Practice and Procedure


PUBLISHED November 20, 2003

The substantial and late amendments sought by the claimant would be allowed as it would be a denial of justice if the legal consequences of the agreement being void for uncertainty or for non-compliance with Law of Property (Miscellaneous Provisions) Act 1989 could not be worked through as the allegations made were seriously arguable.Application by the claimant ('S'), on 9 October 2003, for leave to amend particulars of claim in an action commenced in early 2001 for which trial was fixed to start on 20 October 2003. S occupied a property in central London as its High Commission. The property fell into disrepair and required considerable expenditure to repair and refurbish. To this end S entered into an agreement with the second defendant company ('C') in April 1999, by which C was assigned the leasehold interest in the property for ?50,000 with a buy back option. C was wholly owned and controlled by the first defendant ('D'). C agreed, inter alia, to refurbish parts of the property and to grant an underlease of those refurbished parts back to S. In 2001 S commenced an action against D, C and others claiming inter alia that: (i) S had been fraudulently induced to dispose of the leasehold interest at a gross undervalue on the basis that the true value of the building was at least £5m; (ii) D and/or C were in breach of the terms of the refurbishment agreement entitling S to damages for breach of contract; and (iii) C acted as an agent or nominee for D in entering into the agreement, or could be treated as a facade for D. Before service of the proceedings, S was granted a freezing order against D protecting the value of S's claim. In August 2003, S's experts inspected the property and reported that the property had in fact a negative value. This evidence destroyed S's case that the assignment to C had been at a gross undervalue and that the true market value in April 1999 was £5m. Therefore, at a very late stage of the proceedings, S sought to delete the primary case of fraud and to introduce a new case that the agreement was void for uncertainty, or was void or unenforceable for failure to incorporate all the express terms in the document as required by s.2 Law of Property (Miscellaneous Provisions) Act 1989 giving rise, in either case, to restitutionary remedies. S also sought to expand the claim for breach of contract and an injunction to restrain C from disposing of its interest in the property to protect its restitutionary claim and prevent frustration of any judgment.HELD: (1) There was a heavy burden on S to justify so radical a re-casting of a serious fraud allegation at so late a stage in the proceedings. (2) D and C had not shown any prejudice which would flow from the proposed amendments and for which they could not be compensated, other than the general prejudice from further uncertainty in a case which, up till now, had proceeded on a false basis of fraud. (3) Although the amendments to the breach of contact claim were late they were to be allowed because they represented an expansion of the existing pleading. (4) The breach of contract claims were linked to those parts of the agreement which were said to be so uncertain as to render it void. (5) It would be a denial of justice if the legal consequences of the agreement, being void for uncertainty or for non-compliance with the 1989 Act, could not be worked through as the allegations made were seriously arguable. (6) Overall the circumstances of the case made it appropriate to allow S permission to amend the particulars. (7) There was sufficient material from which a court at trial could infer the existence of a nominee relationship between C and D. It was not necessary to consider further the alternative claim that C was a facade for D. (8) The freezing order against D would be discharged and the injunction sought against C would be granted.Application allowed.