Ventra Investments Ltd v Bank of Scotland Plc [2017] EWHC 199 (Comm)

Neutral Citation Number: 2017 EWHC 199 (Comm)Case No CL-2015-000559
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 3 March 2017
Before
Ms Sara Cockerill QC(sitting as a Deputy Judge of the High Court)
Between
VENTRA INVESTMENTS LIMITEDClaimantBANK OF SCOTLAND PLCDefendant
Stephen Davies QC (instructed by Hausfeld & Co LLP) for ClaimantRosalind Phelps QC and Rupert Allen (instructed by DLA Piper UK LLP) for DefendantHearing Hearing dates: 26 January 2017
Judgment ApprovedMs Sara Cockerill QC :
[1]By an application dated 26 October 2016, the Defendant ("BOS") seeks to strike out parts of the Particulars of Claim because they are immaterial to the pleaded causes of action or seek to reserve the position on unpleaded causes of action but nevertheless have the potential to increase very substantially the disclosure burden and evidential scope of the proceedings. Summary judgment dismissing a part of the claim on limitation grounds was also sought, but was withdrawn on agreed terms before the hearing.[2]In essence the claim relates to the purchase by the Claimant ("Ventra") of four replacement interest rate swaps (“the Replacement Trades”). Ventra alleges that it was induced to enter into the Replacement Trades by alleged negligent and fraudulent misrepresentations or negligent misstatements and negligent failure to provide an adequate explanation of the nature and effect of the swaps. The key period for these purposes is between September 2008 and February 2009.[3]The relevant factual background is as follows. Prior to the events giving rise to the claim, Ventra, a family owned company, operated a successful property investment and letting business that had a substantial portfolio of properties, principally in central London. As at February 2008, the value of this portfolio was in excess of £86 million. When it entered administrative receivership on 16 May 2011, Ventra owned some 99 properties and was indebted to BOS in the amount of almost £94 million. It is now in liquidation.[4]BOS began to provide lending services to Ventra in 1997. Over the period 2004-2008, BOS made 10 loan facilities available to Ventra (some fixed term loans and other credit facilities).[5]In connection with that borrowing, Ventra entered into a number of interest rate swaps with BOS. Ventra entered into three swaps with BOS on 23 June 2005, 6 February 2007 and 4 February 2008 ("the Original Trades"). The Original Trades were replaced by the Replacement Trades entered into between 1 October 2008 and 6 February 2009.[6]This claim is concerned with the circumstances in which Ventra entered into the Replacement Trades. Ventra's claim against BOS is put in three different ways.[7]First, it is alleged that BOS induced Ventra to enter into the Replacement Trades by making negligent misrepresentations to the effect that: i) There was "significant value" in the Original Trades that could only be accessed if Ventra embedded that value in the Replacement Trades; and/or ii) BOS was unwilling at that time to accept a proposal from Ventra to increase the amount of Ventra's term loan borrowing from BOS to replace its revolving credit facilities (described in the Particulars of Claim as "the Proposed Increase"), but that the prospects of BOS granting the Proposed Increase would be improved if Ventra entered into the Replacement Trades.[8]In this connection I should note that part of the pleading as to the representations relates to something called the “Continuity Assurances”. These are pleaded separately at paragraph 21 of the Particulars and are, in essence, that during 2008 representations were made by BOS that Ventra was regarded by BOS as a “good” customer whose relationship would be likely to be retained, but that when Ventra’s facilities came to be considered for renewal it would be advisable for it to take such steps as were necessary to enhance its status as a “good” customer.[9]The falsity of the representations is pleaded to at paragraph 37 of the Particulars. It is alleged: i) None of the Original Trades had any embedded value to Ventra; ii) There were other reasons for the short term reduction in interest rates payable under the Replacement Trades; iii) BOS had no intention of sanctioning an increase in Ventra’s loan facilities. Importantly for present purposes it is also alleged that “until after disclosure, [Ventra] reserves the right to plead that BOS had no intention to continue the relationship with [Ventra]”. This is a step back both from the draft Particulars and from the pleading summary served pursuant to paragraph C1.1 of the Commercial Court Guide which both asserted a full case in falsity.[10]The other facets of the case are not central to this application, but should be outlined briefly. Secondly, it is alleged that BOS negligently failed to provide a full and accurate explanation of the nature and effect of the Replacement Trades and, in particular, as to the long-term effect of a fall in interest rates on the Replacement Trades (in particular, as regards the potentially increased level of break costs). Thirdly, it is alleged that BOS induced Ventra to enter into the Replacement Trades by making fraudulent or negligent misrepresentations in relation to LIBOR.[11]The focus of the current application is very much on the way in which Ventra puts its first case. Some of the passages of which strike out is sought are said by Ventra to be relevant to the second way in which Ventra puts its case but neither party suggested that those passages were relevant to the third way of putting the case.