Kaplan & Ors v Super PCS LLP & Ors [2017] EWHC 1165 (Ch)

[2017] EWHC 1165 (Ch)Case No HC-2014-002026
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 18/05/2017
Before
MRS JUSTICE ROSE
Between
(1) DR MARK KAPLANClaimants(2) MR ANTHONY DAYClaimant(3) MR JUREK PIASECKIClaimant(4) MR PHILIP GUESTClaimant(5) MR MICHAEL NEVINClaimant(1) SUPER PCS LLP (FORMERLY CHANCERY (UK) LLP)Defendant(2) MR MARK NICHOLSDefendant(3) MR PETER NICHOLSDefendant(4) PRESCIENCE MEDIA LIMITEDDefendant(5) PRESCIENCE FILM FINANCE LIMITEDDefendant(6) [....]Defendant(7) MR TIMOTHY SMITHDefendant(8) MR PAUL BRETTDefendant(9) CHANCERY ACCOUNTS & TAX LLPDefendant(10) 03340066 LIMITED (FORMERLY CHANCERY PARTNERSHIP LIMITED)Defendant(11) MR COLIN FRENCHDefendant
NIGEL JONES QC (instructed by Bankside Commercial Solicitors) for ClaimantsJACK STEER (instructed by David Downton & Company) for Second DefendantPATRICK GREEN QC and KATHLEEN DONNELLY (instructed through the Bar Public Access Scheme) for Third and Eleventh DefendantsHEATHER ROGERS QC (instructed by Simons Muirhead and Burton LLP) for Fifth and Seventh Defendants, and Fourth and Eighth Defendants (costs only)Hearing Hearing date: 3rd May 2017
Judgment ApprovedMrs Justice Rose :
[1]There were three applications dealt with at the hearing on 3 May 2017. The first was the Claimants’ application to amend their Particulars of Claim. That application was issued on 10 July 2015. The Claimants are represented by Nigel Jones QC. The second was an application by the 5th and 7th Defendants, PFFL and Mr Tim Smith, to strike out the claim in its entirety on the grounds that the Particulars of Claim disclose no reasonable cause of action against it. That application was issued on 7 August 2015 and was originally brought also by the 4th and 8th Defendants Prescience Media Ltd and Paul Brett. However the 4th and 8th Defendants are no longer being pursued by the Claimants and have dropped out of the proceedings except for the purposes of any decision regarding costs. PFFL and Mr Smith are represented by Heather Rogers QC. The third application was issued by the 3rd Defendant Peter Nichols and was made on behalf of himself and of the 11th Defendant Colin French. That application was issued on 25 April 2017 and seeks to strike out the claim form and the Particulars of Claim in their entirety on the grounds that the statements of case are an abuse of the court’s process or are otherwise likely to obstruct the just disposal of proceedings (CPR r 3.4(2)(b)) and/or that there has been a failure to comply with a rule, practice direction or court order (CPR r 3.4(2)(c)). Mr Peter Nichols and Mr French are represented by Patrick Green QC and Kathleen Donnelly. The 2nd Defendant Mr Mark Nichols takes a neutral position on these applications and was represented before me by Jack Steer of Counsel.[2]On the morning of the hearing Peter Nichols emailed the Claimants’ instructing solicitors to say he had been declared bankrupt on 10 April 2017. I was told that his trustee in bankruptcy had been appointed the day before the hearing. I raised with counsel whether the trustee consented not only to Mr Nichols opposing the Claimants’ application to amend but also to him proceeding with the strike out application, given that the risk of an adverse costs order is different for those two positions. After taking instructions Mr Green informed me that the trustee was content for Mr Nichols to continue to oppose the amendment application. However, she wanted to take legal advice before consenting to him pursuing the strike out. In the event Mr Green made his submissions on behalf of Mr French who was present in court and was content for Mr Nichols’ strike out application to be pursued on his behalf.[3]The claim brought by the five Claimants as presently pleaded is a claim in deceit. The Claimants were all investors in a company called Prescience Media 4 LLP (“PM4”) which is a vehicle through which members can invest their money in the production and distribution of films for the cinema. They became members of PM4 with the dual purpose of profiting should the films prove a success and if they do not, of mitigating their losses through sideways tax relief.[4]Very broadly, the Claimants allege that all the Defendants were in some way or another involved in the promotion and operation of PM4 and that they induced the Claimants to invest their money by making false representations as to various matters. The alleged dishonest representations include for example that the scheme was a low-risk investment; that it was likely to make substantial profits; and that it had either been approved by HMRC as an effective tax avoidance scheme or at least that would not be challenged by HMRC. The Claimants also allege that they were misled as to how much money would be invested in the scheme on their behalf. They were told that what was referred to in the investment agreement as the Total Contribution to the scheme for each member would be, say, £1 million of which they would provide cash of only £250,000. The other £750,000 would be provided by a loan to the member. The Claimants say that they thought that the whole £1 million would be invested in the scheme but in fact only the cash part was. The significance of this is that the fees charged by the scheme operators were very substantial. If those fees are deducted from the cash contribution, that meant that only quite a small sum would actually be invested. A film would need to be spectacularly successful for it to earn profits for the members of the scheme which over topped the fees that they had paid and gave them some return on their investment.