BL-2021-002293 - [2025] EWHC 678 (Ch)

In response to the defendant’s summary judgment application, the claimant issued its application for permission to amend the particulars of claim, to introduce a number of new factual aversions in support of an allegation of fraudulent misrepresentation.

The claimant wishes to plead that it would not have entered into the SSA at all, or have made the pleaded investments in Comprendium UK, were it not for the alleged misrepresentations. The proposed paragraph 3A of the draft amended particulars of claim provides:

This allegation is developed by reference to Mr Flohr’s prior employment by Comdisco Inc as its President of European Sales, which gave him the opportunity to bid for its European assets when they were sold off during its US Chapter 11 bankruptcy. It is alleged that he did this having filed a claim in the bankruptcy alleging among other things that he had been wrongfully discharged from his employment with the company.

The claimant then seeks to allege that in oral discussions with Mr Horlick and others Mr Flohr set out a vision for what was to become the Comprendium investment, with its business aim that of being a leading provider of enterprise software, document management and storage solutions, with him carrying out an essential role by acting as chairman and promoting and advancing the interests of the business. This led to the signing of a consultancy agreement on 27 March 2002 (i.e. the same date as the SSA), with Mr Flohr providing Mr Horlick with an assurance that he intended to play a full-time and hands-on role at Comprendium UK.

The claimant then seeks to plead that Mr Flohr’s representations to such effect were fraudulent as his intentions were not as he represented.

The draft amendments to the particulars of claim begin, at paragraphs 12A to 12C, by giving details of Mr Flohr’s employment with Comdisco, its insolvency and Mr Flohr’s claim against it in bankruptcy. They also allege that the prospective sales of its European subsidiaries provided a hugely lucrative investment opportunity. At paragraphs 16A to 17, and 21A to 21D, are further details of the discussions between Mr Horlick and Mr Flohr leading to the joint venture and the Fund’s decision to invest in Comprendium UK and the negotiation of the consultancy agreement to be entered into by or on behalf of Mr Flohr. At least much of what is said in these paragraphs adds factual background to what is in the particulars of claim as they stand and, were it not for the decision I have reached above on limitation, I would for that reason have given permission for such matters to be introduced by amendment. They would be material to the existing claim and be unobjectionable from a limitation perspective as they do not in themselves add or substitute a new cause of action.

The key paragraphs sought to be introduced are those found at paragraphs 22A to 22E. The claimant wishes to allege that Mr Flohr falsely and fraudulently represented that:

It is then sought to be alleged that Mr Flohr hid his real intention, which was to leverage and use Comprendium UK and his position as Chairman of Comprendium UK to support his bids for, and acquisitions of, the European subsidiaries of Comdisco Inc, and thereby advance his own interests. Further particulars are then provided. In particular, it is alleged that Mr Flohr did not disclose the fact or circumstances of his dismissal from Comdisco. It is said that the way in which Mr Flohr pushed ahead with the acquisition by Comprendium UK of Sail Labs, a German software translation business, shows that he had no real intention to develop Comprendium UK as an independent business, but only to use it to support his acquisition of the European subsidiaries of Comdisco. He failed to attend a Comprendium UK board meeting in April 2003, showing that his priority and focus was on the acquisition of Comdisco Germany, which completed simultaneously with the board meeting.

Particulars are then given of what is alleged to be a pattern of unscrupulous and dishonest conduct in relation to the acquisition of both Comdisco Switzerland and Comdisco Germany. It is alleged that Mr Flohr impeded, manipulated and sabotaged other prospective bids for those companies, with the intention of advancing his personal interests, by entering into agreements or understandings with others in relation to other bids, and then breaching those agreements. These particulars are supplemented by further allegations, supported by the evidence contained in the third witness statement of Ms Vials and in two witness summaries. The documents containing these further allegations are covered by the confidentiality order I made in July 2023 and continued at the start of the hearing to which this judgment relates. The decision I have reached on limitation grounds does not depend on those allegations, nor is it affected by them. In those circumstances, I do not consider there to be any need to mention the details of those allegations in this judgment, and as that evidence will not form part of ongoing proceedings I consider that the confidentiality order ought to remain in place.

