Hague Plant Ltd v Hague & Ors

Introduction

This is an application by HPL to Re-Amend the Particulars of Claim.

On 15 August 2013 after a full day’s argument I handed down a judgment (“the strike out judgment”) in relation to an appeal against a refusal by Judge Saffman to strike out two sections of the Amended Defences. It can be found at [2013] EWHC 2443 (Ch).

On 3^rd October 2013 after 2 days argument I handed down a judgment (“the Defence Amendment judgment”) in relation to an application by the Defendants to Re-Amend the Defence. It can be found at [2013] EWHC 2931 (Ch).

In those judgments I adopted a number of abbreviations, summarised the parties and the Companies involved in the dispute and summarised – so far as necessary – the nature of the dispute and the allegations in the Amended Particulars of Claim and the Amended Defences.

I shall adopt the same abbreviations as in the previous judgments.

The proposed re-amendments greatly increase the allegations and the scope of the allegations made against the Defendants and thus, if allowed, would force substantial further amendments to the Defences.

It is thus not surprising that (with a number of relatively minor exceptions) the Defendants object to all of the re-amendments.

Before dealing with the application it is right that I should acknowledge the very considerable assistance I have received from the detailed written submissions from the parties. In the light of the fact that I was allocated 2 days reading for this application it was extremely helpful to have such detailed submissions.

Previous Litigation

This is in fact the fifth set of proceedings in the bitter dispute between members of the Hague family. It is not necessary to comment in any detail on Hague (2) – (4) save to note that they are summarised in paragraphs 33 to 36 of the joint submissions of Mr Pipe and Miss Griffin (“the joint written submissions”).

Hague(1) is relevant to many of the issues in these proceedings. There is an extensive summary in paragraphs 5 – 27 of the joint written submissions. The action concerned the equitable ownership of shares held by Martin and Jean Angela in MHH. It was resolved in Martin and Jean Angela's favour.

However the issues in Hague(1) covered a number of areas relevant to the current dispute and the proposed re-amendments. They included the issue of cross-invoicing, the extent of Dianne’s knowledge of the practice, the circumstances in which David and Dianne agreed to transfer their shares in MHH to Martin and Jean Angela and the recycling business which was carried on by both HPL and MHH at Carlisle Street.

Witness Statements

The application is supported by two witness statements from Mr Scott. It is opposed by a witness statement from Mr Wadkin and Mr Cooke.

Mr Scott seeks to justify the extensive nature of the amendments by virtue of a number of factors that he sets out in Section 2 of his witness statement. In summary:

The Conduct of the Proceedings. He complains that Martin had provided bare denials of liability and refused to provide details of how Martin assessed the fairness of the intercompany trading. He accuses Martin and Jean Angela of misleading the court in their explanation for not providing an account of the stewardship of HPL by Martin. He contends that these factors will justify an inference of dishonesty on the part of Martin and Jean Angela.

Changes in the Defendants’ case. He contends that the Defendants’ case has shifted fundamentally since Hague(1) and during the present proceedings.

Disclosure - He makes the point that HPL needs to plead to the JA Note and other (unidentified) documents disclosed by the Defendants.

Mr Scott’s witness statement in Reply contains a number of comments on the witness statements filed by Mr Wadkin and Mr Cooke to which it is not necessary for me to refer. Suffice it to say I have not found them particularly helpful.

Mr Wadkin devotes the first section of his witness statement to the proportionality of permitting the extensive re-amendments. After commenting on the huge increase in size of the new pleading he set out a chronology which is worth setting out in full:

In paragraph 14 he asserts that HPL has changed its position throughout the case and this has resulted in significant work for the Defendants. He concludes in paragraph 16 by asserting that the Defendants will be put to enormous further expense and will suffer further prejudice because they will have to seek further detailed particularity of the new pleading.

After making comments on the lack of evidence by David or Dianne in support of the allegations in the Re-Amended Particulars of Claim he comments that many of the allegations are inconsistent with the findings in the judgment in Hague(1).

For the most part Mr Cooke adopts the comments made by Mr Wadkin. He does, however, go on (in paragraphs 10 and 11) to deal specifically with the attempt to revive the allegation that Jean Angela was a de facto director of HPL. He points out that Jean Angela has been led to believe since the Amended Particulars of Claim that the allegation that she was a de facto director would not be pursued. It is not therefore fair for it to be revived.

The Pleadings

In the light of the allegations in opposition to this application it is important to have in mind the chronology and nature of the pleadings

The Claim Form was issued on 23 June 2011.

The Particulars of Claim was filed on 18 October 2011. It was settled by Leading and Junior Counsel. It was 8 pages long divided into 38 paragraphs. It related to a period between 1986 and 2009. It alleged breach of fiduciary duty against Martin. There were 3 principal allegations:

It alleged that these breaches were dishonest and in conscious breach of fiduciary duty by Martin. It alleged that Martin’s dishonesty was to be imputed to MHH. It alleged that it was to be inferred that Jean Angela was aware of Martin’s breach of fiduciary duty and that she dishonestly assisted Martin. It raised (paragraph 24) an alternative claim that in raising spurious invoices Jean Angela acted as a de facto director and in breach of fiduciary duty. It claimed a variety of relief including an account of profits or damages in excess of £18 million and interest. It sought to rely on sections 21(1)(a) and 32 of the Limitation Act 1980 to avoid the obvious limitation difficulties the claim faced.

