Particulars of claim – Amendment – Limitation – Section 14A of Limitation Act 1980 – Claimants obtaining permission to amend particulars of claim to add new claims not arising out of same facts as original claims – Whether amendments statute-barred – Whether amendments justified on other grounds – Appeal allowed
The first defendant was a firm of solicitors that acted for the claimants between 2001 and 2003, in relation to a project to redevelop a Victorian office building in Manchester as a hotel with finance provided by a bank. The claimants were, respectively, a husband and wife and the company through which they acquired the building and carried out the project. In the event, the costs of the project rose and the company was unable to repay sums owed to the bank; the bank stepped in to complete the project and sold the completed hotel in March 2004 for £13.5m, which left a shortfall of £4.118m owed by the company to the bank.
In two separate actions, brought by the husband and wife and by the company respectively, the claimants sought damages for breach of contract and/or negligence in relation to the first defendant’s advice on the financing and contractual arrangements for the project and on personal guarantees given by the husband and wife in respect of the company’s indebtedness. Those proceedings were stayed by agreement pending the outcome of a claim by the bank to enforce the personal guarantees.
The bank’s claim was allowed in January 2010: see [2010] EWHC 105 (Ch). In light of the judgment in that case, the claimants applied to amend their particulars of claim to add new claims. Those amendments were allowed on the papers by a master. The defendants’ subsequent application to set aside those amendments was dismissed by a judge, who found that the decision to order the amendments was fully justified and within the master’s case management powers.
The judge held that: (i) the new claims were not statute-barred, notwithstanding that they were brought outside the primary limitation period and did not arise out of similar facts to the original claims, since they were saved by section 14A of the Limitation Act 1980 on the ground that the claimants had not had the necessary knowledge to bring the claims until the date when judgment was given in the bank’s possession claim; (ii) in any event, the claimants’ original claim forms were arguably broad enough to encompass their new claims; and (iii) even if the new claims had been statute-barred, there was still a residual discretion to dismiss the defendant’s applications, since the justice of the case was overwhelmingly in favour of allowing the amendments: see [2013] EWHC 417 (QB); [2013] PLSCS 85. The defendants appealed.
Held: The appeals were allowed.
(1) In cases where an amendment was sought to add new claims that did not arise out of similar facts to the original claims, leave to amend should be refused if there was an arguable case that the new claim was statute-barred: Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409 applied. If a claimant sought to raise a new claim by amendment and the defendant objected that it was barred by limitation, the court could proceed in either of two ways.
The more usual course would be to deal with the matter as a conventional amendment application, in which case the court would not descend into factual issues that were seriously in dispute but would limit itself to considering whether the defendant had a reasonably arguable case on limitation. If it did, then the court would refuse the amendment. If not, the court had a discretion to allow the amendment, if it saw fit to do so in all the circumstances. If the court refused permission to amend, then the claimant would have to issue separate proceedings if it wished to pursue the new claim; the defendant would then be able to plead its limitation defence in those proceedings without being prejudiced by the effect of section 35(1) of the 1980 Act, under which a new claim added by amendment was deemed to have commenced on the same date as the original action.
The alternative course was to determine the question of limitation as a preliminary issue at the same time as considering whether to give permission to amend; however, in practice that would seldom be appropriate and the court would have to give serious consideration to the ramifications of such an order before making it.
In the instant case, where there was no order for a trial of a preliminary issue on limitation, the judge had erred in making definitive findings on that issue and in declaring that the new claims were not statute-barred. Had he adopted the correct approach, he would have been bound to conclude that the defendants had at least a properly arguable case on limitation. Although the claimants had not known for certain the effect of the contractual arrangements until judgment was given in the bank’s action, they knew what contracts they had entered into and what advice the first defendant had given, and they were in receipt of expert legal advice as to the effect of the contractual arrangements. On any view, it was arguable that their date of knowledge for the purposes of section 14A(5) fell outside the applicable limitation period.
(2) The claimants could not rely on their original claim forms as justification for their amendments in the instant case. If a claimant applied to amend as against the defendant, the court had to compare the proposed amendments with the original particulars of claim, not the original claim form. Particulars of claim were normally narrower in their scope than the original claim form and, if the claimant sought to add a new claim after the expiry of the limitation period, it could not do so by relying on the broad wording contained in its original claim form: Steamship Mutual Underwriting Association Ltd v Trollope & Colls (City) Ltd (1986) 33 BLR 77 and Tetra Pak Ltd v Biddle & Co [2010] EWHC 54 (Ch) considered.
(3) The court had no power to allow amendments that raised new causes of action outside the limitation period and did not arise out of similar facts to the original claim. Accordingly, the judge did not have the residual discretion that he had sought to exercise in the instant case: Re L and B (Children) [2013] UKSC 8; [2013] 1 WLR 634 distinguished.
The claimants appeared in person; Jamie Smith (instructed by DAC Beachcroft LLP) appeared for the defendants.
Sally Dobson, barrister
