Construction: Judgment successfully striking out allegations of conspiracy to falsify practical completion
The High Court recently handed down the judgment in Gerko v Seal & Ors  EWHC 63 (KB). Charles Pimlott successfully acted for the Fifth Defendant, instructed by Keith Lonsdale of Beale & Co Solicitors LLP. The judgement can be found here.
The Claimant entered into a Sale Contract, under which he agreed to purchase two properties developed by the Third Defendant. The Fourth Defendant was the project manager and the First and Second Defendants were the individuals most involved with the matter on behalf of the Third and Fourth Defendant Companies. Under the Sale Contract, the Third Defendant was obliged to procure that works be completed by 30th April 2019. The Claimant’s obligation to purchase was subject to a clause which provided a right to rescind for a two-month period if a Practical Completion Certificate was not issued by a longstop date of 31st October 2019.
Works were delayed, in part due to the main contractor having left the site and the Third Defendant having to take over as employer, and it was common ground that some works were still being carried out on 31st October 2019. However, on that same day, the Fifth Defendant issued a Practical Completion Certificate. The sale was completed on 4th February 2020 and the Claimant and his family moved in on 26th June 2020. Very soon after, the Claimant said that the Property was seriously defective, unfit for habitation, and unmarketable. He subsequently brought a claim in unlawful means conspiracy against the Defendants, alleging that they had colluded in putting forward a Practical Completion Certificate known to be false. The Defendants applied to strike out the claim under CPR 3.4.
The Claimant had made and sought to make further amendments to his Particulars of Claim, including one application to amend made less than three working days prior to the application hearing. HHJ Parfitt considered that those new amendments could not be dealt with fairly at the hearing and refused to consider the amendment any further.
Hearing & Judgment
The Claimants summarised their case as being one of unlawful means conspiracy, whereby two or more of the Defendants combined or agreed to put forward a Practical Completion Certificate known to be false. The Defendants for their part argued that the Claimant’s Particulars of Claim lacked the particularity and cogency which was essential for any case of dishonesty to be allowed to proceed.
Judge Parfitt reviewed the relevant law on strike-out, summary judgment and pleadings of fraud; alongside the rules and principles underpinning the purpose of statements of case. He considered that, read together, the authorities showed that the Court and the defendants to a pleading of dishonest conspiracy are entitled to expect a clear, concise statement of the relevant facts, in which the key allegations of dishonesty and the acts done in furtherance of the conspiracy are clearly set out with sufficient relevant particulars of primary fact to tip the balance in favour of a potential finding of fraud. Usually, the allegation will be a conclusion the court will be asked to reach at trial; but if the relevant particulars of primary fact are not pleaded at all or if, taken at face value and in the round, they do not point towards a realistic prospect of the allegations being made out at trial, the interests of justice do not require the claim to proceed any further. However, the Judge further recommended a “degree of cautious realism” when considering striking out fraud claims: the Court should be alive to the danger of disallowing what might be good claims from proceeding to trial on the grounds of unrealistic technical requirements around details which the Defendants will likely have sought to keep hidden.
In this case, the Claimant’s Particulars of Claim, whilst disclosing a strong subjective belief in some wrong, did not comply with the basic requirements set out in the King’s Bench Guide. They did not clearly state the allegations of fraud being made against the Defendants. A section headed “Conspiracy” did not, as might have been expected, set out the essential facts to support a conspiracy finding. Each defendant was entitled to have set out in the Particulars of Claim details of what they are alleged to have known, why, and the properly particularised basis upon which a fraud inference is to be made against them. The Claimant’s Particulars were fatally flawed as they had not achieved this. It was fanciful to contend that the Practical Completion Certificate was fraudulent: it was a heavily caveated document which did what it expressly said it was doing. Taking the matter at its highest, there was a realistic contractual dispute between the Claimant and the Third Defendant as to whether the obligations under the Sale Contract had been met, but that was insufficient to give rise to any inference of fraud against any of the Defendants or to an inference of dishonest conspiracy between any of them.
The Judge concluded that there was no pleaded basis for the Fifth Defendant to be party to any unlawful means conspiracy; and that, because of that finding, the conspiracy as pleaded could not have existed either. Further, there was no pleaded basis for the First and Third Defendants being a party to the conspiracy other than on the basis that there was a conspiracy to start with; and there was no pleaded basis to establish combination or knowledge against the Second and Fourth Defendants. In any event, the Particulars of Claim did not disclose facts sufficient to make a finding of intent to injure the Claimant against any of the Defendants.
The Judge struck out the claim and dismissed the application for further amendment.