In favour of the claimant, it must be said that the arguments put forward by the claimant in support of the proposed new claim are prima facie substantial. If the question for the court were merely one of whether they were coherent and properly particularised, that question would be answered in the affirmative. Many of the allegations of primary fact made by the claimant (as opposed to the inferences which are sought to be drawn from those facts) are supported by contemporaneous documentation. I also take the view that if all the primary facts pleaded under the heading of particulars of fraud were proven, a trial judge could conclude that they were more consistent with an inference of fraud than with honest conduct and that, at the least, the question whether the plea of fraud is justified is evenly balanced in that respect: see Jinxin Inc v Aser Media Pte Ltd [2022] EWHC 2988 (Comm) at [41]. I also consider it to be properly arguable that similar fact evidence of Mr Flohr’s dealings with others (as pleaded in draft in paragraph 22(c)(xii)) would be admissible at trial in carrying out this assessment. Whilst I agree with Mr Cohen that the allegations surrounding the acquisition of the Comdisco companies are not by themselves inconsistent with an intention to attempt to make a success of Comprendium UK, there are also enough factual allegations (if they were established at trial) to support the inference that Mr Flohr did not intend to make a success of Comprendium UK. Again, I express this view of the adequacy of the pleading of dishonesty without regard to the allegations covered by the confidentiality order, but if taken into account they only strengthen that view.

In his submissions on the amendment application, both oral and written, however, Sir Geoffrey did not clearly distinguish between his response to the defendant’s application, and the arguments in favour of the claimant’s. Much of his oral submissions were taken up with an exposition of how the evidence before the court supports the new case in fraud which is sought to be introduced by way of amendment. Mr Cohen observed that the submissions on behalf of the claimant were a form of jury speech rather than a response to the defendant’s application (and to the defendant’s arguments why the claimant’s proposed amendments ought not to be permitted). There is force in what Mr Cohen said. The question whether to permit the amendments is, a matter of logic and analysis, quite separate from the question whether the limitation arguments on the claim as currently pleaded are susceptible to summary judgment. That is because of the authorities on the question whether an amendment should be permitted when it is arguable that a relevant limitation period has ended.

The relevant provisions and considerations for the court when an application is made for permission to amend a claim after the end of a relevant limitation period were summarised by Coulson LJ in Mulalley & Co Ltd v Martlet Homes Ltd [2022] EWCA Civ 32 in the following way at [36]–[38]:

It is common ground that it is arguable that the limitation period for bringing a claim in fraudulent misrepresentation has passed. Such a claim constitutes a claim based upon the fraud of the defendant (i.e. within the Limitation Act 1980, s.32(1)(a); see Regent Leisuretime v National Westminster Bank plc [2003] EWCA Civ 391 at [100]). The effect of this is that time starts to run, as in a case of deliberate concealment within s.32(1)(b), once the claimant has discovered the fraud or could with reasonable diligence have discovered it. There is therefore a question whether the claimant in the present case could so have discovered the facts alleged within the six-year period applicable to claims in tort by virtue of s.2 of the 1980 Act.

It is the claimant’s evidence, in the form of the third witness statement of Ms Vials, that the ‘requirement to amend’ the particulars of claim became apparent from the further investigations carried out by the claimant’s solicitors between 23 May 2022 and 15 November 2022. The contention set out there is that the need to conduct those further investigations was prompted by the defendant’s summary judgment application, issued in May 2022. The evidence does not explain why the application prompted those investigations, nor does it positively assert that the claimant (or Mr Horlick) had no reason to carry them out sooner.

The claim in fraudulent misrepresentation plainly constitutes a new cause of action from that which is currently pleaded.

The claimant’s contention is that the deceit claim arises out of the same or substantially the same facts as those which are already in issue. Sir Geoffrey submitted that the new facts sought to be introduced in the amended particulars of claim drew out what was already there, and that there is a substantial overlap. He said that it was not sufficient that there were new facts or facts relevant only to the deceit claim for the court to come to the conclusion that the amendments did not arise out of the same or substantially the same facts as those already pleaded.

He relied on the judgment of Millett LJ in Paragon Finance plc v D B Thakerar & Co (a firm) [1999] 1 All ER 400, who at 404 said this:

The claimant contends that, in the same way, the claim in fraudulent misrepresentation is the equitable counterpart of the existing claims for breach of a duty of good faith and breach of fiduciary duty.

As Mr Cohen points out, Millett LJ was not, at this point in his judgment, dealing with the argument that new claims arose out of the same or substantially the same facts as those already in issue. He was addressing the plaintiffs’ argument that, by virtue of Limitation Act 1980, s.21, there was no period of limitation at all. The question was whether the defendants were (if liable as accessories as alleged) trustees for the purposes of that section, or whether the language of constructive trusteeship was merely a ‘formula for equitable relief’.

