England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/11/2015

Mr Justice Andrew Smith:

The Applications

1. There are before me applications in seven consolidated actions.

i) By an application notice dated 24 October 2014 the claimants in five of the actions seek permission to amend the claim forms;

ii) By an application notice dated 31 March 2015 the claimants in the same five actions seek permission to amend their particulars of claim; and

iii) By an application notice dated 17 July 2015 the second defendants in all seven actions seek to have the claim forms and the particulars of claim struck out, or to have summary judgment entered in their favour.

The Background

2. The proceedings concern a property at 5 Canada Square, Canary Wharf, London E14 (the "Property"). On 23 July 2007 a wholly owned subsidiary of 5 Canada Square Holdings Limited (the "Company"), which is incorporated in Jersey, acquired the shares in Rhodium Investments 2 Limited ("Rhodium 2"), who owned the freehold, and Drummond Investments Limited ("Drummond"), who had a leasehold interest, and so acquired indirect ownership of the Property. (Rhodium 2 and Drummond were referred to in some of the documentation as the "Targets" and I shall adopt this expression.) According to the claimants, it was acquired from the Royal Bank of Scotland ("RBS") for some £453 million, using (i) debt finance provided by the Bank of Scotland, by way of facilities of £348,350,000 and bridging finance of about £63,350,000, and (ii) an initial equity investment of £40 million.
3. The Property had apparently been valued on 19 July 2007 at £466.5 million. Thus, the loan to value ratio ("LTV") was just under 75%. By 23 July 2008 it was valued at only £410,850,000. In July 2009 the first defendant, Ulster Bank Ireland Limited (the "Bank") referred in a letter to investors to an investment value of £322 million, observing that the value had "substantially reduced from its peak".
4. The second defendants, Evans Randall Investment Management Limited ("ER"), are a company in an investment banking group that specialises in real estate investments. They acted as advisers to the Company. They prepared and approved an Investment Memorandum dated 5 September 2007 (the "IM") that invited offers for shares in the Company (and also for units in a trust, the "Exempt Trust", that was to invest in shares in the Company, but the Exempt Trust is not important for present purposes). The claimants contend that, while ER present themselves as no more than advisers to the Company, in reality the scheme was "entirely arranged, orchestrated, managed and dictated by ER and its personnel".
5. The IM stated that in relation to offers ER were not "responsible for providing potential investors with the protections which it gives to its clients for advising them in relation to the investment and it owes no duties under the [Financial Services and Markets Act, 2000 ("FSMA")] regulatory regime to any person other than to the Company and the Exempt Trust". It was recommended that prospective investors "seek advice as to whether this is a suitable investment for them from an appropriately authorised and qualified independent financial adviser". Various risks of investing were specifically identified.
6. The IM contemplated that generally investors should subscribe directly for shares in the Company. However, because of the tax regime there, it contemplated that investors domiciled in the Republic of Ireland should not become direct shareholders in the Company, but should invest by subscribing for shares in a Maltese company called Canada Square (Malta) Plc, which in turn owned another Jersey company, Canada Square (Jersey) Limited (the "Jersey company"), which in turn subscribed for shares in the Company.
7. The IM included an "Application Form for Irish Investors", which was addressed to the Maltese Company and which the applicants were to sign. It stipulated a minimum investment of £200,000, but this was subject to the ER's discretion to accept smaller amounts of not less that the equivalent of €50,000 (a power that, of course, might have been used in particular if the investment had been oversubscribed). The application was to be accompanied by a draft for the investment payable to "Ulster Bank Wealth", which is a division of the Bank. The application form also provided for the applicant to give various covenants, including these:

i) "The Applicant irrevocably offers to invest the sum specified … and to become an investor in the [Maltese] Company".

ii) "The Applicant undertakes to the [Maltese] Company that the [Maltese] Company may rely on the offer made by the Applicant to subscribe for Investments in the [Maltese] Company pursuant to the Memorandum and accordingly this offer may not be cancelled, rescinded or otherwise revoked after the date [of the application]. The Applicant agrees to accept the Investments allocated to him whether the number applied for or a lower number".

iii) The Applicant gave a warranty to the [Maltese] Company and [ER] that he "is making an investment based solely on the information contained in [the IM] and not on any other oral or written statement by the [Maltese] Company, [ER], any placing agent or any partner, officer, director, employee, shareholder or affiliate of any of them".

8. The IM contemplated that investors should give powers of attorney to act on their behalf in connection with their investments to two named persons, said by the claimants to be directors of the Maltese company and described in the IM as being "of ER", and to any director of the Maltese Company.
9. The claimants in the seven actions are mostly residents of the Republic of Ireland, one of them, Calry Properties Limited, being a company resident in Northern Ireland. They claim in respect of investments made in the Company between September 2007 and April 2008 through shares and loan notes of the Maltese company. There were 80 claimants in the five actions, if joint investors, such as man and wife, are counted together. Apparently some 18 of the claimants had not in fact invested. However, those claimants and some others, a total of 26, have served notices of discontinuance. It might be that the notices are not effective: CPR 38.2(2)(c) provides that "where there is more than one claimant, a claimant may not discontinue unless – (i) every other claimant consents in writing; or (ii) the court gives permission", I was not told whether other claimants had so consented and the court's permission for discontinuance has not been sought. However that may be, it seems that about 54 claimants wish to pursue claims.
10. The Bank distributed the opportunity to invest in the Company in Ireland, and all of the claimants but one, a Dr Maccon Keane, were introduced to the investment by the Bank. Dr Keane makes no claim against the Bank: he has served his own separate particulars of claim seeking relief against only ER. (The CPR contemplate that all claimants will serve a single pleading, but no complaint was made about that at the hearing before me.) The claimants say that in some cases, but not all, the Bank provided them with the IM, and in some other cases the Bank is said to have used a four page "summary" to introduce the investment. There is an issue, to which I shall return, about whether the Bank was acting as agent for ER.
11. The claimants delivered their signed application forms to the Bank between September 2007 and May 2008. The Bank transferred investment funds to the Maltese company to a total of £13,130,000 between about 11 January and 24 February 2008. The Maltese company used the money to subscribe for shares in the Jersey company, which in turn used it to subscribe for shares in the Company. By the end of May 2008, according to the evidence of Mr Adam Brown, a partner in Jones Day, ER's solicitors, the investments of all but six of those claimants who actually did invest had been transferred to the Maltese company, or, in the case of Calry Property Limited, the Company. Share certificates and loan notes were issued to most of the claimants between 22 February 2008 and 5 November 2008, but three claimants were issued with share certificates and loan notes only on 16 October 2009. The scheme closed in October 2008: in a letter to investors dated 9 July 2009 the Bank explained that, in order to close the scheme, (i) preferential equity investment of £25 million paying an accrued 12% annual return for the term of the investment had been accepted from a Luxembourg based fund, which was advised by ER; and (ii) in order to repay the bridging loan the Bank of Scotland had increased its facilities by £4 million. The claimants contend that, by the time that the bridging loan was renewed in August 2008, ER knew that the Property had been given a reduced valuation of £410 million in July 2008, they must have known that there was virtually no prospect of raising subscribed investment of £90 million, and they knew that the LTV covenant in the facilities had been substantially breached.
12. In the letter of 9 July 2009, the Bank also wrote that, although the investment value of the Property had fallen to £322 million, ER "retains a positive outlook for this property for the longer term …". However, the scheme was unsuccessful: according to the evidence of Mr David Craig, a partner in their solicitors, Johnsons, in May 2010 the claimants were told by the Bank and ER that they had lost all their investments, and this was confirmed by the Bank on 7 July 2010 at an Investors Briefing.

