Stewart v Engel & Anor [2000] EWCA Civ 362

EWCA-Civ
Stewart v Engel & Anor
[2000] EWCA Civ 362 · 2000-05-17
[1]The court has jurisdiction to grant an application to amend the pleadings to raise new points and/or to call fresh evidence and/or to hear fresh argument.[2]The court must clearly exercise its discretion in relation to such an application in a way best designed to achieve justice.[3]The general rules relating to amendment apply so that(a) while it is no doubt desirable in general that litigants should be permitted to take any reasonably arguable point, it should by no means be assumed that the court will accede to an application merely because the other party can, in financial terms, be compensated in costs;(b) as with any other application for leave to amend, consideration must be given to anxieties and legitimate expectations of the other party, the efficient conduct of litigation, and the inconvenience caused to other litigants.[4]Quite apart from, and over and above, those principles, because it is inherently contrary to the public interest and unfair on the other side that an unsuccessful party should be able to raise new points or call fresh evidence after a full and final judgment has been given against him, it would generally require an exceptional case before the court was prepared to accede to an application where the applicant could not satisfy the three requirements in Ladd v Marshall.[5]Almost inevitably, each case will have particular features which the court will think it right to take into account when deciding how to dispose of the application before it.[6]The court should be astute to discourage applications which involve parties seeking to put in late evidence, but cases where new evidence is found after judgment is given and before the order is drawn up will be comparatively rare. Those will no doubt be relevant considerations in considering the application of the overriding objective under the CPR to the facts of the particular case. I agree, for example, that after a full trial, the application of the overriding objective would be unlikely to lead to the conclusion that the losing party should be permitted to reopen the matter save in an exceptional case where the requirements of Ladd v Marshall were not met. However, all must depend upon the circumstances. The question under this head is whether the judge misdirected himself in the instant case in reopening the matter. In my opinion he did not. The judge referred to the passage in Re Barrell Enterprises which I have quoted above and to a further decision of Neuberger J in Re Blenheim Leisure (Restaurants) Ltd (3), The Times 9th November 1999, where he held that in relation to an interlocutory order the court should not reconsider it unless there were strong reasons. He gave examples such as a plain mistake by the court, the parties' failure to draw to the court's attention a plainly relevant fact or point of law and discovery of new facts after the judgment was given. To my mind those are simply examples. How the discretion should be exercised in any particular case will depend on all the circumstances. In this regard the judge said this: I consider, however, that what I am being asked to do is of a different nature to the situations which were mainly in mind in those cases. I am not being asked to reconsider my primary decision, namely that the statement of claim as it stood had no real prospect of success. I am being asked to reconsider a consequence of that decision, namely the dismissal of the action. That would be inappropriate if leave to amend is to be given, just as it is appropriate if it is not. It is, as it were, a matter of mechanics. I think that the history which I have set out is something to be taken account of in weighing whether, in so far as it is a matter of discretion, leave to amend should be given. Sir Christopher Slade has expressed the view that the judge erred in principle in that passage. I regret that I have reached a different conclusion because I do not think that the question is whether there were such exceptional circumstances as to satisfy the test in Re Barrell Enterprises, but the much broader question contained in rule 1.1(1) of the CPR. As I see it, the judge correctly directed himself. He said, in the next passage in his judgment, after that which I have just quoted: Amendment is covered by Part 17 of the CPR. Part 17 does not contain any express provision as to the court's general power to allow amendments. It is, of course, subject to the over-riding objective set out in Part 1. The court's aim must be to do justice between the parties in the circumstances before it. In my view, cases decided under the Rules of the Supreme Court as to the exercise of the court's discretion as to leave to amend will generally remain relevant. I consider that in particular the court should generally allow an amendment which is necessary to allow the real dispute between the parties to be determined, where the other party can be compensated in costs and there is no other factor which would make the amendment unjust. The judge then considered the power to allow amendments after the expiry of the limitation period in rule 17.4 and the facts of the case, which are relevant under issues (C) and (D) below. While (as stated earlier) I have serious reservations about the desirability of extensive reference to the very many cases decided under the RSC, I can see no basis for holding that