IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT [2015] EWHC 3487 (Ch) Before: No. HC-2015-000615 Rolls Building Royal Courts of Justice Friday, 27 th November 2015 MR. JUSTICE NEWEY B E T W E E N : SKELWITH (LEISURE) LIMITED (In Liquidation) Claimant - and - (1) ALAN ARMSTRONG (2) MARGARET ARMSTRONG (3) BRIAN MATTOCKS (4) SIMON ARMSTRONG (5) RICHARD ARMSTRONG (6) POLAR HOLDINGS LIMITED (a company incorporated in the Isle of Man) (7) FLAXBY PARK LIMITED (a company incorporated in the British Virgin Islands) (8) DANIEL WARD (9) TOBIAS WARD Defendants Transcribed by (a trading name of Opus 2 International Limited) Official Court Reporters and Audio Transcribers 5 Chancery Lane, London EC4A 1BL Tel: 020 7831 5627 Fax: 020 7831 7737 info@beverleynunnery.com J U D G M E N T (As approved by the Judge)
A P P E A R A N C E S MR C. PARKER QC and MISS R. PAGE (instructed by Gateley) appeared on behalf of the Claimant. MR. M. WARWICK QC (instructed by PCB Litigation LLP) appeared on behalf of the First, Second, Fourth to Sixth Defendants. MR. H. JORY QC and MR T. FLETCHER (instructed by Newtons Solicitors Limited, Knaresborough) appeared on behalf of the Third Defendant. MR T. GRANT QC and MR. D. McCOMBE (instructed by Barker Gillette LLP) appeared on behalf of the Seventh, Eighth and Ninth Defendants.
MR. JUSTICE NEWEY: 1 I have before me an application by the remaining claimant, Skelwith (Leisure) Limited, for permission to amend its particulars of claim and join additional defendants. 2 As I explained in a judgment that I gave last month ([2015] EWHC 2830 (Ch)), the case concerns a property now known as Flaxby Golf Club. Skelwith is the registered proprietor of the Club, but it charged the property in favour of the first defendant, Mr Alan Armstrong, as security for obligations to the members of the Flaxby Partnership, which comprises Mr Armstrong and other members of his family and a Mr Brian Mattocks. Skelwith having failed to fulfil its obligations, Mr Armstrong made a demand for payment in January of this year. Subsequently, in February, a deed was executed to assign the benefit of Skelwith s indebtedness and the charge to the sixth defendant, Polar Holdings Limited, a company associated with the Armstrong family. Thereafter, on 11 February, Polar entered into two agreements for the sale of the Club to Flaxby Park Limited, a company whose shares are owned beneficially by a Mr Daniel Ward and his brother Tobias. Neither contract had, however, proceeded to completion by 19 February, when Skelwith and its shareholders, Mr Paul Ellis and Mr Darren Broadbent, applied without notice for, and were granted, an injunction restraining the members of the Flaxby Partnership (as the first to fifth defendants) and Polar from disposing of the Club. Flaxby Park was later added as the seventh defendant to the proceedings. 3 As they stand, the particulars of claim include allegations that the first, second and fourth to sixth defendants breached their duties under the Charge to take reasonable steps to obtain the best obtainable price for the [Club] and/or their fiduciary duties. Among other things, the defendants in question are said to have knowingly sold the property at a significant undervalue. 4 The particulars of claim originally contained, too, the allegation that the sales to Flaxby Park (and certain other transactions) were not valid and/or effective transactions and/or have not taken effect at law for various reasons. At the end of July, however, I heard applications by the then claimants and Flaxby Park to have matters disposed of summarily in their favour, and I concluded in my October judgment that the relevant paragraph of the particulars of claim fell to be struck out. A provision to that effect was, accordingly, included in an order I made on 8 October. 5 The application with which I am now concerned had been issued the previous day. Draft amended particulars of claim were served with the application notice, but the draft has been revised subsequently. Each version has provided for Flaxby Park to remain as a defendant and for the Ward brothers to be added as the eighth and ninth defendants. In their current form, the amended particulars
of claim would, among other things, introduce allegations that the Armstrong defendants, Polar, Flaxby Park and the Wards were parties to an unlawful means conspiracy; that Flaxby Park and the Wards knew or had notice of breaches of duty by the other defendants when Polar contracted to sell the Club; that the fact that Flaxby Park and the Wards are on notice of breaches of duty now is anyway sufficient to render the sale contracts unenforceable and liable to be set aside; that Polar had not become an equitable assignee; and that Mr Mattocks, as one of the Partners, did not take reasonable care to obtain a proper price for the Club. 6 In practical terms, the amendments would not add all that much to the existing claim against the first, second and fourth to sixth defendants (i.e. the Armstrong defendants and Polar), for