Vendor and purchaser — Sale of freehold of blocks of flats by landlords to a company formed by lessees of most of the flats as a vehicle for the purchase of the reversion — Most of the flats were held on long leases, such as a 99-year lease — Difficulty about accounts rendered after completion of sale — Points taken in landlords’ respondents’ notice which had not been raised below — Views of Lord Griffiths in Ketteman v Hansel Properties Ltd
sold by landlords to lessees’ company under a written contract of August 15
1986 which incorporated the National Conditions of Sale (20th ed) — Clause 22
of the contract contained a full and complete procedure for apportioning
expenditure and compensating the vendors if their expenditure on the premises
up to completion exceeded their receipts in respect of interim service charges
— However, Condition 6(5) of the National Conditions provided for the vendors
and purchasers to remain mutually bound after completion to account for and pay
or allow to each other any balances or excesses due — Completion took place on
September 12 1986, but about three weeks later the purchasers were presented
with a bill for £6,125.24 from the landlords’ surveyors for inspecting the property
and the preparation of a specification of works to eradicate external and
internal defects together with redecoration — The lessees had never seen or had
any benefit from the specification, but it was not disputed that the liability
fell within the definition of total expenditure in the leases and consequently
within clause 22 of the contract of sale — The purchasers refused to pay the
bill on the ground that everything had been settled on completion — In a
transferred county court action the judge gave judgment for the vendors for the
amount claimed and the purchasers appealed
had relied on Condition 6(5) of the National Conditions and the judge accepted
the view that the balance struck at completion did not preclude the later
settlement of accounts in accordance with that subclause — The Court of Appeal
disagreed — They pointed out that Condition 6(5) applied naturally to the
assignment of a leasehold interest and did not fit easily the sale of a
freehold reversion. In any case clause 22 of the contract provided a complete
procedure which excluded the application of Condition 6(5)
however, in their desire to see that nothing was overlooked, allowed the
respondent vendors to serve a respondent’s notice out of time and to deploy two
wholly new arguments — These were that there were authorities which supported
the right to reopen a settled account or subject it to the process of surcharge
or falsification; and that there was the principle of repayment of money paid
under a mistake — Whatever merit these points might have had (and the court did
not pronounce on them) they had never been taken in the court below and had
never been pleaded — It would have been necessary to allow an amendment of the
statement of claim — This the court was not prepared to do, particularly in the
light of the comments of Lord Griffiths in the Ketteman case — The vendors were
attempting at a late stage to put forward an entirely new basis of claim — The
court would not exercise its discretion to consider it — Purchasers’ appeal
allowed
The following
cases are referred to in this report.
Barrow v Isaacs & Son [1891] 1 QB 417
Clarapede
& Co v Commercial Union Association
(1883) 32 WR 262
Daniell v Sinclair (1881) 6 App Cas 181; 50 LJPC 50; 44 LT 257; 29
WR 569; 35 Digest (Repl) 95, PC
Gething v Keighley (1878) 9 ChD 547, 48 LJ Ch 45, 27 WR 283, 20
Digest (Repl) 294
Hood of
Avalon (Lady) v McKinnon [1909] 1 Ch 476
Kelly v Solari (1841) 9 M&W 54
Ketteman v Hansel Properties Ltd [1987] AC 189; [1987] 2 WLR 312;
[1988] 1 All ER 38; (1987) 85 LGR 409; [1987] 1 EGLR 237, HL
Lucas v Worswick (1833) 1 M & Rob 293; 35 Digest (Repl) 626
Perry v Attwood (1856) 6 E&B 691; 25 LJQB 408; 27 LTOS 170; 2
Jur NS 1071, 4 WR 608; 12 Digest (Reissue) 577
Riverlate
Properties Ltd v Paul [1975] Ch 133; [1974]
3 WLR 564; [1974] 2 All ER 656, CA
Samuel
Properties (Developments) Ltd v Hayek [1972]
1 WLR 1296; [1972] 3 All ER 473; (1972) 24 P&CR 223; [1973] EGD 266; 225 EG
1749, CA
Tasmania
(Ship Owners and Freight Owners) v Smith City of
Corinth (Owners), The Tasmania (1890) 15 AC 223; 6 Asp MLC 517, HL 51
Digest (Repl) 830
This was an
appeal by Arlington Park Mansions Ltd, a company formed to represent the
interests of lessees of flats in Arlington Park Mansions, Sutton Lane,
Chiswick, London W4, against the decision of Judge Barr, at Brentford County
Court, in favour of Laimond Property Investment Co Ltd, the former freehold
owners of the flats, present respondents.