[5]The false statements on which the Claimants rely are alleged to have been made to the Claimants in two ways. Some representations are said to have been made in the written Business Proposal that was given to each of the Claimants before they invested. Other representations are alleged to have been made orally by one or more of the Defendants at meetings and in conversations in 2008 and early 2009.[6]There is at present no defence pleaded to the claims. However the Defendants made clear at the hearing that they strenuously deny the claims made against them.[7]The amendments for which the Claimants seek permission fall into two categories. The first category is made up of amendments intended to expand or clarify the deceit claim by setting out more detail of who is alleged to have said what to whom and when. The second category is the introduction of a new claim based on an alleged breach of the Financial Services and Markets Act 2000 (‘FSMA’). The allegation underlying this claim is that the PM4 scheme constituted a collective investment scheme for the purposes of FSMA. The claim as set out in the draft of the amended Particulars attached to the application is brought under FSMA against the 1st Defendant, Chancery (UK) LLP, on the basis that it is an authorised person under FSMA but that it promoted the scheme in breach of applicable regulatory rules. A claim under FSMA is brought against PFFL on the basis that it is not an authorised person under FSMA. It is alleged that PFFL’s involvement in establishing and operating the scheme was in contravention of the general prohibition in section 19 of FSMA. The Claimants therefore rely as against PFFL on the cause of action provided by section 26(2) of FSMA to recover the money transferred under the agreement and compensation for any loss suffered as a consequence of transferring that money.[8]At the hearing before me, Mr Jones said that as it now appears that Chancery (UK) LLP is insolvent, the Claimants are no longer pursuing any relief against that company. The FSMA claim is now limited to the claim for relief against PFFL.[9]The fact that the Claimants’ application to amend the Particulars of Claim was issued on 10 July 2015 but is only being heard on 3 May 2017 calls for some explanation. The chronology is as follows. a) The claim form was issued in August 2014 and served on 11 December 2014. b) The action was then stayed for four months to allow the Defendants an appropriate opportunity to consider the matters raised in the claim. c) In March 2015 the solicitors for some of the Defendants asked for clarification of some aspects of the claim. d) On 18 May 2015 the Claimants produced a draft amended Particulars of Claim. At that stage the main amendments were to abandon a negligence claim originally pleaded against the Defendants and to add in a claim under FSMA against all the Defendants. The Defendants criticise the Claimants because even though some of the litigants were at that point litigants in person, they were invited by the Claimants’ solicitors to agree to amendments introducing a new FSMA claim without being alerted to the fact that the amendment would be introducing the new claim outside the primary limitation period. So it was not pointed out to the Defendants that the claim could only be included in the statement of case if it fell within CPR 17.4. e) After some correspondence it became clear that the Defendants would not consent to the proposed amendments and on 10 July 2015 the Claimants issued an application for permission to amend. f) On 7 August 2015 PFFL and Mr Smith applied to strike out the claim. The hearing of both the amendment and the strike out applications was fixed for 5 October 2015. g) A new draft amended Particulars of Claim were served by the Claimants on 22 September. On 25 September 2015 shortly before the hearing of the application, a further draft was substituted as the Claimants said that the 22 September draft was served in error. The Defendants complain that the successive drafts did not make clear what had changed since the draft in May. h) At the door of the court on 5 October 2015 there was largely agreement between the parties as to the form of order to be made by Master Price. At the hearing Master Price adjourned both the applications and set a timetable for service of the revised draft amended Particulars of Claim by 9 November 2015. The Claimants complied with this order. Master Price also ordered the removal of the 4th and 8th Defendants from the claim. The order provided that the remaining Defendants could serve a request for further information of the revised draft Particulars of Claim if so advised. i) Various requests for further information were served by PFFL and Mr Smith in November 2015 and the Claimants responded to those requests and to requests from other Defendants in December 2015 and on 2 March 2016. j) After considering those responses PFFL and Mr Smith gave notice on 27 May 2016 that the two applications, that is the application to amend and the strikeout application should be restored. k) On 29 December 2016 the date for this hearing at the beginning of May was fixed. I am told that the reason for the delay after 29 December 2016 was simply difficulties in finding the date when all counsel could attend and the court could hear the matter.