whom Mr Mark Warwick QC appeared. While Mr Warwick s clients would for the first time face a claim for conspiracy, they are already said to have knowingly sold the Property at a significant undervalue. So far as these defendants are concerned, neither the size of the claim nor the facts requiring investigation would have altered much. 7 The key consequence of acceding to the application for permission to amend, from the point of view of Mr Warwick s clients, would be that the trial would have to be deferred. On 20 March of this year, an order for expedition was made by Mr Stuart Isaacs QC, sitting as a Deputy High Court Judge. On the strength of that order, the trial has been fixed for 15 February 2016, with a time estimate of six to eight days. If, however, Skelwith is to be allowed to join the Ward brothers and to make the proposed allegations against them and Flaxby Park, there can be no question of maintaining that trial date. Flaxby Park and the Wards could not fairly be expected to be ready for trial by February, especially given the very serious nature of some of the allegations made against them. An order I made on 31 July provided for a draft of the trial bundle to be produced as soon as 14 December. Were, however, I to grant Skelwith permission to amend as asked, Flaxby Park and the Wards could not, I think, even be expected to have progressed as far as disclosure by 14 December. 8 The possibility of amendments being made to allege that Flaxby Park and the Wards were complicit in, or at least knew of, breaches of duty by other defendants has long been trailed. In a witness statement of 1 May, Mr Mario Betts, who was then acting for the claimants, asserted that it was their case that Flaxby Park was aware of the circumstances surrounding the sale and must have known that the ostensible sale price did not reflect the Property s true value. In a similar vein, Mr Betts referred in a witness statement of 5 June to the claimants having a second head of claim that Flaxby Park was not a bona fide purchaser without notice. On 17 July, Mr Betts made a further witness statement exhibiting draft amended particulars of claim which asserted that the Wards were and knew themselves to be parties to a transaction which was not at
arm s length and was at an undervalue or very likely to be at an undervalue. However, Mr Betts stressed in his witness statement that no application to amend the Particulars of Claim has yet been made. 9 In the event, no application for permission to amend was made until the application now before me was issued on 7 October. By then, Skelwith had gone into liquidation. Provisional liquidators had been appointed on 16 July on the application of HM Revenue and Customs, and a winding-up order was made on 21 September. A new legal team was instructed by Skelwith s provisional liquidators, now its liquidators. 10 A convenient summary of some of the principles applicable to applications to amend is to be found in the judgment of Carr J in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm). Carr J said this in paragraph 38: "Drawing these authorities together, the relevant principles can be stated simply as follows : a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always 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; b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission; c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept; d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;
e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation; f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay; g) a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so." 11 Since the amendments for which permission is sought in the present case would cause the trial date to be lost, the application is appropriately categorised as a very late one. That acceding to the application would result in the trial having to be delayed is an important factor to be taken into account when deciding whether permission to amend should be given. As Carr J said, [t]he risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission. 12 In the present case, Mr Christopher Parker QC, who appeared with Miss Rowena Page for Skelwith, took me through a variety of materials which, he argued, show that the additional claims that Skelwith wishes to advance have good prospects of success. Mr Parker also highlighted the fact that the provisional liquidators were not appointed as liquidators until 24 September, no more than a couple of weeks before the application to amend was issued. He argued, too, that the core new allegation of the Wards more direct involvement had always been pleaded : just not in the right place (since it was to be found in a reply). Further, Mr Parker queried the extent to which the defendants would suffer prejudice if the trial date were vacated and pointed out that earlier cases have not concerned expedited trials. 13 Various matters, however, seem to me to weigh against granting Skelwith the permission to amend it seeks.
