This judgment was handed down remotely at 2:00 pm on 2 May 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
.............................
MASTER MCQUAIL
- In 2015 the claimant refinanced existing borrowing and raised capital by taking out an interest only "buy to let" loan of £560,000 with Castle Trust Capital PLC (the Castle Trust Loan). The Castle Trust Loan was secured over her property at 143 Peckham Rye, SE15 (the Property), in which she continued to live in breach of the terms of the Castle Trust Loan. By her claim the claimant claims that she was given defective advice by the Defendant (in the persons of a Mr Lane and a Mr Moore) in 2017 and 2018 to enter into a secured bridging loan for a twelve month term with Peninsula Finance PLC (Peninsula) in order to extricate herself from the Castle Trust Loan and subsequently to enter into a second bridging loan for an eight month term with Peninsula to refinance the first. The claimant sold the Property in October 2019 for £1.45m. After repayment of the second Peninsula loan the claimant received net proceeds of sale of £544,000.
- On 19 March I heard the defendant's application dated 29 October 2024 to strike out parts of the claimant's Amended Particulars of Claim (APOC) and Reply as well as the claimant's application dated 8 November to re-amend the APOC and the appended Schedule of Loss as well as for permission to rely on an expert report as to the value of the Property on the date it was sold by the claimant.
- The APOC pleads claims for breach of statutory duty, misrepresentation and deceit. The loss claimed is the cost of the Peninsula loans plus additional costs and incidental expenses and compensation for distress and stress. The appended Schedule of Loss sets out two alternative cases on loss. The first is on the basis that the claimant would not have redeemed the Castle Trust Loan until the date of sale, such that the loss is said to be:
(i) the costs and interest charged in respect of each of the bridging loans;
(ii) the difference between the amount of money she in fact received after the sale of her property at £1,450,000.00 less the amount required to redeem the second bridging loan and the amount of money she would have received after the sale of the property, had the Castle Trust loan remained in place (this would more simply be described as the difference between the total amount of the second bridging loan and the hypothetical amount of the Castle Trust Loan at the date of sale);
(iii) costs of renting a property and storing belongings; and
(iv) a payment for stress and distress.
The alternative calculation adds £150,000 "on the assumption that [the] Property would and should have sold at £1.6m if no exigent sale had been forced."
- The defence takes issue with the adequacy of the pleading in a number of respects:
(i) the particularisation of the allegedly defective acts of the defendant;
(ii) section 138D of the Financial Services and Markets Act 2000 (FSMA) provides that liability of a financial adviser would arise where breaches of specific rules of the FCA Handbook are established whereas what are pleaded are breaches of sections of the FCA Handbook which would not give rise to such liability;
(iii) since Mr Lane was never the Defendant's appointed representative, the plea under section 39 of FSMA that the defendant is liable for him as its appointed representative serves no purpose (the defendant accepts that, subject to the usual principles relating to vicarious liability, the defendant may have such liability for Mr Lane);
(iv) no case on causation is pleaded, as there is no positive pleading of what non-negligent advice would have been and what would have resulted.
- By the Reply the claimant:
(i) has advanced a case under section 49 of the Consumer Rights Act 2015 (wrongly referred to as the Consumer Protection Act); and
(ii) makes a series of new allegations of breaches of FCA Handbook rules.
- The Defendant's application seeks:
(i) to strike out as disclosing no reasonable grounds for bringing the Claim:
(a) paragraphs 14 c) and d) of the APOC which make claims for breach of statutory duty premised upon the defendant having acted in breach of section headings within the FCA Handbook, rather than specific rules;
(b) paragraph 4 of the APOC, and Paragraph 3 of the Reply to Defence which make claims pursuant to section 39 of FSMA;
(ii) to strike out from the Reply on the ground that they ought to have been included in the APOC:
(a) subparagraphs 13(ii) to (vii) inclusive and 14(viii) to (x) inclusive of the Reply which make allegations that the Defendant acted in breach of specific rules of the FCA Handbook;
(b) paragraphs 5 and 6 of the Reply which advance a claim under the Consumer Rights Act;
(iii) asks in the alternative, for an order that, unless the Claimant amends the offending parts of her pleadings, the claim be struck out.
