Kevin Ley & Anor v Douglas Suttle & Anor [2025] EWHC 796 (Ch)

[2025] EWHC 796 (Ch)CR 2023 004038IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESINSOLVENCY AND COMPANIES LISTIN THE MATTER CL REALISATIONS 2020 LIMITED (IN LIQUIDATION)AND IN THE MATTER OF THE INSOLVENCY ACT 1986Venue Royal Courts of Justice, 7 The Rolls Building, Fetter LaneLondonEC4A 1NLDate 03/04/2025
Before
ICC JUDGE BARBER
KEVIN LEY AND HENRY ANTHONY SHINNERS(as Joint Liquidators of CL Realisations 2020 Limited)
Between
and –RespondentDOUGLAS SUTTLERespondentGRAHAM REEDRespondent
Rachel Sleeman (instructed by Irwin Mitchell LLP) for ApplicantsAndrew Brown (instructed by JMW Solicitors LLP) for RespondentsHearing Hearing dates: 13 December 2024, 8 January and 19 February 2025
Approved JudgmentThis judgment was handed down remotely by email and MS Teams. It will also be sent to The National Archives for publication. The date and time forhand-down is 9.30 a.m. on 3 April 2025..............................ICC Judge Barber
[1]This is a contested application of the liquidators of CL Realisations 2020 Limited (‘the Company’) issued on 28 February 2024 (‘the Amendment Application’) for permission to amend an Insolvency Act application notice issued on 24 July 2023 (‘the Application’) seeking relief under sections 212 and 238 of the Insolvency Act 1986 (‘IA 1986’) against the Respondents, who were each directors of the Company. Background[2]The Company was incorporated on 31 July 1996 under the name Callimedia Limited. It specialised in print management and offline marketing. It changed its name to CL Realisations 2020 Limited on 18 February 2020.[3]The First Respondent was a director of the Company from incorporation until 30 January 2020. The Second Respondent initially worked as a marketing officer for the Company, but later became a director in the events outlined below.[4]The Company’s share capital comprised 10,000 ‘A’ shares, 1,000 ‘B’ shares and 1 ‘C’ share. At all material times up to 13 September 2017, these were held as follows:(1) 10,000 ‘A’ shares were held by the First Respondent(2) 510 ‘B’ shares were held by the First Respondent(3) 490 ‘B’ shares were held by a Ms Dawn Leary(4) 1 ‘C’ share was held by Frodsham Enterprises Limited (‘Frodsham’). The First Respondent was the sole director and shareholder of Frodsham.[5]On 17 July 2017, the Second Respondent incorporated Marlixia Limited (‘Marlixia’). The Second Respondent was the sole director and sole shareholder of Marlixia. The SPA[6]On or about 13 September 2017:(1) The Second Respondent was appointed a director and as company secretary of the Company;(2) The First Respondent and Frodsham entered into a share purchase agreement (‘SPA’) with Marlixia. By the SPA, Marlixia agreed to purchase the shareholdings of the First Respondent and Frodsham in the Company for a total sum of £1 million for goodwill (comprising an initial payment of £520,000 payable on completion and deferred consideration of £480,000 payable over a 4 year period in monthly sums of £10,000) plus an additional sum of £565,000 for net asset value (‘NAV’) payable on completion;(3) Marlixia also purchased the shareholding of Ms Dawn Leary, so that it held the full share capital of the Company. The Loan and Additional Loans[7]On or about 13 September 2017, the Company lent to Marlixia the sum of £1,085,000 (‘the Loan’) pursuant to an undated written loan agreement (‘Loan Agreement’) signed in counterpart by the First Respondent as director of the Company and by the Second Respondent as director of Marlixia. As Marlixia was a newly incorporated company with no income or assets, the effect of the Loan was that the Company was funding the consideration which would be due from Marlixia to the First Respondent under the SPA about to be entered into. Under the terms of the Loan Agreement, the Loan was repayable on demand, unsecured and interest free.[8]By an undated written resolution, signed in the run-up to the Company and Marlixia entering into the Loan Agreement, the First Respondent as sole director of the Company resolved, ‘having considered the matters in section 172 of the Companies Act 2006’, that(1) it would be ‘most likely to promote the Company’s objects and would constitute a proper exercise of the director’s powers’ for the Company to enter into the Loan Agreement with Marlixia and(2) that the Loan Agreement be entered into and signed by the First Respondent as sole director on the Company’s behalf.[9]After the Loan, the First and Second Respondents, as directors of the Company, authorised the following additional loans from the Company to Marlixia:(1) Between 13 September 2017 and 31 January 2018, a loan of £78,417 (‘Additional Loan 1’);(2) On dates unknown in the financial year ending 31 January 2019, a loan of £120,000 (‘Additional Loan 2’); and(3) On dates unknown between 1 February 2019 and 31 December 2019, a loan of £110,035 (‘Additional Loan 3’).[10]The purpose of Additional Loans 1, 2 and 3 was for the Company to continue to fund the consideration for the purchase of the Company’s shares under the SPA. These were again unsecured loans with no set date for repayment.