the judge erred in principle in his approach to this case. He carefully took into consideration what he described as the history of the matter. That included both the fact that he thought that the conversion point might be a point open to the claimant and for that reason had suggested it in argument and in his draft judgment and the further important fact that he had been informed by the claimant's counsel on the day he handed down judgment that it was not intended to seek to amend to plead conversion. He thus had all relevant considerations in mind, including the fact that it was only after he had been given that information and announced the order that the application for permission to amend was made. The judge has been criticised for drawing a distinction between this case and cases like Re Barrell Enterprises. I do not think that that criticism is justified. He was to my mind right to say that that what he was being asked to do was of a different nature from the situations which, as he put it, were mainly in mind in the earlier cases. He was being asked, not to revisit any of the questions which he had decided, but to allow the claimant to put forward a point which the judge thought might be open to her, but which had not yet been taken. The difference between the position on the 24th September when the matter was discussed orally and the position on the 20th or 22nd October when the application was made was that the judge had indicated the order which he was making in the light of the concession and that just under a month had elapsed. There can I think be no suggestion of any prejudice to the defendants during that month. It was, in my judgment, open to the judge to hold that, if it was just to permit the amendment on the 24th or 25th September, it was also just so to hold on the 22nd October. I recognise that the position would have been different if the order had been sealed before the application is made. However, I do not think that that invalidates the exercise of the judge's discretion in this case because after an order is sealed the judge no longer has a discretion, whereas the order had not been sealed (or indeed drawn up) on the 22nd October when the judge was asked to exercise his discretion. I recognise also that it can be said that the claimant's legal advisers had been given every opportunity to take the conversion point, but had not done so, presumably on the basis that they had advised the claimant that it would not succeed and the claimant had accepted that advice, with the result that the judge was told on the 24th September that an application for leave to amend would not be made. Those are of course relevant and important considerations, but the judge had them in mind when he exercised his discretion. Applications for permission to amend are often made because advice is taken from leading counsel, as occurred here, and it can often be said that amendments are necessary because of a mistake of the applicant's legal advisers. Those, too, are relevant considerations but, as the judge held, all depends upon the application of the overriding principle. For these reasons I do not think that it can fairly be said that the judge misdirected himself. He had all relevant considerations in mind in deciding to reopen the matter. I would therefore decide issue (B) in favour of the respondent. Issue (C) This issue raises the question whether the judge had jurisdiction to permit the amendment so as to introduce new and otherwise statute barred claims for rectification and conversion having regard to section 35 of the Limitation Act 1980 and rule 17.4 of the CPR. I agree that the judge had jurisdiction to do so for the reasons given by Sir Christopher Slade and do not wish to add to them in any way. Issue (D) The questions under this head are whether the judge exercised his discretion to allow the amendment on wrong principles or, if not, whether he was plainly wrong to do so. If the answer to those questions is no, the appeal must fail. Mr Salzedo, however, submits that the answer to both questions is yes. As Sir Christopher Slade has indicated, Mr Salzedo's submissions included in effect the following:[1]The appellants could not be adequately compensated in costs for the amendment since the claimant, who is legally aided, is impecunious.[2]The original transaction was handled on behalf of the liquidator by Ms Charlotte Halsall. Her evidence would be crucial in the claim for rectification, on which the claim for conversion depends. She is no longer employed by his firm and, after this long lapse of time, her memory as to the details of the relevant negotiations is likely to have become dim.[3]After this length of time, the chances of a fair trial of the new issues would in any event be slender.