- The claimant's proposed re-amendments to the APOC and Schedule of Loss for which she seeks permission are:
(i) at paragraph 6.1 a claim to rely on s. 49 of the Consumer Protection (sic) Act 2015;
(ii) at subparagraphs 14(e)1 to 14(e)9 inclusive, pleas of various rules from the FCA Handbook which the Defendant is said to have breached which, if proved, give rise to a right of action for breach of statutory duty, pursuant to s.138D of FSMA;
(iii) at subparagraphs 14(k) to (m) inclusive, further particulars of deceit;
(iv) at paragraphs 15 and 16, further particulars of the Claimant's case on loss and an embryonic case on causation;
(v) at paragraphs 17 to 22, a claim in restitution;
(vi) at paragraphs 23 to 25, a claim for a lost chance "to purchase a replacement house from the net proceeds of sale without the assistance of any mortgage…";
(vii) at paragraphs 26 to 32 inclusive, a claim in negligence;
(viii) at paragraphs 33 to 34 inclusive, a claim for interest;
(ix) at paragraph 15 and in the Amended Schedule of Loss an increase in the claimed loss from £568,633.19 to over £1,000,000.00. The increase arises from a claim that the Property was in fact worth £250,000 more than the price the claimant sold it for on the date she sold it.
- The Claimant's Application also seeks permission to rely on expert valuation evidence. She has obtained a report of David Cooper RICS dated 10 October 2024, which provides a retrospective valuation of the Property on the date on which it was sold (the Cooper Report) at a figure £250,000 higher than the sale price.
- The defendant did not oppose proposed amendments to the APOC:
(i) which seek to advance a case based on section 49 of the Consumer Rights Act 2015; and
(ii) particularising the claim for interest;
The application to strike out paragraphs 5 and 6 of the Reply, which simply mirror the unopposed re-amendment to the APOC to make the section 49 claim, thus falls away.
- The claimant on the other hand did not pursue:
(i) the amendment to plead further particulars of deceit
(ii) the amendment to plead a claim for restitution; or
(iii) the pleading of a claim for a lost chance to purchase a replacement house acknowledging that it added nothing to the pleaded case.
- It was also agreed that section 39 of FSMA was irrelevant. Any question of vicarious liability is a separate matter and the defendant does not oppose a proposed amendment being the proposed addition of a sentence to paragraph 4 of the APOC which reads: "Further or alternatively at all material times the said Lane was the servant agent associate employee of the Defendant". The defendant's position is the claimant should be permitted to make that proposed amendment but that paragraph 4 of the APOC and paragraph 3 of the Reply so far as they refer to section 39 of FSMA be struck out.
- It was also agreed that the original Schedule of Loss impermissibly double-counted the costs of the Peninsula loans and that that error was present also in the proposed Amended Schedule of Loss and in the narrative description of loss in proposed amended paragraph 15 of the APOC.
- I am therefore left to determine whether the claimant should have permission to amend her APOC to include:
(i) subparagraphs 14(e)1 to 14(e)9 inclusive (which are in mirror form to , subparagraphs 13(ii) to (vii) inclusive and 14(viii) to (x) inclusive of the Reply);
(ii) paragraphs 15 and 16;
(iii) paragraphs 26 to 32 inclusive;
(iv) a case that the Property was worth £250,000 (as opposed to £150,000 as pleaded in the APOC) more than the claimant sold it for and, relatedly, whether the Claimant should have permission to rely on expert valuation evidence.
- I must determine also whether to strike out:
(i) from the APOC paragraphs 14 c) and d);
(ii) from the Reply subparagraphs 13(ii) to (vii) inclusive and 14(viii) to (x) inclusive.
Law
- The relevant rules relating to strike out are CPR r. 3.4(2)(a) and (c) as follows:
"3.4
(2) The court may strike out a statement of case if it appears to the court –
(a) that the statement of case discloses no reasonable grounds for bringing… the claim;
(b) …
(c) that there has been a failure to comply with a rule, practice direction or court order."
- The White Book at paragraph 3.4.2 explains a statement of case is suitable for strike out under (a) if it raises "an unwinnable case where continuance of the proceedings is without any possible benefit to the respondent and would waste resources on both sides", see Harris v Bolt Burdon [2000] CP Rep 70. It explains also that a claim can be struck out if it does not constitute a valid claim as a matter of law, Price Meats Ltd v Barclays Bank Plc [2000] 2 All ER (Comm) 346.
