Success for Katrina Yates before the High Court in the latest case under the Contracts (Rights of Third Parties) Act 1999 and on the power to make conditional strike out orders

Jonathan Hilliard KC (sitting as a Deputy Judge of the High Court) has today handed down judgment in Jon Flowith & Partners v (1) John Greaves & Others (2) Wendy Hollinshead & Others (3) IM Properties Development Ltd [2025] EWHC 2343 (Ch), upon the Third Defendant’s successful application under CPR r. 3.4(2)(a) to strike out the Particulars of Claim for failure to disclose reasonable grounds for bringing the claim. The judgment provides useful guidance on the proper formulation of claims under the 1999 Act and is a cautionary tale on the sanctions that may befall a claimant who does not satisfy those requirements.

The dispute concerns a promotion agreement made between the First and Second Defendants, as Landowner, and the Third Defendant, as Promoter, to promote the development of the Landowner’s land through the planning system. The Claimant was at one time the First and Second Defendant’s land agent, but that arrangement ended. The Claimant was not a party to the agreement but is seeking to enforce its alleged right to receive certain land agent fees in the agreement, pursuant to the Contracts (Rights of Third Parties) Act 1999, as well as seeking damages for breach of contract to the tune of c.£6million from the Third Defendant and others.

The Third Defendant applied to strike out the Claimant’s Particulars of Claim on two grounds: (i) that there was no cause of action pleaded against the Third Defendant to justify the substantial damages claim; and (ii) that there was no real prospect of curing that defect by amendment. At the strike out hearing, the Claimant defended its existing pleading but, as a fallback position, made an oral application to amend the Particulars of Claim in which the proposed amendments were indicated.

Jonathan Hilliard KC accepted the Third Defendant’s submissions and allowed the application. The test for striking out under CPR r. 3.4(2)(a) was satisfied because the Particulars of Claim failed to plead what obligation in the contract the Third Defendant had allegedly breached, how it had been breached, and how that breach had caused loss. The Judge was not prepared to permit the Claimant to amend its Particulars of Claim based on its oral indications, as the Third Defendant was entitled to consider formal pleadings. A conditional strike out order was therefore the appropriate order to make, which would give the Claimant 28 days to make an application for permission to amend its Particulars of Claim or for the amendments to be accepted by consent.

The judgment helpfully clarifies two points of wider significance - one legal, and one procedural:

• The Legal Significance: Jonathan Hilliard KC has provided the clearest and most concise statement yet of the essence of a cause of action under the 1999 Act. The Judge held that: s.1 gives a third party the right to enforce a term of a contract; what obligation the term of the contract imposes and on which party to the contract depends on its construction. If the contract provides that Party A shall pay Third Party C, the 1999 Act may allow Party C to seek payment from Party A under the terms of the contract by way of an action for an agreed sum, but it does not allow it to seek payment from Party B unless the contract provides that Party B shall also pay Party C. Similarly, it does not allow Party C to sue Party B for damages for breach of a contractual obligation imposed on Party A. The Act does not seek to give Party C a remedy beyond that which he would have if he had been a party to the contract, by allowing him to claim against another party to the contract.
• The Procedural Significance: The Court may afford a party an opportunity to put right a defective statement of case, rather than immediately striking it out (Kim v Park [2011] EWHC 1781 (QB)). But it does not follow that a strike out application should be rejected wherever it might be possible for a claimant to re-plead in a way that would disclose reasonable grounds for bringing the claim. It is incumbent on the respondent to the strike out application to make clear in good time before the strike out hearing that an application for permission to amend will be made and to provide a draft of its proposed amendments. It is unsatisfactory, even as a fallback, to make an oral application for permission to amend when the application could have been made significantly earlier and in writing, which would have allowed proper consideration of the proposed amendments before or at the hearing.

Katrina Yates appeared for the Applicant/Third Defendant, instructed by Lodders Solicitors LLP.

David Holland KC appeared for the Respondent/Claimant, instructed by Shakespeare Martineau LLP.

Click here for a copy of the judgment