Hemmingway & Anor v Roddam (a firm) & Ors [2003] EWCA Civ 1342

Case No A2/03/1647-8[2003] EWCA Civ 1342
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
NEWCASTLE UPON TYNE DISTRICT REGISTRY
(HIS HONOUR JUDGE BEHRENS)
Venue Royal Courts of JusticeDate Thursday, 18 September 2003
Strand
London, WC2A 2LL
B E F O R E:
LORD JUSTICE WALLER
LORD JUSTICE CLARKE
Between
MARK HEMMINGWAYAppellantJANICE HEMMINGWAYAppellant-v-
Between
SMITH RODDAM (A FIRM)RespondentA N FAIRCLOUGHRespondentG M CHISEMRespondentG JOHNSONRespondentD L HARRISRespondent
(Computer-Aided Transcript of the Palantype Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
MR N BROWN (instructed by Messrs Anthony T Bryson & Co, Newcastle upon Tyne, NE1 6EE) appeared for AppellantsMR M JACKSON (instructed by P I Brokerlink, London) Appeared for Respondents
J U D G M E N T(As approved by the Court)
Crown copyright©

LORD JUSTICE WALLER:

This

[1]appeal is concerned with whether leave should be given to amend the particulars of claim under CPR 17.4(1) after the relevant period of limitation has expired.[2]This appeal has an unfortunate background. The cause of action would have arisen on 3 March 1995, the date of the completion of the transaction under which the claimants had purchased a business and in relation to which the defendant solicitors were acting for those claimants. The claimants had already been conducting that business from January 1995. The business went exceedingly badly, whether for reasons which already existed prior to them going in or for reasons due to their conduct of the business would be in issue at any trial. The business ceased in October 1995.[3]The claimants went to Brysons for advice in relation to the conduct both of the vendors and of their professional advisers, the accountants and the defendant firm. It was in that context that Brysons obtained the file of the defendant firm in January 1997. They had foreshadowed that they were considering a claim in professional negligence against the defendant firm but no details were provided at that stage.[4]It was not until 19 December 2000 (nearly 4 years later) that a letter before action was sent by Brysons to the defendant firm. That was followed fairly swiftly by the issue of a claim form on 25 January 2001. The particulars of claim were served on 24 May 2001, which led to a detailed defence being put in on 19 July 2001.[5]There then followed some interlocutory proceedings relating to the striking out of certain aspects of the particulars of claim relating to loss (paragraph 8 of the particular of claim). It was in that context that counsel was first asked to act on behalf of the claimants. On 9 October 2002, by letter from Brysons to the defendant firm, a firm notification was given of some proposed amendments to the particulars of claim. There were numerous amendments proposed at that stage: paragraphs 3(A) and 3(B) to which I will return; an addition to the particulars of negligence, which covered 39 paragraphs; an addition to paragraph 5(d); and certain other amendments, including removing certain parts of paragraph 8 which the defendants had previously sought to strike out.[6]The matter came before His Honour Judge Behrens. He made an order on 5 March 2003 under which he divided the amendments into categories, one of which he said related substantially to the facts pleaded in the original particulars of claim. He held that he had jurisdiction to make the amendments and would exercise his discretion to allow the same. In relation to many of the other amendments, he held that he had no jurisdiction under CPR 17.4 and, in any event, he would have exercised his discretion against allowing them. He also refused permission to appeal.[7]The application which was made to this court to appeal the judge's refusal to allow amendments limited its application to four of the particulars of negligence and to paragraphs 3(A), 3(B) and 5(d). Permission to appeal was granted by my Lord. This appeal is therefore concerned only with a limited number of amendments, although an eye should be kept on what might happen if those amendments are allowed so far as the facts the subject of the application for leave to amend are concerned which has not been pursued.[8]In that regard I start with the basic law in order to identify the appropriate test. The important provision is contained in 17.4(2), which provides that:
"The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."
[9]That rule stems from section 35 of the Limitation Act which, in essence, provides that a party should not be allowed to gain permission to plead a new cause of action unless certain conditions are complied with. It provides for the making of rules of court to which the relevant subsection of section 35 applies. The relevant conditions are contained in subsection (5):
"(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action."
[10]There is a slight difference in language between CPR 17.4 and section 35(5). CPR 17.4 and section 35 have been construed in the light of the Human Rights Act in a case called Goode v Martin [2002] All ER 620. That case concerned a case in which a claimant alleged negligence in relation to an accident suffered on a yacht. She had no memory of the accident and alleged one way in which the accident had occurred. The defendant pleaded a detailed defence saying it occurred in another way. Outside the limitation period she sought leave to amend her pleading to say that, even if it happened in the way the defendant alleged, the defendant was negligent. The argument on behalf of the defendant resisting the amendment was that, if one followed the language in CPR 17.4 which related to "facts or substantially the same facts as a claim in respect of which the party applying for permission was already claiming a remedy in the proceedings", then permission to amend should not be given. The Court of Appeal accepted the submission of counsel for the claimant in that case saying that the CPR should be interpreted so as to contain additional words which would allow the claimant to bring her claim outside the limitation period. It held that CPR 17.4(2) should be read, so far as material, in the following way:
"The court may allow an amendment whose effect will be to add a new claim, but only if the new claim arises out of the same facts or substantially the same facts as are already in issue on a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."