[11]At no time did the Company demand repayment of the Loan or any of the Additional Loans. The Dividends[12]On 8 March 2018, the Company resolved to pay dividends of 50 pence per A share (£5,000) per month from September 2017 to March 2018 (‘the March 2018 Resolution’). On 2 May 2019, the Company resolved to pay dividends of 50 pence per A share (£5000) per month from February 2018 to January 2019 (‘the May 2019 Resolution’). Pursuant to these resolutions, £85,000 was paid to Marlixia as dividends (‘the Dividends’). The Company’s entry into Administration/CVL[13]On 3 February 2020, the Company entered administration. Paul Higley and Paul Pittman were appointed as administrators.[14]On 3 July 2020, the Company moved to CVL. Emma Thompson and Nicholas Myers were appointed as liquidators.[15]On 22 June 2022, Kevin Ley replaced Emma Thompson. On 5 August 2024, Henry Shinners replaced Nicholas Myers. Marlixia’s dissolution[16]Marlixia was dissolved on 5 October 2021. The Application- procedural history[17]The Application was issued protectively (owing to possible limitation issues) on 24 July 2023 and initially was not supported by a witness statement.[18]The Application was stayed for 4 months to facilitate ongoing pre-action correspondence and the possibility of ADR. After the stay expired, Mr Ley filed and served a witness statement dated 13 November 2023 in support of the Application.[19]There was a directions hearing on 27 November 2023, at which an order was made allowing the Respondents to inspect the documents held by the Applicants and directing the filing and service of points of claim by 28 February 2024, points of defence by 27 March 2024 and points of reply by 10 April 2024. A further 30 minute hearing was listed for 29 April 2024. This was subsequently adjourned to 13 December 2024 with a 2 hour time estimate.[20]When serving their points of claim on 28 February 2024, the Applicants also served the Amendment Application (in respect of their Insolvency Act Application Notice issued on 24 July 2023). The points of claim included the new claims that were the subject of the Amendment Application. Points of defence were filed on 27 March 2024, raising limitation defences. Points of reply were served on 10 April 2024.[21]The Amendment Application was initially listed for hearing at the same time as the directions hearing on the Application fixed for 29 April 2024, but as it was opposed, was subsequently adjourned to a longer hearing slot on 13 December 2024.[22]The hearing time estimates for the Amendment Application have proved inadequate twice. The matter was adjourned part-heard from 13 December 2024 to 8 January 2025 and then again from 8 January 2025 to 19 February 2025. Happily, the parties have made good use of the adjournments, agreeing a number of amendments between themselves and thereby narrowing the issues for the court to determine.[23]The focus of this court is therefore simply on the remaining points of dispute between the parties. The Amendment Application[24]The proposed amendments which remain contested relate to paragraphs (1), 2(a), 2(b) and (3) of the Insolvency Act Application Notice. These are set out below, along with paragraph (4) for a certain amount of context, with the contested amendments underlined and in bold for ease of reference:
‘Section 212 Insolvency Act (IA 1986) Misfeasance Claims (1) A declaration pursuant to Section 212 of the IA 1986 that the First Respondent, a former director of the Company, was guilty of misfeasance and in breach of his fiduciary and other duties owed to the Company under sections 171-177 Companies Act 2006 (CA 2006) and should account to the Company by reason of: (a) lending without adequate consideration and/or without interest, and/or a set repayment date and/or without taking any security on an exact date or dates unknown but believed to be on or about 13 September 2017 the total sum of £1,085,000 of the Company’s money (Loan) to Marlixia Limited (Marlixia) (being a company solely owned by the Second Respondent) which had no prospect of being able to repay the monies lent thereby resulting in £1,085,000 becoming substantially lost to the Company by reason of Marlixia’s failure/inability to repay the Loan and subsequent dissolution and striking off from the Register of Companies on 5 October 2021 on the application of the Second Respondent. The Loan was made in breach of the First Respondent’s duties to act in the best interests of and to promote the success of the Company, to exercise reasonable care, skill and diligence and/or to exercise independent judgement. The Loan caused the Company to become insolvent pursuant to section 123(2) IA 1986. (2) Further, pursuant to section 212 IA 1986, a declaration that the First and Second Respondents were guilty of misfeasance and in breach of their fiduciary and other duties owed to the Company under sections 171-177 CA 2006 and should account to the Company by reason of: (a) lending without adequate consideration and/or without interest, and/or a set repayment date and/or without taking any security on an exact date or dates unknown in the financial year ending 31 January 2018 a further sum of £78,417 (Additional Loan 1) to Marlixia which had no prospects of repayment resulting in £78,417 