[12]Ventra claims that it has suffered loss and damage as a result of entering into the Replacement Trades. Its case is that the cost of the Replacement Trades was essentially the cause of Ventra’s failure. If it had not entered into the Replacement Trades, it would have terminated one of the Original Trades at a cost of approximately £1.5 million in or about June 2009. It refers to this course of action as “the Termination Strategy”. Ventra claims that this would have improved its cash flow so as to generate a quarterly cash flow surplus. Ventra says, however, that it could not pursue the Termination Strategy because it had entered into the Replacement Trades and as a result it was transferred to BOS's Business Support Unit ("BSU") in or about May 2010. Administrative receivers were appointed by BOS on 16 May 2011.[13]Ventra claims that it has paid about £5.5 million more to BOS under the Replacement Trades than it would have done if it had adopted the Termination Strategy and in addition that it has suffered further consequential losses of just under £75.5 million, including losses suffered because of an alleged sale of Ventra’s property portfolio by the administrative receivers at an undervalue for which BOS is said to be liable.[14]BOS denies that it has any liability to Ventra. BOS's position is that it did not make the alleged misrepresentations to Ventra and/or that Ventra was not induced to enter into the Replacement Trades by the alleged misrepresentations. BOS also denies that it acted negligently in breach of any common law duty of care that it owed to Ventra. In any event, BOS contends that any claim for negligence in respect of two of the Replacement Trades (Swap 6 and Swap 7) is time-barred. It is further denied that BOS made any misrepresentations to Ventra in relation to LIBOR or that they induced Ventra to enter into the Replacement Trades or that BOS acted fraudulently or negligently as alleged. Finally, BOS says that if it has any liability to Ventra it is entitled to set off the sum of around £30 million still owing to it from Ventra in relation to its borrowing. In sum, BOS says that this is a relatively clear and narrow dispute, which should be capable of being tried without a vast panorama of factual issues.[15]The basis of this application to strike out is that BOS say that there are within the Particulars of Claim, principally in sections D and K, a number of very general and wide-ranging allegations about the effect of the global financial crisis on BOS, BOS's acquisition by Lloyds Banking Group ("LBG"), the involvement of the Government in effecting rescue measures for the banking sector and the measures taken to remove riskier assets from LBG's balance sheet.[16]They contend that these allegations are irrelevant to the central issues of whether in fact the alleged representations were made to Ventra or not and, if so, whether they were false and caused Ventra to enter into the new swaps and/or of whether BOS provided an adequate explanation of their nature and effect. BOS has not pleaded to these allegations in its Defence pending the determination of this application.[17]It is part of BOS’s case that dealing with these allegations would impose a very heavy burden on BOS in terms of time and costs at each stage of the proceedings, especially in giving disclosure and preparing witness evidence and that if pursued, the allegations will also significantly increase the length of the trial, without in any way assisting the Court to resolve the factual issues between BOS and Ventra.[18]BOS also note in connection with their application that this is a case with limitation issues already. They are concerned that allegations which are not strictly relevant may be used as a springboard for arguing in the event of some future amendment to introduce a new cause of action, that the claim arises out of the same or substantially same facts and thus falls within CPR 17.4. It would therefore be wrong, they say, to leave matters which are extraneous to the current pleading in when the result might be to open this door to Ventra. This concern arises from the fact that prior to service of the Particulars of Claim, Ventra served a draft Particulars of Claim which encompassed wider and more serious issues, including fraudulent misrepresentation. BOS see these contentious factual pleadings as a “stalking horse” designed to attract disclosure, which may then enable Ventra to plead a case which was not available to them when the Particulars of Claim were served.[19]Ventra, for their part, essentially deny the allegations of irrelevancy, as will be explored further below.

The Relevant Legal Principles

[20]CPR r 3.4(2) provides that the Court may strike out a statement of case (or part of a statement of case) if it appears to the Court that(a) the statement of case discloses no reasonable grounds for bringing or defending the claim,(b) the statement of case is an abuse of the Court's process or otherwise likely to obstruct the just disposal of proceedings, or(c) there has been a failure to comply with a rule, practice direction or order. While BOS’s application notice only cites sub-paragraphs (a) and (b) BOS in fact rely on (c) as well.[21]So far as sub-paragraph (c) is concerned, BOS rely in particular on CPR r 16.4(1) which requires the Particulars of Claim to include "a concise statement of the facts on which the claimant relies" and on paragraph C.1.1(a) of the Admiralty and Commercial Courts Guide which states that statements of case must be "as brief and concise as possible" and "comply with Appendix 4 to the Guide". Appendix 4 to the Guide adds that "particular care should be taken to set out only those factual allegations which are necessary to support the case" and "evidence should not be included".[22]In this connection BOS rely on Tchenguiz v Grant Thornton [2015] EWHC 405 (Comm) where Leggatt J said at [1, 3]:
“Statements of case must be concise. They must plead only material facts, meaning those necessary for the purpose of formulating a cause of action or defence, and not background facts or evidence. Still less should they contain arguments, reasons or rhetoric. These basic rules were developed long ago and have stood the test of time because they serve the vital purpose of identifying the matters which each party will need to prove by evidence at trial. … prolixity adds substantial unnecessary costs to litigation.”
