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||Neutral Citation Number:  EWHC 925 (Ch)
||Case No: FL-2016-000003
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
B e f o r e :
THE HON MRS JUSTICE ASPLIN DBE
David Reade QC and Farhaz Khan (instructed by Berg) for the Claimants
Mark Hapgood QC, Laura John and Adam Sher (instructed by Dentons UKMEA LLP) for the Defendants
Hearing dates: 6 & 7 April 2016
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mrs Justice Asplin DBE :
- There are two applications before the Court. The first in time is an application by the defendants, the Royal Bank of Scotland plc and National Westminster Bank plc (together referred to as "the Bank") dated 21 December 2015, to strike out parts of the Claim (the "Strike Out Application"). The second is an application by the Claimants, Diane Hockin, Michael Hockin and Lonwest Ltd seeking permission to amend the Particulars of Claim (the "Amendment Application"). It is dated 24 March 2016. The Claimants are assignees of various causes of action alleged to have been enjoyed by London & West Country Estates Ltd (in administration) ("LWE") against the Bank. The precise extent of that assignment is one of the issues central to both of the applications before the court.
- LWE which is now in liquidation, owned and managed a number of commercial business parks in Somerset and Devon. It was a wholly owned subsidiary of a holding company owned by Mr and Mrs Hockin the first and second Claimants. In 2008 the Bank extended a £55m loan facility to LWE under which it was required to repay the loan over 3 years with interest referable to LIBOR (the "2008 Facility"). The parties also agreed a 10 year bank callable interest rate swap (the "Swap") a hedge of some description having been a pre-condition of the 2008 Facility. The 2008 Facility in large part refinanced an existing long term Bank Base Rate loan facility. In or about October 2009, LWE was placed into the Bank's Global Restructuring Group, ("GRG"). After a period, the 2008 Facility was assigned to a company referred to as Isobel, a joint venture between the Bank and Blackstone, at a significant discount, despite what are alleged to have been substantial offers made by LWE to refinance the 2008 Facility. Thereafter, Isobel placed LWE into administration.
- Rights of action against the Bank having been assigned to the Claimants by a Deed of Assignment dated 20 March 2014 (the "Deed of Assignment"), the proceedings were issued on 22 June 2014 and Particulars of Claim followed on 22 July 2014. A Defence was served on 29 October 2014 and the Claimants served a Reply on 18 February 2015. The first Case Management Conference took place on 23 April 2015 and Warren J made directions down to trial. Disclosure took place in two tranches in October and December 2015 respectively. The claim was transferred into the Financial List on 19 February 2016, witness statements are currently due to be exchanged on 24 June 2016 and the trial is set down for five weeks in January 2017.
- In the Agreed Case Summary, submitted in April 2015 prior to the CMC, the Claimants' case is described as falling under four heads. They are: the Advisory claim under which it is alleged that the Bank owed a duty of care properly to advise in relation to the Swap; the Swap Representation Claim pursuant to which the claimants say that the Swap was induced by misrepresentations made to LWE; the LIBOR Claims to the effect that impliedly, the Bank made representations to LWE as to LIBOR which were untrue and were made by the Bank knowing them to be untrue, without belief in their truth or recklessly as to their truth or alternatively that the Bank breached the LIBOR Implied Terms; and what is referred to as the GRG Claim pursuant to which the Claimants say that the Bank and in particular GRG acted in breach of an implied term to act in good faith in its performance of the terms of the 2008 Facility. It is stated that as a result of the alleged breaches of duty, LWE was forced into administration by Isobel, a company to which the Bank sold its debenture loan and suffered substantial loss and damage. The Bank denied that it was liable as alleged or at all. In particular, in relation to the LIBOR Claims it admitted that it was involved in LIBOR misconduct in relation to the Swiss Franc and the Japanese Yen but denied involvement in manipulation in relation to GBP LIBOR. It also denied that LWE had suffered any loss as a result of any alleged breach of what had been termed the LIBOR Implied Terms. Further in relation to the GRG Claim amongst other things, it was expressly stated that the Bank denies that the Claimants have standing to make the allegations in relation to the conduct of GRG.
- Although the Strike Out Application was made shortly before Christmas 2015, disclosure already having taken place, the first version of the proposed draft Amended Particulars of Claim was only received by the Bank on 18 March 2016, followed by a further version on 22 March 2016. By a letter of 30 March 2016, the Claimants were invited to produce a revised draft addressing the issues set out in that letter and a further revised draft was received by those instructed on behalf of the Bank after close of business on 1 April 2016.
- In summary, the Strike Out Application is concerned with the GRG Claim in its original form and for the most part turns upon whether the Claimants can rely upon an alleged implied duty to act in good faith on the part of the Bank. Mr Reade QC on behalf of the Claimants submits that it has been overtaken by events in the form of the Amendment Application. In fact, the proposed draft Amended Particulars of Claim contains substantial proposed amendments, all of which are opposed by the Bank. They are described by Mr Reade for the most part as further particularisation of the allegations as a result of having analysed the considerable amount of disclosure made by the Bank. They include for example, substantial particularisation of the allegations of falsity of the LIBOR Representations at proposed paragraphs 14.4.2- 14.4.11. In relation to what has been termed the GRG claim, Mr Reade seeks to add significant additional claims by way of amendment. They are a claim of unlawful means conspiracy and further allegations of deceit or negligent misrepresentation which for the most part are pleaded at paragraphs 16.1A 16.1Z of the draft Amended Particulars of Claim. It is proposed to allege that Bank employees had deceived and misled LWE and conspired to procure the debenture and other security to enable the Bank better to control LWE's assets once in GRG (the "Further Claims"). In addition, it is proposed to amend the Particulars of Claim by the addition of paragraphs 16.2.7 16.2.10 particularising an alleged breach by the Bank of the implied duty of good faith with regard to the 2008 Facility by its assignment to a company referred to as Isobel leading to LWE's ultimate administration and liquidation (the "Assignment Claim").
- In the light of the application for permission to amend and its very close relationship in some respects with the strike out application, both Mr Hapgood QC on behalf of the Bank and Mr Reade QC on behalf of the Claimants helpfully sought to make their submissions with regard to both applications together. However, for the sake of clarity I will consider the applications first through the prism of the Strike Out Application with reference where relevant to the proposed amendments and what is said about them.
- CPR 3.4(2) provides that the court may strike out a statement of case if it appears to the court
"(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or
(c) that there has been a failure to comply with a rule, practice direction or court order."
The Rule is supplemented by PD3A. It is not in dispute that the touchstone for the exercise of case management powers is the overriding objective and that the Court must deal with cases justly and at a proportionate cost. Furthermore, for the purposes of CPR 3.4(2)(a), strike out should not be granted in a developing area of the law unless the court is certain that the claim is bound to fail: Hughes v Colin Richards & Co  EWCA Civ 266;  PNLR 35. Cases which are suitable for strike out include those which raise an unwinnable case or do not raise a valid claim as a matter of law: CPR at paragraph 3.4.2 and Price Meats Ltd v Barclays Bank plc  2 All ER 346. It is also accepted that if the court considers that the defect in question might be cured by amendment, the claim should not be struck out without first giving the party concerned an opportunity to amend: Soo Kim v Youg  EWHC 1781 (QB). For the purposes of CPR 3.4(2)(b) the term "abuse of the court's process" was explained by the then Lord Chief Justice, Lord Bingham, in Attorney General v Barker  1 FLR 759 in another context as "using that process for a purpose or in a way significantly different from its ordinary and proper use."