becoming substantially lost to the Company by reason of Marlixia’s failure/inability to repay Additional Loan 1 and its subsequent dissolution and striking off from the Register of Companies on 5 October 2021 on the application of the Second Respondent. Additional Loan 1 further depleted the Company’s cash reserves and was made to a connected non-trading entity with no assets/ability to repay the same. The Second Respondent was the sole director and shareholder of Marlixia when Additional Loan 1 was permitted or authorised. Additional Loan 1 was authorised by the First and Second Respondents at a time when no repayments whatsoever in respect of the Loan had been made. A director exercising reasonable care, skill and diligence and exercising independent judgement would/should have known that Marlixia had no assets/ability to repay Additional Loan 1. In authorising Additional Loan 1, the First and Second Respondents breached their duty to act in the best interests of and to promote the success of the Company, to exercise reasonable care, skill and diligence and/or to exercise independent judgement including but not limited to authorising Additional Loan 1 when the Company was insolvent and the First and Second Respondents knew or ought to have known that Additional Loan 1 would not be repaid in breach of section 172(3) CA 2006; (b) lending without adequate consideration and/or without interest, and/or a set repayment date and/or without taking any security on an exact date or dates unknown in the financial year ending 31 January 2019 a further sum of £120,000 (Additional Loan 2) to Marlixia which had no prospect of being able to repay the monies lent resulting in £120,000 becoming substantially lost to the Company by reason of Marlixia’s failure/inability to repay Additional Loan 2 and its subsequent dissolution and striking off from the Register of Companies on 5 October 2021 on the application of the Second Respondent. Additional Loan 2 further depleted the Company’s cash reserves and was made to a connected non-trading entity with no assets/ability to repay the same. The Second Respondent was the sole director and shareholder of Marlixia when Additional Loan 2 was permitted or authorised. Additional Loan 2 was authorised by the First and Second Respondents at a time when no repayments whatsoever in respect of the Loan or Additional Loan 1 had been made. A director exercising reasonable care, skill, diligence and independent judgement would/should have known that Marlixia had no assets/ability to repay Additional Loan 2. In authorising Additional Loan 2, the First and Second Respondents breached their duty to act in the best interests of and to promote the success of the Company, to exercise reasonable care, skill and diligence and/or to exercise independent judgement including but not limited to authorising Additional Loan 2 when the Company was insolvent and the First and Second Respondents knew or ought to have known that Additional Loan 2 would not be repaid in breach of section 172(3) CA 2006. ….. (3) Further and/or in the alternate, a declaration pursuant to section 212 IA 1986 that the First and Second Respondents were guilty of misfeasance by causing or permitting the Company to advance sums to Marlixia to fund its purchase of the Company’s shares payable by Marlixia under an undated Share Purchase Agreement and enter into the above transactions for the sole purpose of transferring valuable assets belonging to the Company for the Respondents benefit were distributions out of the Company’s capital in contravention of Part 23 CA 2006 and in breach of their fiduciary and other duties owed to the Company. In accordance with FRS 102, the said loans should not have been treated as assets of the Company in the Company’s accounts in their entirety, or alternatively at all, and accordingly, the said distribution was unlawful because there were insufficient assets in the Company from which the distribution could be made contrary to section 830 CA 2006. The transactions were authorised, permitted or allowed by the Respondents at a time when they knew or ought to have known that the Company was insolvent and/or that the transactions would render the Company unable to pay its debts as and when they fell due contrary to s123 of IA 1986. The Respondents authorised the distribution in breach of inter-alia section 172(3) CA 2006 and are liable to repay the sums received. (4) Further, the Respondents were guilty of misfeasance and in breach of their fiduciary and other duties and should account to the Company by reason of their paying to the shareholder of the Company, namely Marlixia, a dividend out of capital at a rate of £0.50 per ordinary share per month, amounting to £5000 per month, from September 2017 to an exact date unknown but which amounted to at least £85,000 in the period of 1 September 2017 - 31 January 2019 (Dividends). The Dividends were authorised, permitted or allowed by the Respondents: (a) at a time when they knew or ought to have known that the Company was insolvent; (b) in breach of inter-alia section 172(3) CA 2006; and (c) at a time when insufficient profits were available for distribution contrary to section 830 CA 2006.’