Martin, MHH and Jean Angela filed their Defences on 27January 2012. As I noted in paragraph 25 of the strike out judgment there is a significant amount of overlap between them. In paragraphs 3 to 45 of the Defences the Defendants set out in summary form a history of matters leading to these proceedings. That history contains sections on the Hague Family, the Development of HPL, the Business of HPL and Benefits taken by the Hague Family, the Development of MHH, the Development of HFL, Loxley House Farm and LHCL and the Hague(1) dispute with subsequent events.

Martin dealt expressly with the allegations of fiduciary duty. He in particular alleged that when he became a director of MHH HPL and its shareholders consented to Martin owing a qualified fiduciary duty to HPL. In particular they consented to Martin running HPL and MHH as he saw fit. In doing so business opportunities that could have been taken out on behalf of MHH would be taken up by HPL and vice versa. Similarly land that could have been acquired by HPL would be acquired by MHH. It was inevitable that from time to time Martin would favour one company over the other. Provided he did not act dishonestly and attempted to act fairly in good faith and in the interest of each company his fiduciary duty was satisfied.

Martin asserted that the fiduciary duties pleaded were circumscribed by the matters set out above. In the alternative Martin relied on an estoppel based on an implied representation that the fiduciary duties were so circumscribed.

The allegations of breach were denied. There was not sufficient detail for Martin to plead in detail to the allegations. He did, however, admit by a process of cross invoicing he procured HPL to transfer moneys to MHH which he knew were not referable to goods and services provided. However he contends that there were equivalent cross invoices in respect of moneys paid to HPL by MHH. He asserts that there was no net cost to either company and that the practice was an illegal attempt to defer tax. He alleges that a similar practice was carried out between HPL and HFL, HFL and Loxley House Farm, HPL and Loxley House Farm, and Douglas and Loxley House Farm. He contends that all parties were aware of the practice and condoned it.

Martin denied dishonesty and sought to rely on a limitation defence.

Jean Angela dealt with the specific allegations against her in the last 6 paragraphs of her defence. She admitted that she participated in the practice of cross invoicing. She did so with the knowledge and upon the instruction of the directors of HPL including Martin, Dianne and David. She denied she acted as a de facto director. She denied dishonesty and sought to rely on a limitation defence.

On 10May 2012 HPL filed Further Information pursuant to a Part 18 Request.

On 13 September 2012 HPL served the Amended Particulars of Claim. It is 12 pages long and comprises the same 38 paragraphs albeit that some have been expanded.

The majority of the amendments related to the Particulars of Breach, the Particulars of Loss and the reliance on section 32 of the Limitation Act.

However in paragraph 24 of the Amended Particulars of Claim HPL expressly deleted the allegation that Jean Angela was a de facto director. Thus the claim against Jean Angela was made solely on the basis that she dishonestly assisted Martin to commit breaches of fiduciary duty.

Following a contested hearing and an unless order made by District Judge Saffman (as he then was) Amended Defences were filed by Martin, MHH and Jean Angela on 29October 2012.

It is not necessary for me to comment on the amendments save to comment that the main amendments were directly concerned with the amendments to the Particulars of Claim. I summarised the position in paragraphs 26 - 34 of the strike out judgment. I shall not repeat that section of the judgment.

On 7 December 2012 Martin and MHH filed Further Information pursuant to a Part 18 Request.

Following legal argument for 2 days I granted Martin, MHH and Jean Angela permission to re-amend their Defences. The full reasons for this and the nature of the re-amendments can be found in the Defence Amendment judgment. In summary there were two principal reasons for the re-amendments. First, the Defendants wished to allege that Dianne was involved in the preparation of the tipping cross invoices. These assertions had not been the subject of specific allegations in the Amended Defences. Judge Saffman ruled that they needed to be pleaded. Hence in paragraph 15 of his order he made an unless order which required the Defendants to seek to re-amend the Defence if they wished to allege that Dianne or anyone else was responsible for HPL paying to MHH on tipping invoices more than MHH was entitled to receive. Second, in May 2013 Martin alleged he discovered a document (“the JA Note”) in Jean Angela’s handwriting which, he contended, supported his case that much of the cross invoicing was neutral (i.e. created no net cost to either party).

The Defendants contended that the purpose of the amendments was to put forward a better case by reference to evidence that has emerged since the Amended Defence was served and work that has been done to meet specific aspects of the claim, and to include reference to Dianne's involvement as a result of Judge Saffman’s ruling.

For reasons that I gave in the judgment I granted permission to re-amend. I shall not repeat those reasons in this judgment. Nor shall I set out the analysis of the proposed re-amendments that is contained in the judgment.

The order included an order for costs in the following form:

One of the points taken by the Defendants against this application is that it is a tactical application to impose the vast costs of the application on them.

The Proposed Re-Amended Particulars of Claim

The proposed Re-Amended Particulars of Claim is 65 pages long and now comprises 104 paragraphs. It is thus 5 times as long as the Amended Particulars of Claim. It also incorporates 35 pages of Appendices some (but not all) of which were contained in the Further Information supplied by HPL in May 2012.

