The Argo Fund Limited v ArcelorMittal Nippon Steel India & Ors

Permission to amend a claim should be refused where the proposed claim has no more than a fanciful prospect of success. The applicant must plead sufficient primary facts to support any inference on which the claim depends. Where dishonesty is alleged by inference, the pleaded facts must make dishonesty more likely than innocence or negligence. The court must construe contractual wording in its commercial and textual context. An omission from a certificate does not support an inference of dishonest concealment where the certificate tracks the language of the governing contractual provision and an innocent explanation is at least as likely. The same principles apply where the proposed claim also depends on standing or avoidance of a limitation defence.

The claimant held beneficial interests in global loan notes issued by the first defendant. Following a payment default, a resolution to accelerate repayment failed after the fourth defendant, the first defendant’s parent, voted against it. The claimant alleged that the fourth defendant held the notes on behalf of the first defendant and that a certificate supplied by two directors dishonestly concealed that interest.

The claimant applied for permission to amend its claim. The third, eighth and ninth defendants applied for strike-out or summary judgment, accepting that those applications would succeed if amendment was refused. The central issue was whether the proposed inference of dishonest concealment had a real, rather than fanciful, prospect of success.

1. Permission to amend refused. The proposed claim depended on an inference that the fourth defendant held the notes as nominee or trustee for the first defendant. The claimant had to show a real, rather than fanciful, prospect of success. The relevant principles were drawn from Elite Holdings Limited v Barclays Bank Plc [2019] EWCA Civ 204.
2. Where an inferential case depends on alleged dishonest concealment, the pleaded primary facts must make dishonesty more likely than innocence or negligence. The court applied the approach stated in Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm).
3. The certificate’s use of “held by” tracked the wording of the proviso to the definition of “outstanding” in the Trust Deed. Read in context, that wording accommodated the global-note structure and the possibility of definitive notes being held directly. It did not make it more likely that the fourth defendant held its notes on behalf of the first defendant.
4. The fourth defendant was the first defendant’s parent, not its subsidiary, and was entitled to hold a beneficial interest for its own business purposes. The omission of the words “on behalf of” therefore had an innocent or non-dishonest explanation which was at least as plausible as the claimant’s case.
5. The allegation against the eighth defendant, based solely on his senior legal role and attendance at the meeting, likewise had no more than a fanciful prospect of success. The application for permission to amend failed. Summary judgment was granted to the eighth defendant and, as accepted, to the third and ninth defendants.