The Proceedings

13. Five of the actions were issued in the Queen's Bench Division on 23 October 2013, 29 October 2013, 4 November 2013, 23 December 2013 and 25 February 2014. No letters before action were sent. Particulars of Claim in the first action were served on 18 February 2014, and particulars in similar terms were served in the other four actions. These five actions had all been served by 9 July 2014. The Bank and ER served defences dated 31 July 2014.
14. The defendants criticised the claimants' pleading, and in August 2014 Johnsons wrote that they intended to amend it. They also wrote that they intended to incorporate schedules relating to each individual claimant, estimating that it would take them some 8 to 10 weeks to prepare them. They asked the Bank for early disclosure, but the Bank considered the request unfocused and refused it, observing that, assuming the complaint was about how the Bank presented the investment to the claimants and led them to invest, the important facts were within the claimants' knowledge and they had many of the documents of the categories sought. The claimants did not make an application to the Court to pursue their request.
15. On 19 December 2014 Flaux J ordered (in face of the claimants' opposition) that the five actions be transferred to the Commercial Court, and he consolidated them. The claimants had not served a proposed amendment, and he directed that, if they were going to seek permission to amend their particulars of claim, they serve a draft of the proposed amended pleading by 4.00pm on 30 January 2015. He also gave the claimants liberty to serve "further voluntary particulars of any existing allegations in respect of the claims of individual Claimants" without prejudice to the defendants' right to challenge them on the basis that permission to amend was required and without prejudice to "any accrued limitation defence". He made directions with a view to having a case management conference on the first available date after 28 April 2015. In the event, however, this was the first substantial procedural hearing since Flaux J's order.
16. Although this was not known to the defendants and was not mentioned to Flaux J, in October 2014 Johnsons had issued two other claim forms against the defendants in the ordinary Queen's Bench list for other investors. They were served on 16 February 2015. On 30 January 2015, the claimants in the five actions had served draft amended particulars of claim (the "January draft"), and on 23 February 2015 the claimants in the two new actions served particulars of claim that are materially in the terms of the January draft. On 18 March 2015 Eder J made an order by consent that the two actions be transferred to the Commercial Court, consolidated them with the five actions and stayed them pending the case management conference in the five actions or further order of the court.
17. With regard to the so-called "voluntary particulars of claim" referred to in Flaux J's order, Mr Craig stated in a witness statement of 7 August 2015 that "the process of finalising each claimant's voluntary particulars is almost complete" and that "all efforts" were being made to provide them by 15 September 2015. (Although they are referred to as "voluntary", Mr Craig described them as being "required", rightly recognising, I think, that without them the claimants' pleading is inadequate.) In the event, particulars have been served in respect of 42 investors: those which are signed (for some are not) are dated 22, 23 or 24 September 2015. Therefore, leaving aside those who have served notices of discontinuance, twelve claimants have not served particulars of the allegations about their investments.
18. A good number of the voluntary particulars that have been served do not refer to the IM at all or state that the claimant does not recall seeing it. Other claimants refer to it but say that they did not rely on it: for example, a Mr Joseph Drury said that he did not "read it in any detail and did not understand the little he read"; a Mr William and Mrs Ann Kelleher said that Mr Kelleher "does not recall the [IM] being explained in any great detail" and Mrs Kelleher was "completely side-lined from any discussions"; a Mr Trevor Hunter said that he only "glanced" at the IM and "did not study it"; a Mr Stephen Daly said that the IM was emailed to him but he did not understand it; a Mr Frank Hemeryck "attempted to read the [IM] but he did not understand it"; and a Mr Eric Poole said that he "looked at the IM briefly but did not understand it and did not read it". I have seen nothing in any of the particulars that indicates that any claimant who had dealings with the Bank or was provided with the IM by the Bank relied on it, still less does any identify a specific representation in it on which (s)he relied.
19. Dr Maccon Keane, the investor who was not introduced to the investment by the Bank, has served voluntary particulars in which he states that he read the IM and what he understood from it. He does not state that he relied on it when deciding to invest. I accept that in his particulars of claim, which were modelled on the January draft, he stated that "He entered into the Offer to invest in reliance upon the aforesaid representations", but it is unclear quite what representations are there referred to, or what standing the pleading is now intended to have, now that (as I shall explain) the other claimants do not seek to adopt the January draft.

The Unamended Particulars of Claim

20. I should say something about the claimants' present pleading, the original particulars of claim, in the five actions. After introducing the parties and describing the Property, explaining the structure of the investment scheme and setting out extracts from the IM on which reliance is placed, it is alleged that the Bank and ER each owed the claimants a duty of care to disclose "all material facts pertinent to an informed decision" whether to invest; "between issuing the IM and the asset purchase" to disclose anything that made any representation in the IM inaccurate or misleading; and to "avoid foreseeable loss to the Claimants": the expression "asset purchase" is not defined. It is also pleaded that ER and the Bank were "fiduciaries to each Claimant". And it is alleged that representations about the completeness, truth and accuracy of the content of the IM were "continuing representations" intended to stand until ER and the Company determined or withdrew the offer.
21. I come to two sections headed "Application Form for Irish Investors" and "Implied Terms". The pleading goes on to allege that in and about October 2007 the Bank invited the claimants to make an application to invest, and they did so and gave powers of attorney to two directors of the Maltese company who were "of ER". It is then pleaded that the attorneys were not required to complete the transaction because the claimants' applications were obtained "by the misrepresentations and/or breach of contract and/or breach of statutory duty and/or breach of fiduciary duty and/or negligence referred to below", and their conduct was "not lawful in completing and closing the transaction when they knew that the claimants would suffer loss". It is also alleged that the claimants' consent should have been obtained by ER, the attorneys and/or the directors of the Company before closing the offer because of changes in the "structure" from that described in the IM in that the preferential equity had been created. It pleads various implied terms of the "Application Offers" made by the claimants and the powers of attorney in them to the effect that the claimants' "right to participate in the investment" should be revoked or withdrawn in various adverse circumstances, and it is alleged that the attorneys, "as agents for" ER and the Bank, were in breach of them in not withdrawing the offers to invest.
22. There are then two sections of the pleading headed "Conflicts of Interest between the Ulster Bank and Evans Randall" and "Undisclosed Conflict of Interest". They refer to ER acquiring the Property from RBS, and plead that it was a "very significant omission from the IM by [ER] and [the Bank]" that the Property was bought from RBS for £452,000,000, a price lower than the valuation of £466,500,000, that ER knew that by October 2007 the Property has reduced in value, and that it was being sold by ER. It is not alleged that these matters were known to the Bank, but it is pleaded that the Bank is put to proof "as to what steps it took to ensure that those in the RBS Group who were concerned with the solvency of the banks in the RBS Group did not influence [the Bank's] promotion of this investment to the Claimants for its own financial/commercial advantage".
23. I come to a section headed "Misrepresentations". It is pleaded that representations made by ER on its own behalf and for the Bank were untrue in various respects; that they were intended to be relied on and were relied on by the claimants, who were induced both to invest their own money in the scheme and to borrow from the Bank in order to invest; and that they were made negligently, in breach of the duties of care owed by ER and the Bank, in breach of their statutory duties and in breach of their fiduciary duties. There is then a paragraph in which it is alleged that a Mr Barry Goodman of the Bank said to Mr Brendan McEneaney, one of the claimants, "and others" that the Property would be "a great investment because of its location" and would provide a return of "at least 20% plus interest annually and more". The representations were said to have been false, essentially (i) in that ER represented that the Targets owned the Property without disclosing that it had acquired it, (ii) as to the value of the property, (iii) in that ER represented that the property was an excellent investment and (iv) in that the LTV was said to be "approximately 75%" after bridging facilities were repaid, whereas ER knew various matters that made that improbable: it is said that "the Company was in breach of the loan to value covenants with the Bank throughout the period of the offer and at the date of closing".
24. A section headed "Breach of Statutory/Regulatory Duty" relies on various provisions of the Conduct of Business Sourcebook ("COBS"). The claimants claim that they are entitled to damages from the Bank and ER under the FSMA for breach of COBS.
25. There is then an important paragraph, which pleads that "The loss and damage which the claimants have suffered has been caused or contributed to by the breach of the implied terms and/or duty and/or negligence of [ER] and [the Bank] their servants or agents". Particulars of the allegation are given in nine sub-paragraphs. They do not distinguish between allegations against the Bank and allegations against ER. Nor do they distinguish between allegations of breach of implied terms (of the applications, presumably), allegations of breach of statutory or regulatory duty and allegations of negligence. I do not set out all the particulars, but they include these:

i) "Failed adequately to investigate and/or report on the decline in the value of the Property between the IM and completion/closing".

ii) "Failed to inform the Claimants that the loan to value ratio had been breached prior to making the Offer in October 2007 and that it was unlikely that the ratio would be met without (a) additional capital investment, (b) an increase in the ratio, (c) both additional capital and an increase in the ratio or (d) elimination of the ratio".

iii) "Failed to abandon the Offer once it appeared that the Offer would be an unmitigated disaster and that the Claimants would lose all their investment".

iv) "Caused or permitted to close [the] Offer while undercapitalised".

