England and Wales High Court (Queen's Bench Division) Decisions

1.                  INTRODUCTION

This judgment relates to a strike-out application in respect of pleadings now said to be inconsistent with a recent Supreme Court decision, and a cross-application for permission to amend Particulars of Claim 6.5 years after issue of the Claim Form. In reaching a determination, it has been necessary to examine the recently evolving boundaries within substantive company law on the application of the principle of reflective loss. In particular, it has been necessary to reflect upon the question of when a shareholder is not prevented from mounting claims relating to losses arising from their original shareholdings. The matters specifically before me were:

2.                  The claim arises from a discontinued prosecution of the two claimants on a charge of conspiracy to defraud.  The claimants were majority shareholders, and directors, in a company (latterly known as Cawston Park Holdings Ltd) whose business, inter alia, was to provide private sector mental health care to the National Health Service. Operations were managed through two wholly owned subsidiaries. The criminal charges laid against the claimants related to the running of the mental health business.  The claimants were acquitted at trial on 19^th June 2009 but by that time all three companies in the group were insolvent, which the claimants say was directly due to the police investigation and subsequent prosecution.

3.                  The claimants seek damages for malicious prosecution and misfeasance in public office arising out of their prosecution. Those damages, it was submitted orally, absent business losses, appear unlikely on case law to reach £100,000 each although they may be straining towards that figure. Additionally, the claimants seek damages for their financial business losses, said to be in excess of £15,000,000 each, in respect of their interests in the businesses which they say were destroyed by the defendant's conduct.

5.                  The action has become procedurally complicated and protracted. There have been several prior attempts to amend statements of case by the claimants, in addition to those resulting from the evolving case law referred to. The defendant also criticises the claimants for delay. The police actions complained of, which give rise to the claims made, occurred in 2006 but the claim form was not issued until March 2015. The first costs and case management conference was in November 2017 but a number of issues were adjourned, and matters have still not progressed beyond the statements of case phase. There have also been listing difficulties in getting the defendant's application heard.

6.                  The amendments now sought by the claimants can be separated out into three categories. The first group is inconsequential and by way of clarification or correction only which the defendant would not oppose, subject to adequate explanation. The second group is the most controversial, with claims for losses which the defendant says have been "refashioned" following changes in the case law and are said to arise from the demise of the company. For example, they re-categorise the statuses of the claimants as an employee, ex-shareholder or indirect shareholder. Finally, the third group contains some new factual averments said to underpin the "refashioned" claims.

7.                  In addressing the issues this judgment is divided into the following parts:

8.

9.                  It is plain from the chronology that the claimants' Statement of Case has latterly placed reliance upon what has been termed the "Giles v Rhind" exception to the principle espoused in Prudential Assurance Co Ltd v Newman Industries Ltd ( No2 ) [1982] Ch 204 which said that a shareholder cannot recover losses for which the company in which the shares are held, has an identical claim, regardless of whether or not the company chooses to pursue that claim.

10.              The original Particulars of Claim dating from July 2015 did not refer to Giles v Rhind even though the case had been decided in 2002. The pleading was only amended to incorporate the reference following a strike out /summary judgment hearing in 2016 and in response to the defendant's criticism that the Particulars merely stated the lost value of the claimants' interest in the company without citing the mechanism by which that loss was said to have been sustained. During the hearing both sides had markedly different interpretations of the existing case law regarding recovery by a shareholder for diminution in value of shares.

12.              Following the amendments, and some further supplemental ones which I do not need to discuss, the case was ready to proceed with case management, when it became known that the Supreme Court was to review the whole area of law pertaining to the reflective loss principle, so the claim was stayed to await that determination.

13.              In order to reach a determination on the strike out application it is plainly important to review what the Supreme Court in Marex actually decided, and how that has been interpreted in subsequent authorities. The parties are diametrically opposed in their current interpretation, and it is submitted for the claimants that I should not strike out proposed amendments in what is "an evolving area of law". That presents a warning light to me as to the clarity of the law as it currently stands, and whether the defendant's application even meets the threshold for a strike out to be considered. I have therefore needed to study the authorities in some depth in order to satisfy myself on the point. My summary of those authorities is rather more fulsome than usual, as a consequence. I was not assisted in my deliberations by the claimants' late production of a skeleton and authorities, on the eve of the hearing, which also meant counsel for the defendant was unable to address a number of points made until orally during the hearing.

16.              Lord Reed continued to summarise the ruling in Prudential  "that a shareholder cannot bring a claim in respect of a diminution in the value of his shareholding, or a reduction in the distributions which he receives by virtue of his shareholding, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, even if the defendant's conduct also involved the commission of a wrong against the shareholder, and even if no proceedings have been brought by the company".

17.              Lord Reed reflecting on that decision said it created a new rule of company law "applying specifically to companies and their shareholders in the particular circumstances described, and having no wider ambit". None of the justices in Marex favoured any extension of the rule, even though courts subsequent to Prudential, (such as the House of Lords in Johnson v Gore Wood (No1) [2002] 2AC1), had started to enlarge upon it. In Marex the Supreme Court had to decide the position of a creditor seeking to sue where a company could have had a cause of action also, and they were unanimous that a creditor was not debarred from seeking its own redress.

The Marex decision

18.              It is important to note that the Supreme Court in determining Marex was divided over whether there was in fact any justification for retaining even a slimmed down principle of reflective loss; some questioned whether claims where the issue arose should instead be managed utilising other well-established principles of causation and assessment of damages to ensure appropriate outcomes and avoid double recovery and other ills. In the end a narrow majority favoured retention of the "bright line legal rule" for shareholders established in the Prudential case.

19.              In order to understand the majority reasoning in the Marex judgment, so as to apply it to this case, it is necessary to consider, at least briefly, two topics. First, the unique position of a shareholder said to justify the restrictions placed upon them from making a claim for diminution in value of their shares and, secondly, the policy considerations said to bolster the court's approach.

20.              Position of a shareholder

a)                  In Prudential at p 223 it was held "The plaintiff's shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property." Lord Reed expanded further at p 28 of Marex "what the court meant, put shortly, …. the fall in share value (or in distributions) is not a loss which the law recognises as being separate and distinct from the loss sustained by the company. It is for that reason that it does not give rise to an independent claim to damages on the part of the shareholders".

b)                 At p 31 Lord Reed continued, "The starting point is the nature of a share, and the attributes which render it valuable. A share is not a proportionate part of a company's assets….. a share is a right of participation in the company on the terms of the articles of association. The articles normally confer on a shareholder a number of rights, including a right to vote on resolutions at general meetings, a right to participate in the distributions which the company makes out of its profits, and a right to share in its surplus assets in the event of its winding up".

c)                  Lord Reed expanded further at p 32 "Where a company suffers a loss, that loss may affect its current distributions or the amount retained and invested in order to pay for future distributions (or, if the company is wound up, the surplus, if any, available for distribution among the shareholders)."