The FSMA claims

[10]I will deal first with the Claimants’ application to amend the Particulars of Claim to introduce the FSMA claim. The Defendants oppose this on the grounds that it is statute barred and it does not fall within CPR r 17.4. That rule provides that where a party applies to amend his statement of case in one of the ways mentioned in the rule and a period of limitation has expired under the Limitation Act 1980, then the court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings. That rule gives effect to section 35 of the Limitation Act 1980 which provides that if a new claim is permitted by way of amendment, it is treated as having been made by way of a separate action commenced on the same date as the original action.[11]It is accepted by the Claimants that the relevant cause of action arose sometime between October 2008 and January 2009 and was therefore statute barred when first proposed in May 2015. It is also common ground that the proposed amendment does seek to add a new cause of action. The only issue for me to resolve is therefore whether the new cause of action arises out of the same or substantially the same facts as the claim in deceit.[12]In order to establish that PFFL has acted in breach of the general prohibition in FSMA, the Claimants must establish that the scheme was a collective investment scheme as defined in section 235 of FSMA. This is strongly denied by the Defendants. The elements that need to be proven in relation to the scheme are those set out in paragraph 46 of the proposed amended Particulars of Claim. It is alleged that: a) the scheme was an arrangement with respect to films, the purpose or effect of which was to enable the Claimants to receive profits or income arising from dealings with the films; b) the Claimants did not have day to day control over the management of the films; c) the Claimants’ contributions were pooled and any profit or income out of which payments would have been made to them would have been pooled; and d) the acquisition and exploitation of the films was managed as a whole by or on behalf of PFFL. Because these four conditions are satisfied, the Claimants allege that PFFL carried on a regulated activity by establishing and operating the collective investment scheme and/or by advising on the merits of an investment in the scheme without being an authorised person.[13]The Claimants assert that the main area of contention between the parties as to whether those requirements are satisfied is likely to be whether they had day to day control over the management of the films. Thus the proposed new paragraph 9A in the proposed amended Particulars of Claim asserts that:
“… the practical reality of the Scheme was that investors were not required to have any experience of the film industry. The level and degree of participation in the Scheme was never formulated and considered with a view to providing day to day control. In fact day to day control was exercised by PFFL, the member of the Scheme who was a professional in the industry.”
[14]The application of CPR r 17.4 was discussed by the Court of Appeal in Mercer v Ballinger [2014] EWCA Civ 996, [2014] 1 WLR 3597. Tomlinson LJ (with whom the Master of the Rolls and Briggs LJ agreed) stated (para 27) that if the availability of the defence of limitation depends upon the resolution of factual issues which are seriously disputed, it cannot be determined summarily but must go to trial. The Court of Appeal approved the formulation of the test by the judge in the court below as being whether the proposed amendments or any of them arise out of the same facts or substantially the same facts as those already in issue in the claims as then currently pleaded. That is regarded as being a closer description of the test set in section 35 than the actual wording of CPR 17.4(2). Tomlinson LJ went on:
“34. Helpful guidance as to the proper approach to the resolution of this question was given by Colman J in BP plc v Aon Ltd [2006] 1 Lloyd’s Rep 549, 558 where he said:- “52. At first instance in Goode v. Martin [2001] 3 All ER 562 I considered the purpose of Section 35(5) in the following passage: “Whether one factual basis is ‘substantially the same’ as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim.” 53. In Lloyd’s Bank plc v. Rogers [1997] TLR 154 Hobhouse LJ. said of Section 35: “The policy of the section was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arises from those facts.” 54. The substance of the purpose of the exception in subsection (5) is thus based on the assumption that the party against whom the proposed amendment is directed will not be prejudiced because that party will, for the purposes of the pre-existing matters [in] issue, already have had to investigate the same or substantially the same facts.” 35. In the Welsh Development Agency … Glidewell LJ said, in an often quoted passage at page 1418, that whether or not a new cause of action arises out of substantially the same facts as those already pleaded is substantially a matter of impression. 36. Less well-known perhaps is the cautionary note added by Millett LJ in Paragon Finance, … where at page 418 he said, after citing the passage from Glidewell LJ to which I have just referred:- “In borderline cases this may be so. In others it must be a question of analysis.” 37. I would also point out, as did Briggs LJ in the course of the argument, that “the same or substantially the same” is not synonymous with “similar”
. The word ‘similar’ is often used in this context, but it should not be regarded as anything more than a convenient shorthand. It may serve to divert attention from the appropriate enquiry.” “52. At first instance in Goode v. Martin [2001] 3 All ER 562 I considered the purpose of Section 35(5) in the following passage:
“Whether one factual basis is ‘substantially the same’ as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim.”