In the light of the extensive nature of the proposed re-amendments I do not propose to go through them individually.

In paragraph 16 of his written submissions Mr Parker QC divides the amendments into 8 categories:

Amendments to plead, rely upon and take account of the Defendants’ admissions;

Amendments to set out and address Martin's varying accounts of how he dealt with the services that HPL provided to MHH;

Amendments to set out and address the Defendants’ change of position on the Grey Books;

Amendments to rely on the Defendants’ conduct of the proceedings and refusal to engage with the claims made;

Amendments to address the Defendants’ latest case on the alleged cross-invoicing as presented in the Re-Amended Defence;

Amendments to re-introduce the allegation that Jean Angela was a de facto director of HPL;

Amendments to plead further heads of relief in light of the above;

Miscellaneous.

The Defendants object to almost all of the proposed re-amendments. In the joint written submissions Mr Pipe and Miss Griffin make a number of points:

They point out that this is not the usual application to amend. It is an application by HPL to change its case fundamentally after some 2½ years of litigation.

They criticise the Re-Amended Particulars of Claim as “a rambling, narrative pleading which copiously and comprehensively misstates Ds' position, in material respects, and then seeks to draw conclusions by a false syllogism from false premises”

They draw to my attention the legal principles applicable to an application to amend including citation from Swain-Mason v Mills & Reeve LLP (Practice Note) [2011] 1 W.L.R. 2735. They draw to my attention the changes brought about by the Jackson reforms including the need for the case to be dealt with at proportionate cost, the need to comply with rules practice directions and orders. They draw to my attention the guidance offered by the Court of Appeal in a series of post Jackson cases such as Mitchell v News Group Ltd[2013] EWCA Civ 1537

They divide the proposed re-amendments into a number of categories of which the most important are:

Principles

In paragraphs 60 – 64 of the Defence Amendment judgment I set out the relevant principles in relation to an application to amend. For convenience I repeat what is there set out.

The dictum of Peter Gibson LJ relied on by the Defendants is in the following terms:

“The overriding objective (of the CPR ) is that the court should deal with cases justly. That includes, so far as is practicable, ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party caused by the amendment can be compensated for in costs, and the public interest in the administration of justice is not significantly harmed”.

As Mr Parker QC pointed out this dictum was considered by Lloyd LJ in Swain-Mason v Mills & Reeve LLP (Practice Note) [2011] EWCA Civ 14; [2011] 1 W.L.R. 2735, CA particularly with regard to late amendments. Lloyd LJ’s comments appear at paragraphs 68 – 72 which include the endorsement in paragraph 79 of the judgment of Rix LJ in Savings & Investment Bank Ltd v Fincken [2003] EWCA Civ 1630 :

“As a postscript I would add that, although decided prior to the introduction of the CPR and concerned with an egregious application to change direction in the course of trial itself, the judgment of this court in Worldwide Corporation Ltd v. GPT Limited contains a full compendium of citation of authorities as at that date which emphasises that, even before the CPR , the older view that amendments should be allowed as of right if they could be compensated in costs without injustice had made way for a view which paid greater regard to all the circumstances which are now summed up in the overriding objective.”

It also included a quotation from Worldwide Corporation v GPT:

“Where a party has had many months to consider how he wants to put his case and where it is not by virtue of some new factor appearing from some disclosure only recently made, why, one asks rhetorically, should he be entitled to cause the trial to be delayed so far as his opponent is concerned and why should he be entitled to cause inconvenience to other litigants? The only answer which can be given and which, Mr Brodie has suggested, applies in the instant case is that without the amendment a serious injustice may be done because the new case is the only way the case can be argued, and it raises the true issue between the parties which justice requires should be decided.

We accept that at the end of the day a balance has to be struck. The court is concerned with doing justice, but justice to all litigants, and thus where a last minute amendment is sought with the consequences indicated, the onus will be a heavy one on the amending party to show the strength of the new case and why justice both to him, his opponent and other litigants requires him to be able to pursue it.”

Thus, as Lloyd LJ recognised in paragraph 72 it is always a question of striking a balance but the court is and should be less ready to allow a very late amendment than it used to be in former times, and that a heavy onus lies on a party seeking to make a very late amendment to justify it, as regards his own position, that of the other parties to the litigation, and that of other litigants in other cases before the court.

It is equally clear that an amendment will not be allowed if it is clear that the proposed amendment does not have real prospect of success. The test is the same as the test under Part 24.

In that passage I was not considering an amendment where there was a limitation defence. In such a case the court would only allow an amendment where the conditions set out in CPR 17.4(2) are satisfied. The position is more complex where (as here) HPL alleges that there is an answer to the limitation defence.

On p 516 of the current edition of the White Book the following guidance appears:

“Where it does appear reasonably arguable that the defendant has a limitation defence in respect of a new claim, the court should not permit the claimant to raise that new claim by amendment since to do so could defeat the arguable defence, i.e., the amendment would take effect from the date of the original document amended (see para.17.3.4 above). Instead the claimant should be left to bring fresh proceedings on the new claim (Goode v Martin [2001] 3 All E.R. 562), reversed on other grounds, [2001] EWCA Civ 1899; [2002] 1 All E.R. 620.”