William Hunter
(instructed by Rodgers Horsley) appeared on behalf of the appellants; David
Grant (instructed by Julian Holy) represented the respondents.
Giving judgment,
DILLON LJ said: This litigation arises from the sale in 1986 by the then
landlords, the plaintiffs in the action and respondents to this appeal, of the
freehold of certain blocks of flats known as Arlington Park Mansions in Sutton
Lane, Chiswick, to the present appellants, the defendants in the action,
Arlington Park Mansions Ltd, a company formed by the lessees of most of the
flats as a vehicle for buying the freehold reversion.
There are 35
flats in Arlington Park Mansions. Fifteen are on short leases and for immediate
purposes do not matter. The remainder are on long leases. The specimen lease in
the papers before us is a lease of a flat granted in 1981 for 99 years from
September 29 1971 at a ground rent of £50 a year in this case until the end of
the year 2006 and then rising by stages. The lease imposes obligations on the
landlords to repair and insure the main structure of the building of which the
flat forms part, and to repair and clean the common parts and so forth subject
to payment by the lessees of a service charge. The service charge is to cover
total expenditure — a phrase which is defined in the Fifth Schedule as meaning
the total expenditure incurred by the lessors in any accounting period in
carrying out their obligations under clause 5(5) of the lease and any other
costs and expenses reasonably and properly incurred in connection with the
building, including without prejudice to the generality of the foregoing the
costs as set out in a particular subclause, the cost of any accountant or
surveyor employed to determine the total expenditure and the amount payable by
the tenant hereunder, and certain other sums that do not for present purposes
matter. The accounting period is the calendar year.
Each lessee’s
service charge is a specified portion of total expenditure. It is collected in
part by an interim charge raised on the lessees which is to be such sum to be
paid on account of the service charge in respect of each accounting period as
the lessors or their managing agents shall specify at their discretion to be a
fair and reasonable interim payment. The balance of the service charge is
raised from the lessees when total expenditure is known and apportioned. There
are carry-forward provisions if the interim charge paid by a tenant in respect
of any accounting period exceeds the service charge for that period. These
provisions have latterly had effect subject to the powers of the county court
under the Landlord and Tenant Act 1985.
It appears
that by 1986 the flats were not in good repair and there had been difficulty in
persuading the local authority to provide the cost of repair by way of grant.
In January 1986 there was a meeting between the landlords and the residents’
association and their respective surveyors, and a letter to the residents’
association chairman of January 22 1986 suggests that, subject to the matter of
paying the arrears and the method of future payment for the works being
resolved, a time-scale should be:
1 A report to be drawn up by both firms of
surveyors, having inspected flats on the top floors of the buildings, by the
end of February.
2 Schedule of Works to go out to tender to
contractors at the end of February and to be returned within one month.
3 Schedule 19 Housing Notice to be served early
April for works to commence early May.
In fact, that
suggested procedure was not adopted. Instead, the freehold was sold to the
appellants, the lessees’ company formed for that purpose, under a written
contract of August 15 1986. That contract included in clause 17 a provision:
Save to the
extent that the same are inconsistent with the terms hereof the National
Conditions of Sale (Twentieth Edition) (‘National Conditions’) shall apply to
these presents.