26. Finally, the Claimants anticipate defences that they thought the defendants might raise in a section headed "Ineffective Exclusion of Liability".
27. There is then a prayer for this relief against both the Bank and ER:

i) Damages.

ii) "Repayment of the money advanced by the Claimants under the Application Offers".

iii) "Cancellation of all loans the proceeds of which were used to fund the Application Offers".

iv) "A declaration that the Defendants are not entitled to an indemnity under the Power of Attorney or at all".

v) Statutory interest.

28. I do not find the pleading easy to follow, or to identify what causes of action it is intended to advance. It includes allegations, for example about conflicts of interest, that seem to lead nowhere, it does not state the basis on which the attorneys are said to be agents of the Bank and ER or on which the defendants are liable for what they did (or did not do), it is obscure as to how the defendants are said to have breached the provisions of COBS that are pleaded, and I do not understand the basis of the claims for relief other than damages and interest thereon.
29. That said, I make these observations about the original particulars of claim:

i) They are, to adopt the expression of Ms Patricia Robertson QC, who represented the Bank, largely a generic pleading: apart from the paragraph about what Mr Goodman is alleged to have said to Mr McEneaney "and others", it pleads nothing of any exchanges between the Bank and individual claimants or about the circumstances of individual claimants and how they came to invest.

ii) They do not allege deceit or any other kind of fraudulent or dishonest conduct.

iii) The claim for breach of statutory duty is pleaded by reference to COBS and the English regulatory regime. It was not disputed before me that, as Ms Robertson submitted, the Irish regime would govern dealings between the Bank and the claimants (apart, I would suppose, from Calry Properties Ltd).

iv) It is pleaded that ER made representations in the IM on behalf of the Bank, as well as themselves, but it is not pleaded that the Bank acted as agent for ER.

v) It sets out that the claimants' applications to invest were stated to be irrevocable, and it does not plead that the claimants had the right to withdraw them or that they would have withdrawn them had they been able to do so.

I must return later in this judgment (at paragraphs 76ff below, where I consider the so-called "back end" claims) to Ms Robertson's submission that the particulars of claim do not plead a case that the Bank was in breach of duties to the claimants after they had made their investments by transferring funds to Ulster Bank Wealth, or at least that it was in breach of duties to advise them or provide information after they had invested.

The January Draft

30. By the January draft the claimants sought to replace the original pleading with an entirely new pleading. In it the claimants seek relief against the Bank by way of:

i) A declaration that the claimants who borrowed money are not indebted on any loan the proceeds of which were used to fund an application to invest.

ii) "Cancellation of all loans the proceeds of which were used to fund an Application".

iii) A declaration that the Claimants are entitled to an indemnity in respect of all loans.

They also seek against both defendants:

iv) Damages.

v) The repayment of money advanced by the claimants on applying to invest.

vi) "Repayment of money had and received".

vii) "A declaration that the Defendants are not entitled to an indemnity under the Power of Attorney or at all".

viii) Statutory interest.

31. The January pleading runs to 59 pages and 166 paragraphs (even though it does not set out the old pleading and show it as deleted). Despite its length, the claimants had not sought permission to serve such a long pleading either when they appeared before Flaux J or at any time: see Admiralty and Commercial Courts Guide (9^th Ed.) para C1.1(2).
32. Nor did the claimants initially serve a summary of their pleading: see CPR16PD para 1.4. They did so only when ER pointed out in a letter dated 20 February 2015 that a summary should set out "by reference to the paragraphs of the [January draft], (1) the exact causes of action advanced against Evans Randall; (2) the relief claimed in respect of each cause of action; and (3) the allegations relied on in respect of each cause of action". However, ER justifiably complain that what the claimants served as a summary does not achieve this purpose, and, perhaps more importantly, it impermissibly introduces allegations (apparently allegations of impropriety) that are not in the January draft: for example, an allegation that a requirement of the application forms that they should be executed as deeds was "part of a strategy employed by [ER] … so that it could claim such offers notwithstanding the very substantially changed commercial property market".
33. Among the complaints made by the defendants of the January draft were that it was prolix, unclear and lacking in particularity. I agree with those criticisms: the proposed pleading did not serve its purpose of defining the issues. The requirements of a proper pleading were explained by Leggatt J in Tchenguiz v Grant Thornton UK LLP, [2015] EWHC 405 (Comm), and I need not repeat what he said or seek to put it in my own words. The defendants also said that the January draft sought to introduce new claims for which the applicable limitation period has expired.
34. The Bank complained that the claimants sought in the January draft to introduce new complaints against it, which it grouped under five heads:

i) A case in fraud.

ii) A claim for breach of section 85 of the FSMA.

iii) An allegation that the Bank was the agent of the Company or the Maltese company.

iv) A challenge to the validity of the applications to invest made by the claimants, apparently on the basis that they purported to grant powers of attorney but they were not properly attested at the time of signing, an allegation that, I think, was intended to support a claim in restitution.

v) What were labelled "back end" claims: that is to say, claims that the Bank was in breach of duties that continued after the claimants decided to invest and made their investments, including a duty to monitor the investments on a continuing basis and to advise the claimants to withdraw from their investments.

35. The Bank resisted the application for permission to amend so as to introduce these allegations. Ms Robertson made it clear, however, that the Bank did not resist amendments to the claimants' pleading to set out a case of mis-selling and misrepresentation "at the point of sale", because she accepted that the original of particulars of claim indicated, albeit imperfectly and inadequately, an intention to make such allegations. Nor did the Bank object to the claimants presenting their case by reference to Irish law and the Irish regulatory regime and with allegations of breach of it made in the January draft in so far as they corresponded to allegations in the original particulars of claim of breach of the English regime.
36. ER identified in the January draft claims that it grouped under five heads:

i) Claims in fraudulent misrepresentation.

ii) Claims under section 85 of FSMA.

iii) The claim in restitution for money had and received, and concerning the powers of attorney.

iv) Claims of breach of statutory duty and COBS.

v) Claims of negligence, including a claim under section 2(1) of the Misrepresentation Act, 1967.

Like the Bank, ER resisted the new allegations.

The Revised Draft

37. Mr Geraint Jones QC, who represented the claimants, submitted that some of these concerns resulted from a mis-reading of the January draft. However that may be, in face of these and other criticisms, at the end of his oral opening on the first day of the hearing he asked that the hearing be adjourned to allow him to produce a revised draft of the proposed pleading. To save time, I continued the hearing that day, allowing Mr McQuater to complete his submissions about the January draft, but I agreed to sit at 2.00pm on the second day to give Mr Jones time to consider the position.
38. On the second day of the hearing, the claimants served a revised draft pleading of their proposed amendments (the "revised draft") in place of the January draft, and pursued an application for permission so to amend their pleading. Like the January draft, the revised draft seeks to abandon the original pleading and to replace it. The revised draft is much shorter than the January draft (being 70 paragraphs over 23 pages), and, as I shall explain, it abandons a good deal of the January draft.
39. The revised draft does not include in its prayer a claim for repayment of money advanced or of money had and received. It omits the claim for a declaration that the defendants are not entitled to an indemnity under the powers of attorney. Further, as will appear from my summary below, the revised draft includes no reference to the powers of attorney, makes no claim under section 85 of the FSMA, and does not allege that the Bank was the agent of the Company or the Maltese company. Therefore, of the Bank's complaints about the January draft, I must still consider those about claims in fraud and in relation to the "back end" claims, and I must consider the claims against ER in fraud, in breach of statutory duty and the provisions of COBS, and in negligence.
40. It is convenient to mention here that the changes dispose of one point made by Mr McQuater about the claim forms: that they do not include a claim for any remedy in restitution and the claimants had not applied for permission to amend them to do so. A similar point is made about the claims in fraud, and that complaint can still properly be taken in relation to the revised draft. In his skeleton argument Mr Jones acknowledged this procedural deficiency, but nothing has been done to remedy it. This is unsatisfactory, but if it were the only objection to the amendments to introduce the fraud claims, I would not refuse them on this ground alone.
41. I must try to summarise the revised draft sufficiently to deal with the applications.