d)                 Lord Reed went on to consider the varying nature of companies, large and small, public and privately owned and noted at p 49 "The rule in Prudential is not premised on any necessary relationship between a company's assets and the value of its shares (or its distributions). Then at p 81 "There may, however, be circumstances where the company's right of action is not sufficient to ensure that the value of the shares is fully replenished. One example is where the market's valuation of the shares is not a simple reflection of the company's net assets. Another, is where the company fails to pursue a right of action which, in the opinion of a shareholder, ought to have been pursued…. But the effect of the rule in Foss v Harbottle is that the shareholder has entrusted the management of the company's right of action to its decision-making organs, including, ultimately, the majority of members voting in general meeting. If such a decision is taken otherwise than in the proper exercise of the relevant powers, then the law provides the shareholder with several remedies, including a derivative action, and equitable relief from unfairly prejudicial conduct".

e)                  At p 82 Lord Reed explained "The company's control over its own cause of action would be compromised, and the rule in Foss v Harbottle could be circumvented, if the shareholder could bring a personal action for a fall in share value consequent on the company's loss, where the company had a concurrent right of action in respect of its loss".

f)                  Finally, at p 83 Lord Reed said "The critical point is that the shareholder has not suffered a loss which is regarded by the law as being separate and distinct from the company's loss, and therefore has no claim to recover it. As a shareholder (and unlike a creditor or an employee), he does, however, have a variety of other rights which may be relevant in a context of this kind...". The minority view expressed by Lord Sales at p 132 was that the phrase "separate and distinct" losses of the shareholder from those of the company when considering share value may not strictly be true as "There is no necessary, direct correlation between the two". He also referred to "unhelpfully slippery and imprecise language" in some of the authorities on this point. The importance of recording some of the strongly dissenting views in this judgment is that they have not prevailed against the majority so I should not succumb to argument now which might be seen by some as an attempt to re-litigate the point.

21.              Policy considerations

Four policy justifications for the rule of reflective loss were also reviewed by the court in Marex. They were disputed by the minority, as being adequate to justify retention of the rule, even on a strict and narrow basis, where bespoke case management interventions for individual situations were considered to be more suitable. The majority however found continuing benefit in the application of some policy considerations in retaining the bright line legal rule. So, it is necessary to refer to those policies now, briefly at least, as many of them are woven into other judgments which have sought to explore the boundaries established by Marex; it is important not to give them an inappropriate elevation. Lord Reed said with great clarity in Marex that the reflective loss principle was to have "no wider ambit" than that allowed for in the judgment, whatever the policy considerations.

a)         Avoidance of double recovery

i)                   Lord Reed acknowledged that the courts have several procedural routes which they can adopt to ensure that multiple claims by different claimants do not result in double recovery. It is not necessary for me to describe these, suffice to say the policy consideration alone does not require retention of the reflective loss principle. Indeed, Lord Reed noted at p 10 "one consequence of the rule is that, where it applies, the shareholders claim against the wrongdoer is excluded even if the company does not pursue its own right of action, and there is accordingly no risk of double recovery".

ii)                 Thus, the majority having noted the possible hardship of retaining the rule, even where there may in fact be no possibility of double recovery in certain situations, still chose neither to jettison the rule, nor to create an exception to it on this policy ground.

b)                 Causation

i)                   The majority in Marex found no favour with the view that causation arguments were sufficient to explain the continuance of the reflective loss principle as a helpful and binding one. At p 57 Lord Reed, quoting Lord Hutton in Johnson stated "causation does not provide a satisfactory explanation. One difficulty is that the failure of the company to sue the wrongdoer, or its decision to settle with him for less than the full value of its claim, may be the result of its impecuniosity, caused by the defendant's wrongdoing. In those circumstances, the company's failure to recover its loss can hardly be regarded as interposing a novus actus interveniens between the defendant's wrongdoing and the shareholders loss.  Furthermore, in an economic tort case, where the shareholder's claim is based on an allegation that the wrongdoer committed the wrongdoing with the intention of causing the shareholder to suffer loss, it is bizarre to say that the loss which the defendant intended to cause, and which ensued from his wrongdoing, was nevertheless not caused by what he did".

ii)                 Lord Reed had already considered at p 38 the practical complexities for a trial judge in trying to establish the extent, if any, to which a fall in the value of a company's shares was attributable to a loss that it had suffered because of the defendant's wrongdoing, adding "But the existence of a concurrent claim by the company would add another dimension to the difficulties. It would be necessary, for example, to take account of the fact that the wrongdoing had resulted in the company's acquiring an asset, namely its right of action against the defendant, which might have offset any detrimental effect of the wrongdoing on the value of the shares….Those issues might have to be addressed in the context of a proliferation of claims, possibly in different proceedings, at different times, and in different jurisdictions. They would also arise in a context where there might well be conflicts of interest between the shareholder and the company's directors, its liquidator, other shareholders, and creditors".

c)                  Company autonomy, conflicts of interest and the encouragement and integrity of settlements

i)                   At paragraphs 37 and 59 Lord Reed considered that the reflective loss principle was required to allow company's management, whether through its directors or a liquidator, to compromise the company's claims. At p 37 Lord Reed discussed the company autonomy point and the fact that "The existence of concurrent claims could also result in the shareholders preventing the company's management from dealing with its claim in the way they considered appropriate in the best interests of the company, thereby undermining the rule in Foss v Harbottle. That could occur, for example, where the company's management wanted to compromise the company's claim but were prevented from doing so by the shareholder's refusal to enter into a settlement with the wrongdoer."

ii)                 He continued, "One can envisage other situations where the existence of concurrent claims could result in the shareholders acting contrary to the company's interests, for example where the wrongdoer's assets were inadequate to satisfy both claims. But the effect of the rule in Foss v Harbottle, as the court said in Prudential at p 224, is that "[the shareholder] accepts the fact that the value of his investment follows the fortune of the company". It is for that reason that the rule in Prudential has been said to recognise "the unity of economic interests which bind a shareholder and his company".

iii)              It was said the policy consideration avoided issues where shareholders could refuse to enter settlement with the wrongdoer, or where the wrongdoer's assets were inadequate to satisfy both claims. Lord Reed held at p 37 that this policy reason was "not merely a theoretical concern" but a very real one which the rule in Foss v Harbottle addressed.

d)         Avoidance of prejudice to other shareholders and creditors

i)                   This policy justification for retaining the rule, and therefore excluding claims other than by the company, was focussed on the mischief, aptly described in argument at page 51 H of a "free-for-all in which the distribution of assets depends on the adventitious location of assets and the race to grab them is won by those who are swiftest, or best informed, best resourced or best lawyered".

ii)        The majority in Marex once again reinforced the unity of economic interest factor binding a shareholder and the company together, with Lord Reed reflecting at p 85 that "Where a company suffers a loss, it is possible that its shareholders may also suffer a consequential loss in respect of the value of their shares….Even where a loss causes the company to become insolvent, or occurs while it is insolvent,....the shareholders will recover only a pro-rata share of the company's surplus assets, if any". The court accepted this position (and therefore the consequent loss to a shareholder) but sought to make an exception for a creditor -who could be a non-shareholding creditor or a shareholder who in a separate capacity had given a loan or provided a guarantee to the company.

The "Giles v Rhind" exception

22.              The Court of Appeal held in 2002, that there were special circumstances where a shareholder could recover for loss, flowing from the company's loss, where the company failed to pursue its cause of action. In Giles another company had caused loss through conducting a business in competition with the company in which the claimant held shares, and in breach of contract both to the claimant and to the company. The company had to discontinue its action because it was unable to provide security for costs, its own impecuniosity having been caused by the defendant's wrongdoing.