- It is also not in dispute that in relation to the proposed amendments when determining whether to grant permission, the court should have regard to all of the circumstances summed up by the overriding objective and is also concerned with whether the proposed amendments are sufficiently arguable to go to trial in the sense that they have a real prospect of success: see SwainMason v Mills & Reeve LLP (Practice Note)  EWCA Civ 14;  1 WLR 2735 and Civil Procedure para 17.3.6. In this regard, albeit in the context of summary judgment applications, Lord Hope set out the court's approach in Three Rivers DC v Bank of England (BCCI) (No 3)  2 AC 1 at  as follows:
"The method by which issues of fact are tried in our courts is well settled. After normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence... To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases, it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents and other material on which it is based. The simpler the case, the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Wolfe MR said in Swain's case ... that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
- Further, it should be borne in mind that the "basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it": British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd 45 Con LR per Saville LJ. In addition, in relation to claims where the limitation period has expired, the court may allow an amendment the effect of which will be to add or substitute a new claim only where it arises out of the same facts or substantially the same facts as a claim for which a remedy is already sought in the proceedings: CPR 17.4.
Strike Out Application
- With those principles in mind, I turn first to the Strike Out Application. It relates to paragraphs 9.3, 16.2 - 16.2.6 and 16.3 - 16.3.5 and the words "and the Bank's (in particular GRG's) further unlawful conduct as set out in paragraph 16 above" in paragraph 18.4 of the Particulars of Claim. As I have already mentioned, those paragraphs are all concerned with what has been termed the GRG claim which in its original form turns upon an allegation of an implied duty to act in good faith in the performance of the terms of the 2008 Facility. Paragraph 9.3 is in the following form:
"There were further terms of the 2008 Facility implied by law so as to reflect the parties' intentions (1) that the Bank would act in good faith in its performance of the Terms of the 2008 Facility and, where appropriate, in compliance with its duties as mortgagee and in any case where the Bank had a power or discretion, this would be exercised in good faith and not arbitrarily or capriciously and (2) as set out in paragraph 12 below."
The reference to paragraph 12 was to a contractual duty to exercise due skill and care. At paragraph 16.3.5, the Particulars of Claim then contains an allegation of breach of the terms set out in paragraph 9.3, based upon the facts pleaded at 16.2 to 16.3, although reference was made to paragraph 14 in error. Paragraph 18.4 contains a claim for loss and damage in respect of the breach. In summary, at paragraphs 16.2 and 16.3 the Claimants plead: the alleged facts and matters concerning LWE's treatment by GRG, including allegations (i) as to the undervaluation of LWE's property portfolio by external valuers DTZ acting on behalf of the Bank which is stated to be "incorrect and unreliable"; and (ii) that the Bank's approach forced LWE into insolvency as well as allegations as to the sale of the debenture and the conduct of the administration.
- The Bank's Defence in response to paragraphs 16.2.1 to 16.3.4 of the Particulars of Claim stated that the Claimants had not identified any alleged "power or discretion" under the 2008 Facility as being exercised by the Bank and provided no pleaded basis for alleging that the (unidentified) exercise of such alleged power or discretion under the 2008 Facility was arbitrary, capricious or in bad faith. There was no response to this in the Reply.
- It is submitted on behalf of the Bank that the paragraphs in question should be struck out in essence upon three grounds and that permission in relation to the amendments and in particular, the Further Claims and the Assignment Claim should not be granted for the same reasons. First, Mr Hapgood submits that the Claimants lack standing to bring the GRG claim and that as a result, permission should not be given to amend to plead the Further Claims and the Assignment Claim because the rights of action assigned to them did not extend to such matters which stem from the 2008 Facility rather than the Swap. Secondly, he says that the claims are based upon an alleged implied duty of good faith in relation to the performance of the terms of the 2008 Facility which he says is unarguable in law or at least in relation to which there is no reasonable argument. He submits that the covenants in the 2008 Facility had been breached and that the Bank was contractually entitled to call in the loan and there is no more to be said. He accepts for the purposes of this hearing that the Bank was considering which loans could be called in in order to improve its liquidity, but he says that in the light of the undisputed breach of covenant it cannot be said that there is bad faith. Lastly, he says that there has been an abuse of process because he says that the paragraphs in relation to the GRG paragraphs were inserted into the Particulars of Claim without any belief in the claim and as part of a fishing expedition in order to obtain material on disclosure, for the purposes of mounting a claim. In relation to the proposed amendments, Mr Hapgood says they make matters worse rather than better: the Further Claims seek to extend or particularise the pleading in relation to breach of the alleged implied duty of good faith and the Assignment Claims fall foul of the Claimants' lack of standing.
(i) Lack of standing
- First, Mr Hapgood submits that the Claimants do not have title to bring the GRG claims nor to amend them in the manner which is proposed because those claims do not fall within the ambit of the Deed of Assignment. By way of relevant admissible context to the construction of the Deed of Assignment, Mr Hapgood referred me to the judgment in In re London & Westcountry Estates Ltd, Hockin & Ors v Marsden & Anr  Bus LR 441 which was given in relation to the application made to the court pursuant to paragraph 74 Schedule B1 Insolvency Act 1986, for the assignment and as a result of which the Deed of Assignment was executed. In particular, he drew my attention to: paragraph  of the judgment at which the learned judge, Nicholas Le Poidevin QC, sitting as a deputy High Court judge, observed that the complaint centred on LWE having entered into the Swap and described it as "one of mis-selling"; paragraph  at which it was stated that the claims which the applicants wished to bring had been analysed as falling into three being:
"a breach of an alleged duty of care said to have been owed by the Banks and two alleged misrepresentations"
and explained thereafter, that the duty of care was a duty to advise in relation to the Swap before LWE was committed and that the misrepresentations were as to future interest rates and that LWE would have the right to terminate the Swap without cost on its third anniversary; and the judge's conclusion at . For the sake of completeness and better understanding, I set out both  and  as follows:
" The first question is which claims should be assigned. I have held that only one of the proposed claims passes what I may call the vexatiousness test. Should the assignment be limited to that claim?
 I have no doubt that if there were entirely distinct claims of which one or more was vexatious and one or more was not, the assignment should exclude any vexatious claim. In this case, however, the proposed claims are closely bound up with each other. This is clearly so in the case of the alleged duty of care to advise and the alleged misrepresentation as to the credit break but it is also true of the alleged misrepresentation as to interest rates. It seems to me that to try to specify in advance precisely what claims the applicants, as claimants could and could not pursue would be a difficult exercise, likely to be productive of argument and expense without corresponding benefit. The draft deed prepared by the applicants refers generally to claims arising out of what they call mis-selling and my view is that I should adopt that provision."
In fact, at   of his judgment the learned judge had considered each of the three heads of claim in turn in order to determine whether they were viable as opposed to being frivolous or vexatious and as a result, that the court should not direct their assignment. The heads were described respectively as: "Bank's duty to advise"; "Representation as to future rates"; and "Representation as to credit break." He had concluded that only the representation as to credit breaks claim passed his "vexatiousness" test.