[4]Both the claims are weak and would have little chance of success, particularly in the case of the rectification claim, because of the claimant's laches. It is in my opinion important to consider the application in the context of the pleadings as the stood before the application. The judge considered them in detail, as has Sir Christopher Slade in the context of issue (C). It is not therefore necessary for me to do so. However, although, for the reasons given by Sir Christopher Slade under issue (B), I agree that the conversion and rectification cases were not pleaded in the statement of claim, the facts relied upon were essentially pleaded either in the statement of claim or the reply. In order to establish conversion the claimant would have to show that on the true construction of the agreement, either in its original form or as rectified, the property in the physical materials, which like Sir Christopher Slade I shall call "the Copies", passed to her, that the defendant liquidator converted them by passing them to a third party and that the liquidator was personally liable for doing so. There seems to me to be little or no difficulty about the second and third of those requirements. As to the first the claimant's case under the agreement is based on recitals(a) (A) to (C) and (F), the definition of "Assessment Library Materials" and clause 2.2 construed in the context of what are said to be the commercial probabilities. Recital (F) recites that the liquidator, acting on behalf of the company, has agreed with the claimant for the sale of the "Assessment Library Materials" which were part of the products referred to in recitals (A) and (B). In clause 1 the "Assessment Library" is defined as the "Assessment and Development Centre Materials Library" and in recitals (A) and (B) the products are described as "a series of new products to be used in the fields of performance appraisal" and other fields which the claimant had been appointed to design and develop under an earlier agreement. It is recited in recital(b) (B) that that earlier agreement also provided that Mosaic would become the "sole owner of such products and of all the intellectual property rights therein". By recital(c) (C) it is recited that the ownership of such products and of all the intellectual property rights therein were now vested in the Company. It is said that recital (C) shows that a distinction is drawn between the products themselves and the intellectual property rights in them. Thus it is said that in these circumstances recital (F) shows that it had been agreed that the products, including the "copyright in such materials", were being sold to the claimant. As I understand it, it is the claimant's case that the recitals show that it had been agreed that the sale included not only the copyright in the materials, but the materials themselves. Against that it is submitted by Mr Salzedo that clause2.1 makes it clear all that was sold was "the copyright and all other rights of a like nature". I see the force of that submission, which would almost certainly be correct if attention were focused only on clause 2.1. However, clause 2.1 (which has been set out by Sir Christopher Slade) provides that the liquidator hereby assigns to [the claimant] the copyright and all other rights of a like nature …. in and to the materials comprising the Assessment Library … and clause2.2 provides: It is hereby agree that the assignment and sale only includes materials originally written by [the claimant] and does not include any rights to any developments made by the Company or Mosaic or the the (sic) performance management material developed by the Company or Mosaic. It may be said that although clause 2.1 refers to assignment, which on its face may be particularly apt to describe "copyright and rights of a like nature", the use of the word sale in recital (F) and clause 2.2 shows that it had been agreed that the sale would extend to the physical products. It seems to me that the claimant's case that property in the Copies as well as the copyright was intended to pass under the agreement is certainly arguable, as the judge plainly thought, without the necessity for rectification. Mr Mann QC asked rhetorically: why would the parties agree to include only the copyright and not the Copies? There may be a good answer to that question, but it is not one which it is appropriate to resolve on an application (let alone an appeal) of this kind. Moreover it appears to me that the essential facts required to establish conversion were alleged in the original statement of claim. In addition to the above, it was alleged that the claimant duly paid the agreed sum of £5,000 to the liquidator and that fact was expressly admitted in the defence. Clause 2.1 of the agreement begins by stating "in consideration of the sum of … £5,000 now paid by [the claimant] …". Thus the essential basis upon which it can be said that the property included in the sale passed to the claimant on the making of the agreement was alleged and it was further alleged in the particulars of negligence in paragraph 12 that the liquidator was negligent in failing to recover the Copies. In paragraph 7(i) of the defence the defendants raised the very issue which arises or would arise for decision on the true construction of the agreement in a claim for conversion. It reads: On its true construction, the subject matter of the Agreement and Assignment was certain "copyright and all other rights of a like nature", which does not include any tangible assets such as the documents and papers comprising the Assessment Library Materials and associated advertising materials. That issue was thus raised by the defendants as long ago as the 26th November 1998. In my judgment it can be fairly determined now, just as it could have been fairly determined then. Some limited evidence of background or factual matrix may be required now, just as it was then, but I see no reason why it should not be adduced now, just as it was no doubt contemplated by both parties that it would have been adduced then. As to rectification, the plea of rectification was first raised on the 26th