23.              Of central importance, to at least some of the amendments before me, is the continuing applicability, or not, of this exception to the reflective loss principle. In fact, at the time the defendant's application was made (before the claimants' current application to amend) they argued that the claimants' pleaded claim for the diminution in share value was built entirely on the premise that it fell within the Giles exception.

24.              I can summarise the references to the Giles v Rhind exception in Marex, fairly briefly. Submissions on the point were diametrically opposed as to correct interpretation. The defendant submitted that there could be no question that any claim brought in reliance upon the exception "must fail". They asserted there is no longer a situation of developing jurisprudence on the point and the Supreme Court's majority decision has conclusively resolved the matter. The claimants submitted that Lord Reed's views of the case were not decisive and were strictly obiter. They further contended that the dissenting minority had used terms strongly suggestive that they considered the exception should remain, that Lord Hodge did not address the issue and that the issue was not one argued before the Supreme Court.

25.              I have studied the Marex judgment in detail and note that both the appellant and the respondent did in fact argue the principle in Giles when making their submissions. I also found the following references to the authority in Giles v Rhind in the majority judgment:

·                    Headnote at page 2, para-C "Giles v Rhind….overruled"

·                    Issues in the appeal at p 22 "Whether there is any and if so what scope for the court to permit proceedings claiming for losses which are prima facie within the no reflective loss rule, where there would otherwise be injustice to the claimant through inability to recover, or practical difficulty in recovering, genuine losses intentionally inflicted on the claimant by the defendant in breach of duty both to the claimant and to a company with which the claimant has a connection, and where the losses are felt by the claimant through the claimant's connection with the company".

·                    Lord Reed at p 70 "One can sympathise with the Court of Appeal's sense of the unattractiveness of the defendant's position, but the fact that a wrongdoer has unmeritoriously avoided his liability in damages to A is not a reason for requiring him to pay damages to B. The basis of the decisions in Prudential and Johnson is that a shareholder, whose shares have fallen in value as the consequence of loss suffered by the company for the recovery of which it has a cause of action, has not suffered a recoverable loss. That conclusion does not depend on whether the company is financially able to bring proceedings or not". Then at p 71 "The same criticism applies to the later decision… where the court followed Giles v Rhind".

·                    Lord Reed at p 74 "I would hold that no such exception exists".

·                    Lord Reed at p 89 "I would therefore reaffirm the approach adopted in Prudential.. and by Lord Bingham in Johnson ..and depart from the reasoning in the other speeches in that case, and in later authorities, so far as it is inconsistent with the foregoing. It follows that Giles v Rhind, Perry v Day.. and Gardner v Parker.. were wrongly decided".

·                    Lord Reed at p 91 "Three issues arose before the Court of Appeal… The second issue was whether the Giles v Rhind exception applied. The Court of Appeal held that it did not" and continuing at p 92 "For the reasons I have explained, the rule in Prudential has no application to the present case, since it does not concern a shareholder. That disposes of the first issue. It also disposes of the second, since no question arises of a possible exception. In any event, as I have explained, there is no Giles v Rhind exception".

26.              None of the cases to which I was referred, and which were decided after Marex have sought to discuss a new position in respect of the Giles v Rhind exception beyond what was said in Marex. Counsel for the claimants referred to a Cambridge Law Journal article written by a legal practitioner, which said that as Lord Hodge did not comment on any of the rule's exceptions, Giles remains (arguably) good law.  This is at odds with all other legal commentaries that I have located through simple internet searches against the case name, where well-known law firms and chambers have concluded that the Giles exception is no longer valid. My determination on the point, as it relates to the defendant's application for strike out, on the basis Giles is no longer good law, is dealt with later in this judgment at paragraph 47 and onwards.

CASES DECIDED AFTER MAREX

27.              The claimants sought to persuade me that there have been four potentially important decisions, after Marex, which I should consider in reaching my determination on their application and the evolving nature of the substantive law as it impacts their request for further amendments (beyond the Giles v Rhind exception) to the statement of case. The amendments of most significance were:

a)                  Claim for loss of a favourable sale of the business in which the claimants held shares

b)                  Loss of value of the shares now they have ceased to exist post-dissolution/now the company has transferred the loss upon its dissolution

28.              The cases referenced touch upon these matters. I will consider each judgment in the chronological order in which it was handed down. I have already explained that as the claimants' skeleton argument was only prepared the day before the hearing, the defendants had to make their submissions on this new case law orally. I have found the need therefore to consider the cases in-depth myself following the hearing.

29.              Unsurprisingly there are particular factual matrices to each of the decisions which I consider are relevant to the breadth of applicability of any new authority established. I have set these out. The defendant's own skeleton relied on just one case, Naibu, which I shall come to later.  The application of my interpretation of the authorities referred to below, to the instant case, is dealt with in the paragraphs below when considering each application.

35.              The table below sets out the paragraphs which the defendant invited the claimants to discontinue on 4th September 2020, when they also advised that they were prepared to agree to the remainder of the amendments. These amendments relate to the Giles v Rhind exception as pleaded following the previous hearing before Master McCloud. They therefore pre-date the latest amended Particulars supplied by the claimants on 22^nd September 2021, well after the strike out application had been issued. The latest draft amendments seek to extend the Giles v Rhind point even further post-Marex to apply it to additional/refashioned claims for other financial losses by used of the words "alternatively, if and insofar as necessary, the Claimants rely on the exception to the reflective loss principle in Giles v Rhind". The refashioned claims themselves are described more fully and dealt with at paragraph 57 and onwards of this judgment where I consider the claimants' application to amend, as they are not the subject of the strike out claim which is focussed upon the pleading of any Giles v Rhind exception.

THE LEGAL TEST ON STRIKE OUT

36.              The test is set out at CPR 3.4(2):

"The court may strike out a statement of case if it appears to the court—

a)         that the statement of case discloses no reasonable grounds for bringing or defending the claim;

b)         that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or

c)         that there has been a failure to comply with a rule, practice direction or court order."

Incoherent /ill-founded claims

37.              The notes to the White Book, at 3.4.1 state that grounds (a) and (b) cover statements of case which are unreasonably vague, incoherent, vexatious, scurrilous or obviously ill-founded and other cases which do not amount to a legally recognisable claim. The notes continue, at page 127, to say that whilst the application to strike out can be made without evidence in support, the applicant should consider whether facts need to be proved and, if so, whether evidence in support should be filed and served.

41.              In Hamblin v World First Ltd [2020] EWHC 2383 (Comm) at [3]-[4], further guidance was more recently set out:

42.              However, it is not appropriate to strike out a claim in an area of developing jurisprudence since, in such areas, decisions as to novel points of law should be based on actual findings of fact. (Farah v British Airways, The Times, 26 January 2000, CA).

44.              Case law reflects that the court should consider whether any defects can be cured by amendment and, if they might be, the court should refrain from striking claims out without first giving the party concerned an opportunity to amend.

46.              The notes to the White Book at 3.4.16 state that "Rule 3.4.(2)(b) is not strictly relevant where the complaint is one of delay rather than a complaint as to the form or content of a statement of case… However in Habib Bank Ltd v Jaffer (Gulzar Haider) [2000] C.P.L.R 438,CA, a claim was struck out where delays were caused by a claimant acting in wholesale disregard of the norms of conducting serious litigation and doing so with full awareness of the consequences… Delay, even a long delay, cannot by itself be categorised as an abuse of process without there being some additional factor which transforms the delay into an abuse".

