DEFENDANTS’ APPLICATION TO RESILE FROM ADMISSIONS REFUSED: NO EVIDENCE THAT DEFENCE WAS NOT CAREFULLY CONSIDERED BY THE LEGAL ADVISERS WITH THE DEFENDANTS

The judgment of Chief Master Marsh in Financial Conduct Authority v Skinner & Ors [2019] EWHC 392 has only recently arrived on BAILLI. It is an example of the court refusing to allow a party to withdraw from admissions.  The Master found that the admissions must have been made with the defendants’ full knowledge and consent, allowing them to resile would be prejudicial. Not least the proposed amendments did not give ground to any viable defence.

 

THE CASE

The claimant brought an action alleging that the defendants had breached a general statutory prohibition against carrying on an activity that could only be conducted by an authorised person.  Defences were filed which admitted the breaches. The defence was a composite defence from all the defendants, two of the defendants signing the statement of truth personally.

THE DEFENDANTS’ APPLICATION TO RESILE

The claimant made an application for an interim payment. This appears to have prompted the defendants to reconsider their position and they made an application to resile from the admissions made.  That application was dismissed by the Chief Master.

THE JUDGMENT

    1. The defendants seek to make a number of changes to their defence. With a view to keeping this judgment brief, I will gratefully adopt the table very helpfully prepared by Mr Purchase, who appears for the claimant, which sets out in the left-hand side the claimant’s case. On the right-hand side, the material part of the defence, as it was originally pleaded, and then the changes that are sought to be made.
    1. When considering an application of this type, the court is required to have regard to the factors that are set out in paragraph 7 of Practice Direction 14, at least so far as they are material. These factors include: the grounds of the application; the conduct of the parties; the prejudice caused in both directions; the stage the proceedings have reached; prospects of success; and the interests of the administration of justice. That last point plainly requires the court to have regard to the overriding objective.
    1. The grounds are, without, I hope, being unfair to Mr Miller and Mr Mongalar, rather thin. It is, to my mind, quite clear that the defence was drafted on their instructions by solicitors, with the involvement of counsel. There is no evidence to lead the court to the conclusion that the defence does not reflect the instructions that were given when the defence was drafted.
    1. In light of the very detailed way in which the defence is drafted, such that it includes a considerable volume of facts pleaded that the defendants rely on, it is inconceivable (or at least there is no evidence to the contrary) that it was not very carefully considered by the legal advisers with the defendants.
    1. I am unable to accept, as it is now suggested, that there was a misunderstanding about the position. I do not consider that conduct is an important factor in relation to this case. Prejudice, however, is of significance.
    1. So far as the claimant is concerned, plainly there would be significant prejudice if the defendants were now to put forward a viable defence. It would involve substantial reworking of the claim altogether and there is, as well, potential prejudice to investors who have lost money as a result of the activity. Plainly, if there was a viable defence that could be put forward now, which the defendants are unable to put forward, that indeed would be prejudicial to them.
    1. The desire to change the defences to withdraw admissions, is not put forward at a particularly late stage in this claim. Trial will not take place until April 2020. But the claim has proceeded on the basis of the defence now for a considerable period and the catalyst for the change is clearly the recognition that immediate liability may be faced.
    1. The prospects of success are a matter that is of profound importance. Without, I hope, oversimplifying the legal position, the claim is based on sections 19 and 21 which involve the authority proving facts under section 19: that regulated activity was carried on by a person who was not authorised and under section 21 they seek to prove that in the course of business communications and other activities which were not authorised were undertaken.
    1. So far as the individual defendants are concerned, they seek to show that because the two companies undertook that activity, they were thereby knowingly concerned in that activity.
    1. In relation to the claims that are made, it is not directly relevant or a defence if the defendants believed that the accountants were authorised. That belief would not undermine the case based on the events which were carried out. The substance of the amendments is that in each case the defendants seek to rely on their understanding or belief about what occurred. Without going through each amendment in detail, the effect of the withdrawal of the admissions would be to change what is an entirely clear basis, namely that the facts pleaded are accepted and relevant admissions are made to a bare denial based on what is not in fact a defence to the claim. That is clearly not an attractive basis for permitting the withdrawal of the admissions to take place.
    1. Looking at the matter overall and having clear regard to the requirements of justice and the needs of the overriding objective, I am satisfied that it would not be right at this stage to permit the defendants to withdraw these admissions, if for no other reason than that to do so would not in fact further their cause. It would merely create confusion by permitting them to put forward a defence which, on the face of it, has no real prospect of success.
    1. I will, therefore, dismiss the application.