There were
certain variations provided for to the National Conditions but they are not
material to the present case. Clause 29 provided:
Notwithstanding
that completion shall have taken place the provisions in this Agreement shall
remain in full force and effect save to the extent that they shall have been
satisfied fully on completion.
More
importantly, clause 16 provided for completion to take place on September 12
1986. Clause 16(c) provided:
The Purchaser
shall at completion pay to the Vendor the amount of all ground rents properly
due under the terms of the Leases referred to in the Second Schedule hereto
insofar as the same relate to the Vendors period of ownership of the Property
to the date of actual completion and the amounts demanded by the Vendor’s
managing agents in relation to service charges up to December 31 1986 in
relation to the period commencing December 25 1985 or January 1 1986 ending
December 31 1986.
The Second
Schedule leases were the long leases as opposed to the short leases. Clause 22
then dealt with how expenditure was to be dealt with. It provides as follows in
subclauses (a) to (e):
(a) In this Condition the phrases used shall have
the meanings given to them in the Leases referred to in the Second and Third
Schedules hereto.
(b) As soon as possible following completion the
Vendor shall prepare an account showing the total expenditure incurred and sums
received from the tenants for the period from January 1 1986 to the actual
completion date and shall provide a summary of the share of such total
expenditure attributable to each flat in the Property.
(c) Within fourteen days of the submission of
such account the following shall occur:
(i) In the event that the total expenditure
exceeds all sums received by the Vendor in respect of interim charge and
further interim charge for the financial year from January 1 to December 31
1986 the Purchaser will pay to the Vendor the amount of such excess.
(ii) In the event that all such interim charge and
further interim charge for the said financial year 1986 received by the Vendor
exceeds the total expenditure the amount of such excess will be paid by the
Vendor to the Purchaser.
(d) For the purpose of calculating the figures
referred to in the immediately preceding sub-clause the Vendor shall be deemed
to have received the proper share of total expenditure in respect of those
flats referred to in the Third Schedule hereto.
— I interject
that those were the ones occupied on short tenancies —
(e) Subject to the Purchaser complying with
clause 16(c) hereof on completion of the Contract the Vendor will pay to the Purchaser
the full amount of any sum or sums held by the Vendor or its agents as sinking
or reserve fund under the terms of the Leases referred to in the Second
Schedule hereto.
It seems that
completion duly took place on September 12 1986. But, for convenience, the
parties by their solicitors decided to combine the account envisaged by clause
22 with the completion statement and settle the lot on completion.
To this end
the managing agents prepared schedules and these were submitted to the
appellants’ solicitors (as purchasers’ solicitors) and were accepted. The
effect, as the vendors were releasing the amounts of the sinking or reserve
funds referred to in clause 22(e), was very substantially to reduce the amount
which the appellants had to provide on completion by way of balance of purchase
money.
Certain
last-minute adjustments were made on the completion day. In particular:
(1) The vendors gave credit for up to date
interest earned by the reserve funds and certain other small sums which the
vendors had received, and a small balancing payment was made by the vendors to
the purchasers; and
(2) The managing agents sent to the residents’
association, and the purchasers accepted and discharged, small final bills from
cleaning companies for cleaning services in the common parts of the premises up
to the actual completion.
All this, as I
see it, was mere machinery to achieve the resolution of the clause 22 account
on actual completion of the purchase.
On September
29 1986, however, less than three weeks after completion, the landlords’
surveyors sent to the landlords an account in the sum of £6,125.24 including
VAT. That was for professional services provided in regard to Arlington Park
Mansions, and specifically for inspecting the property and preparation of a
specification of works to eradicate external and internal defects together with
redecoration of external and internal common parts. The surveyors had been
given instructions by the landlords in January or February to prepare such a
specification. It seems that the specification had been completed by the
surveyors in mid-April or earlier, but the surveyors were told by the landlords
not at that stage to send a copy to the tenants. The tenants have thus never
seen the specification or had any benefit from it, but it has not been disputed
that the liability incurred by the landlords to the surveyors in respect of the
specification falls within the definition of total expenditure in the leases
and consequently in clause 22(b) of the contract for sale.