SUBMISSIONS ON THE STRIKE OUT APPLICATION AND MY CONCLUSIONS UPON THEM 

            Giles v Rhind exception

47.              I have already summarised some of the main submissions on this point at paragraph 24. The claimants maintained such claims remained "well-founded" and that "on a true reading of the [Marex] case, the point was not decided". They considered that Lord Hodge did not address the issue. I have already referred to the Cambridge Law Journal article at p 26 which they said demonstrates that Giles v Rhind remains "open for argument". They further cited "there are compelling arguments for its retention in the interests of justice". They urged me not to strike out the claims based on the Giles exception unless I was certain they were bound to fail. They asked me to consider the lateness in the context of the consensual agreement with the defendants in 2018 to let Marex work its way through the Supreme Court before taking further steps. They argued there was none of the usual prejudice as the amendments have been drafted early in the procedural timetable of the case, and before case management directions.

48.              The defendant sought to persuade me that all amendments relating to the Giles v Rhind exception should be struck out as bad law post-Marex. In their skeleton they said, "There can be no question, having regard to the speech of Lord Reed in Marex, adopted by the majority, that any claim brought in reliance upon the so-called Giles v Rhind exception must fail". They said that this was not an area of developing jurisprudence and referenced the extreme delay in the amendments being drafted. They added that prior to the hearing, "The Claimants have failed to articulate any basis upon which their claim, as currently pleaded, could succeed. They have simply asserted that they "do not agree with [the Defendant's] interpretation/ understanding" of the Supreme Court's judgment in Marex".  During the hearing, following submissions from the claimants, they sought to emphasise that there was no way I could avoid striking out the Giles v Rhind claims, post-Marex, and that I should resist all attempts by the claimants to seek to "case manage away the [Marex] decision".  They considered it was hopeless on a proper reading of Marex to suggest, as the claimants did, that Lord Hodge somehow disagreed with Lord Reed on the Giles point but kept it to himself. They also pointed to the fact that none of the subsequent cases have sought to suggest that Lord Reed did not mean to put an end to the Giles exception.

49.              I have set out detailed extracts from the Marex judgment in respect of the Giles v Rhind exception at paragraph 25 above. On my clear reading of those extracts and the judgment, there was no caveat or suggestion that remarks on Giles were obiter or best left for a future appeal. The Giles exception was a specific issue raised by the appeal for determination. The remarks made by Lord Reed were intrinsic to the whole structure of the judgment. It was not a situation like that in the Broadcasting Investment Group case referred to above at p 32 (f) where one of the points raised on appeal (relating to whether a claim for specific performance by a shareholder fell outside the reflective loss principle) was held at p 62 as "best left to a case in which it is essential to determine the issue". There was no sense of this being a leftover issue from the enlarged panel of justices.

50.              In fact, contrary to the claimants' submissions, Lord Hodge did comment on other exceptions at p 98 "When a shareholder pursues a personal claim against a wrongdoer in another capacity, such as guarantor or creditor of the company, the exclusion has no application". He also referred at p 108 to the rule of reflective loss upholding "the default position of equality among shareholders in their participation in the company's enterprise" which I consider would not be the case if the Giles v Rhind exception remained.

51.              In my determination Giles v Rhind is dead for all intents and purposes on any straightforward interpretation of Marex.  In this regard I have already referred at paragraph 26 to my own simple internet searches which tend to a similar view, albeit this is contrary to the Cambridge Law Journal article relied upon by the claimants to say the position was still "arguable". I do not consider this is persuasive enough for me to alter my view.

52.              Having reached my conclusions on what I believe is the correct interpretation of Marex relating to Giles v Rhind, when then applying the CPR test on strike-out I consider I am bound to accept the defendant's submissions that the amendments reflecting the old Giles position must be struck out. This is on the basis that they are obviously ill-founded and no longer amount to a legally recognisable claim. It would waste time and costs for both sides for this point to be pursued further. Having reached this decision, it is not appropriate to make any allowance for developing jurisprudence.

53.              Even putting to one side the question of the certainty of the law on Giles, as I see it, I also remind myself that this is not the first opportunity the claimants have had to plead the Giles exception. Master McCloud granted an indulgence in 2016, backed by an unless order. As I noted at paragraph 45 the court must be mindful of allowing a claiming party multiple opportunities to amend its case. This is not consistent with the CPR.

54.              Delay is not a ground for striking out on its own, but it can be a material factor in reaching a determination. I found the claimants' delayed approach towards the amendments currently sought in respect of Giles v Rhind, to be wholly inappropriate. Having agreed with the defendant to await the outcome of Marex they did not produce a revised draft pleading until 14 months after the Supreme Court judgment, and 11 months after the defendant's strike out application had been issued. There was no proper explanation for this, simply a restatement of the fact they had been awaiting the Supreme Court decision, and they cited a lack of prejudice. To my mind this is totally at odds with modern CPR compliant litigation where there is an onus on efficient case progression. I accept the court's listing difficulties have added to the delay, but this does not exonerate the claimants from at least preparing their revised draft pleading more quickly and seeking to engage upon it with the defendant promptly. The Towler case cited above at paragraph 38 contains useful references to the need to keep the other party informed as to the nature of the claim they are expected to meet, and the onus on saving time and costs through appropriate conduct.

55.              In addition to requesting a strike out of the Giles v Rhind exception, the defendant also sought to resist some of the additional refashioned claims which are the subject of the claimants' application by arguing for a strike out. This request was not contained within their application, as they did not have sight of the extra amendments when that was issued. I will consider those particulars within the overall context of the claimants' amendment application at paragraph 57 below.

56.              Notwithstanding my conclusions above regarding strike out of claims referencing the Giles v Rhind exception within the existing pleadings, and new paragraphs citing the same case within the draft amendments, all amendments also fall to be considered in the claimants' application which I now turn to.

THE AMENDMENTS SOUGHT BY THE CLAIMANTS IN THEIR CROSS-APPLICATION (an overview)

57.       As set out at paragraph 6 above the defendant helpfully categorised the types of amendment now sought by the claimants, into three groups:

(a)        Those said to be inconsequential and by way of clarification or correction only, such that subject to an explanation from the claimants as to why they were now required, they were not contested. The explanation put forward on behalf of the claimants, as recorded at paragraph 54 above, was simply that they had been awaiting the Marex decision which I did not find compelling. I will return to this group of amendments and what should happen to them at the end of my judgment.

(b)       Those said to contain refashioned claims for losses which were said to arise from the demise of the company. These also fall into three groups which can loosely be described as:

(i)                financial losses stemming from original shareholdings,

(ii)              loss of employment benefits and

(iii)            financial losses associated with a

            loss of reputation.

            I will consider each of these further from paragraph 71 onwards

(c)       Those said to contain new factual averments, apparently underpinning the amendments for the "refashioned" claims.