i) Using the initials UB to refer to the Bank, it pleads that "each claimant … is a person to whom the Investment Memorandum was directed and upon which reliance was placed [upon offering to invest, save in respect of those offerors who in their Voluntary Particulars disclose that the IM was not brought to his/her attention and/or relied upon UB's oral presentation/representation rather than read the IM] when deciding upon offering to invest". I find it impossible to understand this pleading (or what the parenthesis is intended to connote, which was not explained). As I have said, many of the 42 claimants who have served voluntary particulars indicate that they did not rely on the IM, either because they did not receive it or because they did not read it and understand it, and none of them pleads that (s)he did rely on it.

ii) It pleads that the Bank was "the agent of [ER] for the purpose of selling the investment and obtaining offers to subscribe in the investment …". (Elsewhere it pleads that the Bank acted as "a promoter, distributer, introducer and agent for [ER] and/or on its behalf".)

iii) It pleads that the Bank owed each Claimant a duty of care as his or her financial adviser.

iv) It pleads that ER were under a duty of care to "its clients, the Claimants", described as a "continuing" duty not to misrepresent any material matter and to inform each claimant of any material change.

v) Like the unamended pleading, the revised draft alleges that representations about the completeness, truth and accuracy of the content of the IM were "continuing representations" intended to stand until ER and the Company determined or withdrew the offer.

vi) It alleges that the Bank informed, or gave "the clear impression" to, each claimant about various matters, including that (s)he would acquire a "direct interest" in the Property and be "owners" of it and that the investment was very low risk. It is also alleges that warnings in the IM and elsewhere were "expressly and unequivocally contradicted and over-ridden" by what was said by representatives of the Bank who spoke with the claimants.

vii) It is pleaded that each claimant was introduced to the investment by a Wealth Manager of Ulster Bank Wealth, and that, as was intended, (s)he relied on oral representations by the Wealth Manager and was induced by the Wealth Manager to invest and to borrow money from the Bank to do so, which no claimant would have done but for misrepresentations and breaches of duty. It is also pleaded that the claimants could have withdrawn their investments at any time before the Offer was closed "in the event that the investment became different in any significant particular to that portrayed and 'sold' to the Claimants; incapable of and/or unlikely to achieve the projected performance" because of breach of the LTV covenants with the Bank of Scotland or some other such "supervening event".

viii) The Wealth Managers were negligent and in breach of duties of care and negligently made false representations. I shall set out some of the particulars of negligence when I consider the amendments about "back end" claims.

42. There is then a section of the revised draft headed "Reckless Fraud by [the Bank]", in which it is said that the Wealth Managers "knew their representations … were false and/or did not and could not reasonably have believed them to be true and/or were reckless as to whether they were true or not and/or made the same negligently" in various respects, some of which I set out below when I consider the application for permission to plead a claim in fraud.
43. Next, the claimants plead under the heading "Evans Randall" that ER had duties under the 1 November 2007 version of COBS or "its predecessor version" to act "honestly, fairly and professionally in accordance with the best interests of its clients (the Claimants)" and in other respects, and that ER were in breach of their statutory and regulatory duties and made negligent misrepresentations and/or acted negligently "as set out hereafter". However, Mr Jones accepted that in fact the pleading did not go on to particularise these allegations: it was intended to refer back to comparable allegations made against the Bank.
44. The claimants then plead aspects of problems in the British economy in 2007 and 2008 and what they label the "Radical Change to the Structure of the Investment described in the IM". It is said that the introduction of the preferential equity required the consent of each claimant, which had not been obtained, and the pleading continues "It is alleged that Evans Randall (by its in-house Attorneys) was fraudulent in keeping and/or using the Offerors' monies given the radical and undisclosed change to the structure of the offered product", and that the offers were thereby rendered revocable (even if they were not otherwise). However, in his oral submissions Mr Jones said that the parenthesis, "by its in-house Attorneys" should be omitted from the revised pleading. The revised draft also asserts that the claimants made their offers to invest "in reliance on the aforesaid representations", and that (s)he would not otherwise have done so and would not have proceeded with the investment "but for the fact that [the Bank] and [ER] failed in their duties and/or acted fraudulently and/or negligently" as had been pleaded.
45. This section does not include the allegation in the original pleading that the attorneys were the agents of the Bank and ER, which has apparently been abandoned.
46. The next section of the pleading is headed "Subsequent Fraud and Breach of Trust/Dishonest Assistance (the "back end" claims)". Here the claimants' allegation is that, when they paid to the Bank funds for investment, they were held subject to a trust "to pay the same to the order of [ER] to Malta and/or the UK Company upon the Claimants' respective offers to subscribe being accepted", and to repay them to the claimants if "no viable investment was available when the subscription offer period closed"; and that the Bank acted in breach of trust in paying the monies to the Maltese Company or the Company, at ER's request, before the investment offer was closed. This, it is alleged, constituted a fraudulent breach of trust, and it was dishonestly and knowingly assisted or procured by ER. Moreover, it is pleaded that the claimants learned of the transfer of funds that gives rise to the claim only in July 2015, when the payments were referred to in evidence on these applications given by Mr Kent Gardner, the Chief Executive of ER, in a witness statement dated 17 July 2015.
47. There is then a claim pleaded against the Bank under the Irish regulatory regime. This section does not include an allegation of breach of the regime.
48. Thus, the revised draft abandons some parts of the January draft to which the defendants objected, but it seeks to introduce claims of breach of trust and knowing assistance or procuring the breach, which were not included in the January draft. These claims are not covered by the claim forms, but no application has been made to amend the forms. In a witness statement dated 9 October 2015, less than two working days before the hearing was listed and after skeleton arguments had been prepared, Mr Craig stated that in light of Mr Gardner's witness statement it had become evident that the claimants should seek to make a further amendment in addition to those in the January draft so as to allege breach of trust against the Bank and dishonest assistance in the breach of trust against ER. He set out a proposed amendment, which is in rather different terms from those of the revised draft. In his skeleton argument Mr Jones said that it was "inevitable" that the claimants would seek permission to introduce the claim of breach of trust. However, in his oral submissions on the first day of the hearing he said that the claimants had yet to decide whether to plead breach of trust, and that they would do so "if necessary". The defendants resist the amendments.

Limitation

49. The defendants argue the proposed amendments (both in the January draft and in the revised draft) which would introduce new claims are prohibited by the Limitation Act, 1980. The claims against the Bank, and any limitation defences to them, are probably governed by Irish law but all the parties before me were content to proceed by reference to the English law of limitation and to assume that it is not materially different from Irish law. After all, until the revised draft was served during the hearing, the claimants pleaded their claims against the Bank (and against ER) on the basis of English law.
50. Section 35 of the 1980 Act provides that, "For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced — (a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and (b) in the case of any other new claim, on the same date as the original action". The expression "a new claim" includes any claim involving the addition or substitution of a new cause of action. The section goes on to provide that rules of court may allow a new claim to be introduced into an action in some circumstances, but otherwise (subject to irrelevant exceptions) the court shall not allow a new claim after the expiry of any Limitation Act time limit that "would affect a new action to enforce that claim". Accordingly the court may allow amendments introducing a new cause of action only if the conditions specified in CPR 17.4 are met.
51. In Mercer Ltd v Ballinger, [2014] EWCA Civ 996, Tomlinson LJ explained the court's approach where there is an issue as to whether a limitation period has expired:

"… provided the defendant can show a prima facie defence of limitation, the burden must be on the claimant to show that the defence is not in fact reasonably arguable. … If the availability of the defence of limitation depends on factual issues which are seriously in dispute, it cannot be determined summarily but must go to trial. Hence it can only be appropriate at the interlocutory stage to deprive a defendant of a prima facie defence of limitation if the claimant can demonstrate that the defence is not reasonably arguable" (at para 27).

52. A claimant can, of course, issue separate proceedings for the new claim in order to protect himself against injustice in the event that the defendant raises on an application to amend a reasonably arguable but ultimately invalid limitation defence. The validity of the limitation defence will then be determined in the separate proceedings. Indeed, on 30 June 2015 63 of these claimants issued a further claim form against the Bank and ER, in which they claim damages for fraud and fraudulent misrepresentation. It is not, of course, for me to determine whether the claims in those proceedings are statute-barred. (I observe in passing that the amount claimed in this claim form is stated to be approximately £10.5 million. This is much closer to the £12.675 million that I was told was the total investment by the claimants and much less than the amount claimed in the other seven actions when they were issued, which I was told was £252.75 million. Even if these claim forms are amended as the claimants seek, the claims would still be said to exceed £100 million. On the face of it, this is a puzzlingly large amount. Mr Craig acknowledged that the original claim forms were inaccurate and sought to explain this on the basis that there had not been time to investigate the amount of the claimants' losses. I regard the explanation as inadequate.)
53. CPR 17.4 provides that such amendments to introduce claims after a relevant limitation period under the 1980 Act has expired may be made only in specified circumstances. It states, so far as is material, that the court "may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings". Accordingly, where it is reasonably arguable that the relevant limitation period has expired before the amendment is made (not before the application for permission to amend was made), the applicant must show that it is covered by CPR17.4.

