JMW Solicitors LLP & Ors v Injury Lawyers 4U Limited & Ors

Permission to amend will be refused where the proposed claim has no realistic prospect of success. The court must avoid a mini-trial, but may reject a case that is fanciful, unsupported by evidence, incoherent or insufficiently particularised.

The Duomatic principle may validate an act carried out in the wrong corporate capacity where all persons whose assent is required have assented. Directors may ratify acts within the company’s powers. Terms cannot be implied into articles of association merely from extrinsic shareholder expectations; strict necessity and commercial or practical coherence are required. Allegations of sham, bad faith or rectification require more than bare assertion and must have an evidential foundation.

The claimants challenged the removal of a slot price differential by Injury Lawyers 4U Limited. They sought to amend their particulars of claim to allege invalid appointments of directors, invalid transfer of “A” shares, breach of a good faith obligation, and rectification of a shareholders’ agreement.

The amendments followed an earlier judgment granting summary judgment on parts of the claim and allowing the claimants an opportunity to apply to amend the validity claims. The court considered whether each proposed amendment had a realistic prospect of success and whether the rectification claim had already been finally determined or amounted to an abuse of process.

1. Amendment test. The applicable test was whether the proposed claims had a realistic rather than fanciful prospect of success. The court had to avoid evaluating conflicting evidence at a mini-trial, but could reject claims founded on assertion, unsupported inference, insufficient particulars or facts lacking reality.
2. Directors’ appointments. The appointments of Mr Maxey and Mr Slade were valid. Under the Duomatic principle, Mr Twambley’s assent was effective although expressed through a board resolution. Article 11.1 entitled him to appoint the two directors because the existing directors had not both been appointed under that provision. Any defect would in any event have been cured by confirmation by the holder of the “A” shares.
3. Ratification. The directors could ratify the previous removal of the slot price differential because the board had power under clause 4.2 of the 2013 Shareholders’ Agreement to vary the service charge. The validity of the share transfer was therefore irrelevant to the board’s power to remove the differential.
4. Share transfer and implied term. The evidence showed no realistic prospect that Express had acquired Amelans before the appointments and transfer. “Amelans” referred to the solicitors’ practice operating under the identified SRA number, rather than only the original partnership. A term preventing transfer after acquisition could not be implied from shareholder expectations or extrinsic circumstances and was unnecessary for commercial coherence.
5. Sham and change of control. The sham allegations lacked particularisation and evidential support. The proposed change-of-control claim depended on the good faith claim and could not succeed once that claim failed. Until the contractual discretion was exercised, the transfer remained valid and effective.
6. Good faith. The scope of clause 5.1(a) was context-dependent and could extend beyond honesty to commercially unacceptable conduct. However, financial benefit to Express and a potential conflict of interest did not, without more, establish bad faith. The pleaded case contained no properly reasoned or particularised basis for alleging dishonest or commercially unacceptable conduct.
7. Rectification. The rectification argument had already been finally determined in relation to the contract and estoppel claims. Its attempted resurrection was barred by cause of action or issue estoppel or was an abuse of process. In any event, the proposed case lacked convincing evidence of common or unilateral mistake and had no realistic prospect of success.
8. The Amendment Application was dismissed. The earlier order granting summary judgment on the claims concerning the directors’ appointments, the transfer of the “A” shares and removal of the slot price differential therefore took effect.

First instance decision. The judgment determined an application to amend following the court’s earlier judgment granting summary judgment on specified claims: [2024] EWHC 3103 (Ch) .