Neil Leslie Humphrey & Anor v Paul Craig Bennett & Ors

The court considered two interlocutory applications in a derivative claim brought under the Companies Act 2006 on behalf of Esprit Land Limited: an application by the claimants for permission to re-re-amend their Particulars of Claim to add four causes of action, and an application by Esprit Homes Construction Limited to strike out parts of the claim against it. Key legal principles applied included the strike-out threshold under CPR 3.4(2), the proper approach to late amendments (including the real prospect of success test), and statutory provisions of the Companies Act 2006 (notably ss.190 and 195) and the Land Registration Act 2002 (notably s.29 and Schedule 3 paragraph 2) as they relate to proprietary and personal claims.

The judge refused to strike out the knowing receipt claim against EHCL because (i) Byers v Saudi National Bank did not determine the effect of s.29 LRA 2002 on registered land transfers and (ii) the statutory concept of "postponement" in s.29 made it inappropriate to decide the point at strike-out. The judge allowed the Claimants to re-re-amend to add causes of action in unjust enrichment, dishonest assistance, unlawful means conspiracy and claims under ss.190 and 195 CA 2006, finding each to be adequately pleaded and having a real prospect of success such that they should proceed to trial.

The claimants, who held 49% of the share capital and were former directors of Esprit Land Limited, brought derivative proceedings alleging that two majority controllers (Mr Bennett and Ms Murphy) and their company, Esprit Homes Construction Limited (EHCL), diverted development opportunities and misapplied company assets (the Ansty Road Project and related land transfers). The proceedings were long-running and earlier interlocutory rulings included summary judgment issues and injunctions. The applications before the High Court were (1) permission to re-re-amend the Particulars of Claim to add four new causes of action (unjust enrichment/restitution; dishonest assistance; unlawful means conspiracy; and relief under ss.190 and 195 Companies Act 2006), and (2) a strike out application by EHCL of the claims against it following the Supreme Court decision in Byers v Saudi National Bank.

Nature of the relief sought:

• The claimants sought permission to amend to add alternative causes of action based on the same factual matrix.
• EHCL sought strike out of the paragraphs alleging knowing receipt / liability in respect of the Wyken Grange Land and profits of the Ansty Road Project.

Issues framed by the court:

• Whether the knowing receipt claim against EHCL should be struck out in light of Byers and the effect of s.29 LRA 2002 on equitable interests in registered land.
• Whether the proposed new causes of action were properly pleaded, had a real prospect of success and could properly be pursued derivatively under the Companies Act 2006 (including s.263).
• Whether any purported member resolution affected the availability of remedies under ss.190–196 CA 2006.

Concise account of the court's reasoning:

• The court held that Byers did not decide the effect of s.29 LRA 2002 and that s.29 uses the new concept of "postponement" rather than expressly extinguishing equitable interests; given the absence of authority and factual disputes (including possible actual occupation under Schedule 3 paragraph 2), it was inappropriate to strike out the knowing receipt claim at this stage.
• The court applied the established test for amendment: new causes must have a real prospect of success and be adequately pleaded. The judge accepted that, on the present pleaded facts, claims in unjust enrichment, dishonest assistance and unlawful means conspiracy were sufficiently particularised and arguable to proceed to trial.
• As to the ss.190/195 CA 2006 claim, the court found that the relevant statutory scheme rendered such claims apt for derivative treatment where the directors who acted are the wrongdoers, and that the later purported member resolutions did not dispose of the interlocutory application to amend. The court therefore permitted the statutory claim to be brought derivatively.

The court refused EHCL's strike out application, allowed the claimants' permission to re-re-amend the Particulars of Claim, and granted any necessary permission under s.263 CA 2006 to continue the proposed causes of action derivatively on behalf of the company. The substantive disputes, including whether s.29 LRA 2002 prevents the knowing receipt claim, remained for trial.

First instance: The judge declined to strike out paragraphs 13 to 27 of the Re-Amended Particulars of Claim and granted the claimants permission to re-re-amend to add causes of action in unjust enrichment, dishonest assistance, unlawful means conspiracy and relief under ss.190 and 195 Companies Act 2006. Rationale: the legal points raised (notably the effect of s.29 Land Registration Act 2002 on equitable interests and the availability of alternative causes of action) were novel or fact-sensitive and not suitable for resolution on strike out; the proposed amendments were adequately pleaded and had a real prospect of success such that they should proceed to trial, and s.263 CA 2006 permission was granted as necessary to pursue the derivative claims.