The Application to Plead Fraud

54. I therefore come to the application for permission to introduce claims of fraud against the Bank and ER, and the defendants' objection that the proposed amendments are prohibited by the 1980 Act. Mr Jones acknowledged that the unamended pleading does not plead fraud against either the Bank or ER. It is an ingredient of a claim in fraud that the person making the false representation intended his statement to be understood by the representee in the sense in which it was false (see Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd, [2011] EWHC 484 (Comm) at para 221) and, as it used to be put, there must be "moral obliquity": (per Lindley LJ in Angus v Clifford, [1891] 2 Ch 449, 468, and see Maple Leaf Macro Volatility Master Fund v Rouvroy, [2009] EWHC 257 (Comm) at para 327). That was not originally alleged.
55. Nor can there be any dispute that the primary limitation period has expired in that more than six years has passed since the claimants suffered the loss that they allege. There might be room for debate about quite when they suffered loss: Mr Jones was inclined to argue that loss was not suffered until the offer closed in October 2008 because, he submitted, until then investors (or at least the claimants) could revoke their offers to invest and recover the money paid to Ulster Bank Wealth. I consider it distinctly arguable that loss was suffered earlier, when the investments were made, even if they were recoverable, but I do not need to decide that. On any view, the claimants' losses were suffered more than six years ago.
56. In his written submissions Mr Jones contended that the amendments to plead fraud are based on substantially the same facts as a claim for which the claimants have already sought relief in the original particulars of claim, and so are covered by CPR17.4. This argument is apparently put forward on the basis that representations that are now alleged to be fraudulent were pleaded as negligent misrepresentations. I accept that this is true of some, but not all, of the representations pleaded in the revised draft. However, even in respect of those representations that reflect the original pleading, I do not accept that an allegation of fraudulent misrepresentation such as the claimants now seek to advance is substantially the same as an allegation of negligent misrepresentation, or that a claim in fraud relies on substantially the same facts as a claim in negligent misrepresentation. The ingredients of knowledge that the representation is false and of moral obliquity are important and, in my judgment, they put the fraud claims outside the ambit of CPR17.4.
57. As I understood him, Mr Jones accepted this during the hearing, and he put the claimants' application for permission to introduce fraud claims only on the basis that the claims are not statute-barred because of section 32 of the Limitation Act, 1980, which provides (so far as is material) that, where an action is based upon the fraud of the defendant or any fact relevant to the right of action has been deliberately concealed from the claimant by the defendant, the period of limitation does not begin to run until the claimant discovered the fraud or the concealment or could with reasonable diligence have discovered it. The claimants argued that until the Investors Briefing on 7 July 2010 it was concealed from them that the Company had issued the preferential equity to the Luxembourg fund and ER had negotiated a change to the LTV covenants with the Bank of Scotland, and that only in July 2015 did they learn from the evidence of Mr Brown served on these applications that the investment funds were paid (or, as Mr Jones put it, the investors' funds were "drip-fed") to the Maltese company or the Company before the Offer was closed, and used to pay interest rather than to repay capital loans, so that it was "inevitable" that the LTV would exceed 75%.
58. In a case to which section 32 applies, time starts running against a claimant once he knows or could with reasonable diligence have discovered those facts which, if pleaded, would constitute a valid claim: see Arcadia Brands Group Ltd v Visa Inc, [2015] EWCA Civ 833 at para 30. Once the ingredients of a cause of action are known or could with reasonable diligence have been discovered, it is irrelevant that the claimant has later learned other matters that strengthen his case: see Halsbury, Laws of England (5^th Ed, 2008) Vol 68 para 982. It is therefore nothing to the point that the Investors Briefing or Mr Brown's evidence confirmed matters that the claimants would have to prove to make out a case in fraud: the question is whether they knew them, or could with reasonable diligence have known them, more than six years ago.
59. I consider that the defendants have a sufficient argument that, even if they did not actually know the relevant matters, at least the claimants could with reasonable diligence have discovered them. The Bank's letter dated 9 July 2009 expressly referred to the preferential equity, and it also referred to the increase in the loan facilities and the reduced value of the Property: if any investor was relying on the LTV, it would have been reasonably apparent from the letter that it was no longer at the 75% ratio referred to in the IM. If this was not understood by an investor, (s)he could have taken up the Bank's invitation to contact the Bank on one of the two telephone numbers provided in the letter for that purpose.
60. None of the claimants who has served voluntary particulars has indicated that (s)he did not know that the investment fund had been paid over by the Bank before the Offer closed. The letter of 9 July 2009 said that the offer had closed in October 2008: many claimants had received their share certificates and their loan notes from the Maltese company some months before then, and it would have been obvious to them that they were issued on receipt of their investment funds. Certainly they could have come to appreciate this if they acted with reasonable diligence.
61. In any case, in my judgment the defendants have a reasonable argument that the claimants would have appreciated, if they had exercised reasonable diligence, that their investment funds would have been transferred by the Bank before the offer closed. The application forms signed by investors required that they enclose with them drafts payable to Ulster Bank Wealth for the full amount of the investments, and stated, "These funds will be lodged to a pooled 'Client Money Account', in an eligible credit institution, i.e., your funds will be commingled with other client funds. … The Ulster Bank Wealth Client Money Account is a non-interest bearing account and so no interest will accrue on the funds held in it. Ulster Bank Wealth will forward your funds to the Company". It would have been surprising if that the money was to be held in the Client Money Account for an indefinite period pending closure of the offer (for the IM did not state when the Offer would close or was expected to close), notwithstanding the investors were not benefitting directly from interest and the funds were not put to use to benefit the scheme and so the investment.
62. I add that in his skeleton argument Mr Jones referred to the statement in the letter of 9 July 2009 that ER retained "a positive outlook for this property in the longer term …", and submitted that this statement was designed to "deflect attention away from a failed/failing investment and to give a contrary impression to investors to lead them to believe in the longer term the investment would be successful". The claimants do not plead this allegation, even in the revised draft. All I need say about it is that it does not sufficiently clearly answer the defendants' arguments about limitation to assist the claimants on their applications to amend.
63. I therefore conclude that the application for permission to amend to plead fraud should be refused because section 35 of the Limitation Act, 1980.
64. However, I would also have accepted the defendants' argument that permission for the amendments should be refused because they are not adequately pleaded. In view of my conclusion about limitation, I deal with this briefly. Allegations of fraud must always be properly particularised: in Three Rivers District Council v Governor and Company of the Bank of England (no 3), [2001] UKHL 16, Lord Hope observed (at para 51) that "The more serious the allegation of misconduct, the greater is the need for particulars to be given which explain the basis for the allegation". More specifically, an allegation of fraud is not supported by an allegation that the defendant made a representation that he knew or ought to have known to be untrue. As May LJ put it in Lipkin Gorman v Karpnale Ltd, [1989] 1 WLR 1340, 1351H/1352A:

"… where fraud or dishonesty is material this must be clearly pleaded, if not explicitly, then in such terms that the reader of the pleading can be left in no reasonable doubt that this is being alleged. … where an element in the alleged fraud or dishonesty relied on is the other party's knowledge of a given fact or state of affairs, this must be explicitly pleaded. It is ambiguous and thus demurrable, if fraud is relied on, to use the common "rolled up plea" that a defendant knew or ought to have known a given fact. If it is desired to allege and plead fraud and, in the alternative, negligence based on similar contentions, then the former must be pleaded first and clearly and the relevant part of the plea confined to fraud. The allegation in negligence and then be pleaded separately and as a true alternative contention".