[15]The Court of Appeal in Mercer overturned the judge’s decision on this point. Although the judge had not misdirected himself as to the law, they held that he had not carried out a sufficient analysis of the extent to which the appellants would be required by the new claims to embark upon an investigation of facts which they would not previously have been concerned to investigate.[16]The Defendants also referred me to Takhar v Gracefield Developments Ltd and others [2015] EWHC 1276 (Ch). There Newey J refused to allow the claimant to amend the particulars of claim so as to add a claim for conspiracy or deceit. That claim was based on an allegation that certain documents were forgeries. The allegation of forgery also formed the basis of the existing claim which sought to set aside the order of the lower court on the basis that it was obtained by fraud. Newey J noted that the existing particulars of claim contained allegations that the relevant documents were forged but the new claim that the claimant wish to bring was not founded on that alone. It also alleged various false representations. Newey J said that even if it was right to say that the alleged forgeries were at the heart of both the existing claim and the new one, the latter did not arise out of “the same facts or substantially the same facts” as the former. It depended also on a range of facts that did not feature in the existing pleading.[17]The Claimants here argue that the existing claim in deceit will require the court at trial to focus on what is said in the Business Proposal since a number of the false representations relied upon come from there. Mr Jones argued that when considering the question of whether the members exercise day to day control over the scheme for the purpose of the FSMA claim, the court will also have to consider in detail the terms of the Business Proposal.[18]In this context he referred to the judgment of Ouseley J in R (oao Chancery (UK) LLP) v Financial Services Ombudsman and Sir Ian Robinson [2015] EWHC 407 Admin concerning a different but very similar scheme also operated by the 1st Defendant in this action. The issue raised in that case was whether that scheme was a collective investment scheme. If it was, then the Financial Ombudsman Service had jurisdiction to consider a complaint made against Chancery (UK) LLP in respect of the scheme because it was an investment. Chancery (UK) LLP contended that the scheme was not an investment but was a tax avoidance scheme. In order for the scheme to be successful as a tax avoidance scheme (enabling the members to claim “sideways relief”: see paragraph 11 of Ouseley J’s judgment) HMRC had to be convinced that investors were actively involved in the business of the scheme. It was therefore a key requirement both of the scheme at issue there and of PM4 at issue in the current proceedings that each member should commit to working on average at least 10 hours each week in the business of the scheme for at least six months. Each member would be a party to all decisions taken about the scheme and in performing the day to day tasks of the scheme.[19]The Financial Ombudsman had held that even if members were actively involved in the partnership in accordance with the scheme documentation, they did not have sufficient day to day control to avoid the scheme falling within the definition of a collective investment scheme. Ouseley J upheld that decision. He held at paragraph 114 that the level of activity for day to day control is not that of supervisory oversight; the power to exercise day to day control if so minded does not suffice. He went on:
“The participation may well satisfy the level and degree of activity required by HMRC. But it was never formulated and considered with a view to providing day to day control.”