[23]That case however was an unusual one; the claimant was seeking retrospective permission from the Court to serve a 94-page pleading. It will be only in such highly unusual cases that a strike out is likely to succeed on this head alone. Certainly I would not order a strike out of any of the portions of the pleading complained of here simply by reference to sub-paragraph (c) of the rule.[24]In relation to the core of the application BOS place particular reliance on Charter UK Ltd v Nationwide Building Society [2009] EWHC 1002 (TCC). In that case there were allegations about a contract for software to manage complaints. The claimant pleaded the existence of a contract, which was denied. The claimant also however included in its pleading a contingent plea regarding use of its confidential information, reserving a right to amend after disclosure, and with no remedy sought.[25]Akenhead J from [10] onwards considered a number of authorities relating to the circumstances in which it is appropriate to strike out parts of pleadings and summarised the relevant principles thus at [16]:
“1. Claim forms and particulars of claim must identify the nature of the claim and the remedies sought. 2. Particulars of claim must contain the basic facts on which the claimant relies to support its claim or claims. 3. The remedies sought must relate to the claim or claims made and the basic facts pleaded by the claimant. 4. Generally at least there should be no half measures taken in the claim or in particulars of claim in terms of pleading matter which is immaterial to the relief or remedies sought. 5. It would be wrong, at least generally, in principle, to plead a matter which does not support or relate to any of the remedies sought. 6. It would be wrong in principle to plead a matter which is immaterial to the claim or claims made or relief sought for the purpose of securing disclosure of documentation relating to such immaterial matter. 7. Whilst infelicities in pleadings will not usually justify striking out, where no cause of action is pleaded then the court must give serious consideration to striking out that part of the pleading, particularly where its presence complicates and confuses the fair conduct of the proceedings. 8. Either through the CPR or through its inherent jurisdiction the court has wide powers to strike out parts of a pleading if it contains immaterial matter, particularly in circumstances when its continued presence will confuse the resolution of the underlying and properly pleaded claims. 9. A party absent agreement has no automatic right to amend its Particulars of Claim.”
[26]Akenhead J proceeded to strike out the contingent passages in which the claimant had referred to potential allegations against the defendant that were not presently pursued, commenting at [23] that:
“… it is wrong in principle for parties to plead half a case in the hope or anticipation that that will create sufficient of an issue to give rise to disclosure obligations; it is important that clarity is reached as soon as possible on pleadings as to what the real issues are currently.”
[27]BOS rely on the principles summarised by Akenhead J. They say that: i) The principle at (5) is relevant to all of the passages of which they complain; ii) The passage at (6) is also relevant to a number of these; iii) The passages at (7) and (8) engage the logistical and case management problems which they say will occur here if the complained of passages are allowed to stand.[28]As for the approach which I should take in the light of the authorities BOS says that there is no firm line between the approach to the different categories (a) and (b). They say in both cases the first question is: is the allegation relevant? If it is not, one looks to the consequences and to questions about whether the inclusion is one which is tactical or will confuse and complicate the action come in to play.[29]Ventra takes a rather different approach. They say that the application is made prematurely and should not have been made before clarification had been sought by way of further information. They say that the application misapplies the relevant legal principles and that there are different approaches which pertain in respect of striking out for irrelevancy and striking out for abuse of process.[30]So far as striking out for irrelevancy is concerned they refer me to BCCI v Bank of India [1999] BCC 943. In that case there was an application to strike out 10 paragraphs of a pleading which related to how BCCI did its business. It was argued that they were completely irrelevant and nothing to do with the claim. Ventra place reliance on a passage at p 948 where Neuberger J (as he then was) said:
“one should not strike out allegations on the ground of irrelevance unless they are, to use Rattee J's words, ‘so clearly irrelevant to justify their being struck out’. Further, as the earlier passage I quoted shows, if the relevant pleading suffers from insufficient particularity the court can, rather than strike it out, require particulars to be given.”
