knowledge 8 July 2019 |

Show Your Hand: Court of Appeal of England and Wales Determines that All Conspiracy Claims Must be Pleaded in Full

A recent judgment from the Court of Appeal in England and Wales, Elite Property Holdings Ltd v Barclays Bank Plc1 presents a useful reminder of the procedural aspects of the tort of conspiracy. The case involved an appeal of a decision from the High Court. The Court of Appeal held that all conspiracy claims must be properly pleaded, in other words all grounds must be set out in detail in the statement of claim.  The case makes it clear that claimants must show their hand at an early stage of proceedings. 

Background

Elite Property Holdings and an associated company, Health and Home Ltd (together, the “Companies”) appealed against the dismissal of their applications to amend their statements of claim that set out pleas of conspiracy against the defendant, Barclays Bank Plc (the “Bank”).2

The Companies were incorporated in the British Virgin Islands (“BVI”) and entered into a number of loan agreements with the Bank which were secured by properties in England, including three care homes.  In 2010, the Companies also entered into structured collars,3 also known as interest rate hedging products ("IRHPs"),4 as replacement hedging in respect of loan facilities. 

In 2012, the Financial Conduct Authority (the “FCA”) carried out a review of the sale of IRHPs and this led to the introduction of a redress scheme for customers who had been mis-sold these products. The Bank gave an undertaking to the FCA that it would not foreclose on IRHP customers in financial difficulties, unless "exceptional circumstances” existed. Any assessment of “exceptional circumstances” must be carried out by an independent and suitably “skilled person”.

 In August 2013, the Companies submitted a proposal for a Company Voluntary Arrangement, which was defined as a default event in the terms of the loan facilities.  Shortly after this, the Bank learned that the Companies had been struck off the BVI company register. In September 2013, KPMG as the independent "skilled person", determined that "exceptional circumstances" existed and that the Bank could take enforcement action against the Companies.  The Bank appointed BDO as administrators and receivers to enable the care homes to operate until the business could be sold.

The Conspiracy Claims

The Companies argued that the Bank and BDO had conspired to enable foreclosure on the loan facilities and breached the undertaking that had been given to the FCA.  They argued that this amounted to conspiracy to injure them by unlawful means. 

The Court of Appeal noted that “for the amendments to be allowed the Appellants need to show that they have a real as opposed to fanciful prospect of success which is one that is more than merely arguable and carries some degree of conviction".5

The Court of Appeal held that the conspiracy claims did not have any prospect of success and that “…no exceptional circumstances existed and…neither the wrongful interference claim, nor the conspiracy to use unlawful means claim can be made, because there was no unlawfulness to begin with."6

The elements of the tort of conspiracy involve two or more persons combining or agreeing to act in an unlawful manner with the intent to injure a third party.7 In this case, there was no allegation of an agreement to do an unlawful act in the amended draft pleadings, nor was there a real prospect of showing that the Bank and BDO had conspired to injure the Companies based on the facts of the case.8

This decision shows that a heavy burden falls on parties who want to advance a claim of conspiracy, particularly when it can be difficult to obtain evidence of an alleged conspiracy.  It places an obligation on the claimant to show their hand at a very early stage of the proceedings, crucially in the absence of any discovery to support the claims being advanced.  Any subsequent amendments to the pleadings will only be permitted if they have a real chance of success.

Analysis

The principles outlined in the Elite case align to those established in Irish jurisprudence. In this regard, it is worth noting the Irish decision of National Education Board v Ryan.9 This case makes it clear that similar principles apply to fraud claims as to those grounded in the tort of conspiracy. Clarke J held that a balance must be struck between (a) the requirement to properly and fully plead one’s case; and (b) the difficulties inherent in doing so. Clarke J’s decision confirms that a plaintiff alleging fraud must plead the claim with sufficient detail so as to enable a defendant prepare a defence, a bare allegation will not suffice.  Once a plaintiff makes out a prima facie case by establishing, in general terms, the nature of the fraud and the consequences thereof, he will not be required, prior to the delivery of the defence, to narrow his claim unreasonably.

Both cases confirm that litigants must seek to ensure at the outset to litigation that claims alleging unconscionable wrongdoing are properly pleaded and that every element of the alleged wrongdoing is dealt with to the greatest extent possible. It will not be enough to make a bare claim of conspiracy or fraud, as the case may be. 

  1. [2019] EWCA Civ 204 – Judgment delivered on 21 February 2019 by Lady Justice Asplin.
  2. [2017] EWHC 2030 (Queen’s Bench) – High Court judgment delivered by Justice Waksman.
  3. A strategy used as a way of hedging against possible losses.
  4. The purpose of an IRHP is to enable a customer to manage fluctuating interest rates on payment of a premium. These products are typically separate to loans and include interest swaps (one type of interest rate payment is swapped for another) and structured collars (base interest rates reduce/increase repayment amounts and involve a ceiling and a floor, with capped interest rates).
  5. See [4].
  6. See [30] citing [70] of HHJ Waksman’s judgment.
  7. See [60].
  8. See [60].
  9. [2007] IEHC 428.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.