[20]The Claimants point out that at the date of Ouseley J’s decision, the law as to how the court determines the existence of day to day control was as stated by the Court of Appeal in Asset Land Investment PLC v FCA [2014] EWCA Civ 435. That indicated that the issue of day to day control depended not only on the terms of the scheme documentation but on what had happened in practice. The Asset Land case subsequently went to the Supreme Court. Although the Court dismissed the appeal Lord Sumption (with whom Lord Mance, Lord Clarke and Lord Hodge agreed) stated that for the purpose of the day to day control test, the absence of such control has to be a feature of the arrangements. Lord Sumption said “This is necessarily prospective, viewed from the time when the arrangements are made. Either those arrangements confer or allow control on the part of the investors or they do not. The test cannot depend on what happens after the arrangements have been made. Nor would a test based on the actual exercise of control be realistic.” (see [2016] UKSC 17 at para 94).[21]The Claimants submit that the effect of the Supreme Court decision in Asset Land is that at the trial of the FSMA claim, the court will focus on the content of the PM4 documentation and will not have to delve into what happened once the members joined the Scheme. Since the scheme documentation will have to be investigated closely anyway in the context of the deceit claim, the Claimants contend that the FSMA claim satisfies the test in CPR 17.4.[22]In my judgment the FSMA claim does not arise from the same or substantially the same facts as those currently at issue in the proceedings.[23]First, although we do not yet have the details of the Defendants’ Defence, they may well put the Claimants to proof as to all the elements that go to determine whether the PM4 scheme was a collective investment scheme or not. The test set by the Limitation Act 1980 and by CPR r 17.4 does not require the court to consider whether the facts which are mostly likely to be in dispute in the new claim are going to be the same as the facts which are most likely to be in dispute in the existing claim. The purpose of the test is to determine whether the defendant should be required to respond to the claim at all. It is not right therefore to focus only on the overlap between what the Claimants currently anticipate will be the main issue in the existing claim and in the new claim.[24]There are elements of the FSMA claim which are entirely different from the deceit claim, namely the issue of the pooling of contributions and the question of whether PFFL’s activities amount to establishing and operating a collective investment scheme within the meaning of article 51ZE of the Regulated Activities Order or to advising on the merits of an investment within the meaning of article 53 of the Regulated Activities Order.[25]Secondly, in my judgment reliance on the judgment of Ouseley J in the earlier judicial review proceedings proves too much as far as the Claimants are concerned. What emerges from that case is that the question whether the Business Proposal envisaged that the Claimants would play a sufficient role in the operation of the scheme for it to be an effective tax avoidance scheme is not the same question as to whether they had day to day control over the scheme for the purposes of FSMA. I do not accept that the judgment of the Supreme Court in Asset Land means that the factual enquiry in this case will be limited to an examination of the wording of the Business Proposal, or that even if it was, that would mean that the test in CPR 17.4(2), as explained in the authorities, is satisfied. In my judgment it is likely that the enquiry as to the existence or not of day to day control will raise factual issues which go significantly beyond those which need to be made to determine the deceit claim.[26]I therefore hold that the amendment to introduce the new claim based on FSMA should not be allowed because the period of limitation has expired and the claim does not meet the test set in CPR 17.4.

The proposed amendments to the deceit claim and the strikeout application

[27]I now turn to consider the proposed amendments to the deceit claim and the strike out application. CPR r 3.4(2) provides in paragraph (a) that the court may strike out a statement of case if it appears to the court that the statement of case discloses no reasonable grounds for bringing the claim and in paragraph (b) that the court may strike out a statement of case if it appears to the court that “the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings”.[28]At the hearing of this application Ms Rogers QC said that neither the allegations of dishonest representations arising from the Business Proposal nor the alleged oral representations have any real prospect of success. She took me through the wording of the Business Proposal appended to the Particulars of Claim to show how the allegations as to the misrepresentations said to be made in the document are flatly contradicted by the actual wording of the Business Proposal itself. For example in paragraph 39(i)(a) of the proposed amended Particulars of Claim it is alleged that a representation was made in the Business Proposal that “PM4 was a safe, low risk investment scheme led by industry professionals”. However, the Business Proposal is replete with warnings that prospective members are “strongly advised to conduct their own due diligence” and that “The value of the Partnership’s interests and the underlying assets may go down as well as up and a Member may not get back the amount he or she has contributed. No guarantees as to performance, the income payable to Members, or capital gains, are given either expressly or by implication”.