- Mr Hapgood points out that no reference whatever was made to the alleged duty of good faith in the judgment which gave rise to and was the basis for the execution of the Deed of Assignment, executed the day after the judgment was handed down. By clause 3.1 of the Deed of Assignment LWE as Assignee assigned to the Claimants
all of the Assignor's rights, title and interest in and to the Rights of Action, and the Benefits together with the rights to prosecute the Rights of Action".
In turn, "Rights of Action" were defined in clause 1.1 of the Deed of Assignment as:
"all claims, counterclaims causes of action, disputes and proceedings (together with any associated orders obtained in connection therewith) whether known or unknown, contemplated or not, and whether actual or contingent, as exist at the date of this Deed or arise in the future and which relate to, are in respect of, result from or are connected with the Breaches or any one or more of the Breaches and, for the avoidance of doubt any rights to claim compensation under the FCA Led Review."
"Breaches" are defined as:
"the actions, omissions and breaches described in clause 2.2"
and clause 2.2 provides:
"The Assignees contend that RBS and or its principal NatWest acted in breach of contract or in actionable misrepresentation and/or breach of duty of care owed to the Assignor by mis-selling to the Assignor a 10 year callable LIBOR swap with NatWest and that such actions, omissions and breaches have caused the Assignor to suffer loss, costs and damage. . ."
Mr Hapgood also highlighted clause 2.1 of the Deed of Assignment which provides:
"The Assignor [LWE] entered into loan agreements with RBS acting as agent for NatWest dated respectively on or around 11 July 2008 and on or around 8 October 2008 and into a swap agreement with RBS on or around 10 July 2008."
- He draws attention to the distinction made in clause 2.1 between the loan agreements and the Swap and submits that it is relevant to the proper construction of the operative assignment clause and the provisions incorporated by reference within it, which refer solely to the Swap. He also points out that not only was there no reference to the implied duty of good faith in the judgment which gave rise to the Deed of Assignment but also clauses 3.1, 2.2 and the definitions in clause 1.1 themselves contain no such reference. He submits therefore, that as a matter of language, on the plain ordinary meaning of the words used in the operative clauses the Deed of Assignment the assigned rights of action are those which arise in relation to the acts/omissions of the Bank in allegedly mis-selling the Swap and cannot include the GRG claim as originally pleaded which is a claim for breach of the alleged implied term of good faith to be implied into the 2008 Facility. Further, he says that the claim contains wholly separate allegations of misconduct/bad faith on the part of the Bank in its dealings with LWE in/or around its transfer to GRG, including an alleged undervalue of LWE's property portfolio which have nothing to do with the alleged mis-selling of the Swap which is no more than a part of the factual background of the previous dealings between the Bank and LWE. In his written submissions he stated that this can be tested in a number of ways: even if it were held that there was no mis-selling in relation to the Swap it would be no answer to the alleged GRG claim, any abuse by the Bank of its alleged discretion under the 2008 Facility being entirely independent; and secondly, that the GRG claim could be brought without reference to the Swap and alleged mis-selling at all. Mr Hapgood submits that this is all the more so in relation to the Further Claims and the Assignment Claim which it is proposed to introduce by way of amendment.
- It is said therefore, that the construction contended for by the Bank is straightforward, is based on the actual words used in the operative clauses and is consistent both with the other terms of the Deed of Assignment and the relevant, admissible factual matrix. Accordingly, it is said to be the only available construction. In addition, Mr Hapgood points out that such a construction is consistent with the Claimants' own correspondence. He took me to a letter dated 5 November 2015 from the Claimants' solicitors in which they assert that the Claimants have a claim in relation to the alleged breach of duty of good faith, and go on to state:
"However, we believe that the matters pleaded at 16.2 and 16.3 do also give rise to claims and we anticipate in early course inviting Messrs Marsden & Bloom to agree to assign the rights to also pursue a claim inter alia against your client in respect of the above additional matters in respect of which there can then be an application to amend the Particulars of Claim."
Messrs Mardon and Bloom were the administrators of LWE. A further assignment did not take place.
- Mr Reade reminded me of the well known approach to the construction of commercial agreements to be found in the speech of Lord Hoffmann in the ICS v West Bromwich case and the judgment of Lord Mance in Re Sigma Finance  1 All ER 571 at . In addition, he referred me to the judgment of Lord Neuberger in the Supreme Court in Arnold v Britton and others  AC 1619 (SC) at  - . Lord Neuberger re-emphasised the rule that words should be given their natural and ordinary meaning and the court should be slow to accept that something must have gone wrong with the language, in the following terms at :
the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook  AC 1101, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision."
- Mr Reade submits that the GRG claims flow from the mis-selling of the Swap because had the Swap not been entered into LWE's indebtedness would never have been transferred to GRG in the first place. He says that the GRG claim was part of the chain of causation starting with the mis-selling of the Swap and that the 2008 Facility (in relation to which it is alleged that there is an implied duty of good faith) and the Swap are one and the same package and should be considered together. In this regard, he pointed out the Swap was entered into pursuant to clause 10.4 of the 2008 Facility by which LWE was required to "ensure that an interest rate hedging instrument acceptable to the Bank" was entered into and maintained.
- He also drew attention to the reference in the operative clause by which the assignment is effected, namely clause 3.1 of the Deed of Assignment, to "Rights of Action". He submits that the definition of the term is very wide and should not be restricted by the definition of "Breaches". He says that the claims in respect of the 2008 Facility "relate(s) to" and/or are "in respect of" and/or "result from" and/or are "connected with" the breaches concerning the Swap for the purposes of the inter-related definitions of "Rights of Action" and "Breaches". Of Mr Hapgood's submission that this takes matters no further because there is no relationship between the alleged breaches of implied duty good faith and the mis-selling of the Swap, Mr Reade says that this confuses "connected with" with "reliant upon". He also says that the reference to future claims and to those which are unknown and uncontemplated in the definition of "Rights of Action" is an indicator of how wide the definition is.
- He referred me to the consideration of similar provisions including "arising out of or in connection with" in KMR Ltd v Forsters LLP  EWHC 583 (Comm) per Sir Bernard Eder at  . In particular, at  the judge commented that it is often unhelpful and dangerous to rely upon earlier authorities as to the meaning of a particular word, with which I agree. He went on to state, however, that as a matter of language, "in connection with" was clearly wider than "arising out of", a conclusion with which I also agree. Mr Reade also took me to Barclays Bank plc & Ors v Commissioners for Her Majesty's Revenue and Customs  EWCA Civ 442 which was concerned with the construction of provisions of a tax statute. Arden LJ stated at  that a connection may be indirect for the purposes of the statutory definition of relevant benefits. Given the very different context, I find this authority to be of little assistance in this case, save as a reminder of the potential breadth of the phrase depending on the relevant context. The same is true of the Scottish case of Bank of Scotland v Dunedin Property Investment Co Ltd  SC 657 in which the Court of Session, Inner House considered the construction of the phrase "in connection with" in the context of loan stock. Lord Kirkwood concluded at 671C that there was no reason to imply "directly" into the phrase and that it did not matter whether the connection was direct or indirect.
- Mr Reade submits therefore, that the GRG Claim, the Further Claims and the Assignment Claim are connected whether directly or indirectly with the Breaches, that the Strike Out Application is misconceived and that permission to amend should be granted.