March 1999 in paragraph 5 of the reply, which is in the same terms as paragraph 10 of the amended statement of claim. It reads: Further or alternatively the Plaintiff avers that the continuing common intention of the parties up to the time the Agreement was signed, as evidenced by the words of recital, was that the Assessment Library Materials were included in the Agreement and the Plaintiff is entitled to have Clause 2(1) of the Agreement rectified accordingly. The defendants were thus not taken by surprise by the rectification plea in October 1999 because it had been advanced earlier in response to their own plea that on its true construction the agreement did not include the Copies, which they regarded as relevant or potentially relevant to the case as originally pleaded. In these circumstances it seems to me that it would be very unlikely indeed that any judge would have refused the application to amend the statement of claim which was made in October 1999 if it had been made in, say, March 1999 at the same time as service of the reply. In granting the application the judge said this: In opposing the application Mr Salzedo relied on the position of Ms Charlotte Halsall. It appears that it was she who handled the transaction on behalf of the liquidator. She is no longer employed by Stoy Hayward. If she can be found, it may be difficult for her to cast her mind back to 1992 and her intention as to the physical materials. That would carry more force in the absence of the agreement based on the fax and the recital. Further, until the success of the application to strike out, her evidence was going to be required in order to answer the case in negligence. Mr Salzedo also referred by way of prejudice to the liquidator to my disallowance of costs incurred on the liquidator's side in preparing to resist an application to amend on 24 September following delivery of judgment. I disallowed those costs because there had been no indication from the claimant's side that such an application was going to be made. As I see the claimant's case, it has always been at least a substantial part of it that, in broad terms, the liquidator let Mr Murray have the physical materials when he should not have done. That, in broad terms, is the case which she now seeks to advance. Her amendment comes very late in time. On the other hand the action has not yet advanced beyond statements of case. There is no bar in law to the amendments. Bearing in mind all the circumstances including the circumstance that if the order made on 24 September had been drawn up swiftly the only way forward would have been by way of appeal, I think it right to allow the amendment. I see nothing wrong in principle with the judge's approach. It may be added that, as Mr Mann has observed, no attempt has apparently been made to contact Ms Halsall recently, so that there is no evidence that she cannot be found or that she would be unable to give helpful evidence. Moreover, the issue as to whether the agreement covered not only copyright but also physical materials was canvassed in correspondence at the very outset in January 1993. The judge had before him evidence from the liquidator and reached the conclusion that these matters can be fairly tried. I agree, although it was essentially a matter for him in the exercise of his discretion, with which I can see no basis upon which we could interfere. I would only add this on the question of laches and costs. As to laches, I do not think that the question whether there was such laches is one which we should seek to determine now. It will be a matter for the trial judge. As to costs, I accept Mr Mann's submission that the costs incurred in the action so far are not costs incurred as a result of the amendment, as was submitted by Mr Salzedo. Thus the costs which the claimant was ordered to pay the defendants as a result of the defendants' successful application, which was the subject of the judgment delivered on the 24th September, are unconnected with the amendment and are thus irrelevant for present purposes. I am not persuaded that the defendants would not have had those issues determined, even if an application for permission to amend had been made earlier. The claimant has been ordered to pay the costs of and occasioned by the amendment permitted by the judge. Those costs seem to me to be unlikely to be very substantial and such that (if legal aid were ignored) the claimant would be unlikely to be unable to pay. They would have been payable whenever the application was made. In my judgment the judge would have been entitled to give permission to make these amendments at any stage during the course of the action and I do not think that there is any proper basis upon which this court could properly interfere with the exercise of his discretion when he in fact exercised it in December 1999. In short I do not think that the appellants have discharged the heavy onus referred to by Sir Christopher Slade. On the contrary, I agree with the judge that the effect of the amendment will be to enable the claimant to advance what has been, in broad terms, her case from the outset, namely that she bought the physical materials as well as the copyright. In all these circumstances, I would dismiss the appeal. LORD JUSTICE ROCH: I agree with Sir Christopher Slade that this appeal should be allowed for the reasons that he gives. As we shall be reversing the decision of his Honour Judge Jack QC and because