The
landlords/vendors promptly sent on this bill to the surveyors for the
purchasers to pay, but the purchasers have refused to accept liability. The
basic attitude of the purchasers as indicated in this court has been the
understandable one that everything had been settled at completion.
The vendors
accordingly issued the writ in this action in the High Court claiming payment
of the £6,125.24 (which the vendors had by then themselves paid to the
surveyors) with interest and costs. The action was transferred by consent to
the Chiswick County Court and tried there by His Honour Judge Barr who, on May
3 1988, gave judgment for the vendors for the sum claimed with interest and
costs. It is against that judgment that the purchasers now appeal.
It is
necessary to consider first the course the case took on the pleadings and in
the court below. The statement of claim alleges by para 1 an agreement by the
plaintiffs to sell and the defendants to purchase the freehold interest in the
premises for £40,000; by para 2 that by the terms of the agreement the
defendants agreed to discharge all expenditure which the plaintiffs should have
incurred upon the premises for the financial year January 1 to December 31
1986; by para 3 that the agreement was duly completed on September 12 1986 but
notwithstanding completion thereof pursuant to clause 29 thereof the provisions
of the agreement remain in full force and effect; and by para 4 that, contrary
to and in breach of the agreement, the defendants have failed and/or neglected
to discharge the sum of £6,125.24 being expenditure incurred as referred to in
para 2, full particulars of which had previously been provided.
By way of
further particulars the plaintiffs pleaded under para 2 that the clauses and
terms of the agreement they were relying on were clause 17, and in particular
clause 6(5) of the National Conditions of Sale (20th ed) and clause 22 of the
agreement. Further, by way of particulars under para 4 of the statement of
claim, they pleaded that the sum of £6,125.24 was not upon completion brought
into account under clause 22 of the agreement and they asserted that it was to
be recovered under clause 17, clause 6(5) of the National Conditions of Sale
and clause 22 of the agreement.
The defence
pleaded clause 22(b) of the agreement, and pleaded the accounts prepared under
that clause for which, it was said, the appropriate balancing payment was made
in accordance with the terms of the agreement. It also pleaded that the sum of
£6,125.24 was not brought into account in the taking of the accounts under
clause 22. That is common ground. The defence also pleaded an alleged estoppel
and that the sum claimed was not properly chargeable to the service charge
account, but those pleas were abandoned at the trial.
At the trial,
and in accordance with the case as pleaded, the plaintiffs’ case was placed
firmly, and indeed solely, on Condition 6(5) of the National Conditions of
Sale. Clause 6 of the National Conditions of Sale is concerned with rents,
outgoings and apportionments. The opening general words of the condition
provide that:
The purchase
being completed (whether on the completion date or subsequently), the income
and outgoings shall be apportioned as follows (the day itself in each case being
apportioned to the vendor).
Subclauses
(1), (2) and (3) of Condition 6 are concerned with whether the apportionment
should be made as at the date of actual completion or at the contractual date
for completion or at some other date. Subclause (4) provides:
Rates shall
be apportioned according to the period for which they are intended to provide
and rents (whether payable in advance or in arrear) according to the period in
respect of which they have been paid or are payable; and apportionment of
yearly items (whether or not the same are payable by equal quarterly, monthly
or other instalments) shall be according to the relevant number of days
relatively to the number of days in the full year.
Subclause (5)
then provides as follows:
Service
charges under leases, in the absence of known or readily ascertainable amounts,
shall be apportioned according to the best estimate available at the time of
completion and, unless otherwise agreed, the vendor and the purchaser shall be
and remain mutually bound after completion to account for and pay or allow to
each other, within 15 working days after being informed of the actual amounts
as ascertained, any balances or excesses due.
