Logix Aero Ireland Limited v Siam Aero Repair Company Limited

For strike-out and summary judgment purposes, a claim has no realistic prospect of success where established principles show that it is bound to fail. Apparent authority requires a representation by the principal that the alleged agent has authority, reasonably relied upon by the contractor. It does not arise where both parties believe they are dealing directly with one another and neither knows of the fraudster’s involvement.

A confidentiality claim must identify a viable breach and causal connection to the loss. Where a fraud depends on information supplied unwittingly by both parties, it is artificial to attribute the loss to selected communications by one party alone. Allegations suggesting fraud must have a sufficient evidential foundation. An inappropriate pleading may justify indemnity costs even without bad faith.

The claimant agreed in principle to purchase two aircraft engines from the defendant. During negotiations, a fraudster intercepted and manipulated communications between the parties, substituted the fraudster’s bank details, and caused the claimant to pay the purchase price into the fraudster’s account.

The claimant claimed that the defendant had breached a contractual confidentiality clause and that the fraudster had apparent authority to conclude the sale and purchase agreements on the defendant’s behalf. The defendant applied to strike out the claim or obtain summary judgment, relying on the draft amended pleading. It also sought indemnity costs because the original pleading suggested that the defendant might have been complicit in the fraud.

1. Strike out and summary judgment. The tests under CPR 3.4(2)(a) and CPR 24.2 were treated as materially identical. The question was whether the claims were realistic, rather than fanciful, and whether they were bound to fail. The court considered the pleaded case and the essentially agreed factual material.
2. Apparent authority. Apparent authority depends on a representation by the principal, by words or conduct, that the alleged agent is authorised to act on its behalf, together with reasonable reliance. The defendant made no such representation. Both parties believed that they were communicating directly with each other, and neither knew that the fraudster existed. The fraudster could not self-authorise. The apparent-authority claim was therefore bound to fail.
3. Confidentiality clause. The parties’ competing interpretations of the clause were arguable. The court did not determine the proper construction at this stage. Nevertheless, the pleaded causation case was unsustainable. The fraudster’s scheme depended on communications supplied unwittingly by both parties, including the claimant’s own emails. The claimant could not attribute its loss to four selected communications from the defendant. The loss was caused by the fraudster. London Joint Stock Bank Limited v Macmillan and Arthur was distinguished as a fact-sensitive negligence decision concerning a blank cheque and did not establish the broader principle advanced by the claimant.
4. Disposition. Both pleaded claims were struck out because they had no realistic prospect of success and could not be cured by further amendment. The alternative abuse-of-process ground was not determined.
5. Indemnity costs. The original pleading did not satisfy the strict requirements for pleading fraud and inappropriately raised possible complicity without sufficient evidential foundation. Bad faith was not a prerequisite. The claimant’s conduct was outside the ordinary and reasonable conduct of proceedings, so indemnity costs were awarded in respect of the original Particulars of Claim. Consequential matters were left for written submissions.