THE LEGAL TEST ON AMENDMENT

CPR and case law

58.      CPR 17.3.5 sets out the general principles governing the granting of permission to amend by the court. The starting point is having regard to all the matters mentioned in Rule 1.1 [2] under the overriding objective so as to deal with the case justly and at proportionate cost. This includes so far as is practicable –

(a)        ensuring that the parties are on an equal footing and can participate fully in proceedings, and that parties and witnesses can give their best evidence; 

(b)       saving expense;

(c)        dealing with the case in ways which are proportionate –

(i)        to the amount of money involved;

(ii)       to the importance of the case;  

(iii)      to the complexity of the issues; and

(iv)      to the financial position of each party;

(d)       Ensuring that it is dealt with expeditiously and fairly;

(e)        allotting an appropriate share of courts resources, while taking into account the need to allot resources to other cases;

            Striking a balance

59.       Pursuant to CPR 17.3.5, the power of the court is a discretionary one, with the court being required to seek to strike a balance between injustice to both the applying and opposing parties. The notes at CPR 17.3.8 remind parties that the modern approach in litigation is to require them to be open, above board and co-operative such that once the necessity to amend has become apparent they should tell their opponents about the amendment they intend to seek, in order that they can consider whether to oppose or consent to it.

A real prospect of success

65.       Coulson J also considered lateness to be a relative concept, quoting further from the Hague judgment at p 18 "a tightly focussed, properly explained and fully particularised short amendment in August may not be too late, whereas a lengthy, ill-defined, unfocussed and unexplained amendment proffered in the previous March may be too late. It all depends upon a careful review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of its consequences in terms of work wasted and consequential work to be done".

67.       At p 36 Carr J held "the applicant has to have a case which is better than merely arguable". And at 38 f) - g) "it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;" g) "a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so."

68.       Finally, at p 95 in dismissing the application to amend Carr J ruled that "The prejudice to Ms Quah in losing the opportunity to raise a difficult new case is not sufficient to overcome the prejudice to GS as set out above in circumstances where there is no good reason properly explained to justify her failure to bring the new case forward in proper time and where that failure is the result of her own decision not to investigate the merits of her case timeously". Continuing at p 96 "This may be seen as a harsh decision given its consequence for Ms Quah. But this is modern day commercial litigation".  

GENERAL SUBMISSIONS ON THE AMENDMENTS

69.       The claimants submitted in general terms that:

i)         Their factual content is formally vouched in evidence.

ii)                 Insofar as they extend the heads of loss currently pleaded, they have (at the least) a real prospect of success.

iii)              They urged particular caution for cases involving law which is developing or complex.

iv)               They said the matter will go to a heavy trial in any event so little, if anything, was to be gained from disallowing amendments now and the overriding objective required me to act justly.

v)                 There is no real prejudice to the defendant from allowing the amendment. They said the further work required of the parties would be minor to take on board the amendments. By contrast, the prejudice to the claimants from refusing them is potentially severe. They said that it would be an obvious and gross misjustice if the claimants were shut out from claiming the >£30m "real world" losses which they have suffered; and it is barely credible that the Supreme Court, when deciding Marex intended to bring such a result.

vi)               There can be "no question" that they are not within the "very late" category referred to in case law, indeed they have been fashioned pre-CCMC, albeit that the proceedings have been afoot since 2015.

70.       The defendant, in contrast, submitted in general terms:

(i)                There is no question that any amendments brought in reliance upon Giles v Rhind must fail, post-Marex and the claimants' assertion that they "do not agree" with the defendant's interpretation is untenable.

(ii)              I should have at the forefront of my mind that there have been multiple amendments to the pleadings already when describing the "appalling history of repeated reformulations of the claims", but despite that this attempt to re-plead still lacks particularity as to what the loss is, or its factual basis.

(iii)            They reminded me that the last amendments approved by a Master some five years ago were described as a "final" opportunity and backed by an unless order accordingly.

(iv)            The lack of any explanation for the delay counts against the claimants.

AMENDMENTS REGARDING FINANCIAL LOSSES ARISING FROM THE ORIGINAL SHAREHOLDINGS

71.       In respect of each claimant, the draft pleading in relation to the lost business interests was contained at paragraphs 210 (13) and (14) of the draft Re-re Amended Particulars of Claim as the loss of:

(i)        the benefit of a favourable sale which would have been achieved by the claimants and [Lloyds Development Capital] LDC in spring 2007 (alternatively thereafter), but for the Claimants' arrest and prosecution; or in the alternative, the chance of such a favourable sale.

(ii)       His shares in Cawston Park Holdings, which shares have ceased to exist upon its dissolution. Further or alternatively:

(a)       the value of those shares, which crystallised at zero at dissolution;

(b)       Such portion of the loss suffered [by] the company itself as was effectively transferred to the [First][Second] Claimant upon dissolution; and/ or

(c)       the value of his indirect interests in CPL and SHCCL

Prospects

72.       Each of these heads of loss represented a wholly new piece of drafting and a new characterisation of loss which had not been contained in any earlier iteration of the pleadings. Because of the reliance on submissions placed upon evolving case law post Marex it is necessary, on the question of prospects, to consider each sub-clause separately. I also refer back to paragraphs 27-34 where I considered those new cases and general principles to be derived from them.

Loss of a favourable sale

73.       The claimants submitted that this loss is not suffered at company level and carried up into the value of the shares; it can only arise directly at shareholder level, where the claimant is prevented from disposing effectively of his property.

74.       The claimants contended that they had a real prospect of success under this head of loss. They said that Marex establishes that the form of loss that is caught by the rule on reflective loss must be the shares value or distributions arising from them (largely in the form of dividends). They went on to submit therefore, that share sale proceeds are out with the rule (both on this basis and because the company did not have a claim for not being able to sell its shares).

75.       The claimants also argued that the Naibu case relied upon by the defendant does not deal with the point, indeed that it is unclear what the disbursements are, which were being ruled upon in that case. They also said that areas of developing law should go to a full trial.

76.       The defendant submitted that re-fashioned claims to try and convert claims caught by the reflective loss principle into ones which are recoverable by the shareholders, by pleading that a sale of the shares transfers the losses from the company to the former shareholder is "hopeless", not least because the claimants rely upon an entirely different factual matrix to the situation before me. The defendant reminded me that Master McCloud had already struck out claims for losses incurred due to the company's demise where the losses equate to diminution in share value. They invited me orally to strike out these amended claims too.

77.       Finally, the defendant submitted Naibu was good authority for demonstrating the futility of trying to distinguish between the way in which losses materialise (i.e., in terms of sale proceeds rather than share value) when they all originate from the underlying shareholdings. I considered this at paragraph 34 above.

78.       In respect of the draft claims for the loss of a favourable sale, I prefer the defendant's general submissions on interpretation and their specific submission that the judgment in Naibu is applicable to the present claims. I agree that on interpretation it exposes the artificiality of seeking to reclassify the proceeds of sale of a business as something different in nature to the underlying values of shareholdings. I consider that they are not separate and distinct as required by the majority decision in Marex.

79.       To my mind this is also consistent with the Board's findings in Primeo where it was held that the rule on reflective loss is forward looking, designed to encompass all claims as at paragraph 33 above. I remind myself that my conclusions on prospects are just part of the balancing exercise I need to conduct. Other factors are considered below. I am also mindful of the authority in Mandrake that "the possibility that the Supreme Court may develop or change the law was not sufficient to afford the claimant a real prospect of success at trial; the duty of the court is to apply the law as it stands."