The learned
judge in his judgment took the view that clause 22 of the contract was not inconsistent
with National Condition 6(5). He concluded that what was contemplated was that
at completion, so far as could be reasonably ascertained, a balance was to be
struck but it was not to be a final balance because there could be later bills
or receipts, and so he held the vendors entitled to recover.
As I see it,
subclause (5) of Condition 6 of the National Conditions of Sale applies
naturally to a sale by the lessee to an assign of the leasehold interest under
a lease. It does not apply at all easily to a sale of the freehold reversion on
leases under which service charges are payable. What really falls to be
apportioned or adjusted on completion as between vendor and purchaser of the
reversion is the amount of the expenditure incurred by the vendor up to
completion compared with any interim payments he has received. But to apportion
service charge subsequently payable by the lessees is not the same thing
because that may depend in large part on expenditure incurred after completion
by the purchaser as assignee of the reversion, and with such expenditure the
vendor is in no way concerned.
But, even if
it might be possible to apply subclause (5) of Condition 6 to a sale of a
reversion in a case where no other provision had been made, that is not this
case. This case contains in clause 22 of the contract a full and complete
procedure for apportioning expenditure and compensating the vendor if his
expenditure incurred on the premises up to completion exceeds his receipts in
respect of interim service charges.
Accordingly, I
would respectfully disagree with the learned judge and I would hold that
subclause (5) of Condition 6 is not incorporated into this contract and does
not avail the vendors.
At the end of
the day’s hearing concerned entirely with the case as presented in the court
below founded on Condition 6, this court, being troubled at the possible
injustice if there were no remedy to the vendors if a bill bona fide incurred
and which had been overlooked in good faith was presented to the vendors shortly
after the settlement of the account under clause 22 of the contract, intimated
that it proposed to reserve judgment to consider the case further. Mr Grant,
counsel for the vendors, who had not appeared in the court below but had only
come into this case for the hearing of this appeal, then asked that he might be
allowed to make further submissions on the following day as to possible
alternative ways of putting the vendors’ claim. In fact, owing to shortage of
available court space, this division of the court, which had been allocated its
reading day for that day, was unable to continue the hearing on the following
day and the hearing was resumed in the following week. The court then gave Mr
Grant leave to serve a respondent’s notice out of time raising fresh arguments
to support the conclusion reached by the judge that the £6,125.24 is properly
payable by the purchasers. The court has now had the benefit of excellent
argument, concisely deployed but the result of much research, from counsel on
both sides and for that the court is much indebted to them.
The new case
for the vendors is put on two relevant bases. It is said, first, that the
courts have long claimed the right to reopen a settled account, or correct it
by the process of surcharging and falsifying, if even a single error in the
account is shown. It is said, second, that at common law money paid under a
mistake of fact has long been recoverable even though the mistake was over
something that the payer had the means of knowing or would, if he had thought,
have known.
In support of
the first argument we have been referred to a number of 18th-century cases,
where the brevity of the report makes it difficult to discern the limits of the
principle the court was applying. We have also been referred to more helpful
19th-century authorities such as Perry v Attwood (1856) 6 E &
B 691 and the decision of Sir George Jessel in Gething v Keighley
(1878) 9 Ch D 547. We have also been referred to the decision of the Privy
Council in Daniell v Sinclair (1881) 6 App Cas 181 where giving
credit for a sum in account was equated to payment. The relevance of that is
that in the present case the various reserves from which the vendors could have
deducted the amount of the surveyors’ bill were credited against the balance of
the purchase moneys due from the purchasers.
In support of
the second argument we have been referred to Kelly v Solari
(1841) 9 M & W 54 where Lord Abinger CB, in giving the leading judgment,
said (at p 57):
I think the
defendant ought to have had the opportunity of taking the opinion of the jury
on the question whether in reality the directors had a knowledge of the facts,
and therefore that there should be a new trial, and not a verdict for the
plaintiff; although I am now prepared to say that I laid down the rule too
broadly at the trial, as to the effect of their having had means of knowledge.