Amendment: CPR 17[25]CPR 17 sets out the circumstances in which a party may amend his statement of case.[26]CPR r. 17.1(2)(b) applies in respect of any of the proposed amendments which do not fall outside of the limitation period, or which do not introduce any new cause of action. When considering applications under this provision the starting point for the court, in exercising its discretion, is to have regard to all the matters referred to in CPR r.1.1(2) so as to deal with the case “justly and at proportionate cost” in accordance with the overriding objective. This will involve the court striking a balance between injustice to the applicant if the amendment is refused and injustice to the opposing party and other litigants in general if the amendment is permitted:White Book 2024, Volume 1, paragraph 17.3.5. Parties are encouraged to consent to amendments which are limited and can comfortably be addressed at trial (GASL Ireland Leasing A-1 Ltd v SpiceJet Ltd [2023] EWHC 1107 (Comm) at [11]).[27]CPR r.17.4, which should be read in conjunction with section 35 Limitation Act 1980, applies to any amendments that are made after the relevant period of limitation has expired and which seek to introduce a new cause of action. In those circumstances, pursuant to CPR r. 17.4(2) 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 are already in issue on the claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.[28]The approach to be adopted to CPR 17.4 was uncontroversial.[29]If the court is considering the application under CPR r.17.4, the court should consider four questions (see Mulalley & Co Ltd v Martlet Homes Ltc [2022] EWCA Civ 32 at [38] per Coulson LJ):(1) Is it reasonably arguable that the opposed amendments are outside the applicable limitation period?(2) Do the proposed amendments seek to add or substitute a new cause of action?(3) Does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim?(4) Should the court exercise its discretion to allow the amendment?[30]If it is reasonably arguable that the proposed amendments are made outside of the limitation period, the next question for the court to ask is whether a new cause of action has been pleaded. The law on whether a new cause of action has been added was summarised by Tomlinson LJ in Co-Operative Group Limited v Birse Developments Limited & Anr [2013] EWCA Civ 474; [2013] BLR 383 at [20] and [21] where he said (with emphasis added):
‘20. In the quest for what constitutes a “new” cause of action, i.e. a cause of action different from that already asserted, it is the essential factual allegations upon which the original and the proposed new or different claims are reliant which must be compared. Thus “the pleading of unnecessary allegations or theaddition of further instances or better particulars do not amount to a distinct cause of action” – see Paragon Finance v Thakerar [1999] 1 All ER 400 at 405 per Millett LJ. “So in identifying a new cause of action the bare minimum of essential facts abstracted from the original pleading to be compared with the minimum as it would be constituted under the amended pleading” – see per Robert Walker LJ in Smith v Henniker-Major [2003] Ch 182 at 210. 21. The court is therefore concerned with the comparison of “the essential factual elements in a cause of action already pleaded with the essential factual elements in the cause of action as proposed” – see per David Richards J in HMRC v Begum [2010] EWHC 1799 (Ch) at paragraph 32. “A change in the essential features of the factual basis (rather than, say, giving further particulars of existing allegations) will introduce a new cause of action” – ibid, paragraph 30.’