[29]Another example is the allegation in paragraph 39(iv)(e) and paragraph 39(v)(c) of the proposed amended Particulars that the Business Proposal contained representations that the earlier scheme PMs 1-3 had not been challenged by HMRC and that they were ongoing and successful partnerships. However, in the section of the Business Proposal headed “Risk Factors” where legislation and tax are discussed, the Business Proposal points out first that the bases of taxation, tax relief and rates of tax may change and that “HMRC have indicated that they will enquire into significant loss claims where these arise from the trade of an LLP. Further HMRC have indicated that they are likely to withhold any tax repayment arising from a Loss Claim until the completion of the enquiry and they are satisfied regarding the validity and quantum of the claim.”. PM 1 to PM 3 are not mentioned at all in the Business Proposal.[30]As a final example Ms Rogers points to the allegation in paragraph 39(xiii) that PM4 would aim only to invest in films where funding commitments are in place for no less than 75% of total production budgets. Although she accepts that this is based on a statement included in the Business Proposal, there is no allegation in paragraph 41 of the proposed amended pleading that the representation was untrue. Further, as regards the statement “PM4 was a safe, low risk investment scheme led by industry professionals”, although at paragraph 41(i) of the Particulars of Claim it is alleged that the whole of that statement was false, the new paragraph 9A that the Claimants seek to introduce asserts that day to day control was exercised by PFFL which is described as “the member of the Scheme who was a professional in the industry”.[31]I have worked through all the examples contained in the helpful annex to Ms Rogers’ skeleton and I accept that most, if not all, of the allegations as to representation said to be made in the Business Proposal appear untenable – or at the very least it is difficult to see which wording of the document is said to give rise to the alleged representation.[32]Ms Rogers’ second complaint was about the allegations of oral representations. The criticism here is that the structure of the proposed pleading makes it very difficult to work out what is actually being alleged against the individual Defendants. The proposed pleading first describes the investment concept and the business proposal. It then sets out what is called “Specific background for each Claimant”. The paragraphs in that section describe the meetings that each Claimant says he attended, where and when the meeting took place, who was there and what was said. There is then in respect of each Claimant an averment as to the express and/or implied statements made to that Claimant. That section of the pleading runs from paragraph 21 to paragraph 37A.[33]There is then a section sought to be introduced headed “Summary of makers and recipients of statements”. That appears to be intended to set out the same information as in the preceding section but in a different way; namely listed by Defendant rather than by Claimant, setting out for each Defendant the names of those Claimants to whom he is said to have made statements, cross-referring to the paragraphs in the previous section. There is then a further section of the pleading headed “The Representations” which again purports to set out the same information but reordered by representation and so listing 12 representations and saying in respect of each one by which Defendant that representation was made and to which Claimants cross-referring back to paragraphs in the previous sections of the pleading. The Particulars then go on to assert that some but not all of the representations were false and that they were made to induce the Claimants to enter into the scheme, giving particulars of how it is said that the Defendants knew that the representations were false.[34]The problem is that whereas Mr Jones submitted that the intention was for these expanded sections to clarify the position, unfortunately they do the opposite. This is because some of the cross-references on which later paragraphs rely are incorrect and the different sections are inconsistent. So for example, the allegation in paragraph 39(i)(c) of the amended Particulars of Claim that Mr Smith repeated an express representation made by Peter Nichols to Anthony Day refers back to paragraph 25A. There indeed is a sentence that at a meeting on 28 November 2008 Mr Smith told Mr Day that the scheme was low risk. However in the supposed “Summary of makers and recipients of statements” one of the amendments proposed is to cross through the allegation that Timothy Smith made statements to Anthony Day.[35]Another example is that paragraph 39(ii) alleges that Mr Smith made an express statement to Mr Piasecki that the scheme was profitable. That subparagraph cross refers to what is pleaded at paragraph 29A(h) and 28 above. However, neither of those earlier paragraphs actually alleges that Mr Smith said that the scheme “was profitable”. Rather they allege say that Mr Piasecki was told by Mr Smith that 85% of films made money and that because PM4 was first in the recoupment waterfall the scheme was virtually guaranteed success. If the alleged representation that the scheme “was profitable” is supposed to be a paraphrase or summary of the earlier allegation then I agree with the Defendants that that is unsatisfactory way to go about pleading a deceit claim. Where a Claimant asserts that statements made in a meeting many years ago amounted to a deliberately false statement, the Defendant has no chance of recollecting what was said at the meeting in order to defend himself against the allegation unless it is set out very clear precisely what it is alleged was said.