65. The revised draft (like the January draft) does not clearly allege knowledge on the part of the Bank, still less on the part of the managers who dealt with the claimants for the Bank, and its proposed pleading in relation to the allegation of fraud is replete with impermissible "rolled up" pleas and allegations about what the Bank would have known if it had discharged its duties to the claimants. The following examples suffice:

i) "If [the Bank] had discharged its (aforesaid) duties to each Claimant it would have known that because of the deteriorated economic conditions the reviewed rent was likely to be depressed. …".

ii) "If [the Bank] had discharged its (aforesaid) duties to each Claimant it would have known that [ER] was aware that before repayment of the Bridging Facility the Company was already in breach of the LTV covenants to the Bank and/or the intended LTV ratio and that the steep decline in values would cause the breach to persist unless either the investors raised additional investment capital or negotiated an increase in the LTV ratio or both".

iii) "The investment was doomed to failure and was not a viable "investment" as [the Bank] knew or ought reasonably to have known".

iv) "Any reasonably competent investment adviser knew or ought to have known that the proposed investment could and would not be a viable investment absent almost all of the hoped-for £90 million equity be raised. Any reasonably competent investment adviser knew or ought to have known that absent that happening, the proposed investment would not be viable and was doomed to fail".

v) "Any reasonably competent investment adviser knew or ought to have known that if, as happened, any investor's funds were paid away to [the Maltese company/the Company] prior to a viable investment being established (with £90 million of equity being raised) such monies would be lost".

66. In my judgment, it is impossible to discern from the revised draft quite what fraud is alleged against the Bank and those who worked for it. It is, if anything, even less clear what case in fraud is alleged in the revised draft against ER. It does not distinctly plead any representation by ER that could support a claim in deceit. The averment that the representations about the IM were "continuing" does not assist the claimants because none of them other than Dr Keane asserts reliance on the IM at all, and even Dr Keane's voluntary particulars do not support a case of this kind. Certainly the allegation about continuing representations is too vague properly to plead a claim in deceit. I have referred to the pleading about ER being "fraudulent" in keeping or using the invested funds in view of the changed structure of the project, but this is not properly linked to a specific representation. Of course, in some circumstances a representation can be made by silence when there is a duty to speak, but that does not excuse the claimant from pleading the tacit representation distinctly.
67. In these circumstances, I do not consider separately Mr McQuater's further submission that any claim in fraudulent misrepresentation stands no real prospect of success. I cannot do so without understanding what case the claimants intend to plead in deceit against ER.

The Application to Plead Breach of Trust and Knowing Assistance or Procurement

68. I next consider the new claims against the Bank for dishonest breach of trust and against ER for knowingly assisting in or procuring the breach of trust. It is not said, I think, that these claims were made in the original particulars of claim or that they arise from the same or substantially the same facts as a claim in respect of which the claimants are already seeking a remedy. The claims depend on a new allegation that the investors' funds were to be held on trust and new allegations of dishonesty. What, therefore, is the position with regard to limitation?
69. Section 21(3) of the Limitation Act, 1980 provides that "Subject to [sections 21(1) and 21(2)], an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued. …". Subsections 21(1) and 21(2) of the Act provide that:

"(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action—

(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or

(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.

"(2) Where a trustee who is also a beneficiary under the trust receives or retains trust property or its proceeds as his share on a distribution of trust property under the trust, his liability in any action brought by virtue of subsection (1)(b) above to recover that property or its proceeds after the expiration of the period of limitation prescribed by this Act for bringing an action to recover trust property shall be limited to the excess over his proper share.

This subsection only applies if the trustee acted honestly and reasonably in making the distribution".

70. There is no dispute that the causes of action that the claimants allege accrued more than six years ago. The claimants do not rely on section 21(2). The claimants can only amend if the claims are covered by section 21(1) or section 32, or rather if the defendants do not have a reasonably arguable case to the contrary.
71. In my judgment both the Bank and ER have a reasonably arguable case that section 32 does not apply for the reasons that I have already explained in relation to the proposed amendments to plead fraud. The claimants' argument is that they learned only in July 2015 that their investment had been paid to the Maltese company before the offer closed. I have explained why in my judgment the defendants have a reasonable argument that the claimants would have appreciated, if they had exercised reasonable diligence, that their investment funds would have been paid to the Company before the offer closed.
72. Section 21(1) does not assist the claimants with regard to the claim against ER. It does not apply to claims of knowing assisting or procuring breach of trust: see Williams v Central Bank of Nigeria, [2014] UKSC 10.
73. As for the claim against the Bank, as I see it the proper analysis is this: although the revised draft asserts that the breach of trust was fraudulent, fraud is not an ingredient of the cause of action. The cause of action is in breach of trust. As is said in Lewin on Trusts (19^th Ed, 2014) para 44-011, "A claimant may refrain from a charge of fraud in the first instance but may wait to see whether the defendant raises a defence of limitation. The claimant must plead fraud in reply and prove it, if he wishes to defeat the defence in that way; the defendant does not have to disprove fraud to establish that the claim is statute-barred". The question, therefore is whether the Bank has a reasonable argument that, assuming that it is liable because it held the investors' funds on trust and was in breach of its duties as trustee in paying them away as it did, it was not dishonest when it did so. There is no specific evidence about this because the claimants made the allegation of breach of trust so late, but to my mind it is fanciful to suppose that the Bank does not have a reasonable argument. As I shall explain, it seems to me (to say the least) clearly arguable both that the funds were not held on trust and even if they were, they could properly be transferred to the Maltese company: the Bank would not have been dishonest if it considered itself entitled to do so.
74. I therefore conclude that because of the limitation period I should not give permission to introduce the claims of breach of trust and knowingly assisting or procuring breach of trust.
75. In any case, I am not persuaded that the claims are reasonably arguable. To my mind, the terms of the application forms do not support the case that the investors' funds were to be held on trust: on the contrary, they specifically state that they are to be commingled in the Client Money Account. Nor, as I have explained, did the form or the IM say that the funds were not to be paid to the Maltese company until the offer was closed and there is no reason to imply a term to this effect. Certainly the revised draft does not distinctly plead a basis for contending this.

The Application to Plead "Back End" Claims against the Bank

76. I next consider the other controversial aspect of the proposed amendments to the case against the Bank: the so-called "back end" claims. The revised draft alleges that the Bank was in breach of a common law duty after the claimants had made their investments by transferring funds to Ulster Wealth Bank. As I have said, the revised draft does not plead that the Bank was in breach of the Irish regulatory regime. It might have been intended that it should do so, and without an allegation of breach it is unclear why the pleading mentions the regime at all. But there is no proposed amendment to consider on the application before me.
77. Ms Robertson's submission was that the amendments to plead back end claims should be refused in their entirety. Her starting point was that the limitation periods for them have expired. I accept that: just as with the proposed fraud claims, the loss for which the claimants seek relief occurred more than six years ago.
78. Ms Robertson argued that therefore all these amendments are prohibited by the Limitation Act, 1980 because:

i) No back end claims were pleaded in the original cause of action.

ii) Those in the revised draft are based on a different cause of action from any already pleaded.

iii) They do not arise out of the same or substantially the same facts as an existing claim.

Mr Jones responded that the claimants do not seek to plead a new cause of action: that they are simply making additional allegations of breach by way of particularising a cause of action (negligence) or causes of action (negligence and breach of regulations) that is or are already pleaded.

79. Tomlinson LJ considered whether a new cause of action is pleaded when there are new allegations of breach in Co-operative Group Ltd v Birse Developments Ltd, [2013] EWCA Civ 474 at paras 19ff. At para 22 he referred, inter alia, to May LJ's guidance in Steamship Mutual Underwriting assn Ltd v Trollope and Colls (City) Ltd, (1986) 33 BLR 77 that "one must look not only to the duty, but also to the nature and extent of the breach relied upon, as well as to the nature and extent of the damage complained of in deciding whether, as a matter of degree, a new cause of action is sought to be relied upon". Tomlinson LJ continued:

"The question to be resolved is therefore one of fact and degree. For my part I am not convinced that one needs to look further than for a change in the essential features of the factual basis relied upon, bearing in mind that the factual basis will include the facts out of which the duty is to be spelled as well as those which allegedly give rise to breach and damage. I respectfully agree with Lloyd LJ, as he then was, later Lord Lloyd of Berwick, who observed in the Trollope and Colls case, at page 101, that "in most cases it will be easy to say on which side of the line the case falls". But as Lloyd LJ observed, there will sometimes be a grey area, where different views are possible. I would not therefore dissent from the following distillation of the principles by Jackson J, as he then was, in Secretary of State for Transport v Pell Frischmann [2006] EWHC 2909 (TCC) at paragraph 38:-

'(i) If the claimant asserts a duty which was not previously pleaded and alleges a breach of such duty, this usually amounts to a new claim.

