Stuart Pemble considers the recent approval of a claimant pleading its case on an extrapolated basis.
Key point
- In appropriate cases, the courts look set to allow pleadings that rely on extrapolation rather than detailed analysis of each alleged breach or issue.
The development in Newbury at the heart of the decision in Building Design Partnership Ltd v Standard Life Assurance Ltd [2021] EWCA Civ 1793 did not proceed as everyone involved would have hoped. Standard Life was the developer, BDP was the contract administrator and lead designer, and Costain was the contractor. Costain’s original contract price was £77.4m. Its final account (which was paid in full by Standard Life) came in just under double that at £146.4m.
Some £50.3m of the overspend related to variations (£28.4m) and loss and expense paid to Costain (£21.9m). Standard Life blamed BDP for around £33m of those losses and issued Technology and Construction Court proceedings.
The Court of Appeal had to decide the correctness and admissibility of how Standard Life calculated and pleaded that figure. In particular, should part of Standard Life’s claim be struck out or subject to reverse summary judgment on the basis that the pleaded case was an abuse of process or disclosed no reasonable grounds for bringing that element of the claim?
Sampling and extrapolation
At the heart of the dispute was the fact that Standard Life had pleaded its case on an extrapolated basis. As Coulson LJ, who gave the leading judgment of the Court of Appeal, explained: “The use of sampling and extrapolation is not uncommon in the Business and Property Courts (particularly the TCC) as a way of corralling evidence and keeping trials within proportionate limits. The essential proposition is that, if the sampled allegations are found, on the balance of probabilities, to be properly representative of the pool of allegations as a whole, then a detailed investigation into the sample can be extrapolated into a result in respect of the pool.”
However, that accepted approach still requires the claimant properly to plead the relevant facts and details of each allegation in the pool. Standard Life went further. It did not plead a detailed case on each allegation. Rather, it pleaded the details of 167 of the variations which occurred on the project and then extrapolated those results across the remaining 3,437 variations without any pleading (indeed, without any factual investigation) in relation to those. Using the 167 as an example, Standard Life calculated that the entire design team for the project shared responsibility for 83.1% of the variations and that BDP was responsible for 81.71% of that 83.1%. It applied the same percentages to the loss and expense element, which is how it arrived at the £33m figure. The Court of Appeal had to decide whether Standard Life should be allowed to argue the case on this basis.
The proceedings
At first instance ([2020] EWHC 3419 (TCC)), Kerr J allowed Standard Life to claim on the extrapolated basis, but gave various case management directions which, by the time the appeal was heard, had resulted in the quantum of the extrapolated claim being reduced. Central to the judge’s reasoning was that, although accepting that it “is not a tidy pleading”, it was “a genuine and partly successful attempt to treat with professionalism a daunting amount of detail in a manner that is comprehensible, cogent and complete”.
The Court of Appeal (Macur, Coulson and Birss LJJ) agreed, dismissing BDP’s appeal. Coulson LJ’s judgment covers a lot of ground, including:
- The requirement of proportionality contained in the overriding objective in Part 1.1 of the Civil Procedure Rules.
- The two-stage test for strike out/reverse summary judgment under CPR 3.4(2) as applied (with Coulson LJ giving the leading judgment) by the Court of Appeal in Cable v Liverpool Victoria Insurance Co Ltd [2020] EWCA Civ 1015: (i) was there an abuse?; and (ii) if there was, what, as a matter of discretion, should be done about it?
- Two relatively recent authorities allowing claimants to plead a case at the outset on the basis of sampling and extrapolation (Amey LG Ltd v Cumbria County Council [2016] EWHC 2856 (TCC) and Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd (No 2) [2017] 1763 (TCC)). Coulson LJ noted that, while “as a matter of pleading, in an appropriate case, a claimant can plead an extrapolated claim”, both cases showed that extrapolated cases can be particularly difficult to establish at trial.
- The need for pleadings to contain “a concise statement of the facts on which the claimant relies” provided for in CPR 16.4(1)(a) and as applied by the then Coulson J in Pantelli Associates Ltd v Corporate City Developments No2 Ltd [2010] EWHC 3189 (TCC); [2010] PLSCS 307 and the “other side of the same coin” – that vague and unparticularised particulars are liable to be struck out (Towler v Wills [2010] EWHC 1209 (Comm)).
The reasoning
Coulson LJ’s judgment is typically robust:
- Proportionality was a valid concern and it would have been far too costly and time-consuming for Standard Life to have pleaded all 3,437 variations.
- Kerr J applied the correct test for strike out/reverse summary judgment and the evidential hurdle to be overcome by a claimant resisting strike out is “relatively low”.
- Extrapolated claims are permissible in principle, including in professional negligence cases. The judge expressly approved the decisions in Amey and ICI.
- BDP did know the case it had to meet. Coulson LJ acknowledged that the claim may be difficult to prove, but that was an issue for the trial and not beforehand.
The judge also noted that there was no unfairness to BDP – indeed, the force of its criticisms of the pleading showed that it knew the case it had to answer – and the decision would not open the floodgates to “poorly pleaded claims”.
Pleading on an extrapolated basis may be a risky tactic but, in the right case, it is a tactic the courts will permit.
Stuart Pemble is a partner at Mills & Reeve