Clarke LJ, whose judgment I have had the advantage of reading in draft, would uphold the decision, I shall state my reasons shortly. The facts and history of this action are set out in the judgment of Sir Christopher Slade and I shall not repeat them. I shall consider the four issues that arise in this appeal in the same order as set out in the judgment of Sir Christopher Slade. Issue A I agree with Sir Christopher Slade and Clarke LJ that a Court has power to reopen its judgment or order in the period between delivery of judgment either by the judgment being spoken or handed down, and the date on which the judgment or order is sealed or otherwise perfected, when the time for appealing begins to run under Order 59 Rule 4 (1). This will be so although the effect of the judgment or order may be immediate on the judgment or order being spoken, where the Court does not specify that the judgment or order should take effect at a later date, see CPR Part 40.7(1). The Court has power at any given time to correct an accidental slip or omission in a judgment or order, see Part 40.12 (1) of the Civil Procedure Rules. With that exception the Court has no power to vary or amend in respect of a judgment or order that it has made once the judgment or order has been sealed and time for appealing has commenced to run. If that judgment is a final judgment then it can only be altered by a Court hearing an appeal from it. Issue B The power of a Court to reopen, whether by revocation or variation, its judgment or order must be exercised sparingly in my judgment, if it is to be exercised in accordance with the overriding objective of the CPR. The overriding objective of the new Code is to enable a Court to deal with a case justly, see Part 1.1 (1). In dealing with a case justly, as in discharging its duty to manage a case, the Court must bear in mind expense, the financial position of each party, the desirability of ensuring the parties are on an equal footing and that cases should be dealt with quickly and efficiently, which includes dealing with as many aspects of the case as the Court can on the same occasion., see CPR Part 1.1(2)(a)(b) and (d), and 1.4(2)(i) and (1). The judge in his judgment at page 3 of the transcript accepted that the jurisdiction of a Court to reopen a judgment or order which it has delivered but which has not yet been drawn up was discretionary; a discretion to be used in special cases. The judge said:
"It is clear that where the Court has heard argument on a point and made a decision, it will be exceptional that it will allow it to be reopened."
The judge then went on to cite a passage from the judgment of Russell LJ in Re. Barrell Enterprises (1972) 3 All ER 631 at 636F:
"When all judgments have been given, either in a court of first instance or on appeal, the successful party ought save in the most exceptional circumstances to be able to assume that the judgment is a valid and effective one."
His Honour Judge Jack went on to cite a judgment of Neuberger J. in Re, Blenheim Leisure (Restaurants) Ltd No.3 reported in The Times 9 November 1999 that a Court should not reconsider an interlocutory order it had made unless there were strong reasons. It has to be borne in mind that the reason why his Honour Judge Jack was being asked to reopen his order of 24 September 1999 that "the action be dismissed as against both Defendants", was that between that date and 20 October 1999 when the Claimant applied for leave to amend her statement of claim the Claimant had consulted leading counsel. There must have been reasons which ran counter to an application for leave to amend to plead the fresh cause of action in conversion being made. The judge had raised the question of amendment to plead conversion twice with junior counsel for the Claimant and had been told that a decision had been taken not to seek leave to amend because the view was that the agreement and assignment of 8 December 1992 did not operate to pass ownership of any physical property to the Claimant. It was not suggested that a new piece of evidence or information had emerged between 24 September 1999 and 20 October 1999 relevant to the question of amendment or that the Claimant, if so advised could not have put forward the amendment prior to the judge hearing the Defendant's application to strike out the action or during the judge's hearing of the Defendant's application to strike out the action. It is clear that His Honour Judge Jack did not consider that there were either exceptional circumstances or strong reasons which justified his reopening the order that he made on 24 September 1999. The judge went on to say at page 3 of the transcript:
"I consider, however, that what I am being asked to do is of a different nature to the situations which were mainly in mind in those cases. (referring to the cases in Re. Barrell Enterprises and Re. Blenheim Leisure (Restaurants) Ltd (No. 3)). I am not being asked to reconsider my primary decision, namely that the statement of claim as it stood had no real prospect of success. I am being asked to reconsider a consequence of that decision, namely the dismissal of the action. That would be inappropriate if leave to amend is given, just as it is appropriate if it is not. It is, as it were, a matter of mechanics. I think that the history which I have set out is something to be taken into account in weighing whether, insofar as it is a matter of discretion, leave to amend should be given."