- CPR Part 17 deals with amendments. Once a statement of case has been served it may only be amended with the written consent of all the other parties or with the court's permission. The commentary in The White Book explains at [17.3.6] that, in order for permission for an amendment to be granted, the applicant has to show that the proposed amendment has a "real prospect of success", that is the test for surviving a summary judgment application.
- CPR r. 16.4(1)(a) provides that Particulars of Claim must include "a concise statement of the facts on which the Claimant relies". The White Book commentary at [16.4.1] explains that in Particulars of Claim, a claimant "should state all the facts necessary for the purpose of formulating a complete cause of action".
- Bullen & Leake & Jacob's Precedents of Pleadings, 19th edition, [85-09] says that in professional negligence claims, "proper particulars need to be given of breach, setting out the respects in which it is said the defendant has fallen short of the standard to be expected of a reasonably competent professional in the relevant field of expertise".
- Mr Echlin placed particular reliance on the case of Pantelli Associates Ltd v Corporate City Developments Number Two Ltd [2010] EWHC 3189 (TCC) which concerned professional negligence where Coulson J (as he then was) said at [11]:
"the pleading needs to set out clearly what it is that the defendant failed to do that it should have done, and / or what the defendant did that it should not have done…"
and at [12] said about proposed amendments to plead particulars of negligence which simply added "failed to" or "failed adequately to" as prefixes to various contractual obligations:
"It is impossible for anyone to work out from those generalised and generic allegations what particular matters were being alleged … It would be impossible for a solicitor to take a witness statement from those involved … that could hope to meet these points, because no details have been provided for a prospective witness to accept or dispute."
- As to causation and loss Coulson J said at [11] in the Pantelli case that the pleading must set out:
"what would have happened but for those acts or omissions, and the loss that eventuated. Those are "the facts" relied on in support of the allegation and are required in order that proper witness statements (and if necessary an expert's report) can be obtained by both sides which address the specific allegations made."
And at [13] explained that properly to plead causation and loss there need to be set out the
"facts that [the claimants] rely on in support of their contention that a particular breach or breaches has given rise to a particular head of loss"
And the pleading must provide an answer to the question:
"but for the negligence, what would have happened and why?"
- In Blower v GH Canfields LLP [2024] EWHC 2763 (Ch), [125-6] and [134c] HHJ Matthews explains that a plea of professional negligence must set out all of the steps which would have led to a claimant ending up in a better position had the act or omission complained of not taken place, than they in fact are in as a result of the act or omission.
- It is apparent from CPR PD 16, para 9.2 and the commentary in The White Book at [16.7.3] that new claims, which include new allegations of breach, must be included in Particulars of Claim. It is not proper or permissible to advance such claims in a Reply to Defence (Martlet Homes Ltd v Mullaley & Co Ltd [2021] EWHC 296 (TCC), at [17 to 24]. Mr Echlin referred also to Powis Street Estates (No 3) Limited v Wallace LLP & Ors [2021] EWHC 3269 (Ch), where I said at [36] that a Defendant "is entitled to have all the allegations made in the proceedings in one document in order that it may answer them in its own one document".
Defendant's Submissions
- The Defendant submits none of the proposed amendments to the APOC advancing allegations relating to breaches of rules in the FCA Handbook should be permitted because:
(i) in the case of those at subparagraphs 14(e)2 to 14(e)9 they do not contain properly particularised allegations of breach. Subparagraph 14(e)2 quotes from a rule and then states "This is relevant to the misleading statements about Castle Trust initiating possession proceedings". Subparagraphs 14(e)3 to 14(e)9 quote a series of rules. They fail to set out how or why the defendant is said to have acted in breach of those rules;
(ii) the plea at subparagraph 14(e)1, although including a particularised allegation of how the Defendant is said to have breached the rule quoted, is not supported by a properly pleaded case on causation (see below). Accordingly it has no prospect of succeeding and permission should not be granted.