[31]If a new cause of action is introduced outside of the limitation period, the next question is whether the new cause of action arises out of the same or substantially the same facts. If it does not, then the amendment application will fail because to permit amendment would be to allow a party to introduce a new cause of action after the expiry of the limitation period, contrary to section 35 Limitation Act 1980.[32]In the Mulalley judgment at [49] reference is made to two cases (Goode v Martin [2001] 3 All ER 562 and Lloyd’s Bank plc v Rogers [1997] TLR 145) which considered section 35(5) Limitation Act 1980 and the purpose/policy behind the provisions of that section. Whilst, as made clear by Coulson LJ in Mulalley, consideration of the question whether one factual basis is substantially the same as another involves a value judgment, the purpose of the section, as made clear in Goode and Lloyd’s Bank v Rogers, is to avoid placing a defendant in a position where if the amendment is allowed he will be obliged after the expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, or are unrelated to, those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim. This is also a relevant factor when it comes to the court’s consideration of its discretion as to whether to allow the amendments or not.[33]Should the court consider that a proposed amendment introduces a new claim outside of the limitation period but that it arises out of the same or substantially the same facts, the court will then have to determine whether to exercise its discretion in favour of allowing the proposed amendments. Similar considerations on discretion apply to those applicable when determining an application under CPR r.17.1(2)(b).[34]With this guidance in mind, I turn next to consider the Mulalley test. Is it reasonably arguable that the contested amendments are outside the applicable limitation period?[35]In my judgment, insofar as the contested amendments relate to the breach of fiduciary duty claims raised against the Second Respondent in paragraphs (2)(a), (2)(b) and (3) of the Application Notice in respect of the sums advanced by way of Additional Loans 1 and 2, it is not reasonably arguable that the amendments are outside the applicable limitation period. In this regard I accept the Applicants’ submissions that the usual 6 year period for breach of trust/breach of fiduciary duty claims provided by section 21(3) (as against the Second Respondent in relation to the above) is disapplied by section 21(1)(b) LA 1980 by operation of the reasoning applied in Burnden Holdings (UK) Ltd v Fielding [2018] AC 857.[36]In relation to these proposed amendments (hereafter ‘the CPR 17.1(2)(b) amendments’), therefore, CPR 17.1(2)(b) applies. The court has a discretion to allow permission to amend. Such discretion is to be exercised in accordance with the overriding objective.[37]In relation to the remaining contested amendments, in my judgment Mr Brown is right in submitting that it is at least reasonably arguable that Burnden is distinguishable and that the usual 6 year limitation period applies.[38]In relation to these proposed amendments, therefore (hereafter ‘the CPR 17.4 amendments’), I turn next to consider stages 2 and 3 of the Mulalley test.[39]As rightly submitted by Ms Sleeman, in light of the amendments already agreed between the parties, the correct approach, when determining whether a proposed amendment seeks to add or substitute a new cause of action, or is based on the same or substantially the same facts, involves a comparison of the Application Notice as now amended by agreement and the contested amendment, not a comparison of the Application Notice in its original form and the contested amendment. The proposed amendment to paragraph (1) of the Application Notice (as amended by agreement)[40]Adopting that approach, in my judgment the amendment proposed in paragraph 1 of the Application Notice does not seek to add or substitute a new cause of action. Paragraph 1 already expressly alleges that the First Respondent is in breach of his fiduciary duties under sections 171-177 CA 2006. Paragraph (1) also expressly alleges that the Loan was made in breach of the First Respondent’s duties to act in the best interests of the Company; a specific reference to section 172. The proposed amendment simply adds an allegation as to the consequence of the Loan. In this regard I remind myself that the addition of better particulars does not amount to a distinct cause of action: Paragon Finance v Thakerar [1999] 1 All ER 400 at 405 per Millett LJ.[41]Moreover, even if I am wrong in that conclusion, in my judgment the amendment proposed to paragraph (1) arises out of the same or substantially the same facts as are already in issue in the existing claim, by virtue inter alia of paragraph (4) of the Application Notice as amended by agreement. Determining the allegations made in paragraph (4) will already involve the court in considering whether or not the Company was insolvent from 1 September 2017 onwards.[42]Accordingly, the court has a discretion as to whether to permit that amendment, such discretion to be exercised in accordance with the overriding objective.