- If the GRG claims are to be struck out under this head, I must be satisfied that as a matter of law the Claimants lack standing to bring the GRG claims because of the scope of the assignment to them and therefore, there are no reasonable grounds for bringing those claims. To put the matter another way, I must be satisfied that as a matter of construction of the Deed of Assignment the GRG claim is bound to fail as a result of the Claimants' lack of standing and as a result, it would not be appropriate to grant permission to amend to plead the Further Claims and the Assignment Claim. In my judgment, I cannot come to such an unequivocal conclusion based upon the proper construction of the Deed of Assignment. In arriving at my decision, I take into account the principles of construction set out in the speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society  1 WLR 896, together with the additional observation of Lord Mance in Re Sigma Finance Corp  UKSC 2,  1 All ER 571 at  where he noted that interpretation of a commercial contract was an iterative process involving "checking each of the rival meanings against other provisions of the document and investigating its commercial consequences
" I also take into account the passage from Arnold v Britton to which I was referred.
- I accept that the Deed of Assignment makes no express mention of any claim based upon an implied duty of good faith or for that matter, based upon the conduct of bank employees in the sequence of events which led to the administration and ultimate liquidation of LWE. I also do not doubt that the judgment of Mr Le Poidevin QC as a result of which the Deed of Assignment was executed is part of the factual matrix relevant to its construction and that it is clear that an implied duty of good faith or the conduct of bank employees leading to administration of LWE were not considered in that judgment.
- It is also true to say that the terms of clause 2.1 of the Deed of Assignment are of assistance when seeking to construe clause 2.2 and as a result, when construing the operative assignment provisions in the context of the Deed of Assignment as a whole. Reference is made in clause 2.1 to the existence of both the Swap and to two loan agreements. In contrast, clause 2.2 which forms the content of the definition of "Breaches" which are in turn the focus of the definition of "Rights of Action" sets out the Claimants' contentions that the Bank acted in breach of contract, actionable misrepresentation and or breach of duty of care in mis-selling the Swap only. It makes no reference to the loan agreements and therefore, to the 2008 Facility at all.
- The operative clause itself is found in clause 3.1 and where relevant provides that it is "all of the Assignor's rights, title and interest in and to the Rights of Action, and the Benefits together with the rights to prosecute the Rights of Action" which are assigned. "Benefits" are defined in summary as the money arising out of the "Rights of Action". The ambit and extent of the assignment turns therefore, upon the definition of "Rights of Action" (which itself incorporates clause 2.2 by reference) construed in the context of the Deed of Assignment as a whole and against the relevant factual matrix. It has not been suggested that the factual matrix is other than the facts and matters referred to in the judgment of Mr Le Poidevin and the background which led to the application.
- In my judgment, taking those matters into account and the principles of construction to which I have referred, I consider that the meaning which the Deed of Assignment would convey to the reasonable reader having all the background knowledge which would reasonably have been available to the parties when the Deed was executed, is extremely wide. Despite the lack of any reference to the 2008 Facility into which it is alleged that the duty of good faith should be implied and in relation to which further conduct which forms the basis of the Further Claims and the Assignment Claim is complained of, in the definition of "Breaches" and the distinction between sub-clauses 2.1 and 2.2, in my judgment, it cannot be said that it is unarguable or even not reasonably arguable that such claims are "connected with" the Breaches for the purposes of the definition of "Rights of Action" and the operative assignment provision in clause 3. It seems to me that the ordinary and natural meaning of "connected with" is a wide one and is not synonymous with "reliant upon." I agree with Mr Reade that the way in which Mr Hapgood seeks to differentiate between the GRG claims/Further Claims and Assignment Claim and claims in connection with the alleged mis-selling of the Swap is to give "connected with" too narrow a meaning and in effect to limit it to "reliant upon."
- In my judgment the context of the definition of "Rights of Action" itself is such that the phrase should be given a wide meaning. First, in this regard, I consider it important to construe "in connection with the Breaches" against the background of the other terms used in the definition of "Rights of Action" in that regard. They are "relate to", "in respect of" and "result from". In that context, it is not clear to me that the reasonable person with the requisite background knowledge, would not interpret "in connection with" to be wide in meaning and wider than the other phrases used. Furthermore, in my judgment, the fact that "Rights of Action" are defined sufficiently widely to include "all claims ... whether known or unknown, contemplated or not
as exists at the date of this Deed or arise in the future
" militates against a narrow construction limited solely to the causes of action referred to in clause 2.2 for which the Assignees/Claimants contended at that stage or those referred to in Mr Le Poidevin's judgment. Such a conclusion is also consistent with  of the judgment at which the learned deputy judge referred expressly to the draft deed of assignment making reference generally to claims arising out of the mis-selling and stated that such a provision should be adopted.
- As I have already mentioned, I did not find the authorities in which the phrase "in connection with" was considered to be of great assistance. They were each concerned with contexts which differed considerably from the one with which I am concerned and I agree with Sir Bernard Eder that it can be dangerous to rely upon other authorities as to the meaning of a particular word. In any event, whilst not relying upon them, I draw some comfort from the fact that they all point to the breadth of the phrase "in connection with."
- I agree with Mr Reade therefore, that given the breadth of the phrase "in connection with", it is reasonably arguable that the GRG Claim, the Further Claims and the Assignment Claim flow from the mis-selling of the Swap as a matter of causation and because the entry into a hedging instrument acceptable to the Bank having been a term of the 2008 Facility itself. Accordingly, for the reason to which I have already referred, in my judgment the application to strike out cannot succeed on this basis nor is it a reason to refuse the proposed amendments. It cannot be said upon this basis that the Claimants have no basis for a valid claim in relation to the GRG Claim, the Further Claims and the Assignment Claim.
- I should add that I take no account of the solicitors' correspondence which suggests that the Claimants' solicitors doubted that the assignment was sufficiently wide to cover the implied duty of good faith and conspiracy claims. As Mr Reade pointed out the task in hand is the construction of the Deed of Assignment itself and not the correspondence, the former being a question for the Court.
(ii) Bad in Law
- Mr Hapgood's argument in this regard turns upon the proper construction of clauses 16.1 and 16.2 of the 2008 Facility which is accepted to be a standard lending agreement. The sub-clauses appear under the heading, "Miscellaneous" and the relevant parts are as follows:
"16.1 The Borrower [LWE] may not assign or transfer any of its rights or obligations under this Agreement.
16.2 The Bank may assign all or any part of its rights or benefits under this agreement without the consent of the Borrower
- Mr Hapgood submits that when the relevant sub-clauses are read together it is clear the first sub-clause is intended to dis-apply the statutory right of assignment in section 136 Law of Property Act 1925 in the case of the Borrower, and the terms of the second sub-clause make clear that that right is retained by the Bank. He submits therefore, that the reference to "may" does not connote a discretion in relation to which it might be possible to argue that an implied duty of good faith arises with regard to its exercise. Furthermore, whilst he accepts that a mortgagee is subject to a duty to take reasonable care in realising the security he says that what is pleaded here is something else entirely. He characterises it as a conspiracy to bring LWE down.