14 In the first place, I cannot see that the fact that the trial was fixed on an expedited basis makes its deferment any more acceptable. In fact, the contrary might have been thought to be the case. After all, the Court would not have ordered expedition unless it considered that the trial needed to take place quickly. 15 Secondly, the fact that the defendants will have been entitled to expect that the case would be heard in February is, to my mind, of very considerable importance. The point is the more significant because the first to fifth defendants are individuals (Yorkshire pig farmers, I gather) facing a very large claim (up to about 24 million) involving serious allegations and because, in the words of Mr Warwick, they have been diligence itself. 16 A third (and important) point is that Skelwith could have applied to make amendments along the lines of those now proposed much earlier. Even the latest version of the draft amended particulars of claim draws on documents produced by way of disclosure to only a very limited extent. Both they and Mr Parker s submissions as to the merits are principally derived from materials which have long been available to Skelwith. In fact, Skelwith felt able to allege that Flaxby Park knew that the ostensible sale price did not reflect the Property s true value by the beginning of May. By 17 July, it had had draft amended particulars of claim prepared, but it expressly disavowed any application to amend at that stage. 17 In the circumstances, it seems clear that an application for permission to amend could have been made long before 7 October. More specifically, Skelwith could, I think, have applied early enough to avoid any need for the trial date to be vacated. 18 That is not to say that the liquidators or the lawyers instructed by them have themselves been guilty of delay. While, however, responsibility for Skelwith s management will have passed from its directors to the liquidators, the claimant is Skelwith, not its liquidators, and it was open to Skelwith to apply to amend at a much earlier stage. 19 A fourth point is that I am unpersuaded by the argument that the core new allegation had always been pleaded : just not in the right place. What was alleged in the relevant reply was that Flaxby Park had or ought to have had knowledge of undervaluation. As Mr Thomas Grant QC, who appeared with Mr Duncan McCombe for Flaxby Park and the Wards, pointed out, that would not have been read as an allegation of actual knowledge even if it had been contained in the particulars of claim rather than a reply. As indicated in my October judgment, Flaxby Park and the Wards have been entitled to proceed on the basis that the only case they had to meet was that put forward in paragraph 31 of the particulars of claim.
20 A fifth point relates to the merits of the additional claims that Skelwith now wishes to advance. While (on the basis of the arguments I have heard) I would not go so far as to say that the claims for, for example, unlawful means conspiracy have no realistic prospects of success, the materials to which I was taken by Mr Parker do not by any means demonstrate an overwhelming case. 21 Sixthly, it is of some, albeit perhaps not very much, relevance that declining to grant permission to amend would not deny Skelwith the chance to obtain any redress for what it says happened. If the allegations it now wishes to put forward are well-founded, it can expect to succeed in its existing claims. 22 Seventhly, I have been persuaded by Mr Hugh Jory QC, who appeared with Mr Thomas Fletcher for Mr Mattocks, that there is an additional objection to the grant of permission to amend as regards his client. In their present form, the draft amended particulars of claim do not appear to me to explain the nature of the case advanced against him with sufficient clarity. 23 For all these reasons, I have concluded that I should not exercise my discretion to grant Skelwith permission to make the proposed amendments. The position may, however, be different as regards what is said in paragraph 33A of the current draft. The point made in that paragraph appears to turn essentially on law rather than evidence and not to depend on disclosure. On that basis, Flaxby Park should, on the face of it, be able to meet the allegation in time for a trial in Febuary. That may mean that it would be appropriate to grant Skelwith permission to make an amendment along the lines of the present paragraph 33A. Mr Grant, however, asked for more time to consider the proposed paragraph 33A, which was included in the draft amended particulars of claim for the first time this week. In the circumstances, I shall adjourn further consideration of whether Skelwith should be granted permission to make an amendment along the lines of paragraph 33A. In other respects, however, I shall dismiss the application for permission to amend, and I shall also decline to grant Skelwith permission to add the Wards as defendants.