I also have to bear in mind the changes in culture brought about by the Jackson reforms, the need for the case to be dealt with at proportionate cost.

Consent

It is clear from CPR 17.1(2)(a) that the permission of the Court is not required where all other parties consent in writing. It is clear that that consent has been obtained in respect of a limited number of amendments. In respect of those amendments HPL is entitled to Re-Amend the Particulars of Claim. Nothing in the remainder of this judgment is intended to affect that.

Proportionality

I have come to the clear conclusion that this application to Re-Amend is disproportionate in the sense that it would not lead to the litigation being conducted at proportionate cost and would lead to further extensive judicial time being expended at the expense of other litigants.

As was said in Mitchell:

“Cases are usually important to the parties but if such considerations weighed too heavily one would be unable to implement the objectives of the new rules. One would be unable to prevent some claims from taking unfair amounts of judicial resources away from other claims at the very moment when it is common knowledge that budgetary constraints may lead to fewer judges in the courts, and to reduce non-judicial resources to operate those courts.

Judicial time is thinly spread, and the emphasis must, if I understand the Jackson reforms correctly, be upon allocating a fair share of time to all as far as possible and requiring strict compliance with rules and orders even if that means that justice can be done in the majority of case but not all.”

I have summarised the current state of the pleadings in Section 4 above. As Mr Wadkin’s witness statement makes clear this is an action which has been ongoing for over 2½ years. It has already involved 7 days of Court time. In addition to that has to be added significant time (days rather than hours) for pre-reading and judgment writing time both by myself and Judge Saffman. This application was listed for 5 days. The first 2 days were for pre-reading. I restricted the oral submissions to 2 days in order to give myself time to write this judgment.

If the proposed re-amendments had been short and/or easy to deal with the position might have been different. I accept that some of the amendments are relatively minor. One example of a minor amendment is the alteration of the amount claimed in paragraph 28(3)(ii) from £12,311,437 to £12,342,871. Reference to Appendix H shows minor differences in the Invoices submitted to MHH for 2002 and 2009 from those claimed in the Amended Particulars of Claim. Subject to an explanation for the differences these are the sort of amendments which can be easily dealt with and would normally be allowed.

However the majority of re-amendments are extensive. They amplify and/or amend existing causes of action and they introduce new causes of action. As already noted they more than quintuple the length of the pleading.

Whilst I do not necessarily agree that all of the work so far carried out by the Defendants will be wasted I do agree that very substantial further time will be needed and very substantial further costs will be incurred if the Defendants have to plead to the new allegations. I also accept that in many respects the Defendants will be entitled to further particulars of the new allegations and that this will necessarily cause further delays and costs.

Whilst this is a substantial claim the costs so far incurred have been very substantial. In the course of their submissions Mr Pipe told me that the Defendants combined costs were in excess of a £1 million. Miss Griffin told me that Jean Angela’s costs were of the order of £330,000. Mr Parker QC did not volunteer a figure for HPL’s costs though I note from the figures pleaded in paragraph 25 of the new pleading that HPL has spent more than £300,000 on expert reports alone.

In the light of my views on proportionality, it would not be proportionate for me to deal with all of the points raised in the 25 page written submissions of Mr Parker QC or the 80 page joint written submissions of Mr Pipe and Miss Griffin. In the remainder of this judgment, I shall, however, attempt to express my views on what appear to me to be the most important issues between the parties.

A Late Application.

In the light, no doubt, of the observations from Swain Mason set out above Mr Parker QC submitted that this was not a late application in the context of the history of this litigation. He sought to suggest it was necessary as a result of changes in the Defendants’ case.

I accept that it is not a very late application in the sense that it will not necessarily result in the loss of the trial date. Indeed, as I understand it, the trial date has not been fixed as yet and is in any event more than a year away.

However I agree with the comment in paragraph 37 of the joint written submissions that having regard to the time that has passed and the work that has been done, this is a late application to amend.

The Style of the Pleading

Under CPR 16.4 the Particulars of Claim must include a concise statement of the facts on which the Claimant relies. In McPhilemy v Times Newspapers [1999] 3 All ER 775 Lord Woolf MR, commented, at 793:

“The need for extensive pleadings including particulars should be reduced by the requirement that witness statements are now exchanged. In the majority of proceedings identification of the documents upon which a party relies, together with copies of that party's witness statements, will make the detail of the nature of the case the other side has to meet obvious. This reduces the need for particulars in order to avoid being taken by surprise. This does not mean that pleadings are now superfluous. Pleadings are still required to mark out the parameters of the case that is being advanced by each party. In particular they are still critical to identify the issues and the extent of the dispute between the parties. What is important is that the pleadings should make clear the general nature of the case of the pleader. This is true both under the old rules and the new rules….As well as their expense, excessive particulars can achieve directly the opposite result from that which is intended. They can obscure the issues rather than providing clarification.”

