Limited (a special purpose vehicle assigned claims from the liquidators of Serisys Limited), sued seven defendants including directors of Serisys group companies and an asset holding company. The dispute concerns an assignment of intellectual property relating to the ADYPT software from Serisys Limited to Serisys Asset Holdings Limited in August 2017 (the Assignment) and a subsequent charge. The claimant alleged the Assignment had been concealed, effected for no consideration and designed to put assets beyond the reach of Serisys Limited's creditors.

Nature of the application

• The claimant sought permission to serve amended particulars of claim (the APOC) clarifying and reorganising multiple heads of claim.
• Certain defendants (the TH defendants) had applied to strike out parts of the original particulars of claim; that strike-out application remained in issue alongside the amendment application.

Claims and issues framed

• Primary substantive heads of claim included: transactions at an undervalue (s238 IA 1986), transactions defrauding creditors (s423 IA 1986) in relation to the Assignment and the Charge; breaches of directors' duties (ss170–177 CA 2006) against D1–D5 as directors, de facto directors or shadow directors; wrongful/fraudulent trading (ss213/214 IA 1986); unlawful means conspiracy; preference payments (s239 IA 1986); unlawful/illegal loans (s197 CA 2006); dishonest assistance; and exemplary damages.
• Procedural and legal issues for the court: whether the proposed amendments introduced new causes of action after limitation periods had expired (and if so whether they arose out of the same or substantially the same facts under CPR r.17.4 and s.35 Limitation Act 1980), whether the amendments were merely further particulars of existing pleas, and whether any of the proposed amendments were hopeless or demonstrably without merit.

Court's reasoning and disposition

The court applied the established framework: amendments that introduce new causes of action must have a real prospect of success, whereas further particulars of existing pleas will usually be left to trial provided they are relevant to the pleaded claim. The judge emphasised the comparatively low bar for amendment and that where issues are fact sensitive and involve mixed questions of law and fact the court will often be unable to conclude that a proposed amendment is fanciful without a mini-trial.

The judge found that most contested amendments were clarificatory or further particulars and that factual overlap between existing and new pleaded matters was substantial. The claim was at an early stage, so permitting amendment would not cause disproportionate prejudice or require out-of-sequence investigation. Even where the APOC advanced new claims (for example de facto directorship and dishonest assistance), those claims arose from the same or substantially the same facts such that amendment was permitted notwithstanding potential limitation defences.

Result and consequential directions

The amendment application was allowed (save for a minor tweak), the APOC was permitted in its substantive terms (including the unlawful loans and exemplary damages aspects) and the TH defendants' strike out application effectively fell away. The court directed a further consequential hearing to address costs, security for costs and timetable matters, and noted that parties should attempt to agree consequential orders or deal with them on paper if possible.

The claimant's amendment application is allowed and the amended particulars of claim (APOC) are permitted (subject to a minor tweak). The defendants' strike out application falls away. The court exercised its discretion on the basis that most amendments were clarificatory or further particulars and where new causes were advanced they arose out of the same or substantially the same facts and were arguable; the proceedings remain fact sensitive and many issues are for trial.