STATEMENTS OF CASE: A REPLY CANNOT BE INCONSISTENT WITH THE PARTICULARS OF CLAIM

August 23, 2021 · by · in Civil Procedure, Statements of Case

In  R5 Capital Ltd v Mitheridge Capital Management LLP [2021] EWHC 2316 (Ch) Deputy Master Raeburn highlighted the fact that the rules do not allow a Reply to be, or to appear to be, contradictory to the case set out in the Particulars of Claim.

 

“Not only is the proposition that one can advance a new claim in a Reply contrary to the clear terms of the Practice Direction, but it is also inherently undesirable and contrary to the overriding objective of dealing with cases justly and at a proportionate cost. If such practice were to be condoned, claimants would not need to be precise in their formulation of the Particulars of Claim since they could always have a second bite of the cherry when pleading the Reply…”

(Mr Justice Pepperall in Martlet Homes Ltd v Mullaley & Co Ltd [2021] EWHC 296 (TCC))

 

 

THE CASE

The defendant applied for security for costs and to strike out part of the claimant’s case.

THE ARGUMENT IN RELATION TO THE REPLY

The defendant argued that parts of the Reply were incompatible with the claimant’s pleaded case. The Master agreed and the claimant was ordered to rectify the position.

THE JUDGMENT ON THIS ISSUE
66. The Defendant seeks an order compelling the Claimant to produce draft amended Particulars of Claim setting out any case based on its “subsequent subscription” argument, failing which paragraph 20(b) of the Reply is struck out, together with consequential orders.
    1. Paragraph 20 of the Reply states as follows (my emphasis):
“In relation to paragraph 31:

a. Paragraph 19 above is repeated;

b. The investment by TFO in Fund II was a subsequent subscription that resulted from the Claimant’s introduction of the Defendant to OUEM (thereby falling within the definition of Mitheridge Capital Investment Amount under the Agreement);

c. The Claimant is therefore entitled to a Success Fee in respect of Fund II.”

    1. The basis of the Defendant’s application is in essence, that the Claimant’s Reply is inconsistent with its Particulars of Claim, in breach of paragraph 9.2 of Practice Direction 16.
    1. It is said that the Claimant’s Reply introduces a new case that “the investment in TFO was a subsequent subscription” which is contrary to the Claimant’s Particulars of Claim and the Claimant’s Response to the Defendant’s RFI, which states that “The Claimant does not rely upon the Fund II Investment as being a “subsequent subscription“.
    1. Counsel for the Claimant submits that there is no need for any amendment to the Particulars of Claim, nor to the Reply. He says that the Claimant has stated expressly in its response to the Defendant’s request for further information that it does not allege that the Fund II Investment was a “subsequent subscription” as those words are used in clause 1.2.1(f) of the Agreement and that no order should be made by this Court as the Defendant would be bound by its Particulars of Claim and Reply in any event.
    1. In oral argument, Counsel for the Claimant submitted that the confusion has arisen as a result of a mere drafting infelicity and that paragraph 20(b) of the Reply simply refers to the Fund II Investment as a subsequent investment, because it was made after the Fund I Investment and that this was intended to refer to a further, later, second or subsequent investment resulting from the same introduction as the first investment.
    1. The applicable principles are as follows; paragraph 9.2 of Practice Direction 16 provides that:
“A subsequent statement of case must not contradict or be inconsistent with an earlier one; for example, a reply to a defence must not bring in a new claim.“
    1. Counsel for the Defendant referred me to the judgment of Mr Justice Pepperall in Martlet Homes Ltd v Mullaley & Co Ltd [2021] EWHC 296 (TCC), at paragraph [21], which states:
“Not only is the proposition that one can advance a new claim in a Reply contrary to the clear terms of the Practice Direction, but it is also inherently undesirable and contrary to the overriding objective of dealing with cases justly and at a proportionate cost. If such practice were to be condoned, claimants would not need to be precise in their formulation of the Particulars of Claim since they could always have a second bite of the cherry when pleading the Reply…”
    1. CPR 3.4(2)(c) also provides that the Court has a discretion to strike out part of a statement of case if it appears to the Court that there has been a failure to comply with a rule, practice direction or court order.
    1. In my judgment, there is clearly an inconsistency in the Claimant’s statements of case which has arisen due to its use of the term “subsequent subscription” which could be taken as having a particular meaning under the Introducers Agreement. That ambiguity goes to the ambit of the Claimant’s pleaded case. Pursuant to Practice Direction 16, a new and inconsistent case cannot be left to stand in the Reply and although Counsel for the Claimant has conceded that it does not seek to assert a positive case on the basis that investment by TFO in Fund II was a “subsequent subscription”, its statements of case require greater clarity because as drafted, they are contradictory.
  1. I therefore find that it is necessary and in furtherance of the overriding objective to make the order sought by the Defendant as it appears that there has been a failure to comply with a practice direction in the manner described above. I will hear Counsel on the form of order.
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