McPhilemy was followed in Mahon v Rahn [2000] 1 WLR 2150 at [135] where the Court of Appeal said that “under the CPR prolix pleadings are no longer encouraged”. Furthermore in Barnes v Handf Acceptance [2004] EWHC 1095 (Ch) Peter Smith J quoted with approval at [9] the words of Fulford J:

“These amended proposed particulars of claim may be shorter, but they are nonetheless extraordinary in their discursive formulation and they reveal an idiosyncratic and wholly unhelpful structure. In essence they are so prolix, detailed and confusing in the way they are developed that the burden imposed on the respondents and the court in dealing with them would be wholly unreasonable. The length[y] process of unravelling, understanding, answering and adjudicating on them would defeat the overriding objective and would constitute an abuse of the process of the court. This proposed pleading would not allow the case to be dealt with expeditiously and fairly.

Hart J. indicated to the applicant that any proposed amendment should contain a concise statement of the facts on which he seeks to rely. These proposed amended particulars of claim do not begin to comply with such a clear and readily achievable indication. Further, this document does not in any sense lend itself to division between permissible and impermissible paragraphs. It would have been impossible for the learned Judge to dissect these proposed pleadings, allowing certain amendments while disallowing others.”

Mr Pipe and Miss Griffin criticise the pleading (paragraph 38 of the joint written submissions) as:

“a rambling, narrative pleading which copiously and comprehensively misstates Ds' position, in material respects, and then seeks to draw conclusions by a false syllogism from false premises”.

To my mind there is force in the criticisms. There are numerous places in the pleading where HPL seeks to set out what it contends is Martin’s position or cites what are said to be admissions by Martin or Jean Angela. [See for example paragraphs 12(6), 13(1), 16(2), 16(3), 16(4), 16(5), 17(a), 17(b), 19(3), 19(4), 19(5), 24, 26(1), 28(1)(i), 28(4)(i) and (ii), 31(1), 32(2), 33(1), 33(2), 33(6), 33(8)(b), 37(1), 38(1), 39(1), 49, 54(1), 55(2), 57(1),57(4), 58(3)(i), 60(3), 61(3), 61(4), 67(1) and (2), 68(1) and (2),70(1), 72, 73, 74, 76, 77, 80(1), 83(1), and 84(1)].

In my view these assertions are not a concise statement of the facts relied on by HPL. They do not clarify the issues between the parties. They are in reality submissions (or matters for cross-examination) as to why the Court should accept HPL’s case on various issues or disbelieve Martin and Jean Angela.

I also accept Mr Pipe and Miss Griffin’s submission (paragraph 2 of the joint written submissions) that the consideration of these allegations has involved the Defendants in a

“trawl through the historic claims between the parties and their privies, including disclosure, transcripts, pleadings and witness statements in order to understand and to get a measure of C’s extensive (mis)statement of what has happened and what has been said upon which the proposed amendments are founded and said to be justified.”

When I put this to Mr Parker QC in the course of his submissions he submitted that the matters that were included were “primary facts” and that it was necessary to include them in the pleading so as to force Martin and Jean Angela to answer them in a Re-Re-Amended Defence. This was necessary because of the changes of position taken up by Martin and that it was necessary to know what his position is. He also made the point that he was seeking alternative relief that needed to be in the Particulars of Claim.

I do not accept Mr Parker QC’s submission. In my view the matters are not “primary facts”. I do not accept that it is either appropriate or proportionate to include them in the Particulars of Claim (with the possible exception of a concise statement of the facts on which the alternative relief is claimed). I agree with Mr Pipe that it will be difficult for Martin and/or Jean Angela to plead to them. Furthermore I think it will tend to obscure rather than clarify the issues in the case.

Changes to the Defendants’ Case

Much of the oral submissions were taken up with the question of whether Martin has changed his case in relation to preferring the interests of MHH over HPL. Mr Parker QC submits that Martin has changed his case and has now been forced to admit that at least in respect of Carlisle Street Martin has changed his case and has now been forced in these proceedings to admit that he did consciously prefer the interests of MHH. He referred me to paragraph 50 and 55(c)(3) of the Defence and the Amended Defence and to Replies 59, 61 and 62 of the Responses to Further Information dated 7 December 2012 and Responses No. 24 and 25 dated 16 April 2013 provided by the Defendants.

He submits (paragraph 20(6) of the written submissions)

“the response to the allegation that Martin consciously preferred the interests of MHH over those of HPL is now that he and Jean Angela had always expected that he would.”

He submits that as these admissions came after the Amended Particulars of Claim they are to be pleaded in the new pleading.

In his oral submissionsMr Pipe did not accept that there had been any change in Martin’s case which was the same as it had been in Hague(1). He took me to various parts of the evidence in Hague(1) including the witness statement of Martin, where the relationship and the collateral benefits received by HPL are set out and the cross examination of David which was said to show that he understood the position.

In his submissions in Reply Mr Parker QC submitted that Mr Pipe’s assertion that Martin’s case had not changed since Hague(1) was not his pleaded case.

I do not find it necessary to rule on whether Martin has or has not changed his case. Even if (as to which I do not rule) Mr Parker QC’s analysis in paragraph 20(6) is correct it does not in my view justify pleading the supposed admission as a re-amendment to the Particulars of Claim. The admissions (if they are admissions) are already in the pleadings. They do not need to be re-pleaded as part of the Particulars of Claim.