In Paragon, so far as material to the passage under discussion, the plaintiffs sought to rely on exactly the same facts as those already pleaded, but to add a claim in equity to the already pleaded claim, in the (in the event, forlorn) hope that such amendment might provide a better position on limitation. That is a world away from the position in the present application, where the claimant seeks to introduce a plethora of new facts in support of a claim in deceit where none is already pleaded. Sir Geoffrey did not contend in this case that fraudulent misrepresentation is the same cause of action as breach of fiduciary duty or breach of a duty of good faith.

Both parties then referred me to the following comment of Millett LJ in Paragon at 418, where he directly addressed the question whether some of the proposed amendments arose out of the same or substantially the same facts as those already pleaded. The following paragraph contains the entirety of his reasoning in rejecting that part of the application:

At 420, Pill LJ concurred in these terms:

I consider this reasoning to be binding on me (and to be self-evidently correct), and to be determinative of the present application. While the point was not developed in oral submissions, the claimants’ skeleton argument suggested that the authorities on the interpretation of s.35(4) may have to be regarded with some circumspection because of the failure in some of them to take account of the decision of the Court of Appeal in Brickfield Properties v Newton [1971] 1 WLR 862 (see Mulalley & Co Ltd v Martlet Homes Ltd[2022] EWCA Civ 32 at [50], Coulson LJ).

In Mulalley at [47], Brickfield was described as ‘the leading case on this aspect of r 17.4, particularly in a construction context’ (it being relevant that Mulalley was a construction dispute). The key passage from Brickfield cited in Mulalley was from Sachs LJ at 873:

It may thus not be surprising that, in a construction dispute, a case based on an architect’s negligent design can be said to arise out of the same or substantially the same facts as a claim based on the same architect’s inadequate supervision of the contractor (see Mulalley at [87]), and the overlap does not need to be complete. It is, as Coulson LJ said, a question of fact and degree. The point I understand Coulson LJ to have made at [50] (and relied on in this case by the claimant) is that observations about the way in which judges have reached their conclusions in other cases may be of limited utility and that such observations could not be a substitute for the court simply applying the wording of Limitation Act 1980 s.35 and of CPR r.17.4(2). That would seem to include the observations in Goode v Martin [2001] 3 All ER 562, that there should be a focus on the extent of the investigations which may need to be carried out by the defendant in response to the amendment, if it is permitted.

I have indicated above that many of the draft amendments to the particulars of claim up to paragraph 22 may be unobjectionable in so far as they relate to the existing claim. Sir Geoffrey indicated that it was possible to consider each of the particulars of fraud in paragraphs 22A to 22C and to see that they overlapped with existing particulars. I do not agree. My principal reason for doing so is that articulated above with reference to the comments of Millett LJ and Pill LJ in Paragon: a new allegation of fraud when none is currently pleaded is conceptually incapable of being substantially the same as any pleaded fact. This point impacts the analysis of all the facts sought to be introduced. Even where there is an overlap to what is currently pleaded, it is now alleged that the relevant facts are overlaid with an allegation that they were motivated by an underlying dishonest intent which predated the relevant actions and permeated them all.

There are also a number of factual allegations contained within the draft amendments which do not appear in the current particulars of claim, especially concerning Mr Flohr’s (allegedly dishonest) dealings with third parties. To the extent material, these would plainly open up the need for significant further investigation. Ms Vials in her third witness statement explains in a lengthy further passage the ‘significant further investigations’ undertaken on behalf of the claimant in response to the defendant’s application. This includes new and further searches of material previously provided by Mr Horlick. This itself suggests that the amendments arise out of facts other than those substantially the same as those already in issue and that significant further investigations would be required by the defendant if the amendments were allowed. I do not agree with Sir Geoffrey that I can take account in relation to this issue of the fact it is alleged that Mr Flohr was acting fraudulently such that Mr Horlick had difficulty in establishing what he contends required to be pleaded. That is a different point and even if it were correct (a point on which I do not express a view) it would not follow that the new facts were substantially the same as those already pleaded.

Accordingly, I do not consider that the proposed amendments arise out of the same or substantially the same facts as those which are already in issue in the existing claim. The claimant, therefore, is not entitled to amend the particulars of claim so as to introduce the plea in fraud. The general position in such a case, where there is an arguable limitation defence to the proposed claim, is to leave the claimant to issue a new claim so that the defendant can respond accordingly as he sees fit. While the point had not been canvassed in his skeleton argument, Sir Geoffrey suggested that, in such an event, I should instead make an order giving permission to amend, but directing that the date of the new claim for limitation purposes be not the date of the claim form (as the relation back provided for by s.35(1)(b) of the 1980 Act would involve), but some later date.