Shares ceasing to exist or crystallising at zero on dissolution or the company's loss transferring to each claimant on dissolution

80.       The claimants submitted that claims for the loss caused by shares ceasing to exist were personal losses for the shareholder's own property in the shares themselves. This they argued placed the losses out with the reflective loss rule.

81.       In respect of losses crystallising at zero on dissolution, the claimants argued this placed them into the category of "ex-shareholders" who were not caught by the reflective loss principle following Nectrus which they said is binding upon me. The claimants accepted that this loss was likely to be reflected in the quantification of the other claims for loss of a favourable sale and /or the shares ceasing to exist.

82.       Finally, in respect of losses transferred upon dissolution, and to the extent not quantified by the preceding claims, the claimants submitted the situation was analogous to the share redemption in Allianz and therefore recoverable.

83.       The defendant's submissions on the applicability of Nectrus are recorded at paragraph 30 g) to the effect that it is not binding upon me and was overruled in Primeo. As regards the Allianz decision, I recorded at paragraph 31 h) that they considered the context was important and different to this one. Similar to the submissions on loss of a favourable sale, the defendant said I should strike out this latest amendment.

84.       My considered view on the prospects of an argument succeeding at trial in respect of a recoverable personal loss of property in shares, is that it is fragile. Although no specific case was cited to me it would seem inconsistent with the general propositions in other judgments where shares have ceased to exist, for example following insolvency. The authority in Mandrake is also instructive on prospects i.e. amendment applications are not the best forum for seeking to test out novel points of law.

85.       In respect of claims relating to losses said to arise by virtue of the claimants now being "former shareholders" I believe the case law is sufficiently settled for me to conclude that there are no reasonable grounds for bringing such claims, certainly in the factual matrix of this case. I refer to paragraphs 30 h), 31 i) and 33 g) above. I am aware of the non-binding nature of the Privy Council's decision in Primeo but the constitution of that Board could not be more reflective of the enlarged court in Marex. Their reasoning of the forward-looking nature of the reflective loss principle, "directed to limiting the ability of a shareholder to acquire a right of action from that time on", is to my mind, flawless. This view of course takes account of the fact that Marex established that the underlying principle of reflective loss is here to stay, in respect of shareholders suffering losses in relation to diminution of their share value. I prefer the defendant's submissions regarding the correct interpretation in respect of both Nectrus and Allianz when considering likely prospects of success.

Claims as indirect shareholders

86.       The defendant submitted that the validity of any claims by indirect shareholders is "far from clear" on the basis of the current case law. The claimants had of course relied upon Broadcasting Investment Group Ltd which I explored at paragraph 32 above. They wished me to consider the reasoning of the judge at first instance and ignore obiter remarks by Arnold LJ.

87.       I conclude that it is very dubious whether claims made by the claimants as indirect shareholders, in wholly owned subsidiaries would survive post-Marex. The wholly owned subsidiary model more closely mirrors the illustrative situation described by Arnold LJ than the case that was before him. I do not find that such a claim meets the threshold test of "bound to fail" which would be applicable for a strike out application, but the claim is very borderline for the "realistic prospects" test required on an amendment. I recall Arnold LJ's obiter comments that the position is "well arguable" that such claims would fail which seems to be a similar position to my own.

Clarity

88.       In respect of loss of a favourable sale the claimants submitted in their skeleton argument that because a sale depended in part upon the likely actions of LDC and third-party purchasers it should be analysed on a "loss of a chance" basis. It was not however fully pleaded as such.

89.       The defendant submitted that the claimants have not expressly pleaded that they were prevented from selling their shares, it is just an inference; what is currently pleaded lacks particularity, (especially causality of loss).

90.       Whichever way I look at it, it is plain to me that the pleading on loss of a sale is lacking, even in this Re-re-amended set of Particulars.

91.       Turning to consider shares which have ceased to exist or where losses have been transferred, the defendant submitted that any draft amendments referring to the loss of share values upon dissolution lack particularity as to how, or why, a loss might arise at that point in time, which is distinct from overall diminution in share value as caught by the reflective loss principle.

94.       In considering proportionality, the main submissions focussed on the amount of damages at stake and the complexity of a developing area of law. On the first point, without doubt, an awful lot of money is at stake if the amendments are not allowed, but this only makes it even more mysterious that in a 37-page pleading only a scant few lines are devoted to explaining, in very brief outline, the factual basis for making those claims, such explanation having been withheld, or certainly not articulated, for around six years during earlier amendments to Particulars and two Replies. 

95.       When considering the developing area of law around reflective loss, it is plain that claims involving reflective loss, and exploring the exceptions to the rule, have been afoot for a number of years, pre-Marex. Indeed, Marex was of course one such attempt to test a boundary, so it seems to me that the claimants could have tried to test boundaries themselves in an earlier iteration of the Particulars, had they chosen to do so. They would not necessarily have been successful but there was no need to await the outcome of Marex. The judgment in Mandrake says on amendment applications the court should not consider the possibility of what the Supreme Court may decide in the future; the duty of the court is to apply the law as it stands. In this respect the CPR test at 1.1 [2] c (iii) has been developed through case law.

96.       On proportionality I also take account of Hague and consider the amount of work done so far which on the pleadings comprises three previous sets of Particulars, three replies to Part 18 requests and two Replies by the claimants as well as two Defences plus drafting of the Part 18 requests and this being the second strike out application. If the amendments are allowed there will be a revisiting of significant steps involving substantial further cost and effort. This is not true of all the amendments but is correct for the most significant ones relating to financial business losses. I do not accept the claimants' submission that the further work consequential upon allowing the amendments would be minor.

Delay and the reasons for it

97.       The defendant referred to the absence of any explanation for the claims being introduced (prior to the skeleton argument) and for the lateness and lack of evidence. They said it was unacceptable that 15 years on the claimants should be permitted to plead that they were going to sell the company, having not mentioned it before and adduced no evidence either. It should not be introduced as "a sudden revelation". Their more general submissions on lateness related to the other financial losses arising from the original shareholding as above.

98.       The claimants however responded that they are not "very late", and it was not a new factual case regarding the loss of a sale. This was because they maintained that the defendant's officers had been aware of an impending sale and the likely failure of the business in the event of a prosecution such that a sale would be scuppered. That to my mind does not explain why the case was not pleaded previously.

99.       On the subject of delay, I accept the claimants' submission they are not in the "very late" category such that a trial date could be prejudiced, but that is not the end of the matter as the authorities referred to at paragraph 65 make plain. Lateness is a relative concept, and given both the lapse of time since proceedings were issued, the volume of pleadings to date and the Master's very clear "last chance saloon" style order following the hearing on 4^th October 2016, lateness is a heavy factor weighing against the claimants. They were granted a considerable indulgence on the last occasion concerning amendments before Master McCloud. I was surprised by the manner in which the claimants' addressed delay, not having any real explanation, to my mind at least for it. The only reasons offered were delays awaiting the Marex judgment and subsequently awaiting a court listing, neither of which appeared satisfactory given the other timescales involved post-Marex and after the defendant's application being issued.

100.     The chronology at paragraph 8 above records the lack of substantive response to the Marex judgment until 6 weeks before this hearing i.e., some 15 months after judgment had been handed down, and even then, the response was somewhat woolly, "We do not agree your interpretation". That line was maintained without reasoning until the eve of this hearing, and after the usual time by which skeleton arguments should have been delivered.