(b) of the Application Notice (as amended by agreement)

[43]In my judgment the amendments proposed in paragraphs 2(a) and 2(b) of the Application Notice do not seek to add or substitute a new cause of action. Paragraph 2 already expressly alleges breach of fiduciary duties under sections 171-177 against both Respondents, thereby tacitly including reference to section 172(3). Paragraphs (2)(a) and (2)(b) also expressly allege that Additional Loans 1 and 2 respectively were made in breach of the Respondents’ duties to act in the best interests of the Company; a specific reference to section 172. Again, I remind myself that the addition of better particulars does not amount to a distinct cause of action: Paragon Finance v Thakerar [1999] 1 All ER 400 at 405 per Millett LJ.[44]Moreover, even if I am wrong in that conclusion, in my judgment, the amendments proposed to paragraphs (2)(a) and (2)(b) arise out of the same or substantially the same facts as are already in issue in the existing claim, by virtue inter alia of paragraph (4) of the Application Notice as amended by agreement. Determining the allegations made in paragraph (4) will already involve the court in considering whether or not the Company was insolvent from September 2017 onwards and whether the Respondents were in breach of section 172(3) CA in authorising dividends with effect from September 2017 onwards. Determination of the existing agreed allegations of a breach of Section 172 in paragraphs (2)(a) and (2)(b) in granting the Additional Loans will already involve consideration of evidence as to what (if any) the subjective thinking was of the Respondents at the time of making each of the Additional Loans in question; and, in the absence of evidence of subjective thinking, an application of the objective test. In my judgment, these proposed amendments fall squarely and comfortably within the ‘substantially the same facts’ category.[45]Accordingly, the court has a discretion as to whether to permit the proposed amendments to paragraphs (2)(a) and (b), such discretion to be exercised in accordance with the overriding objective. The proposed amendment to paragraph (3) of the Application Notice (as amended by agreement)[46]In my judgment, the proposed amendment to paragraph (3), insofar as it alleges distributions of the Company’s capital in contravention of section 830 of the Companies Act 2006, does seek to add a new cause of action. In this regard I reject the submission that the Application Notice may be read together with Mr Ley’s later witness statement, prepared some 4 months after issue of proceedings, for the reasons explored by Nugee LJ in Libyan Investment Authority v King [2021] 1 WLR 2659 at [65]-[68]. Whilst I accept that the Application Notice made reference to a witness statement ‘to follow’, the witness statement in question was not even under preparation for months thereafter; in the meantime, the Respondents were in the position of having to prepare and take advice on the basis of the Application Notice itself. In my judgment, an applicant who issues at the end of a limitation period cannot leave the door ‘ajar’ to claims not even hinted at in an application notice for months thereafter simply by including the words ‘witness statement to follow’ in the application notice itself.[47]In my judgment, the proposed amendment to paragraph (3), insofar as it alleges distributions of the Company’s capital in contravention of section 830 CA 2006, does not arise out of the same or substantially the same facts as are already in issue in the existing claim. In this regard I accept Mr Brown’s submission that this alternative allegation must be premised on the SPA and the Loan Agreement being shams or without legal effect. An allegation of a sham carries with it an inherent element of dishonesty by an intention to fool innocent third parties as to the true legal position: National Westminster Bank Ltd v Jone [2000] BPIR 1092 per Neuberger J (as he then was) at [59]. Discretion[48]In light of the foregoing conclusions, I am satisfied that this court does have discretionary jurisdiction to grant permission to amend paragraphs (1), (2)(a) and (2)(b) in the manner sought. I am also satisfied that it would further the overriding objective to grant permission to amend in these respects. In reaching this conclusion I reject Mr Brown’s submission that to permit such amendments would add materially to the burden of the Respondents in defending the proceedings. In this regard, I refer to paragraphs [41] and [44] above. The solvency of the Company in given financial years and the decision processes undertaken by the Respondents in and/or relating to those financial years are live issues already. In my judgment, any additional facts to be investigated and evidence to be collated in consequence of the amendments which I have permitted cannot realistically be described as completely outside the ambit of and/or unrelated to those facts which the Respondents can reasonably be expected to be investigating in any event, for the purpose of defending the claim in its agreed amended form.