- The Bank's submissions in this regard were elaborated by Miss John who stated that the Bank does not rely upon any particular factual matrix or upon any of the other terms of the 2008 Facility in relation to the question of whether the duty of good faith should be implied. She also referred me to section 136 Law of Property Act 1925 in the form set out in the 32nd edition of Chitty on Contracts at §19.07. In summary, the section provides that an absolute assignment by writing under the hand of the assignor or any debt of which express notice is given to the debtor is effective in law. She submits that as a result of section 136, the Bank had a statutory right to assign. She says that clause 16.2 did no more than to preserve that statutory right to assign without consent of the Borrower and that clause 16.1 declared as a matter of contract that the Borrower, LWE, did not retain that right. In this regard, she referred me to §19.044 of Chitty on Contracts where it is stated that: "If rights arising under a contract are declared by the contract to be incapable of assignment, a purported assignment will be invalid as against the debtor."
- She went on to point out that the Claimants contend that a duty of good faith should be implied into the 2008 Facility but that a term will only be implied in a detailed commercial contract if it is necessary to give business efficacy to the contract; or it is so obvious that it goes without saying; was concerned with what notional reasonable people in the position of the parties at the time would have agreed; and that it was a necessary but not sufficient condition for implying a term that it appeared fair or that the court considered that the parties would have agreed it if it had been suggested to them: M&S v BNP Paribas Securities  UKSC 72.
- In addition Lord Neuberger reiterated that Lord Steyn had rightly observed that the implication of a term "was not critically dependent on proof of an actual intention of the parties" when negotiating the contract. It is concerned with what notional reasonable people in the position of the parties at the time would have agreed. He went on at   to add:
"21. In my judgment, the judicial observations so far considered represent a clear, consistent and principled approach. It could he dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in the BP Refinery case 180 CLR 266 as extended by Bingham MR in the Philips case  EMLR 472 and exemplified in The APJ Priti  2 Lloyd's Rep 7. First, in Equitable Life Assurance Society v Hyman  1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was "not critically dependent on proof of an actual intention of the parties" when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon's first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd  1 WLR 1988, para 27, although Lord Simon's requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is "vital to formulate the question to be posed by [him] with the utmost care", to quote from Lewison, The Interpretation of Contracts 5th ed (2011), p 300, para 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of "absolute necessity", not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon's second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.
22. Before leaving this issue of general principle, it is appropriate to refer a little further to the Belize Telecom case, where Lord Hoffmann suggested that the process of implying terms into a contract was part of the exercise of the construction, or interpretation, of the contract. In summary, he said at para 21 that "There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?" There are two points to be made about that observation.
23. First, the notion that a term will he implied if a reasonable reader of the contract, knowing all its provisions and the surrounding circumstances, would understand it to be implied is quite acceptable, provided that (i) the reasonable reader is treated as reading the contract at the time it was made and (ii) he would consider the term to be so obvious as to go without saying or to be necessary for business efficacy. (The difference between what the reasonable reader would understand and what the parties, acting reasonably, would agree, appears to me to be a notional distinction without a practical difference.) The first proviso emphasises that the question whether a term is implied is to be judged at the date the contract is made. The second proviso is important because otherwise Lord Hoffmann's formulation may be interpreted as suggesting that reasonableness is a sufficient ground for implying a term. (For the same reason, it would he wrong to treat Lord Steyn's statement in Equitable Life Assurance Society v Hyman  1 AC 408, 459 that a term will be implied if it is "essential to give effect to the reasonable expectations of the parties" as diluting the test of necessity. That is clear from what Lord Steyn said earlier on the same page, namely that "The legal test for the implication of ... a term is strict necessity", which he described as a "stringent test".)"
- Miss John went on to submit that the Claimants pray in aid a line of authorities which are concerned with the exercise of contractual discretions which must be exercised fairly and not capriciously. However, she submits that the use of "may" in clause 16.2 does not create a contractual discretion in this case at all. She says it merely creates a right leading to a binary choice of whether to exercise the right or not. To suggest that it is necessary to imply a duty of good faith into such a provision, she submits undermines the entire contractual regime and certainly cannot be said to be necessary to give business efficacy. By contrast, she says that contractual discretions arise where there are a range of options from which to choose. For example, Socimer International Bank Ltd (in liquidation) v Standard Bank London Ltd  Bus LR 1304 was concerned with an agreement between banks which had been trading in the securities of emerging markets. At the termination date, the Claimant owed the Defendant bank US $24.5m in unpaid amounts in relation to the purchase of a portfolio of forward sales of securities. The agreement permitted the Defendant bank an absolute discretion whether to liquidate or retain the portfolio to satisfy the amount due but obliged it to carry out an immediate valuation of the portfolio as at the date of termination and to credit the resultant amount to the Claimant bank. As a matter of necessity and obviousness, the Court of Appeal held that it was implied that the assets had to be valued in good faith and not arbitrarily or capriciously but would not imply a term that the discretion be exercised reasonably with regard to the interests of the defaulting claimant.
- I was also referred to the 6th edition of "The Interpretation of Contracts" at §14.11 at which contractual discretions are considered and the following extract from Brogden v Investec Bank plc  EWHC 2785 (Comm) a case concerning the award of bonuses under a contract of employment is set out:
"Both on the authorities and as a matter of principle, it seems to me that where a contract gives responsibility to one party for making an assessment or exercising a judgment on a matter which materially affects the other party's interests and about which there is ample scope for reasonable differences of view, the decision is properly regarded as a discretion which his subject to the implied constraints that it must be taken in good faith, for proper purposes and not in an arbitrary, capricious or irrational manner. Those limits apply in circumstances where the decision is final and binding on the other party in the sense that a court will not substitute its own judgment for that of the party who makes the decision. There is therefore also a discretion in the second sense distinguished earlier. The concern as Rix LJ observed in Socimer at para 66, is that the decisionmaker's power should not be abused. The implication is justified as a matter of construction to give effect to the presumed intention of the parties
- Miss John also referred to Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd  EWCA Civ 200 which concerned a provision in relation to performance measurement in a service contract. By clause 5.8 where certain performance criteria had not been met, the NHS Trust was entitled to levy payment deductions against the monthly amount of the Contract Price and in addition: "may by notice to the Contractor award Service Failure Points
" Jackson LJ considered a number of cases including Socimer. In relation to that line of cases he observed at  that:
in each case the discretion did not involve a simple decision whether or not to exercise an absolute contractual right. The discretion involved making an assessment or choosing from a range of options, taking into account the interests of both parties. In any contract under which one party is permitted to exercise such a discretion, there is an implied term
He concluded at  that the discretion in relation to the service failure points was very different from those considered in the authorities. He went on:
The discretion conferred by clause 5.8 simply permits the Trust to decide whether or not to exercise an absolute contractual right.
 There is no justification for implying into clause 5.8 a term that the Trust will not act in an arbitrary, irrational or capricious manner. If the Trust awards more than the correct number of service failure points or deducts more than the correct amount from any monthly payment, then that is a breach of the express provision of clause 5.8. There is no need for any implied term to regulate the operation of clause 5.8."
Miss John submits that in the same way in this case, clause 16.2 contains a simple contractual right which the Bank can choose whether to exercise.