101.     As the authorities make very clear the thrust of modern commercial litigation is to be progressive, narrowing issues as early as possible and where delay can result in real disruption this can, combined with other factors, trump any potential merits of proposed amendments when the court is considering the grant of permission for them.

102.     It is for the claimant to prosecute their action but the procedural history in this matter reveals it has routinely been the defendant that has been setting the pace. They have been seeking to progress matters by requesting clarification of pleadings which have been light on both causality and particularisation of losses. Whilst I recognise that a defendant who constantly chivvies the other party may also not be working totally in the spirit of the CPR, I do not consider the timing or nature of the steps taken by the defendant in this action to fall into that category.

103.     The courts would soon become bogged down in very old claims if they all followed the rather slow and winding path this action has taken to date. It is not for me to speculate as to why some of the delays have arisen, in the absence of anything more meaningful being articulated before me.

104.     I also have in mind that on the last occasion that amendments were before this court, the claimants, most unusually, had not prepared a draft of what they were seeking in advance and were offered the "last chance saloon" to put things right. It is therefore incomprehensible to me (as no proper explanation has been provided) how they find themselves once again on the back foot seeking late amendments without having engaged in a proper CPR compliant "cards on the table" exchange with the defendant in advance of the hearing.

105.     The claimants could have put together their draft amendments post -Marex a year earlier than they did. A number of the current amendments could have been drafted even before Marex; as the defendant said in submissions it is not as though the claimants could only just have remembered that they had plans to sell the company in 2007, such fact being said to underpin some of the refashioned claims to include loss of a favourable sale. Similarly, claims made in the capacity of "indirect" or "former" shareholder could have been pleaded at the outset if there was a belief that it was appropriate. Indeed, one of the cases relied upon by the claimants, Nectrus, pre-dated Marex in terms of original argument on the point about ex-shareholders.

Prejudice

106.     The prejudice to the defendant in allowing the amendments can in part be compensated by costs, although as Carr J observed in Quah at p 88 "an opposing party is never fully compensated for the costs it incurs (or for the business disruption and loss of management time)". This reflects the modern view that prejudice goes beyond costs which may not be seen as adequate compensation.  I do not find this prejudice to the defendant to be overwhelming in my determination, but it is nonetheless a significant factor.  

107.     The prejudice to the claimants of not allowing them the chance to be heard at trial, on the fresh claims they have particularised in the latest amendments, is significant on the face of it. However, in many regards, it could also be viewed as illusory, where poor prospects associated with the amendments is such a strong factor.

STRIKING THE BALANCE AND CONCLUSIONS ON AMENDMENTS FOR FINANCIAL LOSSES RELATING TO SHARES

108.     I have taken the opportunity to weigh up all the factors which are relevant. In terms of prospects, I consider they range from "hopeless" for some of the amendments to "fragile" at best for one of them. In terms of clarity, I consider the new pleadings appear rather more of a draft than a finished product, which given the time scales involved is highly unsatisfactory and does not meet the threshold levels set out in Towler and CIP Properties. Delay is a relative concept and where extreme can trump merits. I consider the delay in this case has been excessive. Proportionality is a significant factor, and more so in the claimants' favour in financial terms but as the modern application of the test also reflects wasted time that provides some counterbalance. I do not consider the prejudice to the defendant in allowing the amendments would be overwhelming (although that does not of itself make it acceptable), but the claimants have contributed significantly to the prejudice against them if the amendments are refused. Overall, the balance is tipped heavily against allowing these amendments by reason of the poor prospects, (and not forgetting the case law in Mandrake that amendments are not the appropriate mechanism for testing novel points of law) delay and lack of clarity.

109.     In terms of overall justice pursuant to the overriding objective, I call to mind the words of Carr J as she then was in Quah at p 38 g) that a much stricter view is taken now of acceptable conduct and the wider public interest in the allocation of court resource, where there has been no good explanation for delay. The claimants have had the benefit of legal representation throughout and had warnings from Master McCloud in 2016 about the critical need to sort out their pleadings earlier, if they wanted to raise claims in a new way. These amendments came before me only after the listing of the defendant's application. 

110.     Draft paragraphs 210 (13) (iii) and 210 (14) (iii) simply refer in identical terms to the losses claimed for each claimant for "His ongoing and future remuneration and benefits as an employee, a director and executive officer of the companies".

Prospects

111.     The claimant submitted that this form of loss is entirely personal and has nothing to do with their status as shareholders; as such they argued it was "plainly not affected by the "reflective loss" principle".

112.     The defendant said it was critical to my view of these claims to consider how such remuneration was paid and,  "While the Supreme Court in Marex unequivocally, and unanimously, held that claims brought in the capacity of creditor were not precluded by the rule in Prudential, it did highlight one aspect of the claim in Johnson which served to illustrate the potentially blurred line that may exist (on the facts) between benefits recovered as a  shareholder and those received as an employee".

113.     In Johnson part of the claim was for the value of a pension policy, but in that case the contributions were apparently a form of distribution of profits to a shareholder, as an alternative to payment of dividends or bonuses. Therefore, the House of Lords concluded it was merely reflective of the company's loss and should be struck out. The defendant accepted that they could not make a submission these claims were unarguable as a matter of law. They did not opine on whether they had a realistic prospect of success.

114.     To my mind, there is a realistic prospect of success for these claims if disclosure reveals forms of employee remuneration which are separate from payments in respect of shareholdings. This would not be at all uncommon in a corporate structure.

Clarity

115.     The defendant submitted "there is a complete absence of particulars as to what sums are said to be involved and as to the basis upon which the Claimants were allegedly remunerated outside any distributions received as shareholders". This seems incontrovertible as the pleading is extremely brief as set out above, but I note that as this is not a personal injury claim CPR 16 PD.4 does not apply.

Delay and the reasons for it

116.     The points concerning delay have already been set out above at paragraphs 97-105. There were no further specific matters raised in respect of this head of loss alone.

Proportionality

117.     It is difficult to fully assess this factor without any great sense of the magnitude of the sums involved. I do not however consider it should be particularly difficult or complex to ascertain which side of the "blurred line" any relevant payments fall, following a proper disclosure exercise encompassing payroll and tax records as well as any contractual documentation.

Prejudice

118.     There were no specific submissions in relation to this head alone, although the general factors already recorded would be relevant. I have read the earlier pleadings thoroughly and noted the following references which taken together point towards the likelihood of a claim, even if not well-articulated (or at least a realistic risk that sums would be sought relating to the events described), for loss of employee benefits even though they were not expressly identified:

·                    Para 119 refers to the claimants absenting themselves from the business "so they were in effect suspended".

·                    Para 161 refers to the claimants being formally dismissed

·                    Para 162 refers to the First Claimant being suspended from his professional register

·                    Para 210 (3) states "the prosecution effectively ended the First Claimant's career"

·                    Para 210 (10) states "The prosecution hampered the Second Claimant's career".

119.     Unlike the claims for losses arising from their shareholdings, these claims did not arrive in the latest draft pleadings wholly "out of the blue". I have already referenced inferences about earnings losses in the existing Particulars of Claim and I note also the Amended Reply to Defence at 1 A where references to dismissals from the positions of Chief Executive (First Claimant) and Finance Director (second Claimant) are contained.

