Commercial Court strikes out £58 million conspiracy claim

An unlawful means conspiracy claim was struck out and described as “structurally fatally flawed, abusive and lacking in pleadable substance.” The court confirmed that where a defendant makes a strike out or summary judgment application, there is no requirement to file a defence under CPR 15.

Facts

The claim in King v Stiefel [2021] EWHC 1045 (Comm) followed the discontinuance of a previous action for fraudulent misrepresentation mid-trial in 2017. The claimants had been ordered to pay the costs of the aborted proceedings on an indemnity basis. The claimants in the present action alleged among other things, that, but for an alleged conspiracy, they would have won their earlier misrepresentation claim. The defendants applied for summary judgment and/or strike before serving any defence.

Judgment

After a six-day hearing, Mrs Justice Cockerill struck out the entire claim and granted reverse summary judgment remarking that she was not “stifling a claim which should be heard”. The judgment covered a number of legal and procedural issues including the following:

1. Approach to summary judgment and strike out in fraud claims

The case is a rare example of a court striking out and giving reverse summary judgment in a fraud claim. This decision provides helpful guidance regarding the approach to be taken by the court:

“i)  The Court should bear in mind that cogent evidence is required to justify a finding of fraud or other discreditable conduct, reflecting the court's conventional perception that it is generally not likely that people will engage in such conduct.

ii)  Pleadings of fraud should be subjected to close scrutiny and it is not possible to infer dishonesty from facts that are equally consistent with honesty.

iii)  However, in view of the common feature of fraud claims that the Defendant will, if the underlying allegation is true, have tried to shroud his conduct in secrecy, the Court should adopt a "generous" approach to pleadings.”

For evidential purposes, the court drew a distinction drawn between summary judgment applications (where evidence was admissible to show that the pleaded allegations were fanciful) and strike-out applications (where the pleaded facts had to be assumed to be true and evidence was inadmissible).

2. Absence of a defence where a defendant has applied for strike out / summary judgment

A recurring theme advanced by the claimants was that the defendants had not served defences; accordingly the applications should not have been allowed. Mrs Justice Cockerill concluded that the defendants were not in breach of the CPR for not filing a defence commenting that “it would be both illogical and contrary to the overriding objective to require a Defendant to file a defence condescending to particulars where if he is right on the law, those facts are completely irrelevant”.

3. Pleading fraud

Attention was drawn to the three purposes of a pleading. First, it enables the other side to know the case it has to meet. Second, it ensures that parties can properly prepare for trial – and that unnecessary costs are not expended and court time is not wasted chasing points which are not in issue or which lead nowhere. Third, the pleading operates as a critical audit for the claimant and its legal team that it has a complete cause of action or defence. In relation to the claimant’s particulars in the case before her, Mrs Justice Cockerill noted that “[t]hose elements were not readily discernible”.

Having considered the conspiracy allegations and case law, Mrs Justice Cockerill also noted “[w]hat the cases do not say is that one can jumble together a vast array of different, apparently trivial or marginally suspicious facts relating to different matters and turn them into a valid pleading of fraud… the desire to allege fraud/dishonesty/conspiracy becomes a kind of philosopher’s stone which transforms innocent errors into dishonest conspiracies - from which in turn the main conspiracy can itself be inferred.”

The author would like to thank Jamie Brazier for his assistance in preparing this post.