[36]At the hearing before me, Mr Jones accepted that the pleading in the form attached to the application to amend still needed quite a bit of surgery. He said that the striking through of the allegation that Mr Smith made representations to Mr Day was a mistake – that allegation was still being pursued. He also accepted that even though the Claimants had decided some time ago not to pursue various of the Defendants because they are now insolvent, there were still large sections of the proposed new pleading which are directed at them and which now need to come out. There was no prospect therefore of me giving permission for the amended Particulars of Claim to be filed and served in the form presented at the hearing. There would need to be a further iteration of the draft, making substantial additional changes to it and then a further consideration of that draft.[37]I recognise that the pleading may need to be lengthy simply because there are five Claimants and now four individual Defendants said to have made different false statements. But it is the Claimants’ obligation to put the case forward in a manner which does not involve the Defendants having to chase back through multiple cross-references to other paragraphs in the pleading which may then say something different leading to a lack of clarity about what the allegation actually is. I agree with the Defendants that the proposed amended Particulars of Claim are properly described as unnecessarily prolix and embarrassing. They fail fairly to identify the claims being pursued in a way which can be reasonably understood or responded to by the Defendants.[38]I have therefore concluded that to accede to the application to amend the Particulars of Claim in anything like their current form would be likely to obstruct the just disposal of the proceedings within the meaning of CPR 3.4(2)(b). The individual Defendants are professional people authorised under FSMA who have been accused of deceitfully inducing prospective investors to enter into a scheme by issuing a Business Proposal which was materially inaccurate and compounding that with false oral representations. These are serious allegations and each of the Defendants is entitled to be told simply and clearly what the case is against him.[39]I therefore will refuse permission to amend the deceit claim and strike out the Particulars of Claim.[40]There then remains the question whether I should strike out the claim itself, rather than requiring it to be re-pleaded.[41]The Defendants contend that it is unfair that these proceedings continue against them in their proposed amended form or at all. They point out that in large part the deceit claim is based on allegations of what was said by various Defendants at meetings in 2008 or very early in 2009. No notice of the claim was given to the Defendants until November 2014 and the claim form was issued in August 2014. Although of course the Claimants are entitled to rely on the six-year limitation period available to them, if they leave the making of the claim which relies on oral representations to the end of that period it is incumbent on them to make as rapid progress with the claim as possible.[42]Far from doing that, there have been many different iterations of the Claimants’ statement of case. Some Defendants have been removed entirely and some causes of action such as negligence or breach of fiduciary duty were asserted in earlier versions of the Particulars and then abandoned in successive drafts. Ms Rogers makes the point that although this is the fourth iteration of the pleading, all versions are supposedly based on instructions taken from the Claimants on the content of the alleged oral conversations. There has been no explanation from the Claimants as to why, if all the different versions have been based on the same material, the ground seems to be shifting so much as to who said what to whom and when.[43]The Defendants also point to the long delays that have occurred in this case so far. The current draft of the proposed amended Particulars was first provided to the Defendants at the end of September 2015. The Defendants have written on numerous occasions to the Claimants pointing out flaws in the pleading and asking for clarification. Those letters have largely been ignored by the Claimants.[44]I can see much force in the Defendants’ complaints but I have decided to step back from striking out the claim in its entirety. There is no suggestion here that the litigation is being pursued by the Claimants for some abusive or ulterior purpose. There may be the kernel of a good claim here. I have considered the cases referred to in note 3.4.3.5 of the White Book on when delay can amount to an abuse of process justifying the striking out of the claim, in particular Icebird Ltd v Winegardner [2009] UKPC 24 and Wearn v HNH International Holdings Limited [2014] EWHC 3542 (Ch). Those authorities make clear that even inordinate and inexcusable delay does not justify the striking out of a claim on the basis of abuse of process unless there is some additional factor. I also have regard to what is said in note 3.4.3 that although the categories of abuse of process are many and are not closed, there must be an abuse before a claim can be struck out and striking out must be supportive of the overriding objective. It does not follow from this that in all cases of abuse the correct response is to strike out the claim. The striking out of a valid claim should be the last option. If the abuse can be addressed by a less draconian course then it should be.[45]I will not therefore strike out the claim. But I make it clear that at this stage the Claimants should undertake a serious review of what allegations can properly be made against each of the Defendants and limit the scope of those allegations to matters which they have a reasonable prospect of establishing at trial.[46]Mr Jones states at the end of his skeleton argument that the Claimants are anxious to press on. I will therefore set a short period in which the case can be repleaded from scratch. The court will be watching carefully to make sure that the claim is pursued with all possible speed from here on in.

Cited in 3 later judgments