- So far as concerns the case on causation and loss, set out in proposed paragraphs 15 and 16, the defendant submits the case is inadequately pleaded, such that there is no prospect of it succeeding because the pleading fails to set out precisely how or why a different outcome would allegedly have come about but for the alleged breaches, when any alternative outcome is neither self-explanatory nor obvious. The claimant has made a number of assertions concerning causation:
(i) in the Reply a possibility of the claimant, in 2017, negotiating new terms with Castle Trust, or seeking an interest-only mortgage as an alternative to the Peninsula loan. The claimant's pleaded case on causation, does not commit to either scenario and fails to particularise what terms Castle Trust would have agreed or what alternative loan the claimant would have taken out or explain how either outcome would have been achieved;
(ii) in a letter dated 17 September 2024 the claimant's solicitors raised multiple points on causation and loss. The letter suggested: that the defendant should have advised the claimant to approach Castle Trust for a period of grace to remain in the Property; that if possession proceedings had been issued at the end of that period, the claimant would have been well placed to defend those proceedings; or join Mr Lane, as a party to the proceedings and to raise mis-selling allegations against him; that the claimant would have been able to challenge the appointment of Law of Property Act receivers by Castle Trust and any litigation would not have concluded until July 2021, such that the Claimant would have had a longer period in which to sell. None of those possibilities have been pleaded;
(iii) the proposed amendments allege that the claimant, but for the alleged breaches by the defendant, would have been able to sell the Property for £1.7m on the same day that she in fact sold it for £1.45m after it had been on the market for almost two years;
- The pleading of negligence in paragraphs 26 to 32 of the proposed RAPOC should not be permitted in the absence of a pleaded case on causation and loss as it would have no prospect of succeeding.
- No permission should be granted to increase the value of the Claim because:
(i) in the absence of a pleaded case on causation, there is no ground upon which a claim for a higher value could succeed;
(ii) the largest part of the increase in value derives from the assertion that the market value of the Property in October 2019 was higher than the price for which it in fact sold. That assertion has no prospect of success where the Property was sold by the claimant as owner after exposure to the market for around two years for £1,450,000.00. To succeed the claimant would have to impugn her own conduct of the sale;
(iii) the calculations are flawed. The claimant has double counted the costs and interest incidental to the bridging loans (as is now accepted).
- The claimant should not be given permission to rely on the Cooper Report because:
(i) the market value of the Property at the date of sale is known; and
(ii) the claimant has no prospect of succeeding on the allegation which the Cooper Report is intended to support without herself being responsible for the undervalue.
- The allegations in the APOC in 14c) and d) purportedly pursuant to s.138D of FSMA for alleged breaches of section headings within the FCA Handbook, rather than specific rules, have no prospect of succeeding. Section138D(2) provides:
"A contravention by an authorised person of a rule made by the FCA is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to a breach of statutory duty".
The discussion in Jackson & Powell on Professional Liability, 9th Ed., 14-087 makes the position plain. Accordingly these paragraphs of the APOC should be struck out.
- Then there are allegations in the Reply which advance new claims against the defendant, and so ought to have been included in the APOC such that the defendant could reply to them and properly plead its case in respect of those allegations. Subparagraphs 13(ii) to (vii) inclusive and 14(viii) to (x) inclusive of the Reply all constitute fresh allegations of breach of duty. They are directly equivalent to the particulars of breach of contract which were struck out of the Reply in the Martlet Homes case. The defendant is entitled to address those allegations, and to plead a case in respect of them. They should never have been included in a Reply.
Claimant's Submissions
- It was the claimant's position that her case was a clear and obvious one. The defendant was responsible for giving her defective advice, as a result she entered into the Peninsula loans which were expensive and inappropriate financial products and she suffered loss as a consequence.
- Ms Perry disputed that the giving of further particulars of the advice given by Mr Moore and Mr Lane was required at this stage. Either the defendant could, if it felt necessary, make a Part 18 Request or the matter would be dealt with at the witness statement stage.
- On causation and loss Ms Perry pointed to paragraph 16 of the Reply in which it is pleaded:
"The Claimant has made clear by her claim that, at the very least, she would have been advised to negotiate with Castle Trust or advised to seek an alternative form of interest-only mortgage at a considerably lower rate than a bridging loan,"
- On value Ms Perry pointed to the report of Mr Cooper which is supportive of the claimant's allegation of true market value in October 2019.
Conclusions
- The claimant has not in her pleaded case committed to a counterfactual scenario that would have happened and why and the loss that eventuated. She has not set out all the steps that would have led to her being in a better position had the defendant's alleged breaches not occurred. Although the calculation of loss proceeds on the basis that the Castle Trust loan would have remained in place, she has not set out how that financing arrangement could have been available to her to enter into. I am not satisfied that a case on causation is presently pleaded.