- Lastly, she referred me to Myers & Anr v Kestrel Acquisitions Ltd & Ors  EWHC 916 (Ch), a decision of Sir William Blackburne in relation to clause 9 of certain Vendor Loan Notes. The clause provided that the Company "may make any modification to this instrument" either with the sanction or an extraordinary resolution or without such sanction if it was "consistent in all material respects with any modification being made to the Discounted Loan Note Instrument." It was submitted that although there was no general duty of good faith in commercial contracts, there had to be some limitation on the power to modify the loan notes. Sir William Blackburne held at  that it was impermissible to imply a duty of good faith for a number of reasons. At  he noted that although clause 9.1 was drafted as a power to modify using the word "may" the power was not a discretion which involved a choice from a range of options. He held that it was an exercise of a contractual right whether or not to modify without consent which was constrained by the requirement that the modification be consistent with the modification to the Discounted Loan Note. He added also at :
"The fact that Kestrel had that contractual choice does not justify subjecting it to some kind of good faith obligation."
- Miss John says that it is not necessary to imply a term here, a provision of this kind is common, there is no need for protection of one party against the other and in fact that such a protection would be contrary to the express words of clause 16.2 which makes it clear that the assignment is not subject to the consent of the Borrower. She also points out that there is no authority for the implication of a duty of good faith in relation to a right to assign in circumstances such as these.
- Mr Reade on behalf of the Claimants submits that this is quite clearly a matter for trial and cannot be determined on a strike out application. He points out that the decision in Brogden v Investec was arrived at after a long trial, the full factual background had been set out in the Mid Essex case and that although Myers v Kestrel was a Part 8 claim, detailed facts were before the court. In this case, he submits that the relevant factual matrix can be found in summary at paragraph 4.1B of the proposed Amended Particulars of Claim and must be considered in full at trial. It is stated at paragraph 4.1B that various named bank employees socialised extensively with the Hockins such that a Bank employee, Mr Scott, was considered a close friend in whom trust and confidence was reposed and that he also "insinuated himself into the dealings of [LWE]".
- Mr Reade also says that it is necessary to construe clause 16.2 in the context of the 2008 Facility as a whole and that it is not possible before trial to decide that it is not reasonably arguable that the use of "may" imports a discretion which also requires a duty of good faith to be implied especially in the light of the need to protect the Borrower which was unable itself to assign as a result of clause 16.1. Lastly, he submitted that both Mr Hapgood and Miss John are wrong to suggest that section 136 Law of Property Act 1925 itself confers a statutory right to assign because the section itself assumes that an assignment has taken place and regulates the consequences.
- First, I have to say that I agree with Mr Reade that section 136 Law of Property Act 1925 does not create a statutory right of assignment in itself as much as regulates the effects of assignments which have taken place. I also agree therefore, that clause 16.2 of the 2008 Facility Agreement does not so much preserve a statutory right of assignment as make clear that the rights arising under the 2008 Facility are capable of assignment by the Bank without the consent of the Borrower. Whether such an assignment operates as a legal assignment would be dependant upon whether it complied with section 136. As the passage in Chitty on Contracts to which I was referred makes clear, the effect of clause 16.1 is as a matter of contract to render any purported assignment by the Borrower invalid.
- In any event, I do not find the consideration of section 136 of much assistance when determining whether or not there are reasonable grounds for a claim that the performance of the terms of the 2008 Facility be subject to an implied duty of good faith and any power of discretion be exercised subject to such a duty, even though it was conceded during the hearing that the alleged discretion relied upon is contained in clause 16.2.
- In this regard, I bear in mind the matters highlighted in Lord Neuberger's recent judgment in Marks & Spencer plc v BNP Paribas and the fact that this is a standard commercial contract. It seems to me therefore, that the threshold for the implication of a term into a commercial contract of this kind is high. Is it necessary to give it business efficacy or to put the matter another way is the term so obvious that it goes without saying or does the contract lack commercial or practical coherence without it? However, it also seems to me that despite the fact that implication is not dependent upon the intention of the actual parties to the contract and is concerned with what notional reasonable people in the position of the parties at the time would have agreed, it is sensitive to the relevant factual matrix. Clause 16.2 must be construed and the question of construction and implication considered against the background of the 2008 Facility as a whole and the relevant factual matrix, an exercise which cannot be carried out properly or fairly on the basis of the evidence as it stands.
- Unlike the case of the Deed of Assignment, in relation to which the relevant factual matrix was clear and the court was not asked to construe its provisions in a vacuum, in relation to the question of whether a term should be implied there was very little if any evidence as to the relevant factual matrix before the court. I was not referred to anything said to be of relevance by those instructed by the Bank. Mr Reade was only able to refer to the proposed paragraph 4.1B of the draft Amended Particulars of Claim. It sets out a very short summary of facts in relation to the social interaction of the individuals concerned on behalf of LWE and the Bank leading to a relationship of trust and confidence prior to the execution of the 2008 Facility. In the circumstances, I agree with Mr Reade that it is not possible for the court on the basis of the evidence which was before it and which did not go to the factual complexity of the relationship of the relevant individuals before the execution of the 2008 Facility, to conclude that there are no reasonable grounds for bringing the GRG Claim, or to conclude that permission to amend to include the Further Claims and the Assignment Claim on the basis that an implied duty of good faith should be refused. To do so would be to come to such a conclusion in almost a factual vacuum.
- It follows that such a conclusion applies equally in relation to the related question whether clause 16.2 contains a contractual right or a discretion. As Mr Reade pointed out, detailed consideration of the complex contractual terms against a full background of the relevant facts by some means or another had occurred in all the cases in relation to contractual discretions to which I was referred. In my judgment, in the light of the paucity of the evidence as to the relevant factual matrix before the court on the Applications, it is not possible to come to a conclusion for the purposes of the Strike Out application as to whether it is unarguable that clause 16.2 contains a contractual discretion. To do so would be to consider the matter in isolation which is impermissible.
(iii) Abuse of Process
- Lastly, Mr Hapgood says that the inclusion of the GRG claim in the Particulars of Claim had no proper basis and amounted to an abuse of process and ought to be struck out under CPR 3.4(2)(b). He says that at all times up to and after the Agreed Case Summary and List of Issues the Bank proceeded on the basis that the GRG claim was genuinely advanced albeit that the Claimants needed to explain its operation and ambit. However, he says that as a result of the Claimants' response to a request for Further Information, the response being dated 17 September 2015 and subsequent correspondence, the Claimants admitted that they were unable to articulate a claim for breach of the alleged implied duty of good faith and asserted that they did not advance such a claim but included the claim in the hope that disclosure might provide material for such a claim.
- Mr Hapgood submits that this is to be gleaned first from the covering letter to the Response to the Request for Further Information in relation to paragraph 16.2.3 of the Particulars of Claim which states that the requests are "premature" and from the Response itself. The request sought amongst other things, an explanation as to which cause of action the allegation of an undervaluation by DTZ of LWE's property portfolio related. The Response was:
"This fact is relevant to the consequential losses claimed under the causes of action that are fully pleaded in the Particulars of Claim. The Claimants reserve their right to add to the causes of action following disclosure."
He also relies upon part of the Claimants' solicitor's letter of 5 November 2015 which is as follows:
"The position is that the matters pleaded in paragraphs 16.2.3, 16.2.6, 16.3.1-16.3.3, 16.3.4 are not pleaded as the basis for a breach of the implied term pleaded at paragraph 9.3. No pleaded claims are presently pleaded out of the matters at 16.2 and 16.3
the Claimants alleged that the events and matters pleaded at paragraphs 16.2 and 16.3 resulted from and were consequential on the mis-selling of the swap."