Extent of duty owed by Martin

In paragraph 12 of the Particulars of Claim HPL alleged that Martin’s fiduciary duty to act in the best interests of HPL was in no way qualified by his position as a director of MHH save that HPL could not complain about MHH conducting a landfill business which might otherwise have been conducted by HPL. It was asserted that HPL was to receive preferential tipping rates when tipping at MHH’s sites.

The new pleading has greatly amplified this allegation. It is now alleged that the extent of the duty and the extent of David and Dianne’s consent is governed by what Douglas told David and Dianne at or about the time they transferred their shares in MHH to Martin and Jean Angela. The repercussions from this new allegation mean that paragraph 12 is now divided into 6 subparagraphs and that there are consequential parasitic allegations in paragraphs 51, 78 and 79.

Mr Pipe and Miss Griffin deal with this amendment in paragraphs 54 to 67 of the joint written submissions. In summary they point out that in Hague(1) both David and Dianne denied that there was any relevant conversation with Douglas. In paragraph 59 the matter is put thus:

“There is no reference in the Judgment in Hague 1, nor in the evidence in Hague 1, to Douglas telling David and Dianne that preferential tipping rates would be provided “at MHH ‘sites”. Douglas’ evidence (which was accepted subject to the qualification outlined above) was that he told Dianne that HPL would be able to tip cheaply at Lightwood Lane (Carlisle Street had not been purchased at this point). C has no real prospect of making out this allegation. Further, Martin did not say he has complied with any promise or condition.”

To my mind there is considerable force in these submissions. In addition there are the further points that there was no suggestion that Douglas was acting as Martin’s agent and no real reason why this amendment is being made at this late stage.

Jean Angela – a de facto director?

One of the most important changes in the new pleading is the re-introduction of the allegation that Jean Angela was a de facto director of HPL. Paragraphs 22 – 27 of the Particulars of Claim were entitled “Dishonesty of Jean Angela”. Paragraph 24 alleged:

Thus there was a limited allegation of acting as a de facto director based on Jean Angela’s actions in relation to the “cross invoices”.

In paragraph 60 of her Defence Jean Angela admitted that she had participated in the cross invoicing process. However she contended that she had done so on the instructions of the directors and shareholders of HPL. She denied that she was a de facto director of HPL and that she had acted in breach of fiduciary duty.

In the Amended Particulars of Claim paragraph 24 was crossed out and thus the allegations were withdrawn. The main allegations in paragraph 22 and 23 against Jean Angela were that she was aware of Martin’s fraudulent breaches of trust and that she dishonestly assisted Martin by raising the inaccurate cross invoices and by causing HPL to pay MHH in respect of inaccurate invoices raised by MHH.

The new pleading seeks to re-introduce the allegation that Jean Angela was a de facto director with a vengeance. Thus the new allegation is not limited to the allegation that Jean Angela was acting as de facto director in relation to the cross invoicing. It is reintroduced much more generally:

In paragraph 16 it is alleged that as a result of a submission (?) made by Mr Pipe (on behalf of MHH and Martin) that the Defendants are estopped from denying that Jean Angela was a de facto director.

In paragraph 17 12 additional matters are pleaded in support of the allegation that Jean Angela was a de facto director.

Other allegations are made in paragraphs 20(1), 21(2), 22, 45, 57, 74(3), 83, 90, 91, 92, 93 which make it clear that HPL now wish to allege that Jean Angela is in effect jointly liable with Martin for all the breaches.

In his oral and written submissions Mr Parker QC sought to justify the new amendments on a number of grounds. He submitted that the law relating to de facto directors as a result of the decision on 26^th March 2013 of Hildyard J in Re Ukli Ltd [2013] EWHC 680 (Ch). In particular he referred me to paragraphs 36 – 41 of the decision. He drew my attention to the 10 factors identified by the judge in paragraph 41 and to the fact that Hildyard J preferred the looser fact-base approach of Jacob J to the “equality of footing” test identified by Timothy Lloyd QC.

He pointed out that it was possible that the Supreme Court would overrule the decision of the Court of Appeal in Central Bank of Nigeria v Williams [2012] EWCA 415.If that happened Jean Angela would have a limitation defence to the claim for dishonest assistance (Footnote: ¹).

He submitted that some of the matters pleaded in the new paragraph 17 were not known to HPL at the time of the Amended Particulars of Claim. He relied in particular on paragraphs 17(h) and (f).

He submitted that Jean Angela was not prejudiced by the re-amendments.

Mr Pipe and Miss Griffin devote no fewer than 26 pages [paragraphs 69 – 160] of the joint written submissions to this issue. For reasons already given it would not be proportionate for me even to summarise the many points they make.

I will, however, briefly express my conclusions:

I have the greatest difficulty in seeing how Jean Angela could possibly be estopped from denying that she is a de facto director. I cannot begin to follow how a representation by Mr Pipe in an application to which Jean Angela was not a party could found such an estoppel [paragraph 91 of the joint written submissions]. I have the greatest difficulty in seeing what representation Jean Angela is said to have made which could found the estoppel.

I agree with the analysis [paragraphs 96 to 98 of the joint written submissions] that there is an analogy with discontinuance under CPR 38.7 and the notes to 38.7.1 are pertinent. I agree that it is only in exceptional circumstances that the Court will allow the claim to be reinstated.