[31]Ultimately he concluded that the paragraphs arguably did or might properly bear on the actual arguments in the case and so should not be struck out. However being concerned about the very great vagueness and generality of the paragraphs he ordered that they be properly recast and particularised.[32]Ventra submit based on this authority that the test is whether an allegation is wholly irrelevant; and that the application of such a high bar is appropriate because otherwise the Court would be inundated with applications to strike out in cases where relevance might be tangential or unclear. BOS respond that Ventra overstates the test and that it is properly to be regarded as whether the allegations “do or may properly bear on the issues between the parties” (p 951). They also note that p 947D of the report indicates that there is no onus on a party who considers that the case it has to meet is defective to seek particulars.[33]Ventra then consider Charter as an example of the “abuse of process” category and submit that it is eminently distinguishable. They say that it was an extreme case in which, exceptionally, it was accepted by the claimant's solicitor that the claimant scurrilously pleaded a discrete set of circumstances which were on an entirely different topic to its pleaded cause of action and unrelated to it. This was in the hope that "something might turn up" on disclosure giving rise to a separate and distinct new cause of action which could then be pleaded for the first time. That was obviously abusive.[34]Ventra also rely on passages from the judgments in Atos Consulting Ltd v Avis Europe Plc [2005] EWHC 982 and Sharp v Blank [2015] EWHC 3219.[35]In Atos particulars of claim were served anticipating arguments which, it later transpired, were not being made, leaving redundant paragraphs in the Particulars. Jackson J at [15] noted that it was an unusual case in that it was driven by case management considerations and not the usual strike out considerations. It was conceded by the applicant that it could understand the case made against it and plead to it but it relied upon the provision in sub-paragraph (b) of the rule contending that the pleading as served was likely to obstruct the just disposal of proceedings. The judge at [18] accepted a submission that that wording denoted “impede to a high extent” and indicated that that meant that it would create a substantial obstruction to the just disposal of proceedings. The judge therefore declined to strike out the paragraphs complained of, noting that “it is not appropriate for the court to step down into the arena and to tell either party how to plead its case” [19].[36]In Sharp v Blank [2015] EWHC 3219 (Ch), Nugee J was considering an application for reverse summary judgment. In summarising his reasons for declining to give summary judgment (by dismissing allegations based on LIBOR manipulation) he explained what might amount to an abuse of process in this context:
“35. I should perhaps make it clear that I am not to be taken as suggesting that a claimant can properly put forward a case where he knows of no facts to support it and hope to survive a summary judgment application or strike out simply on the basis that "something might turn up". There is a well-established line of authority which holds that it is an abuse of process for a claimant to make a claim where he does not know of anything to support it. If however the position is that the Court can see from the material before it at the summary stage that it is not fanciful or unrealistic to suppose that the fuller material that is likely to be available at trial might support the case, then this seems to me to be different, and to grant summary judgment in such a case would run the risk of injustice in shutting out the claimant from running a case which might have something in it. Whether a case falls into the first or second of these categories is necessarily very fact-sensitive but the present case in my judgment falls into the second.”
[37]Ventra also pray in aid Hockin v Royal Bank of Scotland plc [2016] EWHC 925 (Ch). There Asplin J, also dealing with a swaps case, refused to strike out allegations relating to whether the bank’s Global Restructuring Group acted in breach of an implied term to act in good faith under a Facility Agreement. In that case Asplin J held that the pleaded allegations had a relevance to causation of loss and therefore it could not be said that they did not support or relate to any remedy. As she put it:
“the matters were pleaded as a sequence of relevant events as a consequence of misselling which were causative of loss and it seems to me they would have been included whether or not the allegation of an implied duty of good faith had been included … in the Particulars of Claim. … the matters pleaded also went to consequential loss”
[38]Ventra rely on it as being a case with similar issues to the present case, including as to a liquidation policy. On reading the case I do not see the close analogy contended for; it appears to me that the learned judge considered that she was unable to conclude whether the plea of breach was bad in law and that the paragraphs would have survived anyway. Having found that, she also concluded that they would survive also because they related to causation of loss.[39]Overall therefore Ventra argues that on a proper analysis of the authorities there are clear blue lines between the strike out categories. It submits that striking out for irrelevance is only available where the allegation complained of is wholly irrelevant to pleaded allegations. On abuse grounds it says an applicant needs to show something new being alleged for the purposes of establishing a new cause of action after disclosure– as was the case in Charter. They say that there are no authorities which indicate that striking out for case management reasons is permissible, that evidence would be needed to establish that the allegations would introduce a substantial hurdle and that the CMC is the time to raise such issues, when the Court can consider how best to deal with issues such as disclosure and whether a real hurdle would be inevitable.[40]I have found the review of the authorities both interesting and helpful, but I consider that this, like many other strike out cases, is not a case which turns on fine points of law. I do not accept Ventra’s submission that one has to categorise a strike out into a type such as “pure irrelevancy” or “extraneous claim/allegation” and apply different rules to each category. Nor, on the other hand, am I persuaded by BOS’s position that one starts by establishing an irrelevancy and then goes on to weigh consequences. Consequences may be of little moment if a breach of a rule is sufficiently extreme or flagrant.[41]The basis on which strike out applications are capable of being made is set out in the CPR. Cases may fall into one or more of the categories within those rules. The starting point for an application is for the party complaining of the pleading to set out how it says that the document or passages fall within one or more provisions of the rule. It is the function of the Court simply to weigh the complaint or complaints against the particular pleading and the facts of the particular case and decide whether an allegation is sufficiently irrelevant or incomplete or in breach of the rules – or a combination thereof - that it is appropriate to order its removal from the pleadings.[42]Turning now to the paragraphs complained of, I will commence with the paragraphs which formed the core of the dispute and return to deal with other paragraphs complained of later.

