This recent judgment relates to a number of applications made in ongoing proceedings concerning the failure of a complex property investment scheme.
The proceedings relate to a property situated in Canary Wharf. In 2007 the property was purchased by a company incorporated in Jersey ("the Company") by way of a share purchase of two separate entities that owned the freehold and leasehold interest in the property. The Company acquired the property from the Royal Bank of Scotland ("RBS") for £453m, using (i) debt finance provided by RBS by way of facilities of c.£348m and bridging finance of c.£63m in addition to (ii) an initial equity investment of £40m.
The claimants are mostly residents of Ireland who invested in the scheme by subscribing for shares in a Maltese company (and through the Maltese company in a further company, which in turn subscribed for shares in the Company) rather than directly in the Company to avoid certain tax liabilities arising in Ireland. The second defendant, Evans Randall ("Evans") prepared an Investment Memorandum in September 2007 inviting offers for shares in the Company or, in the case of Irish investors, through the more complicated purchase structure described. The first defendant, Ulster Bank ("the Bank") introduced the majority of the claimants to the investment.
Between September 2007 and May 2008, the claimants delivered signed application forms for subscription to the Maltese company to the Bank. The Bank transferred investment funds thus received to the Maltese company in early 2008 in the total sum of c.£13m, which in turn indirectly subscribed for shares in the Company as envisaged. In a letter of July 2009, the Bank informed the claimants that the investment value of the property had fallen to £322m. The Bank also explained that the scheme had closed and that preferential equity investment had been accepted from a different fund and that the debt facilities, which contained loan to value covenants, had increased. In May 2010, the Bank informed the claimants that they had all lost the entire value of their investments, a position confirmed at an investor briefing in July 2010.
The claims in these proceedings are ongoing. However, in a recent application hearing the court was asked to permit proposed amendments to the pleadings to allow the claimants to make additional claims relating to fraud, dishonest breach of trust, knowing assistance or procuring breach of trust and so called "back-end" claims alleging breach of common law on the part of the Bank for failing to monitor the scheme. The court was principally concerned with the question of whether any or all of these new claims were time-barred by the provisions of the Limitation Act 1980.
It was common ground that the primary limitation period for the new claims had passed, since the loss alleged by the claimants had happened over six years previously. Instead, the claimants sought to rely on (1) specific provisions of the Civil Procedure Rules which allow new claims to be made by way of amendment where "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 permissions has already claimed a remedy in the proceedings" (CPR17.4), and (2) section 32 of the Limitation Act, which provides that time starts running against a claimant once he knows or could with reasonable diligence have discovered the facts which would constitute a valid claim.
In respect of the new claims relating to fraud, the court rejected the claimants' contention that the proposed amendments arose out of substantially the same facts as claims already pleaded relating to negligent misrepresentations. The requirements for a claim in fraud, namely knowledge on the part of the representee that his representation is false, along with an element of "moral obliquity", were not part of the original pleaded claim, and CPR 17.4 did not therefore apply. Further, section 32 of the Limitation Act did not apply since the claimants could with reasonable diligence have discovered a cause of action from the bank's letter of July 2009.
In respect of the new claims for knowing assistance or procuring breach of trust, the court held that neither section 32 nor section 21(2) of the Limitation Act, the latter section providing that no period of limitation applies to claims for fraudulent breach of trust, covered the proposed new claims. The Bank and Evans were held to have a reasonable argument that the claimants should have discovered a cause of action in 2009. Further, section 21(1) did not apply to claims of knowing assistance or procuring breach of trust.
In respect of the back-end claims, the court rejected the claimants' suggestion that these new claims were in fact additional allegations of breach by way of particularising causes of action that had already been pleaded. The Limitation Act applied given that the losses alleged occurred more than six years ago and the section 32 exception did not apply.
In addition to rejecting the application to amend, the court also granted summary judgment to Evans in respect of claims relating to breach of the regulatory regime and negligence, on the basis that there was no reasonable prospect of the claimants establishing that they were "clients" of Evans. This decision represents a considerable victory for the defendants and confirms the approach likely to be taken by the courts in respect of time-barred claims.