I do not accept that any of the matters raised by Mr Parker QC justify the reinstatement of the de facto directorship allegation:

I agree with Mr Pipe and Miss Griffin [paragraphs 99 to 103 of the joint written submissions] that the proposed re-amendments are not justified by the allegations made against Dianne in the Re-Amended Defence or in the amendments caused by the JA Note.

I agree with Mr Pipe and Miss Griffin [paragraphs 110 – 117 of the joint written submissions] that no explanation is given as to why HPL has sought completely to change and expand its case against Jean Angela so as to equate her alleged wrongdoing with that of Martin.

I also agree that the allegations against Jean Angela are in many respects inadequately particularised [see paragraph 113 of the joint written submissions].

Findings in Hague(1)

In paragraph 33(7)(viii)(d) of the new pleading HPL seeks to challenge findings of fact that I made in Hague(1) in relation to diaries produced by Jean which evidenced substantial cash payments that had been made to David and Dianne and their knowledge of the cross-invoicing scheme.

In Hague(1) I heard evidence about the diaries and the cash payments there referred to from, inter alia, Douglas, Jean, Martin, Jean Angela, David and Dianne. The findings were made after considering that evidence.

In these proceedings HPL seeks to challenge those findings. It asserts that there are discrepancies between the weather entries in the diaries and the alleged weather on the days in question.

I agree with Mr Pipe and Miss Griffin [paragraphs 229 and 230 of the joint written submissions] that this is a direct attack on the findings in Hague(1). They could have been pleaded in the Particulars of Claim. Furthermore Douglas and Jean are now very elderly and thus the Court is likely to be in a far worse position to assess the relevant evidence than it was when Hague(1) was decided in 2009.

I agree that these paragraphs should not be permitted.

Cross Invoicing

The issue of cross invoicing was first raised in Hague(1). It was raised again in the Defence in these proceedings. [See paragraph 56b of the original Defence and 56c of the Amended Defence]. The details of the cross invoicing were amended following the examination of the JA Note. This was the subject of the application to Re-Amend the Defence and for the reasons given in the Defence Amendment judgment permission to Re-Amend was given.

In the new pleading HPL seeks to deal with the cross invoicing in a completely new section – Section VIII. The section is 6 pages in length and comprises one paragraph (paragraph 33) divided into a large number of subparagraphs.

The section does not address individual invoices from HPL to MHH or attempt to deal with the invoices explained in the Re-Amended Defence. Rather it is an attack on the scheme as a whole. Thus the scheme is described as “a smoke screen” to make the detection of the Defendants’ appropriation of HPL’s money more difficult to detect. The attack is many pronged.

Reliance is placed on Responses given by Martin and Jean Angela in December 2012 and to Jean Angela’s third witness statement. It is said that the JA Note is not a genuine document for a number of reasons including an allegation that it is inconsistent with the evidence in Hague(1). It is said that Martin and Jean Angela have a propensity for relying on misleading or manufactured documents. There then follows a section designed solely to discredit Martin and Jean Angela including a repetition of matters dealt with in Hague(1). After dealing with the diaries David and Dianne deny any knowledge of the scheme and make the point that no such dishonest scheme was or could be ratified by the shareholders.

In paragraph 230 of the joint written submissions Mr Pipe and Miss Griffin suggest:

“these paragraphs take the case no further at all and amount to nothing more than a series of belated attacks on Ds’ general honesty and collateral attacks on the earlier findings of the Court in Hague 1 as a device, unnecessarily, in support of not putting a positive case. There can be no justification for permitting them.”

I agree with some but not all of the criticisms of these paragraphs. For reasons already given I am not happy with the pleading of the admissions or the references to the diaries. Equally I agree that pleading matters that go solely to credit is of no assistance especially where as here many of the allegations are simply taken from the cross-examination in Hague(1).

However the allegations as to the knowledge of David and Dianne and as to whether the shareholders could ratify such a scheme do take the matter further. In my view, though, they should properly part of a Reply rather than a Re-Amended Particulars of Claim. There is no reason why the Defendants should be compelled to plead to them further.

The Grey Books

The Grey Books are manuscript A3 ledgers filled in by different individuals from time to time which record activities undertaken by HPL and which were used in the billing process.

Paragraphs 23 to 27 of the new pleading introduce allegations about the Grey Books which are said to lead to the conclusion that

“the Defendants are estopped … from contending …:

(a)

that documents other than the Grey Books contain a more accurate record of any of HPL’s activities and/or it should be inferred that the claim that they are is false;

(b)

that the value of the services performed at Carlisle Street by HPL does not appear and/or cannot be deduced from the Grey Books.”

This estoppel is said to be based on various parts of the pleadings, the evidence and the judgment in Hague(1). It is said that HPL has acted on the representations to its detriment by spending £300,000 in expert costs and substantial sums in legal costs in an investigation of the Grey Books. It is further said that Martin only challenged the accuracy of the Grey Books in his second witness statement (dated 5 December 2012) in these proceedings.

