Defective premises – Negligence – Party seeking to withdraw admission in defence made by mistake – Judge refusing permission to withdraw because of substantial prejudice to claimant – Whether balance of prejudice falling in favour of permitting withdrawal – Appeal allowed.
The claimant was the household insurer of a property in a small development of two houses purchased by their insured in December 1999. A dwelling-house was then in the course of construction on the site. The first defendant was the developer and contractor and the second defendant was the consulting engineer.
The house was completed in July 2000 and, in August 2003, the insured found signs of structural damage in the form of substantial and extensive cracks, both externally and internally. The cracks worsened and site investigations revealed tree roots beneath the foundations of the right flank wall and the front wall. Remedial works were carried out between March and August 2005 at the cost of the claimant.
The claimant subsequently brought proceedings against the defendants for damages, alleging a breach of their duties under the Defective Premises Act 1972 and negligence. Judgment was entered against the first defendant, which took no part in the current proceedings, but there seemed to be no prospect of recovery under that judgment.
In pre-action correspondence and in its defence to the action, the second defendant had mistakenly admitted that it had designed the foundations of the defective building. However, it subsequently applied under CPR 17.1(2)(b) to amend its defence and withdraw that admission on the ground that the designer was K Ltd, which had been wound up and dissolved.
The Technology and Construction Court dismissed its application. Although accepting that the second defendant had an arguable case that it was not the designer, the judge found that any withdrawal of the admission would cause substantial prejudice to the claimant because K might argue that any claim against it was statute-barred. That prejudice outweighed any prejudice to the second defendant if permission were refused. The second defendant appealed.
Held: The appeal was allowed.
CPR 17.1(2)(b) required that, where a party had served a statement of case, or a defence, it could amend it only with the court’s permission. In deciding whether to grant permission, the court should, in a case where the effect of the amendment would be to withdraw an admission made in an earlier statement of case, have regard to CPR 14.1. In particular, it should take account of the matters listed in para 7.2 of the practice direction that supplemented that rule, which included the relative prejudice that would be suffered by each party if the admission was, or was not, withdrawn.
If the admission was made in pre-action correspondence but had not been repeated after the start of proceedings (especially where it had not been made in an earlier pleading and the case did not fall within CPR 14.1A), the question for the court was whether allowing it to be withdrawn in the party’s pleaded case would be a course likely to obstruct the just disposal of the proceedings. However, the relative prejudice that would be suffered by each party was a factor that the court also had to take into account in this context in order to give effect to the overriding objective to deal fairly with a case.
Justice might require that a party that, by pre-action admission, had led the other party to act to its detriment should not be permitted to withdraw that admission. However, where the detriment was insubstantial, fairness would normally require the case to be determined by reference to the real issue in question, even though an ill-advised admission might have been made at an earlier stage.
In the present case, although the judge had been right to have regard to the prejudice, if any, caused to the claimant by the admission in the pre-action letter, he had erred in failing to examine critically the actual prejudice alleged. In weighing the prejudice that would be suffered by each party if the admission was, or was not, withdrawn, the balance fell firmly in favour of the second defendant.
Sian Mirchandani (instructed by Reynolds Porter Chamberlain LLP) appeared for the claimants; Alexander Hickey (instructed by Berrymans Lace Mawer) appeared for the second defendant; the first defendant did not appear and was not represented.
Eileen O’Grady, barrister