Section D

[43]Section D of the Particulars (paragraphs 15-20) appears under the heading "Measures to rescue BOS". Paragraph 15 alleged BOS had engaged in “perilously high risk lending” which combined with a “colossal failure of senior management” [quotes unattributed] threatened the imminent collapse of BOS. It then provides under 8 sub-paragraphs what might be regarded as a high level status review to October 2008. At that point, it is alleged at paragraph 15.8, following due diligence Lloyds expressed confidence about the figure required for capital adjustments.[44]Paragraph 16 pleads a requirement to reduce risk profile by removal of higher risk loans to SMEs. At paragraph 17 Ventra pleads that "on a date unknown" but "believed to be by 1 October 2008" (i.e. the date of the first of the Replacement Trades), Lloyds had identified those higher risk loans to small and medium sized enterprises that it wished to remove from BOS's balance sheet to improve its capital position.[45]The key paragraph is paragraph 18 which states:
“Pending disclosure, it is inferred that, on a date unknown to [Ventra]: (i) [Ventra]’s indebtedness to BOS was designated as a Legacy Loan for RWA Disposal (ii) BOS decided to manage/permit an “exit” from its banking relationship with [Ventra] and a disposal of the debts owed by [Ventra]…. (iii) BOS decided not to inform [Ventra] because such a decision could not be explained or justified save by reference to RWA disposal.”
[46]Ventra then goes on to set out over two pages various allegations concerning the implementation of an alleged general strategy to remove risky assets from BOS's balance sheet following the merger of HBOS and Lloyds and BOS becoming a subsidiary of LBG. With an immaterial exception these allegations relate to the period after 6 February 2009 (i.e. the date of the last of the Replacement Trades).[47]I return therefore to paragraph 18, which is the only plea of facts specific to this case. BOS complain that this plea is on its face irrelevant. It appears to bear little relation to the paragraphs surrounding it.[48]BOS also complain that this paragraph contains or refers to no primary facts on which the inference is said to be based, and draw my attention to the decision of Flaux J (as he then was) in JSC Bank of Moscow v Kekhman and others [2015] EWHC 3073 (Comm) regarding the importance of pleading facts on which to base inferences – particularly where the inference is one of fraud. In particular they express concern that while fraud is not currently pleaded, this paragraph is designed to be a link to a plea of fraudulent misrepresentation which was advanced in the draft pleading but not included in the served version.[49]In essence BOS’s complaint does not fall under any one head of the rule, but partakes of elements of each sub-paragraph; the inference is not properly pleaded and links to no completed cause of action, it is therefore irrelevant itself and hedged about with irrelevant passages, it may be impermissibly used to found a new pleading and its satellite paragraphs breach the pleading rules and will open the door to mammoth disclosure.[50]Ventra says that these allegations are relevant to the question of the truth of the Continuity Assurances and enhanced prospects representations. It seeks to defend this paragraph by reference to the surrounding materials. It says that these particularise, as best it is able, the measures taken to rescue the Bank in the wake of the financial crisis and the effect on the Bank of becoming part of the Lloyds Banking Group. These factors affect the likelihood of BOS allowing Ventra to continue and enhance its relationship with the Bank. Ventra says that the factual basis for the plea in paragraph 18 is in fact to be found in paragraph 15, particularly sub-paragraphs 15.3, 15.4, 15.5, 15.6. In essence it says that its case is that serious due diligence had occurred by 13 October, by which time BOS had a good idea of what was going into the “good bank” and the “bad bank”. Ventra says that the question of whether Ventra’s business was earmarked for disposal lies at the centre of the case, and its lack of knowledge about this is key to why it carried on and agreed to the Replacement Trades.[51]Ventra submits that it is permissible and proper at this stage (i.e. pending disclosure) to plead the inferences in paragraph 18. On that basis, it says, the Continuity Assurances were false (see paragraph 37.6 of the pleading) and no reasonable person in the position of Ventra would have proceeded with the Replacement Trades if, in response to the pleaded requests made to BOS for the Continuity Assurances, the Bank had declined to give them. Ventra accordingly contends that this application is being used by the Bank to shut out any allegation that BOS designated Ventra as having Legacy Loans and for Exit and Disposal.[52]I should deal here also with paragraph 37.6 of the pleading, which on Ventra’s case links closely to paragraph 18.[53]Paragraph 37.6 states that "Until after disclosure [Ventra] reserves the right to plead that BOS had no intention to continue its relationship with [Ventra]."[54]BOS takes issue with this approach. It relies on the statement of Akenhead J in the Charter UK Ltd case at [23], that it is "wrong in principle" for a claimant to "half plead a case in the hope or anticipation that that will create sufficient of an issue to give rise to disclosure obligations". It says that this is not a case where Ventra has pleaded the relevant cause of action but reserves the right to give better particulars following disclosure. At most paragraph 37.6 of the Particulars identifies a potential new claim that Ventra is not presently able properly to advance - and does not in fact advance in the Particulars - but which it might consider advancing in the future. That is not permissible, particularly where (as here) the limitation period for that claim has expired. That being the case, paragraph 37.6 cannot complete the plea advanced at paragraph 18.