The jurisdiction to make such an order, and the types of order which can be made, was discussed in some detail in the recent decision of Fancourt J in Duke of Sussex v News Group Newspapers Ltd [2024] EWHC 1208 (Ch). At [71], he said this:

He also said, at [73], that, ‘[i]t is notable however that there was no issue of suspension of the primary limitation period under s.32 Limitation Act 1980 in that case and no remaining question of the validity of the limitation defence.’ Furthermore, at [74]:

After mentioning the decision of the Court of Appeal in Mastercard Inc v Deutsche BahnAG [2017] EWCA Civ 272, Fancourt J went on to summarise the more recent authorities in this way:

Fancourt J then set out the considerations to apply when the court determines whether or not to make what he termed an ACS order:

In the Duke of Sussex case, some amendments were permitted to be made on an ACS basis, but not others: see at [182]–[190]. Where they were refused, one of the reasons was that all the existing claims were subject to limitation defences concerning s.32 of the Limitation Act 1980. If the amendments were permitted, the defendant would either lose the opportunity to apply for summary judgment (on limitation) on the new claims, or would have to make the application within the existing claim, which would prejudice it from a case management perspective.

Sir Geoffrey did not expressly mention this point in his skeleton argument, but I indicated in the course of argument (and in favour of the claimant) that the suggestion that paragraph 64 of his skeleton argument might be said to be an argument in favour of a Mastercard(-type) order. In that paragraph, the claimant pointed out that similar limitation arguments arose in relation to the proposed new claim as in relation to the original claim, that there would in such circumstances be little utility in requiring the claimant to issue separate claims, the amendment would cause little practical inconvenience and the claims should be case managed and considered together. These seem to me to be precisely the sort of considerations which Fancourt J took into account in the Duke of Sussex case in determining whether to allow disputed amendments. For that reason, and because I consider that it would be wrong in principle to permit an amendment on this basis where I have granted summary judgment to the defendant on the existing claim, I have not sought further submissions on the Duke of Sussex case, which was not cited at the hearing.

In his submissions in reply to the amendment application, Mr Cohen strongly made the point that the claimant had not led any submissions in favour of a Mastercard-type order and had not put before the court any of the relevant authorities. He submitted that it would not be appropriate to make a Mastercard-type order for a number of reasons. First, he said it would obviate the need to make an application for permission out, and the applicability of foreign law would have to be considered, given where many of the events took place. As he said, not of the relevant events are said to have taken place in England.

Mr Cohen also submitted that the defendant’s limitation defence was prejudiced by the adoption of what would be an ACS form of order, and the issues in relation to the proposed new claim in deceit should be treated separately. The limitation issues are different. The first witness statement of Mr Spray says that Mr Horlick contacted him at ‘the end of 2018’, and ‘explained the investigations he had undertaken and the discoveries that he had made about the Defendant’s conduct during Comprendium UK’s life’. Mr Spray goes on to say that Mr Horlick requested that he assist in the restoration of the general partner. Mr Spray’s evidence was considered in greater detail at the July 2023 hearing, when the court was concerned with the general partner’s continuing authority to act on behalf of the claimant.

Sir Geoffrey responded that the question of whether to permit the amendments on terms that the question of relation back would be determined at trial was a question of prejudice. He submitted that the purport of Mastercard orders was to avoid unnecessary expense and cost and to do justice, and that the time, cost and expense of commencing a new claim would not be justified.

In most of the cases concerning Mastercard orders they have been made by consent. By reference to the comments of Fancourt J in the Duke of Sussex case, the key issues seem to me to be the prejudice likely to be caused to the defendant, and whether the defendant has a strong case for summary or prior determination of the limitation issue in relation to the proposed new claim. In light of those factors, the question is whether the defendant is unreasonably objecting to a Mastercard/ACS order.

I do not consider that the claimant should be permitted to pursue the claim in fraudulent misrepresentation within the existing proceedings.

For those reasons, I do not consider that the defendant is unreasonable in objecting to the making of a Mastercard/ACS order. The general rule, that a claimant should be required to commence a new claim where there is an arguable limitation defence to a claim sought to be introduced by amendment, should be followed in this case.

Accordingly, the claimant’s amendment application will be dismissed.