- On loss Mr Echlin pointed to the statement of Alan Steinfeld QC sitting as a deputy judge of the High Court in Meah v GE Money Home Finance Limited [2013] EWHC 20 (Ch) at [23 iii)]:
"the market value of a property is the price which a willing purchaser is prepared to pay for the property to a willing vendor after the property has been exposed to the market for a reasonable period of time".
That statement is consistent with the definition of market value used by surveyors in carrying out Red Book valuations and referred to by Mr Cooper in Addendum 4 of his report.
- At first sight it would seem likely that the price obtained by the claimant would be the best guide to market value for the Property on the actual date of sale and that any failure to obtain market value must be attributable to the claimant's own fault. However, Mr Cooper, who would appear to have followed a conventional approach to assessing market value by using comparable data, has advised that a different figure is the appropriate market value on the date of sale. At this stage it is not apparent why Mr Cooper's report does not mention the actual sale and price or make any comment on why the actual sale should not be considered to have been at market value.
- The APOC already included a case that the market value was in excess of the price achieved and that was not sought to be struck out. The claimant's original alternative case on loss was that the Property was worth £150,000 more than she sold it for. Presumably as a result of obtaining Mr Cooper's report her proposed case is now that the Property was worth £250,000 more. That is a case that is supported by evidence and I am persuaded therefore that the claimant should be permitted to amend to plead such a case.
- I will not at this stage give permission to rely on expert evidence, that is a matter to be considered at the CCMC when pleadings have closed, but assuming the claimant maintains this aspect of her case it is likely that the parties will persuade whoever conducts the CCMC that both sides should be permitted to rely on expert evidence.
- The allegations in the APOC at 14c) and 14d) allege breaches of FCA Handbook section headings as opposed to rules. A section 138 breach of statutory duty cannot arise as a result. The allegations therefore do not have any prospect of success, and fall to be struck out.
- Subparagraphs 14(e)2 to 14(e)9 inclusive of the proposed RAPOC are, like the pleas in Pantelli Associates, ones from which it is impossible to work out what particular matters are alleged to comprise breaches. As the Judge in that case pointed out, it would not be possible for a witness statement to be taken to meet these points as the details necessary to accept or dispute the complaints have not been provided. It is not good enough for the claimant to say that a Part 18 Request may be made or that the proper time to deal with particularisation of these pleas is in witness statements. The defendant is entitled to know the case it has to meet. Accordingly I will not permit this group of amendments to be made.
- Since I have concluded that the plea of causation is not adequate it follows that I will not permit the amendments in the draft RAPOC at 14(e)1, which sets out a particularised plea of a rule breach or at 26 to 32, which set out a plea of a case of negligence. Without an accompanying case on causation neither of these amendments comprise part of a plea which contains all the necessary elements of the respective causes of action upon which the claimant intends to rely.
- Finally subparagraphs 13(ii) to (vii) inclusive and 14(viii) to (x) inclusive of the Reply plainly fall to be struck out. They advance fresh allegations of breach of duty and ought, if pursued, to be included in a re-amended APOC, together with proper particularisation of the matters alleged to constitute breaches, in order that the defendant has the proper opportunity to address them. If the defendant does not consent to any such amendments a further application for permission to amend may be necessary.
- So far as proposed amended paragraphs 15 and 16 of the APOC and the Schedule of Loss impermissibly double-count elements of claimed loss I will not permit them to be made. Assuming a new RAPOC is to be proposed the double-counting error needs to be eliminated.
- In summary the position is therefore this:
(i) the Claimant may make proposed amendments:
(a) as at the final sentence of paragraph 4 of the draft RAPOC;
(b) as at subparagraph 6.1 of the draft RAPOC (subject to the mistaken reference to the "Consumer Protection Act" being altered);
(c) as at paragraphs 33 to 34 inclusive of the draft RAPOC; and
(d) to plead a case that the market value of the Property as the date of sale was £1.7m.
(ii) the following paragraphs of the APOC fall to be struck out:
(a) paragraph 4 so far as it pleads a case based on section 39 of FSMA; and
(b) 14c and 14d;
(iii) the following paragraphs of the Reply fall to be struck out:
(a) paragraph 3 so far as it pleads a case based on section 39 of FSMA and so far as it pleads any case as to vicarious liability; and
(b) 13(ii) to 13(vii) and 14(viii) to 14(x).