[55]Ventra’s response is to say that paragraph 37.6 contains a reservation of rights in respect of Ventra’s case on the intention of BOS to continue its relationship with Ventra. Strictly speaking, they say, this is unnecessary, because the matter is expressly pleaded earlier at paragraph 18. As for the reservation they say that this is out of an abundance of caution and flag up the fact that the liquidators have had considerable difficulty in obtaining relevant documentation. Pressed on this point in submissions Mr Davies QC for Ventra suggested that the paragraph could instead have pleaded a breach by deleting the opening words or by a reference to a decision that Ventra was designated for exit and disposal, but indicated that at the present it was not possible to put a date on this allegation; this would only be possible after disclosure. Ventra also submit that the Charter principle is inapplicable because a proper cause of action had been pleaded and the reservation was only as regards one part of the cause of action.[56]There are three problems with Ventra’s arguments on these paragraphs. The first is that while, with the oral assistance of counsel, the outlines of the case which Ventra indicated it is running at paragraph 18 can perhaps be discerned, this is certainly not how the pleading reads. Nor indeed was the case clear from the correspondence between the solicitors in the run up to this hearing. Further, as appears from the above Ventra’s position on this allegation was not entirely clear even in oral argument; Mr Davies QC, while indicating that the reservation could be withdrawn, still indicated that Ventra were not in a position to plead the date which would be necessary to complete the pleading of the decision which leads to the falsity plea.[57]The first problem I have identified is rendered more acute because of the second problem, which is that it is actually hard to read this case into the pleading. This is because at paragraph 37.6 of the pleading (where any such pleading naturally belongs), Ventra specifically does not make a case as to the falsity of the Continuity Assurances. The logical correlate of their reservation in paragraph 37.6 is that they do not currently make a case that, as at the date of the representations, the Continuity Assurances were false in that BOS had decided to divest itself of Ventra’s business. I also note that as the pleading stands paragraph 62 appears to suggest that Ventra was designated for exit and disposal following the Replacement Trades, which would be inconsistent with a case of earlier knowledge/decision.[58]It follows that if paragraph 18 (though lacking relevant dates) does import a case of falsity of the Continuity Assurances as at September 2008-February 2009 paragraphs 18 and 37.6 are simply inconsistent and 37.6 is not the completion of paragraph 18. If (as Ventra say) paragraphs 18 and 37.6 are designed to be read together it would appear that they are not at this point in time in a position to plead a case of falsity and the pleas are irrelevant.[59]The third (and more minor) problem is that discerning Ventra’s case becomes still more difficult when the case is accompanied by marginal evidence and extraneous materials such as parts of paragraph 15 and all of paragraph 19 and 20.[60]I would also note that I do not agree that the question of whether Ventra’s business was earmarked for disposal lies at the centre of the case at this time. As explained above, the pleaded case on this limb is concerned only with what was (or was not) said by BOS's representatives to Ventra in connection with the Replacement Trades between around September 2008 and February 2009, whether those representations were untrue and whether BOS discharged any common law duty of care in relation to the information and explanations that it provided. Nor do I accept that the pleas as they stand are relevant to falsity of paragraph 37.5 as Mr Davies QC contended orally. In essence the relation of these paragraphs to paragraph 37.5 could only be one of motivation. They are not the basis for the plea of falsity at 37.5, which is separately pleaded at paragraph 29.3 of the pleading. They are not needed to establish the representation or the falsity.[61]As for Ventra’s point that the Charter principle is only engaged if a whole new cause of action is trailed, I do not accept this submission. As BOS point out, (6) of Charter appears to contradict this suggestion. But in any event it is artificial to regard this allegation as part of the existing allegations. Were it to be made it would introduce a new head of misrepresentation.[62]In terms of the other grounds raised by BOS as a basis for the strike out I am satisfied that these paragraphs do offend against the letter of the rules relating to pleadings (whatever view one takes of the paragraph 18/37.6 issue). I regard this as a relatively small factor in the decision which has to be made, but it should be acknowledged as a point falling within the jurisdictional hurdle. As for the case management aspects, I am not minded to give them much weight. There may be cases where such issues would inevitably impose a substantial hurdle to the efficient operation of justice; I am not convinced that this is one of those cases. Much could be done to cut down the necessary evidence by admissions and by focussed disclosure and case management orders.[63]I am however satisfied that paragraphs 18 and 37.6 cannot remain in the pleading in their current form. There is here a conjunction of irrelevance and incomplete pleading which is both confusing and improper. There may be allegations in embryo in these paragraphs which do or might properly bear on the issues in the case, but they are not properly pleaded. As such the matters pleaded (and the paragraphs which are designed to support them) do not currently bear on the issues in the case. Strictly speaking, paragraph 37.6 (as now drafted) falls to be struck out on Charter principles. Without paragraph 37.6 it would follow that paragraph 18, which is either an incomplete building block for 37.6, or is irrelevant also falls to be struck out; and with it the paragraphs pleaded by way of grounds and context for that plea (ie. the remains of Section D).