(ii) If the claimant alleges a different breach of some previously pleaded duty, it will be a question of fact and degree whether that constitutes a new claim.

(iii) In the case of a construction project, if the claimant alleges breach of a previously pleaded duty causing damage to a different element of the building, that will generally amount to a new claim.'

I would simply add my own gloss to the effect that if the new breach does not arise out of the same or substantially the same facts as those already in issue on a claim previously made in the original action, it is likely to be a new cause of action".

80. In my judgment, the case that the Bank was in breach of duties after the claimants' funds had been transferred involves a different cause of action from the case that the Bank made a negligent presentation (by way of making negligent misrepresentations or giving negligent advice) that led the claimants to invest. Although both cases are presented under the umbrella of a duty of care, to my mind complaints about the Bank's conduct after the claimants had paid their investment funds to Ulster Bank Wealth take the case into a distinct area of factual investigation, and, as Diplock LJ observed in Letang v Cooper, [1965] 1 QB 232 at 242/243, a cause of action is "a factual situation the existence of which entitles one person to obtain from the court a remedy against another person".
81. This leads to the question whether the original particulars of claim plead back end claims. As I have said, I find the pleading difficult to understand. The difficulties are aggravated because, as Ms Robertson observed, the main focus of the original misrepresentation case appeared to be that ER were the Bank's agent and, as such, had made misrepresentations in the IM and had not corrected them. But the unamended pleading is not confined to complaints about the IM: this much is clear from the allegation about what Mr Goodman said to Mr McEneaney "and others". The vague reference to "and others" cannot sensibly be understood to allege that all the claimants who dealt with the Bank relied on the oral presentation that is pleaded, if only because it is, I think, common ground that Mr Goodman did not have dealings with them all. But it does show that the claimants did not intend to limit their case as narrowly as Ms Robertson suggested.
82. Although the pleading is vague, the particulars of claim do assert that the Bank (as well as ER) was under a duty of care until the "asset purchase" to disclose to investors anything that was pertinent to a decision to invest or made anything in the IM inaccurate or misleading, and that the representations in the IM continued until "[ER] and the Company shall in their absolute discretion determine or withdraw the Offers". Although the term "asset purchase" is ambiguous, the claimants clearly intended to allege a duty that continued after they had transferred investment funds. And the plea that the Bank was under a duty of care "to avoid foreseeable loss to the Claimants" is not limited by reference to the "asset purchase", whether by way of the investment of funds or otherwise. In any case, when the original pleading gives "particulars" of the negligence alleged against the Bank, it includes, albeit in the unsatisfactory "rolled up" allegations against the Bank and ER, allegations of negligence that are undoubtedly directed to a time after claimants had transferred their investment funds.
83. In my judgment the original particulars of claim do plead back end claims, and therefore I cannot determine the application for permission to amend to the revised draft on the basis that any back end claim would necessarily be of a cause of action that is time barred: the question is whether the particular back end claims in the revised draft are new, and if so whether they arise substantially from facts already pleaded in support of a remedy that is claimed.
84. It is therefore necessary to examine the allegations of negligence made in the revised draft by way of back end claims in more detail. The revised draft includes 14 sub-paragraphs by way of particulars of negligence. I understand the first eight and the last are directed to criticism of the Bank's conduct before the claimants' decisions to invest and do not introduce back end claims, but I make it a condition of permitting them that this be specifically stated.
85. The other five particulars are that the Bank's Wealth Managers:

i) "Failed adequately to investigate and/or report upon the decline in the value of the Property between circulation of the IM and the Offer closing".

ii) "Failed to monitor the proposed investment and update the financial premises upon which the advice to invest had been given when it was or ought to have been apparent to any reasonably competent investment advisor that the nature of the proposed investment had substantially changed; it had become even higher risk; that the Bank of Scotland LTV covenant had been or was imminently to be breached; and that commercial property values were in freefall and upward only rent reviews likely to be significantly depressed as part and parcel of the 2007/2008 economic recession, "credit crunch" and banking crisis".

iii) "Failed to advise each Claimant to withdraw from the proposed investment and/or to cancel the Power of Attorney given to Evans Randall's nominees".

iv) "If it thought that there might be doubt about each Claimant's ability to withdraw the Offer and/or cancel the Power of Attorney, failed to advise each to take competent legal advice thereon".

v) "Failed to monitor and identify the changing and changed nature of the investment subsequent to (about) October 2007 and to reconsider the advice given to the Claimants in light thereof. It is each Claimant's case that had Ulster Bank done so it would/should have advised each Claimant to refuse to proceed".

86. I do not find it easy to discern from these allegations the structure of the case that the claimants intend to plead about the back end claims, but it seems to me that they must intend to allege that:

i) After the claimants had invested, the Bank should have monitored the investment scheme, and in particular monitored the value of the Property, the impact of falling property values on the LTV and the prospective rental income.

ii) If the Bank had done so, it would or at least should have advised the claimants to withdraw from the scheme or refused to proceed with their investments, or at least to take legal advice about doing so.

iii) The claimants were entitled to withdraw their applications to invest, and, had they taken legal advice, they would have been told this.

iv) Had the claimants been given proper advice by the Bank, they would have withdrawn from their investments (either directly as a result of the Bank's advice or having taken legal advice).

It is not explicitly pleaded why the Bank was at fault in failing to advise the claimants to withdraw or to take legal advice about doing so, but the implication is surely that they should have been given that advice as a result of what the Bank learned from monitoring the scheme. I recognise that the third stage of this reasoning too is not explicitly pleaded in the revised draft (except in as much as a result of that it is pleaded later that the claimants suffered loss "By reason of the matters aforesaid)", but otherwise the allegations pleaded by way of these particulars of negligence would be inconsequential.

87. It should not be necessary to have to analyse a pleading in this way to work out what it is intended to allege, still less to do so when it is proposed to amend a pleading in these circumstances. For this reason I would in any case not permit the claimants to rely on these particulars of negligence. But I shall go on to consider whether the claimants should be permitted to pursue a case such as I have described if it were properly pleaded.
88. The allegation that the Bank should have investigated the value of the Property after the claimants had invested is not new. The first of the sub-paragraphs that I have set out (that the Bank's Wealth Managers "Failed adequately to investigate and/or report upon the decline in the value of the Property ...") precisely reproduces a particular of negligence in the original pleading: it is not itself an amendment. The second sub-paragraph would expand the ambit of the continuing monitoring that the Bank should have undertaken, and specifically that it should have included the impact of movement in the value of the Property on the LTV and the prospective rent after review. Further, the unamended pleading does not allege that (i) the Bank should have given advice to the claimants about withdrawing their applications (or not proceeding with them) and taking legal advice in that regard, or (ii) the implicit contention about the claimants acting on the advice. The contention in the unamended pleading is that the investments should have been ineffective because the Attorneys, as agents for ER and the Bank, should have aborted the scheme: that is abandoned.
89. Thus by the amendments in the revised draft the claimants seek to introduce a contention that the Bank failed in a duty to give advice to the claimants after they had paid their investment funds. In my judgment this contention and the new allegations in support of it are different in kind from anything that is already pleaded and to my mind are such that they would amount to a new cause of action. I also do not accept that the new cause of action would be permissible under CPR 17.4: it does not arise out of the same or substantially the same facts as a claim for which the claimants are already seeking relief. Therefore, even if I had not already rejected this part of the claimants' application to amend on the basis that this part of the revised draft does not set out sufficient clearly what it is intended to allege, I should in any case have refused permission for these amendments.