- Mr Hapgood points out that this was inconsistent with the Particulars of Claim itself, the position adopted in the Agreed Case Summary, the Claimants' List of Issues and the disclosure requests which had already been produced and made. Mr Hapgood submits therefore, that there is an abuse here. He says that it seems that it is acknowledged that there was no cause of action but that the allegations were included in the pleading in order to obtain disclosure in order to assist in mounting such a claim and there is no explanation as to how the statement of truth could have been signed. However, he concedes that an application to strike out based upon the contention that a claim based upon the alleged implied duty of good faith is untenable, could have been made at any time after service of the Particulars of Claim on 22 July 2014 and therefore, long before disclosure took place.
- Nevertheless, by way of analogy he took me to Nomura v Granada  EWHC 642 (Comm) at , - per Cooke J. In that case the abuse in question concerned the illegitimate attempt to circumvent the provisions of the Limitation Acts for a claim which the claimant could not properly identify or plead. Cooke J made it clear at  that:
the key question must always be whether or not, at the time of issuing a Writ, the claimant was in a position properly to identify the essence of the tort or breach of contract complained of and if given appropriate time to marshal what it knew, to formulate Particulars of Claim. If the Claimant was not in a position to do so, then the claimant could have no present intention of prosecuting proceedings, since it had no known basis for doing so. Whilst therefore the absence of present intention to prosecute proceedings is not enough to constitute an abuse of process, without the additional absence of known valid grounds for a claim, the latter carries with it, as a matter of necessity, the former. If a claimant cannot do that which is necessary to prosecute the claim by setting out the basis of it, even in a rudimentary way, a claimant has no business to issue a Claim Form at all "in the hope that something may turn up." The effect of issuing a Writ or Claim Form in such circumstances, is so the plaintiff/claimant hopes, to stop the limitation period running and thus deprive the defendant of a potential limitation defence."
- He went on at  to conclude that the inclusion of the claim in the Claim Form at a time when Nomura was not in a position to do the minimum necessary to set out the nature of the claim was an attempt to seek an illegitimate benefit and was an abuse of the court. Mr Hapgood says that the same is true here and that the Claimants sought disclosure which they would not otherwise have obtained.
- Mr Hapgood also referred me to Charter UK Limited v Nationwide Building Society  EWHC 1002 (TCC), a case in which a claim which sought expressly to reserve rights to plead particular breaches following disclosure, but did not plead a cause of action or claim or remedy, was struck out. At  Akenhead J drew together a number of themes from the relevant case in the context of the overriding objective, one of which was that 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. He also stated that  that:
"It is wrong in principle for parties to half plead a case in the hope or anticipation that that will create sufficient of an issue to give rise to disclosure obligations;
- In summary, therefore, Mr Hapgood says that the approach taken by the Claimants in respect of the GRG Claim is an abuse of process because it circumvents the established disclosure procedure and enlarges it on the basis of a non-genuine claim. He also says that the pleadings themselves do not comply with the basic requirements of particularity particularly in a claim which asserts bad faith or dishonesty to which I will refer in more detail below.
- In response, Mr Reade submits that given Mr Hapgood's concession that an application to strike out on the bad law argument could have been made before disclosure, his argument on the basis of abuse of process falls away. Furthermore, he submits that it is clear that disclosure as to the transfer to GRG and the subsequent occurrences were always necessary for the case. They were pleaded as a sequence of relevant facts which were consequences of the alleged mis-selling of the Swap sounding in loss. However, as a result of the disclosure, it is sought to amend the Particulars of Claim in order to refine the way in which the case is put. He submits therefore, that the position is different both from that in the Nomura case and in Charter UK: in the former, an illegitimate benefit was sought in relation to limitation whereas, in this case, the disclosure would have taken place in any event; and in the latter, it was stated that it would be wrong to plead a matter which does not support or relate to any remedy sought whereas in this case the paragraphs in question were pleaded in relation to causation of loss stemming from the alleged mis-selling.
- I agree with Mr Reade. In my judgment the position in this regard is different from those under consideration in the Nomura and the Charter UK cases. In Nomura, the abuse which was identified by Cooke J was the inclusion of a claim in the hope that something would turn up later but also with the hope or intention that the inclusion of the claim would stop the limitation period running. In this case, I agree with Mr Reade that the full disclosure exercise which took place in the autumn of 2015 would have taken place in any event and was necessary for the prosecution of the claim in the light of paragraph 16.2 as pleaded. The matters were pleaded as a sequence of relevant facts as a consequence of the mis-selling which were causative of loss and it seems to me that they would have been included whether or not the allegation of an implied duty of good faith had been included in paragraph 9.3 of the Particulars of Claim. In the circumstances, it does not seem to me that this was a fishing expedition and matters were included in the pleading for the purpose of obtaining disclosure which would not otherwise have been made. In other words, it does not seem to me that there was an abuse of that kind as the matters pleaded also went to consequential loss, nor can it be said that they did not support or relate to any remedy pleaded in the way described in the Charter UK case. In my judgment therefore, the application to strike out under this head also fails.
- It follows from my decision in relation to the Strike Out Application that I do not consider that permission to amend should be refused on the basis that it is clear that there is no foundation in law for the proposed Further Claims and Assignment Claim. It is necessary nevertheless, to consider those amendments and the others in the light of the further objections made on behalf of the Bank.
- As I have already mentioned, the proposed amendments to the Particulars of Claim are extensive and detailed. Furthermore, the position in relation to the amendments changed as the hearing progressed. However, I was provided with a schedule of what were said to be the key deficiencies in the draft Amended Particulars of Claim of which the Bank complains. They are under five heads: alleged implied term of good faith claim not limited to single discretion identified; conspiracy - there are insufficient particulars in relation to all of the individuals alleged to have been involved and in relation to each individual his or her intention, knowledge, participation/concerted action; LIBOR claims particulars of falsity particulars or the persons alleged to have been involved and the knowledge relied upon in relation to each of them; LIBOR claims particulars of dishonesty particulars of each individual whom it is alleged made the representations, knew they were untrue and intended that the Claimants would rely upon them and in relation to each individual, the factual basis for each such matter; LIBOR claims particulars of breach of implied term particulars as to the date or dates upon which it is alleged that LIBOR was affected by manipulation, the direction and effect of the manipulation and the monetary effect upon the Claimants.
- More generally, Mr Hapgood submitted that the proposed amendments render the pleading prolix, unclear and lacking in particularity. It is said that in particular, the alleged breach of the implied term of good faith, the new conspiracy claim and the further particulars of alleged falsity of the LIBOR Representations make unacceptably vague and un-particularised allegations of bad faith/dishonesty/fraud. Mr Hapgood referred in this regard to a passage from the judgment of Lord Millett in Three Rivers DC v Bank of England (No 3) at   at which he repeated that allegations of fraud and dishonesty must be distinctly alleged and distinctly proved and that in the light of the fact that dishonesty is usually a matter of inference, this includes the primary facts which will be relied upon to justify the inference.
- Mr Hapgood also referred me to Tchenguiz & Ors v Grant Thornton LLP & Ors  1 All ER 961 (Comm) in which Leggatt J held at  that statements of case must be concise and should contain only material facts necessary for the purposes of formulating a cause of action and not background facts or evidence and certainly not argument reasons or rhetoric. Mr Hapgood submitted that if one looks at the pleading in the round, it is clear that the Claimants should go away and seek to draft a clearer, shorter and more particular set of Particulars of Claim which comply with the guidance as to length found in the Commercial Court Guide and unnecessary prolixity. Before turning to his other submissions I should add at this stage, that in this regard, Mr Reade says that it is ironic that in one breath the Bank seeks more particulars of the proposed pleading and in the other seeks a much shortened document. He also a points out that the Bank's Defence stretches to more than 80 pages.
