Fay of London v Axis Specialty Europe: High Court clarifies amendment rules where limitation defence is in play

The Business and Property Courts have dismissed an appeal by Fay of London Limited seeking permission to add a fraudulent breach of trust claim against insurer Axis Specialty Europe SE, in a judgement that reaffirms the principled approach to amendment applications where a defendant holds a reasonably arguable limitation defence.

Jonathan Hilliard KC, sitting as Deputy Judge of the High Court, handed down his decision on 22 May 2026, upholding Master Pester's refusal to permit the amendment and providing important guidance on how courts should handle limitation disputes at the pleadings stage.

Background

Fay of London, a corporate vehicle holding a valuable Eaton Square flat on behalf of a discretionary family trust, brought proceedings under the Third Party (Rights Against Insurers) Act 2010 against Axis as insurer of the Jirehouse entities, a solicitors' practice whose principal fee earner, Stephen Jones, is currently imprisoned for fraud. The claim centred on a series of secured loans allegedly arranged without proper authorisation between 2014 and 2015.

Following a change of legal team and several stays of proceedings, Fay sought to introduce a fraudulent breach of trust claim via a third set of draft amended particulars, alleging that the Jirehouse entities held loan proceeds on trust and paid them away without authorisation, with Mr Jones's involvement rendering the breach fraudulent.

The limitation question

It was common ground that there was a reasonably arguable case that the six-year limitation period under section 21(3) of the Limitation Act 1980 applied. Fay contended, however, that section 21(1)(a) disapplied any limitation period entirely, as the claim concerned a fraudulent breach of trust to which the trustee was party.

The central issue was whether the Jirehouse entities were "category 1" trustees, holding money on trust pursuant to a lawful transaction that predated and was independent of the breach, or "category 2" trustees, whose trust obligation arose only as a direct consequence of the impugned transaction. That distinction, drawn by Millett LJ in Paragon Finance v DB Thakerar & Co [1999], remains unsettled on facts such as these.

The court's reasoning

Hilliard KC rejected each of Fay's five grounds of appeal. On the primary ground, he held that a claimant cannot avoid limitation scrutiny simply by framing an amendment application under CPR r.17.1 rather than r.17.4. The doctrine of relation back operates regardless of how the application is labelled, and the potential prejudice to a defendant's limitation defence remains equally real in either case. Viegas v Cutrale [2025], the Court of Appeal authority on point, was itself a CPR r.17.1 case.

On the procedural ground concerning alleged failure to consider prejudice, the deputy judge declined to grant permission for what he characterised as a fresh ground of appeal raised for the first time during oral submissions. Axis had not been given adequate notice and had been unable to prepare a respondent's notice or evidence in response.

The judgement also rejected the proposition that a difficult point of law should automatically be sent to trial via the amendment route. The presence of a reasonably arguable limitation defence, where there is a real prospect of prejudice from relation back, is sufficient to refuse amendment, whatever the complexity of the underlying legal question.

Significance

The decision is a useful restatement of the principles governing contested amendment applications following Viegas. Courts will look through the procedural label chosen by a claimant and focus instead on whether granting amendment could deprive a defendant of a limitation defence it would otherwise be entitled to run. The claimant retains the right to issue fresh proceedings, but that is a different matter entirely.

Fay was represented by William Flenley KC and Heather McMahon, instructed by Davis Woolfe Limited. Axis was represented by Daniel Shapiro KC and James Sharpe, instructed by CMS Cameron McKenna Nabarro Olswang LLP.