Frontiers Capital I Limited Partnership v Thomas Flohr

The court considered a summary judgment/strike-out application by the defendant and a counter-application by the claimant for permission to amend to add a fraudulent misrepresentation claim. Central legal issues were limitation under section 32 of the Limitation Act 1980 (deliberate concealment), the effect of restoration of a dissolved general partner and attribution of knowledge to the partnership, and whether pleaded duties (an implied duty of good faith and fiduciary duties) and particular pleaded breaches were arguable. The court held that, as a matter of law and fact on the materials before it, the claimant could with reasonable diligence have discovered the facts necessary to commence the pleaded claim by November 2013, so time ran and the claim was statute barred. The proposed fraud amendment was not permitted because it raised a new cause of action not arising out of the same or substantially the same facts as presently pleaded and would therefore be subject to a separate limitation enquiry.

Background and nature of the proceedings

• The claimant is a dissolved limited partnership (Frontiers Capital I Limited Partnership) pursuing a claim through its restored former general partner (Frontiers Capital General Partner Limited) against the defendant, Mr Thomas Flohr. The pleaded case alleges breaches of contractual and fiduciary duties arising from Mr Flohr’s conduct in relation to Comprendium UK and a parallel group of companies that he set up and controlled.
• The defendant applied for summary judgment or striking out principally on limitation grounds (relying on Limitation Act 1980 s.32 and the claimant’s alleged ability to discover the relevant facts earlier) and also challenged aspects of pleading and standing. The claimant counter-applied for permission to amend to add a claim in fraudulent misrepresentation.

Relief sought

• The claimant sought an account of profits and/or disgorgement damages, various heads of equitable compensation and damages in respect of share and loan losses arising from the alleged breaches. The defendant sought dismissal/summary judgment and/or striking out.

Issues framed by the court

• Whether the pleaded causes of action were arguable (including implication of a duty of good faith and the existence of fiduciary duties).
• Whether particular pleaded allegations (notably the allegation that the defendant ‘frustrated’ Comprendium UK by failing to procure €10–20m of business) were properly pleaded and sustainable.
• Whether the claimant’s claims were statute-barred because the relevant facts had been discovered or could with reasonable diligence have been discovered more than six years before issue (application of Limitation Act 1980 s.32 and the ‘worthwhile claim’ test as developed in Gemalto and FII authorities).
• How knowledge of a principal actor (Mr Horlick) and the effect of the restoration of the dissolved general partner should be treated for limitation/attribution purposes (reference to Companies Act 2006 s.1032 and Bilta guidance).
• Whether permission should be given to amend to plead fraudulent misrepresentation under CPR r.17.4 and Limitation Act 1980 s.35.

Reasoning and conclusions

• The court considered the pleaded breaches and concluded that some aspects (notably the allegation that the defendant had promised to ensure €10–20m of annual business for Comprendium UK and that this frustrated the company’s purpose) were inadequately pleaded and were struck out.
• On the core limitation point, detailed correspondence sent in November 2013 on behalf of Mr Horlick (setting out the acquisitions, intertwining of businesses, alleged concealment and potential claims) demonstrated that by November 2013 Mr Horlick knew the central facts or was in a position to embark on the preliminary steps to issue proceedings; under the Gemalto/FII formulation this was sufficient for the running of time. The court rejected the claimant’s argument that later disclosure in 2017 was required to make out a worthwhile claim for the pleaded causes of action.
• The court analysed the effect of restoration of the dissolved general partner and whether the company’s dissolution caused the inability to pursue the claim. Applying Bilta and related authorities, it held on the available evidence that, even assuming the general partner had been dissolved, the facts known to Mr Horlick in 2013 would, in realistic alternatives (for example communication to a liquidator or his being a director), have enabled the partnership to discover the claim by reasonable diligence. Therefore the dissolution did not prevent time running and did not save the claim from limitation.
• Permission to amend to add a deceit/fraud claim was refused because the proposed amendment would introduce a new cause of action based on intentional wrongdoing that did not arise out of the same or substantially the same facts as presently pleaded (CPR r.17.4 / Limitation Act s.35 analysis). The court declined to make an order treating relation-back differently or to adopt a Mastercard/ACS-style approach in the circumstances.

The claim is dismissed. Master Brightwell concluded that, on the evidence before the court, the claimant (acting by its former general partner) had or could with reasonable diligence have discovered the facts necessary to bring the pleaded claim by November 2013 such that the action is statute-barred under the Limitation Act 1980 (section 32). Further, parts of the particulars (notably the allegation of ‘frustration’ by way of a promise to procure €10–20m of business) were struck out as inadequately pleaded, and the claimant’s application for permission to amend to plead fraudulent misrepresentation was refused because the new claim would constitute a new cause of action not arising out of the same or substantially the same facts as already in issue.