Mr Pipe and Miss Griffin deal with the Grey Books in paragraphs 19 to 23 and 171 to 181 of the joint written submissions. They point out that the comprehensive nature of the Grey Books was not an issue in the case. They draw my attention to a passage in the cross-examination of Martin where he made it clear (footnote 20) that at times records were not kept in the Grey Books of loads of tipping delivered to third party sites; they draw my attention to paragraph 4 of Jean Angela’s 2^nd witness statement in Hague(1) which includes:

“Wherever possible cash jobs without paperwork were left out of the records, or if they had been entered, they would be deleted at a later date. In such circumstances it was necessary to ensure that none of the paperwork in the office revealed the existence of such jobs and therefore a check was done to make sure that such jobs were removed from any entries in the documentation which had already been made. The main documents to look at were the entries in the Grey Book to make sure that any entry for a job for which cash was received without any paperwork being issued was removed. This might be done by Dianne, Martin, me or, when he worked at Hague Plant Limited, Ian Sivell. In order to make sure that the entry could not be seen at all we would scribble out the entry in pen and then cover it over with tipp-ex. Or alternatively, if the entry was in pencil we would simply erase it and if necessary tipp-ex over. Simple errors which needed to be corrected would just be tipp-exed out. However, sometimes we would still scribble over these before tipp-exing so that one tipp-ex mistake would look the same as any other.”

They refer me to paragraph 200 of the judgment in Hague(1) which reads:

“[Martin] indicated that the majority of the cash was received by Plant in respect of materials supplied and skip hire but there was some cash received from Excavations. There was an elaborate procedure – “Cash No Ticket” – designed to ensure that there was no reference to any such contracts in the books – including the Grey Books where all work was recorded. He did not dissent from the suggestion that the total amount of cash undeclared over the years could be as much as £1 million.”

To my mind these references make it clear that Martin and Jean Angela did not represent in Hague(1) that the Grey Books were a comprehensive record of HPL’s activities. In my view the reference to the Grey Books in paragraph 200 of the judgment as being “where all work was recorded” has to be seen in context. As the paragraph as a whole makes clear Martin was asserting that there was undeclared cash which was not recorded in the Grey Books.

In my view therefore there is no basis for the alleged estoppel.

New Claims

In paragraphs 48 to 53 of the new pleading HPL introduces a new claim to MHH’s recycling business. The starting point for the allegation is that MHH received the fees for leaving waste at MHH sites even though the majority of the waste was for recycling which was performed by HPL.

It is said that admissions made by Martin disclose this as a breach of fiduciary duty. It is said that David and Dianne’s consent was conditional in the way pleaded in paragraph 12 [see section 12 above] and that the conditions have not been fulfilled. In the result it is said that HPL is entitled (at its election) either to claim that MHH holds its recycling business on trust for HPL, or to seek an account of profits in respect of the alleged breach of fiduciary duty.

Mr Pipe and Miss Griffin deal with this claim in paragraph 236 of the joint written submissions. They point out that the claim is not based on new material and that the basis of the claim is the alleged nature of the qualified duty now set out in paragraph 12 of the new pleading.

Furthermore as they allege in paragraph 28 of the joint written submissions there is a risk of confusion in referring to “the recycling business” at Carlisle Street. They contend that both HPL and MHH operated a recycling business from Carlisle Street albeit those businesses were different.

I agree with Mr Pipe and Miss Griffin that these allegations are parasitic on the new allegations in paragraph 12. I shall not repeat my views on those allegations. I also agree that there is no explanation for the lateness of these new claims.

Paragraphs 54 to 77 of the new pleading introduce a new claim in relation to work done on MHH’s sites. The section extends to some 16 pages and introduces a new Appendix L.

In general terms it alleges that Martin dishonestly preferred MHH over HPL in arranging business on MHH sites and in failing to ensure that HPL was paid a market rate for the work it did. It concludes (in paragraph 58(8)) that HPL is entitled, at its election to claim for the value of the work in the sum of £12.3 million or for an account of profits as set out in Appendix L.

Whilst the general nature of the pleading is understandable the detail is prolix and difficult to follow. In no sense of the word is it a “concise statement of the facts relied on” by HPL.

It would be difficult to respond to. Any response is likely to obscure the issues rather than clarify them.

In paragraphs 237 to 297 of the joint written submissions Mr Pipe and Miss Griffin make detailed criticisms of the paragraphs. I do not intend to lengthen this judgment by dealing with them in detail. I note that they include submissions that:

much of the material repeats the existing case (paragraphs 54(1), (2), 55(1), 56(1),57(2), 58(2).

much of the material misstates Martin’s position (paragraphs 58(3), 58(4), 58(5),59 and 60(1), 60(3), 61(4), 67(2), 68(1).

many of the allegations of fraud are inadequately particularised. There is a new allegation of recklessness.

Appendix L is incomprehensible and thus impossible to plead to.

I do not propose to rule on all of the points taken by Mr Pipe and Miss Griffin. I am however quite satisfied that HPL should not be able to introduce a pleading such as this at this late stage.

Conclusion

For all of the above reasons but especially for the reasons set out in section 8 above I would refuse the application to Re-Amend the Particulars of Claim save in so far as there is express consent for the re-amendments.

It follows that the very late application to amend the Claim Form which I received after the close of submissions and whilst I was preparing this judgment is also dismissed.