- In relation to the Bank's concerns under the first head, as I have already mentioned, it was confirmed by Mr Reade during the hearing that the claim for breach of the good faith term was limited to the alleged discretion in clause 16.2 of the 2008 Facility Agreement. Nevertheless, the Bank continues to question the purpose of the remaining sub-paragraphs of paragraph 16.2.10 of the draft Amended Particulars of Claim which are lettered (a) (e). They contain allegations: as to a failure by the Bank to engage substantially with negotiations for a consensual restructuring; reliance upon the DTZ valuation alleged to have been flawed; rejection of offers made by LWE; refusal to consider restructuring which did not take into account the liability under the Swap; and stating that the absolute minimum acceptable offer was £57m. Sub-paragraph (f) contains allegations in relation to the exercise of clause 16.2 of the 2008 Facility. Mr Reade says that the preceding sub-paragraphs particularise the amendment at (f) which is not now opposed. I have to say that in my judgment, the preceding sub-paragraphs (a) (e) are part of an chronological sequence of events which appear to culminate in (f) and as a result I can see no reason why permission should not be given in relation to paragraph 16.2.10 and all of its sub-paragraphs.
- Further, in relation to the second head of unlawful means conspiracy, during the hearing Mr Reade agreed to limit the allegations to the individuals who are already named and to abandon the claims as pleaded in the draft in relation to other unnamed employees. The issue in relation to particularity in relation the conduct of each individual and his or her state of knowledge remains. For example, Mr Hapgood submits that at paragraphs 16.1Q, U and R allegations as to the knowledge of a Mr Scott and a Mr Davies are made which are inadequate and un-particularised. Specifically, he says that an allegation of fraud is unsupported by an allegation of a representation made which the individual knew or ought to have known to be untrue. In this regard he referred me to a passage in the judgment of May LJ in Lipkin Gorman v Karpnale Ltd  1 WLR 1340 at 1351H 1352A in which it was stated that in such circumstances a "rolled up" plea is insufficient and that where an element in the fraud of dishonesty relied on is the other party's knowledge of given facts or a state of affairs, it must be pleaded explicitly. He goes on to submit that the necessary assertion in a conspiracy pleading that the conduct was undertaken by each alleged conspirator in order to implement or assist to carry out the understanding reached between them is also missing. Lastly, in this regard, he says that the new draft paragraph in relation to loss at paragraph 18.1-18.4 makes no sense. He asked how a conspiracy can result in loss in respect of payments made under the Swap?
- It seems to me that there is sufficient material upon which the pleas can properly be based and in fact, it is not argued by the Bank that the position is to the contrary. However, I agree that it is necessary to refine the proposed amended pleading in order to refer solely to the named individuals all of whom were employed by the Bank at the time of the conspiracy claim, for whom it was vicariously liable. In this regard, therefore, it will be necessary for a further draft Amended Particulars of Claim to be produced before the question of permission can finally be resolved. No doubt, the new draft will address the issue of the knowledge of the Bank and as a result, its employees. I am happy that the matter should be dealt with in the way in which the parties consider to be most convenient and if necessary will seek further submissions on the point.
- In relation to the third head, the LIBOR claims, the proposed amendments run from paragraph 14.4.2 to 14.4.11 of the draft Amended Particulars of Claim and the consequent relief is set out at paragraph 14A1. Mr Reade says that the matters are all properly pleaded and referred me to Graiseley Properties Ltd & Ors v Barclays Bank plc  EWHC 3093 (Comm) per Flaux J which was concerned with an application for permission to amend Particulars of Claim to plead implied representations or alternatively implied terms. The implied representations were alleged to have induced the claimants to enter into a series of loan agreements and related hedging transactions. At  Flaux J pointed out that it was important to have in mind that all the court was concerned with was whether the proposed amendments were sufficiently arguable to go forward to trial in the sense that they had a real prospect of success: CPR para 17.3.6. He determined that there was no doubt as to that and that the points raised were clearly and properly arguable. The pleadings had set out the respects in which the representations were said to be false in large measure by reference to the detailed findings of the regulatory authorities. It was also alleged that they were fraudulent. Prior to disclosure the best particulars of the knowledge of the individuals tracked the regulatory authorities' findings in relation to derivative traders, submitters and to senior management of the bank in question.
- Mr Reade says that the position is similar here and in fact, the Bank's objection is that it wants more detail and it should make a request for further information. He says that the matters are fully pleaded out and that the Graiseley case is authority for the proposition that further particulars in relation to dishonesty are not necessary. I note that Flaux J's judgment was upheld on appeal which was dealt with by the Court of Appeal in a judgment the neutral citation of which is  EWCA Civ 1372. The Court held that misrepresentation allegations in relation to LIBOR supported prior to disclosure by inferences drawn from the conclusions of regulatory authorities were arguable and should go to trial: Longmore LJ at  .
- Whilst this case can be distinguished from the position in Graiseley because disclosure has taken place, it seems to me that the way in which this matter is pleaded by reference to the knowledge of senior executives and traders and the systems in place, which are set out for example, at paragraph 14.4.2(1), (2) and (3) of the draft Amended Particulars of Claim, the list of named senior executives and the further detailed matters pleaded under what has been referred to as LIBORPA1, 2, 3 and 4 at paragraphs 14.4.4 to 14.4.10 falls within the same category as the kind of pleading considered by Longmore LJ. Accordingly for the purposes of the Amendment Application, I consider it to be arguable. The fact that further information may be requested does not lead to the conclusion that permission should be refused and I allow it.
- Further, in relation to the LIBOR Claims particulars of breach of the implied terms, Mr Reade submits that although the matters referred to together as "LIBORPA3" are not relied upon to prove the falsity of the Libor Representations as pleaded at paragraph 14.4.10 in the proposed draft, those matters are part of the sequence of events and are relevant and necessary. LIBORPA3 contains details of the FSA Final Notice and is pleaded at paragraph 14.4.8 to describe the culture and control of the Bank's interest rates derivative business as a whole. It seems to me that in fact, this may be relevant evidence but it is not a relevant part of the pleading at present. Accordingly, it seems to me that it is not appropriate to grant permission in this regard at present but that the matter may well be re-cast in a further draft.
- However, in relation to the Bank's submission that particulars as to the date or dates upon which it is alleged that LIBOR was affected by manipulation, the direction and effect of the manipulation and the monetary effect upon the Claimants should be provided, I agree with Mr Reade that this will be the subject detailed expert evidence and may be the subject of a request for further information. There is sufficient detail for the Bank to know the case against them. It does not however, affect the question of whether permission to amend should be granted. Further, and in any event, there is no proposed amendment which goes directly to that matter.
- I should also add that I do not consider that this is a case in which the principles enunciated by Leggatt J in the Tchenguiz case are relevant. The matters which it is relevant to plead are necessarily lengthy and detailed which is also reflected in the length of the Defence. There is no question here of the pleading containing rhetoric or other irrelevant and unhelpful material.
- The Amendment Application is allowed therefore, in part only.
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