[64]I do of course have a discretion as to how to deal with this; in particular I can order amendment or particularisation instead of striking out – particularly if I was of the view that while the allegations did not at present bear on matters pleaded they might, with some work, do so. I was initially minded to pursue this course, bearing in mind that test and the approach of Neuberger J in BCCI v Bank of India. Mr Davies QC urged me to pursue this course if I was not satisfied with the pleading, indicating that amendments would be being made in any event.[65]However on reflection I have concluded that this is not a satisfactory solution in this case. In BCCI v Bank of India the situation was rather different. It was clear both that the paragraphs in question might arguably bear on the issues in the case on three different bases and that the matter could be dealt with in this way.[66]Here it is not a simple question of particulars, because Ventra have not been clear as to whether they are in a position to plead knowledge and falsity at the relevant dates. In other words I cannot be satisfied that the paragraphs may properly bear on the issues in the case. It seems to me that the only way I could therefore proceed short of a strike out would be to make a contingent order in respect of these paragraphs i.e. striking out these passages unless within a specified period of time amendments curing the defects in the pleading are served. However this course would simply be an open door to further argument; BOS would be likely to find fault with the reformulated plea, and the matter would return to Court for a determination as to whether the contingent order “bit” or not.[67]In those circumstances, and given that Ventra did not proffer any formulations to cure the defects as a secondary case in their skeleton or in oral argument, I have decided that (subject to the point made in the next paragraph) the correct course is to make the order striking out these paragraphs.[68]During the course of oral argument Ventra sought to supplement their arguments on paragraphs 15-17 and 19-20 as set out in Hausfeld’s letter of 30 September 2016 and their skeleton argument by suggesting that even if not otherwise relevant these paragraphs would come in as a reply to arguments on causation. As this is an argument which is squarely in issue in relation to Section K I shall deal with it there.

Section K

[69]Section K of the Particulars (paragraphs 54-60) appears under the heading "Liquidation Policy". This section sets out allegations regarding the operations post July 2009 of the Business Support Unit, and in particular the alleged adoption of a “Liquidation Policy” involving conduct to "artificially distress" customers in order to maximise the incidence of default so as to improve the Tier 1 capital ratio of BOS. Only one paragraph (paragraph 60) pleads to Ventra specifically. It appears from paragraph 67 of the pleading that Ventra was placed into the Business Support Unit in about May 2010.[70]BOS submits that logically (and consistently with their location in the pleading after the sections dealing with the alleged representations and their alleged falsity) these pleas are immaterial to whether the alleged representations were made or were false at the time when they are alleged to have been made between around October 2008 and February 2009. Nor, it says, do they have a wider relevance; BOS notes that in the served pleading there is no allegation elsewhere that the Liquidation Policy was applied to Ventra, that the enforcement measures taken were not open to the Bank, or that they were wrongful. Ventra’s damages claim is said to follow from the cash flow problem brought about by the Replacement Trades, not from any enforcement measures. Accordingly they submit the pleas are irrelevant.[71]As with the earlier pleas BOS argue that this pleading, with its overtones of wrongful acts, is a hangover from the conspiracy/fraudulent misrepresentation claim set out in the draft Particulars; in particular Ventra suggested in that document that the Replacement Trades had been deliberately sold to Ventra with the intention of causing it financial distress so as to facilitate BOS's decision to exit the banking relationship. BOS express concern that these paragraphs are being used as a means to get disclosure to enable that plea to be revived.[72]Ventra’s answer to this is threefold. In the first place they submit that these paragraphs are relevant to the question of the truth of the Continuity Assurances and enhanced prospects representations. They say that this relevance arises from the fact that they concern the impact on BOS of the financial crisis, the Bank’s response (including its liquidation policy), the likelihood of BOS allowing Ventra to continue and enhance its relationship with the bank and the incentives which its staff were under at that time. This answer I do not find compelling, in the light of(i) the timing factor and(ii) the fact that as I have found there is currently no plea of falsity of the Continuity Assurances.[73]Ventra’s second answer, at paragraph 16 of their solicitors' letter dated 30 September 2016, is that these sections were included in the Particulars to set out "context" or "circumstances" in which the alleged representations were made. However, this argument is also unconvincing. These later facts could hardly be context to the earlier representations.[74]Thirdly, and perhaps with an eye to the arguments in Hockin, Ventra argue that these paragraphs contain evidence in support of their case on causation, in particular paragraph 74.3 where they plead that but for the Replacement Trades and the cashflow problem Ventra would not have been forced into default by BOS or BOS would have been unable to apply the Liquidation Policy to Ventra. Here the argument links to the arguments advanced in relation to paragraphs 15-17 and 19-20.