That is a very vague expression, and it is difficult to say with precision what
it amounts to; . . .
He goes on to
say a little later:
. . . if the
party makes the payment with full knowledge of the facts, although under
ignorance of the law, there being no fraud on the other side, he cannot recover
it back again. There may also be cases in which, although he might by
investigation learn the state of facts more accurately, he declines to do so,
and chooses to pay the money notwithstanding; in that case there can be no
doubt that he is equally bound. Then there is a third case, and the most
difficult one — where the party had once a full knowledge of the facts, but has
since forgotten them. I certainly laid down the rule too widely to the jury,
when I told them that if the directors once knew the facts they must be taken
still to know them, and could not recover by saying that they had since
forgotten them. I think the knowledge of the facts which disentitles the party
from recovering, must mean a knowledge existing in the mind at the time of
payment.
And so he
directed a new trial. Rolfe B agreed and said:
With respect
to the argument, that money cannot be recovered back except where it is
unconscientious to retain it, it seems to me, that wherever it is paid under a
mistake of fact, and the party would not have paid it if the fact had been
known to him, it cannot be otherwise than unconscientious to retain it.
But he agreed
also that there should be a new trial on the ground that:
the jury may
possibly find that the directors had not in truth forgotten the fact; and,
secondly, they may also come to the conclusion, that they had determined that
they would not expose the office to unpopularity, and would therefore pay the
money at all events; . . .
We were also
referred to the case of Lucas v Worswick (1833) 1 M & Rob
293. In that case there was a dispute about the amount of an account which had
been rendered to a customer. The amount of the account was then agreed and the
customer paid the full amount agreed, overlooking the fact that he had paid a
sum of £20 odd as a payment on account when the work was ordered. He was held
entitled to recover the amount of the overpayment.
On the other
side, Mr Hunter, for the purchasers, submits that all the cases cited for the
vendors are distinguishable on the facts. He urges that the claims now advanced
on behalf of the vendors are essentially claims for equitable relief in respect
of a binding contract between the parties and he submits that, on modern
authorities such as Riverlate Properties v Paul [1975] Ch 133 and
in so far as it is still good law, Samuel Properties (Developments) Ltd
v Hayek [1972] 1 WLR 1296, such equitable relief can be granted only if
there has been sharp practice or unconscionable conduct on the part of the
other party to the contract.
He also refers
to the views expressed by Lord Esher MR in Barrow v Isaacs & Son
[1891] 1 QB 417 at p 420 to the effect that, if a person forgets to do
something, he is not making a mistake. As to the point about whether there is a
distinction between forgetfulness and making a mistake, in the context of the
present case I would prefer the view expressed by Eve J in the case of Lady
Hood of Avalon v Mackinnon [1909] 1 Ch 476, which is cited in the
judgment of Lord Edmund Davies in Samuel Properties v Hayek,
that, when a person has forgotten the existence of a pre-existing fact and
assumes that such fact did not pre-exist, he is labouring under a mistake, and
that a man makes a mistake in forgetting an existing fact quite as much as he
does in assuming a state of things to exist which does not in fact exist. For
my part, I have no doubt that the case of Lucas v Worswick was
rightly decided.
More
fundamentally, however, Mr Hunter urges that there is no evidence of any
mistake; it is mere surmise. The accountant of the vendors who prepared the
statements of total expenditure on which the completion statement was based was
called as a witness, but he gave no evidence at all to explain why no provision
was made for the vendors’ liability to their surveyors.
Mr Hunter also
reminds the court — and indeed the court was already well aware — that the
points taken in the respondent’s notice were never taken in the court below and
have never been pleaded. It is elementary that, where there is a claim to
recover money paid under a mistake or to reopen a settled account on grounds of
error, the pleading must identify the mistake or error which is relied on.
Therefore, Mr Grant applied for leave to amend the statement of claim and
submitted a properly drawn form of amendment.
