In a contract claim, if the Defence to an allegation of breach, is predicated upon dishonesty by the claimant, e.g. where an insurance company (Defendant) has refused indemnity, then logically the Defence cannot be based upon innocence. That however, is fatal, if the Defence as drafted, is ‘equivocal’. Consequently, the Defence is at risk of being struck-out under CPR, r. 3.4(2).
Axiomatically, this principle and litigation risk applies to every kind of civil claim based upon fraud or intentional wrongdoing where the statement of case as drafted, allows for the possibility of an innocent explanation. That is the achilles heel in such a claim.
In Mullarkey & Ors v Broad & Anor  EWHC 3400 (Ch), Mr Justice Lewison explained the litigation risk as follows:
‘Pleading and proving intentional wrongdoing
41. In Belmont Finance Corporation Ltd. v. Williams Furniture Ltd.  Ch. 250, 268 Buckley L.J. said:
“An allegation of dishonesty must be pleaded clearly and with particularity. That is laid down by the rules and it is a well-recognised rule of practice. This does not import that the word ‘fraud’ or the word ‘dishonesty’ must be necessarily used. The facts alleged may sufficiently demonstrate that dishonesty is allegedly involved, but where the facts are complicated this may not be so clear, and in such a case it is incumbent upon the pleader to make it clear when dishonesty is alleged. If he uses language which is equivocal, rendering it doubtful whether he is in fact relying on the alleged dishonesty of the transaction, this will be fatal; the allegation of its dishonest nature will not have been pleaded with sufficient clarity.” …
43. In Paragon Finance plc v D B Thakerar & Co he said on the question of pleading:
“It is well established that fraud must be distinctly alleged and distinctly proved, and that if the facts pleaded are consistent with innocence it is not open to the court to find fraud.”’
See also my December blog ‘Striking-Out a Hopeless Defence’ .
My article ‘Judicial Early Neutral Evaluation and the New Normal’ was also published by Trusts & Trustees (Oxford University Press) in December 2020: Trusts & Trustees | Oxford Academic (oup.com)
The author’s premise is that in claims allocated to the multi-track, Judicial-Early Neutral Evaluation (‘JENE’) is the new normal. He discusses: the rationale; jurisdiction; and powers of the court to order JENE; its benefits; and the procedure. He concludes that, except where a claim involves the interests of minors and unborn beneficiaries, use of this case management tool is likely to become increasingly routine at the first case management conference where, for example, one party has proposed JENE, and the other has refused consent because he prefers mediation. Whereas mediation requires consent, JENE does not, and the court has the power at the first Case Management Conference to order a stay during which the parties must: (i) take stock and (ii) each carry out a reality check, i.e. before substantial costs are incurred in preparing for trial. Therefore, in an appropriate case, where a binary outcome on liability can open the door to settlement in relation to quantum, relief, and costs, JENE should be considered.
To view the article please visit the ‘Publications’ page at www.ihtbar.com
During the first quarter of this year I am planning to write an in-depth article about duties and powers of executors and trustees in relation to property and investments, which will be co-authored with a leading trust law academic at Cambridge University.
My new book, the ‘Contentious Trusts Handbook’ contains a practice note contributed by the distinguished Art Historian, Pandora Mather Lees (www.artonsuperyachts.com), entitled, ‘Art & Heritage Assets – Duties of Trustees’, see:
In addition to my mainstream private client litigation work, I also undertake commercial contract and tort disputes, and am currently researching substantive aspects of art and antiquities law for a new book I am planning to write for publication in 2023 provisionally entitled, ‘Fiduciary Duties, Art and Cultural Heritage’.
For more information please visit the ‘Art & Antiquities Dispute’ page at www.ihtbar.com