Hipgnosis Music Limited v Merck Mercuriadis & Ors

Permission to amend a statement of case is a broad case-management discretion governed by the overriding objective. The court must weigh the injustice to the applicant if permission is refused against the prejudice to the respondent if it is granted. A counterfactual damages case may involve uncertainty, but that does not justify an inchoate pleading. The proposed case must be sufficiently particularised to show a real prospect of success and to enable the opposing party to know the case it must meet. Delay is especially significant where the amendment introduces a qualitatively different issue shortly before trial, requires substantial consequential work, or affects existing issues and evidence. The fact that refusal may prevent the point being advanced does not outweigh the need for fair and proportionate case management where the amendment is not viable.

Hipgnosis Music Limited sought permission to amend its Replies in claims against Merck Mercuriadis and two associated companies. The claims concern alleged breaches of fiduciary duty, dishonest assistance and equitable compensation arising from the development of a music-catalogues business.

The proposed amendment advanced a counterfactual case that, despite concerns arising from the involvement of investors connected with fraud, an arrangement could have been reached under which the relevant shareholding was surrendered while an economic benefit was preserved. The application was made about five weeks before trial, after expert evidence had identified the need for a more detailed mitigation arrangement. The central issues were whether the proposed pleading was sufficiently particularised, had a real prospect of success, and could fairly be introduced at that stage.

1. The amendment application was refused. The court’s discretion under Civil Procedure Rules 1998, rules 17.1(2)(b) and 17.3, had to be exercised in accordance with the overriding objective. The relevant balance was between the injustice to HML if the amendment were refused and the prejudice to the defendants if it were allowed, applying Various Aircraft Leasing Companies v Saudi Arabian Airlines Corporation [2021] EWHC 2330.
2. The fact that equitable compensation required construction of a hypothetical counterfactual did not justify pleading the case only at a high level. The proposed case required proof that a viable arrangement would have achieved competing substantive and optical objectives in the context of suspected fraud, a public offering and market scrutiny. The pleading did not explain how those objectives would have been achieved and was too inchoate and aspirational.
3. The court assessed the real prospect of success from the pleading itself, applying the approach identified in the White Book 2025 Edn. at note 17.3.6. The lack of particularisation was material because it prevented the defendants and their experts from knowing the case they had to meet. That basic function of pleadings was affirmed in Habibsons Bank Limited v Standard Chartered Bank (HK) Ltd [2011] QB 943.
4. The amendment was also very late. Although amendments may sometimes be needed to reflect developing evidence, this proposal represented a significant qualitative shift from the existing case. The court considered the consequential-work factor identified in Quah v Goldman Sachs International [2015] EWHC 759 (Comm). There was insufficient time to explore possible structures, obtain responsive evidence and address the proposed arrangement’s knock-on effects, including the alleged consequences for banking facilities.
5. The fact that refusal might terminate this aspect of HML’s positive case did not alter the result. Where the amendment lacked a real prospect of success and threatened substantial unfairness and disproportionate cost, refusal was appropriate case management.

not stated in the judgment.