Now, the
general rule is clear that the court must be careful about deciding appeals on
issues which were not argued in the court below. The leading authority is the
case of The ‘Tasmania’ v The ‘City of Corinth’ (1890) 15 App Cas
223, and Lord Herschell at p 225 said:
My Lords, I
think that a point such as this, not taken at the trial, and presented for the
first time in the Court of Appeal, ought to be most jealously scrutinised. The
conduct of a cause at the trial is governed by, and the questions asked of the
witnesses are directed to, the points then suggested. And it is obvious that no
care is exercised in the elucidation of facts not material to them.
It appears to
me that under these circumstances a Court of Appeal ought only to decide in
favour of an appellant on a ground there put forward for the first time, if it
be satisfied beyond doubt, first, that it has before it all the facts bearing
upon the new contention, as completely as would have been the case if the
controversy had arisen at the trial; and next, that no satisfactory explanation
could have been offered by those whose conduct is impugned if an opportunity
for explanation had been afforded them when in the witness box.
As to the time
at which the amendment of the pleading is sought, it is not in doubt that this
court has all the powers of the court below to allow an amendment of a
pleading. But in the case of Ketteman v Hansel Properties Ltd
[1987] AC 189 Lord Griffiths, whose views were endorsed by Lord Templeman and
Lord Goff of Chieveley and represented the majority view of their Lordships’
House, revised the commonly accepted view as to the admissibility of late
amendments to pleadings. He referred to the well-known passage in the judgment
of Sir Baliol Brett MR in Clarapede & Co v Commercial Union
Association (1883) 32 WR 262, at p 263 and he quoted:
The rule of
conduct of the court in such a case is that, however negligent or careless may
have been the first omission, and, however late the proposed amendment, the
amendment should be allowed if it can be made without injustice to the other
side. There is no injustice if the other side can be compensated by costs; . .
.
Lord Griffiths
continued at p 220C:
This was not a
case in which an application had been made to amend during the final speeches
and the court was not considering the special nature of a limitation defence.
Furthermore, whatever may have been the rule of conduct a hundred years ago,
today it is not the practice invariably to allow a defence which is wholly
different from that pleaded to be raised by amendment at the end of the trial
even on terms that an adjournment is granted and that the defendant pays all
the costs thrown away. There is a clear difference between allowing amendments
to clarify the issues in dispute and those that permit a distinct defence to be
raised for the first time.
Whether an
amendment should be granted is a matter for the discretion of the trial judge
and he should be guided in the exercise of the discretion by his assessment of
where justice lies. Many and diverse factors will bear upon the exercise of
this discretion. I do not think it possible to enumerate them all or wise to
attempt to do so. But justice cannot always be measured in terms of money and
in my view a judge is entitled to weigh in the balance the strain the
litigation imposes on litigants, particularly if they are personal litigants
rather than business corporations, the anxieties occasioned by facing new
issues, the raising of false hopes, and the legitimate expectation that the
trial will determine the issues one way or the other. Furthermore to allow an
amendment before a trial begins is quite different from allowing it at the end
of the trial to give an apparently unsuccessful defendant an opportunity to
renew the fight on an entirely different defence.
He added a
little later:
We can no
longer afford to show the same indulgence towards the negligent conduct of
litigation as was perhaps possible in a more leisured age.
What Lord
Griffiths says about amendment to introduce an entirely different defence must
equally apply to amendment to introduce an entirely different basis of claim.