120.     There is a realistic prospect of success. The court in Marex was at pains not to expand the ambit of the reflective loss principle wider than to shareholders, suing in that capacity. I quoted Lord Reed's distinction regarding employees at p 20 f) above. The factors weighing most heavily against them are lack of clarity and delay but they are not sufficient to my mind to displace the potential prejudice which may otherwise be caused by a well circumscribed claim which will not be disproportionate to pursue through disclosure and lay evidence where necessary.

121.     I have therefore concluded it would be unjust in all the circumstances of the case to prohibit the claimants from advancing with their draft, albeit extremely brief, pleading in respect of any remunerative losses connected with their employment but unrelated to their shares. Most employment claims do not require expert evidence but any determination on that point will be for a future case management occasion. At such a juncture better information should be to hand, including budgeting information.

122.     I do not believe this decision is unjust to the defendant in my balancing exercise, given that I do not believe the defendant will need to revisit steps already taken, or at least not to any significant level. The claimants' delay and lack of clarity do them no credit but it would be a disproportionate censure to deny them this last opportunity to set matters straight through procedural case management steps which have not yet begun.

AMENDMENTS REGARDING FINANCIAL LOSSES RESULTING FROM LOSS OF REPUTATION

The pleading

123.     This loss was characterised at 210 (13) (iv) and 210 (14) (iv) for each claimant in respect of "The standing, reputation and track record which he enjoyed and would have enjoyed as senior executive and partial owner of the successful companies".

Prospects

124.     The defendants submitted that these claims appeared to be wholly unparticularised pecuniary loss and whilst general damages for malicious prosecution may, in principle, include compensation for damage to reputation, such damages would be non-pecuniary losses. The defendant therefore objected to the characterisation of these claims as ones more akin to special damages.

125.     The claimants on the other hand submitted that these losses were entirely personal to the claimants and unrelated to shareholdings and should be allowed in as they are not barred under any reflective loss principle.

126.     Prospects of success therefore appear highly uncertain as characterisation of the claim appears to be "out of the norm" for actions of this type. I was not taken to any case authority which might persuade me otherwise. It is difficult for me then to find that there is a realistic prospect of success for this head of claim when it is so vague.

Clarity

126.     The defendant submitted the pleading was "incoherent", and "unsatisfactory".. in terms of clarity and particularity". In their skeleton argument they tried to trace a causal route for the origin of the loss as they said it was unclear on the face of the pleading. They suggested that the claimants might be contending that the root cause was the prosecution which led to the demise of the company and that as a result of its demise the claimants suffered damage to their reputation and standing which was somehow separate from the damage caused by the mere fact of being prosecuted. The claimants maintained it was a proper head of loss and sufficiently pleaded.

127.     I prefer the submissions of the defendant and would have expected this claim to be pleaded in greater detail, especially in the context of this "last chance saloon" if it was considered to be an important and distinct head of loss, separate from other types of damages already contemplated within the main awards and the employment/career losses claimed elsewhere.

Delay and reasons for it

128.     As with the employment losses claim considered above, there were no specific submissions in respect of this factor so I have to fall back on the general submissions regarding delay at paragraphs 97-105 above.

Proportionality

129.     As with employment losses discussed at paragraph 117 I do not have adequate information on quantum to fully assess this factor.

Prejudice

130.     There were no specific submissions in relation to this head of loss alone. As the pleading lacked clarity it is difficult to comprehend what the claimants consider they might be missing out on in addition to the usual general damages claims where there has been a malicious prosecution, and which are already provided for. This is even more so in present circumstances where I am allowing an amendment for financial losses related to employment benefits. The prejudice to the defendant would be the cost and uncertainty of a claim which is so poorly drafted and not understood.

STRIKING THE BALANCE AND CONCLUSIONS ON AMENDMENTS FOR LOSS OF REPUTATION

131.     Weighing up all the factors above, there is nothing other than a vague sense of prejudice which was unquantified that seems to be material in the claimants' favour for allowing the amendment. Certainly, on prospects, clarity and delay my decision was weighed towards the defendant. There was nothing of substance either way in submissions regarding proportionality, beyond the more generic points made in relation to other amendments. Overall, I do not believe that justice would be done under the overriding objective were I to allow the amendment.

OVERALL DETERMINATION OF THE CLAIMANTS' DRAFT RE-RE-AMENDED PARTICULARS OF CLAIM

132.     I have already given my judgment on the proposed amendments relating to financial losses relating to shares, remuneration and benefits as an employee, director and executive officer as well as for loss of reputation. I have not referred to the new proposed wording intertwined with these amendments regarding the Giles v Rhind exception. I have however concluded that the existing wording relating to that case should be struck out under the defendant's application. I would hope it is plain that the amendment application insofar as it relies on that exception fails too.

133.     For the avoidance of doubt I conclude that the proposed amended wording such as at paragraph 210A "Alternatively, if and insofar as necessary.." referencing Giles v Rhind should not be permitted. This is because I do not believe that there are realistic prospects of the claimants' case succeeding by placing reliance on the Giles authority given the judgment in Marex. Additionally, the points made previously causing me to reject other amendments such as delay and lack of clarity, as well as the overriding objective lead me to the same conclusion. Therefore, any part of the draft amended pleading seeking to rely on the Giles case needs to be removed from the Particulars going forwards.

134.     I referred previously to a category of proposed amendments which were said to be inconsequential by way of clarification or correction only, such that subject to an explanation as to why they are now required, the defendant was not contesting them. The explanation put forward by the claimants was simply that they had been awaiting the Marex decision.

135.     I have decided in the context of an already lengthy judgment not to list or describe this group of proposed amendments. However, as they are indeed inconsequential, and a revised pleading will be required in any event following my determination on other points, I am prepared to allow them in if they aid clarity. This is despite the lack of a compelling explanation because I consider in terms of overall proportionality justice will be better served if the pleading is as coherent as possible. It also appears that they will not add appreciably to delay or expense. As there was no time to draw my attention to these paragraphs at the hearing counsel may, if they consider it necessary, address me further regarding any such minor amendments upon hand down of this judgment.

136.     Finally on the amendments I was made aware of a group which contained new factual averments said to underpin the "refashioned" claims. I would hope that having made determinations on the permissibility of each set of "refashioned" claims, it will be clear which amendments in this group will now fall away as otiose.  Similarly, to the inconsequential amendments sought, if counsel needs to address me further on these, because they cannot be agreed between the parties, the opportunity will be available on hand down of this judgment.

137.     To conclude, I find in favour of the defendant's application to strike out claims relating to the Giles v Rhind exception for all the reasons set out above. On the claimants' application for permission to amend I dismiss the requests made save for those relating to loss of remuneration/benefits as an employee, director and executive officer of the companies. In addition, some minor uncontroversial amendments for the purposes of clarification or correction are allowed. Finally, there may be a small number of factual averments, as referred to at paragraph 136, which it will be sensible to permit now that my overall determination has been made on the substantive issues. The parties can address me separately on these if they cannot be agreed.

EDITORIAL NOTE

A         After circulating my Approved Judgment counsel for the claimants brought two cases to my attention which had been decided since the original hearing in this claim. Counsel made it clear he was not inviting me to reopen my judgment, nor to rely upon the authorities. As they touch on some of the issues which I was asked to determine, I simply note them below with the most relevant paragraphs identified by counsel and a cross-reference to my own paragraphs dealing with similar determinations.