The Claim against ER of Breach of the Regulatory Regime

90. I return to the case against ER. ER apply for the case against them to be dismissed under CPR 3.4 on the grounds that the claimants' pleading discloses no reasonable grounds for bringing the claims and under CPR 24.2 for summary judgment. I find it convenient to consider ER's argument by reference to the CPR 24 application, where the question is whether the claimants have a real prospect of success: Mr Jones did not contend that there is any other reason for a trial, so as to bring CPR24.2(b) into play. Of course, strictly ER's application is directed to the original particulars of claim, but applications to amend should be refused unless the new case has a real prospect of success, the test being the same as that for applications under CPR part 24: see CPR 17.3.6. I shall therefore consider application for summary judgment by reference to the revised draft. Mr Jones did not argue that, if the revised draft could not survive an application under CPR part 24, nevertheless a claim pleaded in the original particulars of claim could do so.
91. The revised draft abandons two of the five heads of claim identified by Mr McQuater as being pleaded in the January draft. I have dealt with the proposed allegations of fraud and knowingly assisting or procuring a breach of trust. There remain the allegations (i) of breach of statutory duty and the provisions of COBS and (ii) of negligence (in making misrepresentations or otherwise).
92. Mr McQuater advanced two arguments against the claim for breach of the regulatory regime: that the claimants have not identified any proper basis for their case that they were "clients" of ER so as to be owed duties under the regime, and that they have not pleaded any breach of statutory duty that has any real prospect of success.
93. I did not find it easy to follow Mr Jones' submission about the regulatory regime and its application to the relationship between ER and the claimants. COBS, which is part of the regime of rules made under the general power in section 138 of FSMA, includes the "best interests" rule that a "firm must act honestly, fairly and professionally in accordance with the best interests of its client" (COBS 2.1.1(R)). It applies to "designated investment business" for retail clients and "in relation to MiFID or equivalent third party business, for any client". The original particulars of claim alleged that ER was "at all material times" an authorised person within the meaning of the FSMA and to which [MiFID] is applied by [COBS]", and that that each claimant was "the recipient of financial services from [the Bank]". It went on to plead that ER had various obligations "with respect of each claimant" under COBS, and that "in the premises" ER were in breach of "statutory regulatory duty". The obligations to which the pleading refers include the best interests rule and a provision of the so-called "financial promotion rules" applicable to COBS, that a firm must ensure that "a communication … is fair, clear and not misleading" (COBS 4.2.1(R)).
94. COBS provides this definition of a client at 3.2.1(R):

(1) A person to whom a firm provides, intends to provide or has provided:

(a) a service in the course of carrying on a regulated activity; or

(b) in the case of MiFID or equivalent third country business, an ancillary service,

is a 'client' of that firm;

(2) A 'client' includes a potential client.

(3) In relation to the financial promotion rules, a person to whom a financial promotion is or is likely to be communicated is a "client" of a firm that communicates or approves it….

(4) A client of an appointed representative or, if applicable, a tied agent is a 'client' of the firm for whom that appointed representative, or tied agent, acts or intends to act in the course of business for which that firm has accepted responsibility under the Act or MiFID …".

The original particulars of claim did not plead that ER provided services to the claimants or explain how otherwise they were "clients" of ER.

95. In its defence, ER denied that it owed obligations to the claimants under COBS, pleading that (i) no claimant was a client of ER, and (ii) COBS came into effect on 1 November 2007, after ER had approved the IM.
96. In the January draft the claimants pleaded that each of them was "at all material times" a client to ER "within the meaning of Rule 3.2.1 of [COBS] implementing in the United Kingdom the [MiFID]". It did not say anything to indicate the factual basis of this plea, and did not engage with the answer that COBS came into force after the IM had been approved. It went on to set out various provisions of COBS, including the best interests rule and COBS(R) 4.2.1, and (like the original pleadings) alleged that "in the premises" ER were in breach of "statutory regulatory duty".
97. In the revised draft the claimants seek to plead that each of them was "At all material times" a "client" to ER within the meaning of rule 3.2.1(R) or COBS "or its predecessor version, implementing in the United Kingdom the [MiFID]". It pleads that ER had statutory duties under "COBS [01 November 2007 version] and/or its predecessor version, rules 2.1.1 and 4.2.1 …", and was in breach of them. This is inconsistent with the position of the claimants stated in Mr Craig's witness statement of 23 October 2014 when they first sought permission to amend their pleading: that they wished to allege breach of statutory duty or breaches of the regulatory regime against the Bank in the period prior to as well as after 1 November 2007, but against ER they sought to amend to allege breaches prior to 1 November 2007.
98. Moreover the revised draft still does not explain the basis on which the claimants are alleged to be clients of ER. Nor does it identify the relevant provisions of the "predecessor regime". Although I was not specifically addressed about this second point (partly, no doubt, because the revised draft was produced only after Mr McQuater had addressed me on the claims of breach of the regulatory regime), I do not know what "predecessor version" implemented MiFID: my understanding is that MiFID was adopted by the EC in April 2004 and came into force in November 2007 with the aim of creating a single competitive market for investment services and ensuring harmonised protection for investors in financial instruments. In both respects the pleading is unsatisfactory: for that reason and in any event I would not permit this part of the revised draft.
99. In so far as this part of the claimants' case is based on the fact that ER produced the IM, to my mind it has no real chance of success. Leaving aside the fact that it was approved by ER before COBS came into force, there is no indication in the "voluntary particulars" that the IM was relied on by any claimant to whom the Bank introduced the investment, there is no evidence and it was not suggested that other claimants who have not served voluntary particulars relied on it, and Dr Keane does not indicate in his particulars that he found anything in it unclear or misleading: he states that he made his own assessment of the investment risk.
100. In any case I do not think that there is any real prospect of the claimants in establishing that they were clients of ER within the meaning of COBS so as to be under the obligation in the best interests rule. There is no dispute on the evidence before me that ER had no contractual relationship with any claimant, received no payment from any claimant, gave no advice to any claimant and had no contact or liaison with any claimant whereby ER could provide any service to any of them. Nor was it ever contemplated that ER should do so. The undisputed evidence is that the Bank had a commission arrangement with the Company in relation to the investment.
101. In the end, the contention that the claimants were ER's clients rested on their argument that the Bank dealt with clients as the agent of or on behalf of ER (an argument that is not, of course, available to Dr Keane). On the face of it, that seems to me far removed from reality, and no claimant indicates that (s)he so understood the relationship. It is difficult to reconcile with the claimants' stated position that their relationship with the Bank is governed by Irish law and that with ER governed by English law.
102. When asked to give further particulars of their pleading in the original particulars of claim that the Bank contacted the claimants on behalf of ER and offered them an opportunity to invest on their behalf, the claimants only replied that the Bank "acted in concert with ER (and the RBS) to promote and market the investment", but that they would need disclosure before going beyond this bald assertion. However, Mr Jones relied on a letter dated 4 October 2012 and written on behalf of the Bank to the Irish Financial Services Ombudsman. (According to the evidence of Mr Michael Reading, a solicitor of Pinsent Masons, the Bank's solicitors, nine of the claimants made a complaint to the Ombudsman: eight complaints have been dismissed, and the last is still appealing the findings.) The Ombudsman has asked the Bank to "explain its role and function" in relation to the sale of the investment, and whether it acted as a third party broker. The Bank replied as follows:

"[The investment] was distributed in Ireland by Ulster Bank Wealth on behalf of [ER]. The property investment was arranged and managed by [ER]. The role of Ulster Bank Wealth in this transaction was as distributor and under MiFID meant it had to ensure that this investment was suitable and appropriate for any client who invested. …Subsequent to the inception of the investment, Ulster Bank Wealth provided a client relationship service to investors. This involved providing investors with the annual and any ad hoc reports or communications issued by [ER]. It also included Ulster Bank Wealth Managers or Executives providing clients with progress updates either upon request or as part of an investment review meeting".

103. I do not think that the use in this letter of the expression "on behalf of" can bear the weight that Mr Jones sought to put on it. The IM conveyed an offer of shares by the Company, and it invited Irish investors to make an offer to the Maltese company. Nothing in the letter suggests that ER appointed the Bank as its agent to provide the claimants with advisory or any other services on its behalf. There is no apparent reason that they would have done so, and no evidence that they did so. I therefore conclude that this part of the case that the claimants seek to advance in the revised draft stands no real prospect of success, and I refuse permission to plead it

The Claim in Negligence against ER

104. I take a similar view about the claim in common law negligence against ER in the revised draft for similar reasons: there is no evidence that any claimants other than Dr Keane relied on the IM, Dr Keane's particulars do not identify any misrepresentation in the IM on which he relied, there were no later dealings between ER and any of the claimants, and there is no real prospect of the claimants showing that ER are vicariously liable for any breach of duty on the part of the Bank.

Conclusions

105. I therefore grant ER's application for summary judgment (and it is not necessary to adjudicate on their application under CPR 3.4), and I grant the application for permission to amend the claim against the Bank only to the limited and uncontroversial extent that I have indicated. The claimants will need to prepare a further draft without the proposed amendments for which I have refused permission. I shall consider directions for this purpose and case management directions generally when I hand down this judgment.