In the present case I take the view, first, that the issues set out in the
respondent’s notice should not be entertained and decided by this court because
there was no evidence tendered in the court below to show the nature of the
mistake when evidence could so easily have been tendered and cross-examined to
as necessary if either party had then had the point in mind. But, second, I
take the view also that, because of the strain the litigation imposes on
litigants if they are personal litigants — and in the present case the purchasers,
though a company, are a company formed to acquire the freehold for the
individual lessees rather than a business corporation — and because of the
anxieties occasioned by facing new issues, the raising or extinguishment of
false hopes and the legitimate expectation that the trial would determine the
issues, it is not right for this court at this stage to allow amendment of the
statement of claim. Other things being equal, the points now taken might well
have founded a valid claim for the vendors. It is unnecessary for me to express
a view. The points taken are taken too late. Accordingly, I would refuse leave
to amend the statement of claim. Consequently, the new points must fail. As I
disagree with the judge on the point on which he decided the case, I would
allow this appeal and discharge the order of Judge Barr.
Agreeing that
the appeal should be allowed, BUTLER-SLOSS LJ said: For the reasons given by
Dillon LJ I agree that Condition 6(5) of the National Conditions of Sale had no
application to this contract and that the judge erred in holding that it
applied. That issue was the sole matter litigated in the court below and no
evidence was called or argument adduced as to any other issue.
At a late
stage, in responding to this appeal, counsel for the plaintiff respondent
landlords embarked upon a wholly new case for the vendors relating to the same
sum of money in dispute under two main heads: that there was a settled account
that could be reopened or subjected to the process of surcharge or falsification;
and, alternatively, a claim for repayment of money paid under a mistake. A
respondent’s notice of additional grounds was provided during the course of
counsel’s submissions, and a draft amended statement of claim setting out for
the first time these claims was submitted at the end of Mr Grant’s most
attractive argument.
Before
considering whether Mr Grant might succeed upon the amendment to the statement
of claim it is necessary for him to seek leave to amend under Ord 20, r 5. The
general propositions for granting leave to amend are well known and the
observations of Bowen LJ have been approved and adopted for many years. But
late amendments of pleadings must now be looked at in the light of the decision
in Ketteman v Hansel Properties Ltd [1987] AC 189, and in
particular the speech of Lord Griffiths at p 220 already read by Dillon LJ. His
words are particularly relevant to this application by Mr Grant.
These are new
points raised by the plaintiff respondents for the first time during final
submissions in the Court of Appeal requiring this court to exercise its
discretion. This court should be slow to permit amendments of so fundamental a
nature at such a late stage; and, indeed, it is relevant to point out that, as
Lord Griffiths said at p 220D, there is a clear difference between allowing
amendments to clarify the issues in dispute and those to permit a distinct
defence to be raised for the first time. That must equally apply to plaintiffs
putting forward an entirely new basis for their claim.
I do not consider
that the discretion of this court should be exercised in favour of allowing
these amendments. No evidence was called below on these issues and as to the
mistake of omitting the sum of £6,000 odd from the settled account. It is not
surprising that it was not called below, since it was not pleaded or argued.
But Mr Hunter says, with some force, that we cannot assume the content of the
evidence which might have been called. I have little doubt that we could hazard
a guess as to the likely evidence and inferences that might have been drawn
from the documents. But such evidence was not called and was not challenged and
the defendants are now at a potential disadvantage and we cannot be satisfied
that we have all the relevant facts upon which to form a view.
Following on
no evidence called, there were, of course, no findings of fact by the judge who
was not asked to consider these issues. Consequently, it comes entirely fresh
to the appellate court.
These
defendant appellants, who are a tenants’ association under the guise of a
company buying out the landlords, are now being asked at this stage to face, in
effect, new proceedings, and I, too, would rely upon the words of Lord
Griffiths in dealing with the legitimate expectation that the trial would
determine the issues and the raising of false hopes and with the other
observations made by Dillon LJ.
For those
reasons, in the exercise of my discretion, I would not allow the amendment. The
issues raised in the most interesting and carefully researched argument of
counsel on both sides on reopening a settled account do not, therefore, arise.
Interesting though it would have been to have considered them further, I have
come to the conclusion that it would not be helpful. I would not allow the
amendment to the statement of claim and would allow this appeal.
STAUGHTON LJ
agreed and did not add anything.
The appeal
was allowed with costs in the Court of Appeal and below.