In this passage the judge is directing himself that his decision to reopen by revocation or variation the order he made on 24 September 1999 should turn on his decision whether he should exercise his discretionary power to allow the Claimant to amend her statement of claim. In short the judge has looked at those matters relevant to an exercise by him of his power to grant an amendment and has directed himself that he was not required, in addition, to see whether this was a case in which it was appropriate for him to reopen a judgment he had pronounced and an order that he had made. Consequently the judge has not asked himself whether there were exceptional circumstances or strong reasons for him to take the unusual course of reopening his earlier decision. In my opinion the judge was wrong to say that what he was being asked to do was of a different nature from the situations in the two cases referred to in his judgment. The judge was doing two things: he was revoking the order that flowed from his oral judgment, namely that the Claimant's action was to be dismissed. The judge, in my view, misdirected himself when saying that that order still stood because the Claimant's action as originally pleaded was still being struck out. The reality was that the Claimant's action was being given the kiss of life after it had been pronounced dead on 24 September 1999. To allow a moribund action to be resuscitated cannot be a matter of routine. The matter cannot be looked at simply as a question of exercising a discretion to grant leave to amend. This must be so where a judge has pronounced judgment in favour of the Defendants on a statement of claim, particularly where, as in this case, the judge has specifically enquired of the Claimant's counsel during the hearing of the Defendants' application that the action be dismissed and again when judgment was pronounced if such an amendment has been considered and was going to be sought and has been told that it has been considered and it has been decided not to seek such an amendment. Such an application must be subject to a more stringent test than would an application for leave to amend made during the hearing of the Defendants' application and prior to judgment being given. The question is how that greater stringency is to be expressed? It is clearly not satisfactory for the Claimant to be allowed to wait to see the outcome of the Defendants' application and then, if the judge decides in the Defendants' favour, to apply for an amendment. There must be some satisfactory reason for failure to apply for the amendment at the proper time. The proper time is either before the Defendants' application is heard or during the hearing of the application. In Charlesworth v Relay Road Ltd (1999) 4 All ER 397 at 405D Neuberger J. considered the problem of reopening issues determined at a trial, and formulated six principles. Those are set out in the judgment of Clarke LJ. Neuberger J. in his third principle thought that the fact that the other party could be compensated in costs did not mean that an application to reopen an issue or raise a new issue should be for that reason alone granted. In this case, the evidence indicates that the Claimant is not able to compensate the Defendants in costs either for the costs of the Defendants' successful application or for the costs of the action up to 24 September 1999, unless the Claimant were to succeed and recover substantial damages. This does not seem to have been a matter weighed in the balance by His Honour Judge Jack. In the fourth principle formulated by Neuberger J. it is said:
"It would generally require an exceptional case before the Court was prepared to accede to an application (to reopen an issue or to raise a new issue) where the Applicant could not satisfy the three requirements in Ladd v Marshall."
The Claimant's application was made under Part 3.1 of the Civil Procedure Rules, that is to say the Claimant accepted that her application involved the variation or revocation of the order made on 24 September 1999. It also clearly involved the raising of a new issue. I would adopt the approach of Neuberger J. in that case and apply it to the circumstances of the present case. There was a full and final judgment given against the Claimant. There is no suggestion that the application of 20 October 1999 came about because of the emergence of new evidence or new information. The Court should require the party seeking to reopen the full and final judgment to demonstrate that it is an exceptional case or that there are strong reasons for doing so. The Claimant did not begin to do that. Consequently the application should have been refused. The matter can be tested by considering the position that would have arisen had the order of the judge of 24 September 1999 been perfected prior to 20 October 1999. The Claimant would then have had to appeal to this Court. There would have been no ground on which the judgment spoken by the judge or the order that the judge made could have been appealed other than by the Claimant seeking to persuade this Court that she should have leave to amend her statement of claim despite the decision taken when the matter was before the judge that no such application would be made. Were such an application to be made to this Court, even by an advocate as persuasive as Mr Mann QC, I cannot see this Court granting it or allowing the case to be reopened. For those reasons and the reasons given by Sir Christopher Slade I would allow this appeal on the basis that the judge misdirected himself in the way I have attempted to identify and, that the discretion should be exercised by this Court. For the reasons I have endeavoured to give this Court should exercise its discretion by refusing to revoke or vary the judge's order of 24 September 1999. In the light of my conclusion on issue B, it is not necessary for me to deal with issue C or issue D save to say that I agree with and gratefully adopt the observations of Sir Christopher Slade on those issues.

Order

Order as per judgment. Appellants to have their costs of the action and costs of the appeal. Respondent's liability postponed to be assessed in accordance with reg 127 of the Legal Aid Regulations (General Regulations); Legal Aid Taxation in Respect of Respondent's costs. (Order does not form part of the approved judgment)

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