[49]I also reject Mr Brown’s submission that the Applicants have been guilty of delay in amending their case. They served their application for permission to amend by the first (and only) deadline laid down by this court for points of claim. Any delay since has been as a result of the fact that the proposed amendments were contested; compounded to an extent by inaccurate time estimates, for which both sides must take some responsibility.[50]I shall therefore grant permission to amend paragraphs (1), (2)(a) and (2)(b) as asked.[51]In relation to paragraph (3), save insofar as the proposed amendments relate to the breach of fiduciary duty claims raised against the Second Respondent in respect of the sums advanced by way of Additional Loans 1 and 2, for the reasons given in paragraphs [46] and [47] of this judgment, I have concluded that this court does not have jurisdiction to grant permission to amend as asked.[52]I would add that, even if I am wrong in the conclusions set out at [46], [47] and [51] above, I would in any event refuse permission to amend to include the allegation of wrongful distributions of the Company’s capital in contravention of section 830 CA 2006 set out at paragraph (3) as a matter of discretion, for the reasons set out below.[53]As made clear by Popplewell LJ in the case of Kawasaki Kisen Kaisha Ltd v James Kemball Ltd [2021] EWCA Civ 33, a proposed amendment must be arguable, carry a degree of conviction, be coherent, properly particularised and supported by evidence that establishes a factual basis for the allegation. As put by Popplewell LJ (Henderson and David Richards LJJ concurring) at [16]-[18]: ‘[16] It was common ground that on an application to serve a claim on a defendant out of the jurisdiction, a claimant needs to establish a serious issue to be tried, which means a case which has a real as opposed to fanciful prospects of success, the same test as applies to applications for summary judgement: Atimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804 per Lord Collins JSC. [17] The Court will apply the same test when considering an application to amend a statement of case, and will also refuse permission to amend to raise a case which does not have a real prospect of success. [18] In both these contexts:(1) It is not enough that the claim is merely arguable; it must carry some degree of conviction: ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 at paragraph 8; Global Asset Capital Inc v Aabar Block SARL [2017] 4 WLR 164 at paragraph 27(1).(2) The pleading must be coherent and properly particularised: Elite Property Holdings Ltd v Barclays Bank Plc [2019] EWCA Civ 204 at paragraph 42.(3) The pleading must be supported by evidence which establishes a factual basis which meets the merits test; it is not sufficient simply to plead allegations which if true would establish a claim; there must be evidential material which establishes a sufficiently arguable case that the allegations are correct: Elite Property at paragraph 41.’

[18] In both these contexts:

[54]In the present case, the allegation of wrongful distribution of capital contained in paragraph (3) fails to meet a number of these threshold requirements. As rightly observed by Mr Brown, the factual allegation is ‘strained’, as Marlixia did in fact purchase the shareholding pursuant to the SPA with monies advanced by the Company to Marlixia via the Loan and the Additional Loans. Against that backdrop it is difficult to see how the Applicants could make out a case premised on the SPA and Loan agreement being shams.[55]Moreover, paragraph (3) is not supported by evidence establishing a factual basis which meets the merits test. It is also not coherent and properly particularised. It seeks an order against both Respondents without any distinction, when their respective positions at given material times were entirely different.[56]In my judgment, it would be contrary to the overriding objective to permit the Applicant to introduce by way of amendment an unlawful distribution of capital claim, whether couched (under the umbrella of s212) as a breach of s172 CA 2006 or as a breach of s830 CA 2006.[57]For all these reasons, permission to amend paragraph (3) to introduce an allegation of wrongful distribution of capital is refused.[58]For the avoidance of doubt, however, I would add that refusal of permission to amend in this regard does not of itself preclude the Applicants from relying on allegations that the loans were inappropriately treated as assets in the Company’s accounts for the purposes of their remaining claims against the Respondents in these proceedings. Conclusions[59]For the reasons given, I shall grant permission to amend paragraphs (1), (2)(a) and (2)(b) as asked. I shall refuse permission to amend paragraph (3).[60]I shall hear further submissions on costs and any consequential directions required on the handing down of this judgment. ICC Judge Barber