[75]BOS responds that causation is not linked to this plea. The question of whether Ventra would have defaulted and been transferred to BSU if it had not entered into the Replacement Trades will turn on whether Ventra would have complied with the terms of the swaps and its facilities in those circumstances. It is immaterial to the causation of loss and damage whether BOS put in place the alleged policy (and, if so, whether it applied that policy to Ventra). On Ventra’s case as pleaded simply putting Ventra into the BSU completes the chain of causation. There is, it says, no connection between the purported "Liquidation Policy" and the sale of the Replacement Trades to Ventra or the loss and damage which Ventra claims to have suffered as a result of entering into them. It is not pleaded that the “Liquidation Policy” increased the loss suffered by Ventra. In this respect the case is different from the Hockin case where the judge was able to conclude that the paragraphs in question set out relevant facts which were causative of loss.[76]I consider that BOS is correct in its submissions. The plea cannot be relevant to the questions of representations or falsity. Nor, on analysis, does it bear on the issue of causation. The key points on causation are whether the Replacement Trades caused the cash flow issue which led to the transfer to BSU, or whether Ventra would have been better off under the Original Trades. The question of a Liquidation Policy is extraneous to these issues. As such the paragraphs fail the relevancy test. They would if pursued have a real tendency to inflate and overcomplicate trial preparation; but that is in effect a factor of their irrelevancy.

Paragraphs 13-14 of the POC

[77]Paragraphs 13 and 14 of the POC set out allegations concerning "certain internal assessment and monitoring systems to estimate [BOS's] potential future exposure ("PFE") in respect of swaps that it had sold to SME customers" such as Ventra, including (at paragraph 14) an alleged inference as to the information that would be shown by BOS's systems about the likely financial effect in terms of credit exposure on BOS should the customer default. BOS says that the alleged factual basis for this supposed inference is unexplained and inadequately particularised.[78]BOS submits that the allegations are plainly not relevant to any pleaded case of misrepresentation or breach of duty. They would nevertheless require BOS to give unnecessary disclosure and witness evidence in relation to its internal systems for assessing and monitoring credit risk.[79]Ventra says that these paragraphs plead facts which relate to its case that, by the time each of the Replacement Trades was transacted, the Bank had easy access to the relevant information which, with reasonable diligence, would have informed it that the Representations were false. In other words they are relevant to the allegation of whether BOS ought reasonably to have known the representations were false. Ventra also says that these paragraphs plead facts relevant to the asymmetry of information as between BOS and Ventra at the time the Representations were made and whether the duty to give full information was complied with. Thus, they say, these paragraphs are not wholly irrelevant, they are not trailing a new case and it cannot be said they create a substantial hurdle to the disposal of the case.[80]BOS says that these allegations do not withstand any scrutiny. In particular they submit that there is no issue between the parties that the alleged representation by BOS that the Original Trades had "significant value" to Ventra would have been false if it was made and that BOS knew or ought reasonably to have known that. BOS's defence to the allegation of misrepresentation in this regard is that the alleged representation was not made and further that by late 2008 both parties knew that a break cost would be payable by Ventra if the Original Trades were broken. Accordingly the paragraphs are not relevant to any issue between the parties.[81]As to "asymmetry of information" and the duty on BOS to give "full information", the position is similar. It is not denied by BOS that Ventra's contingent liability increased by entering into the Replacement Trades or that BOS was aware of this; BOS's position is that Ventra was also aware of this. It is therefore Ventra’s knowledge which is in issue and this is a matter to which BOS's internal systems are entirely irrelevant.[82]I note that in correspondence Hausfeld for Ventra did also pray in aid the pleaded duty to give a full explanation and the Liquidation Policy. These were not pursued in the skeleton or at the hearing, and it seems to me rightly so. The duty to give a full explanation hinges on knowledge of the increased break costs and PFE, and is answered again not by a denial of BOS’s knowledge, but an assertion of knowledge on the part of Ventra. I fail to discern the link to the Liquidation Policy, but in the light of my findings above it cannot assist.[83]In relation to these paragraphs it might be said that despite the irrelevance, a strike out is unnecessary given that no issue arises, by analogy with Atos. However in Atos there was a single target for the strike out decision and it appears to have been common ground that the paragraphs were otiose and no complications could arise on disclosure. Here, in the light of Ventra’s position, there may well be dispute down the line as to the ambit of disclosure if these paragraphs remain in the pleading. Given this, and the fact that I am making orders for other passages to be struck out, and given that Ventra has indicated that it will be seeking to amend in any case, I consider that the better course is to strike these paragraphs out for irrelevancy. The business of tidying the pleading in the light of the stricken paragraphs and otherwise amending can then be done more efficiently.

Cited in 3 later judgments