In that way the facts pleaded in the defence became a part of the facts in issue which enabled the court in that case to grant leave to amend. Reliance was also place on a dictum of Hobhouse LJ in Lloyds Bank v Rogers (unreported) when, in relation to section 35, he said:
"The policy of the section was that, if factual issues are in any event going to be litigated between the parties, the parties should be able to rely upon on any cause of action which substantially arises from those facts."
[11]The test to be applied is thus, whether, even if a new claim is being made, the new claim arises out of "the same facts already in issue". The question is whether the factual issues under the old pleading were going to be litigated between the parties; if they were, then the court should take the view that section 35 had it in mind that the parties should be able to rely on a cause of action which substantially arises from those facts.[12]Mr Jackson, for the respondents, has conveniently set out in his skeleton argument the claimants proposed amendments. They are:
"3(A) At all material times it was known (or should have been known) to the First Defendant's partners, agents and employees that: (a) the Claimants had no experience of purchasing or running any form of business; (b) the Claimants were unsophisticated and inexperienced clients; (c) the Claimants were unaware of what enquiries and investigations they should undertake or make before contemplating the purchase of a business of this nature, either in relation to the viability of the business or the price which they should pay; (d) the First Claimant had suffered severe personal injuries in a road traffic accident in the 1980s as a consequence of which he was blind; (e) as a consequence of these personal injuries, the First Claimant was a vulnerable client and/or was unable to make any of the enquiries which an able bodied client might made and/or was unable to acquire a great deal of relevant information by observation or otherwise which an able bodied client would otherwise acquire; (f) as a consequence of these personal injuries, the First Claimant had no realistic prospects of obtaining meaningful and/or remunerative employment unless he and his wife, the Second Claimant, could acquire a suitable and sufficiently profitable business in which they could both work together and earn a living; (g) this was the First and Second Claimants' once and only opportunity to acquire such a business. 3(B) In the premises, the Claimants retained the First Defendant, its partners, employees and agents to advise them about the commercial wisdom of their proposed purchase. 3(C) Further or in the alternative the First Defendant, its partners and employees by their Miss Smith, in a telephone conversation in or about October 1994 and/or a meeting dated 3 February 1995 undertook to advise the Claimants about the commercial wisdom of their proposed purchase. [5 The First Defendant, its partners, agents and/or employees acted in breach of contract and/or negligently in] 5(c)(xxx) Failing to explain to the Claimants either adequately or within a reasonable time or at all the reasons why the Claimants should 'get out' or withdraw from the proposed transaction 'whilst the going was good,' 'if things were not going right'. 5(c)(xxxi) Failing to explain to the Claimants on 3 February 1995 either adequately or within a reasonable time or at all the reasons why the Defendants and/or their Miss Smith did not like the figures relating to the Claimants' proposed purchase of the Vendors' business and/or the leasehold of the business premises and/or why the Defendants and/or Miss Smith were concerned about the Claimants' hefty outlay. 5(c)(xxxii) Wrongly advising the Claimants on 3 February 1995 that, if they proceeded with the purchase and the business was not as successful as they expected, all they had to do was to re-sell the business and re-assign the leasehold of the business premises. 5(d) Failing to explain to the Claimants either adequately or at all the reasons why they should not buy the business and/or the risks which they would assume if they proceeded with their proposed purchase of the business."
Paragraph 5(c)(xxx), 5(c)(xxxi) and 5(c)(xxxii) allege breaches of the duty to advise on the commercial wisdom of entering into the transactions by reference to certain statements made by Miss Smith. Paragraph 5(d) also alleges a breach of duty to advise on the commercial wisdom of entering into the transaction.[13]Whether or not permission should be granted for leave to make those amendments should be tested by looking at the old pleadings to see what facts would have been in issue and litigated at a trial if those pleadings had remained in their old form. In the particulars of claim there was a general plea about the retainer of the defendants, the allegation being that they were retained:
".... to act for [the claimants] as solicitor in and about the purchase of a business known as and situated at 'Newgate Mews', Unit 6, Newgate Centre, Bishop Aukland, County Durham, in and about the transfer of the leasehold interest at those premises from the vendors of the business to the claimants and in and about all matters incidental to the foregoing."
Paragraph 4 alleged a term of the retainer "to exercise reasonable skill and care". There followed the particulars of the breach of duty in paragraph 5. Paragraphs 5a, 5b and 5c related to failures to make inquiries about (i) the terms of the lease; (ii) the state of account between the vendors and the landlord; and (iii) the failure to make formal enquiries before contract in respect of those matters. Paragraph 5d is important:
"Failing to advise the claimants not to commit themselves to the purchase of the business prior to concluding the foregoing matters and/or failing to advise the claimants not to purchase the business." (My emphasis) Paragraph 5e claimed: "
Failing in all circumstances to discover that the vendors of the business were subsequently in arrear in their payment of rent and would remain so until such arrears were cleared following completion of the business sale and purchase." Paragraph 6 alleged the causative link between the failures alleged and the purchase of the business. It alleged that the claimants would not have purchased the business if the defendants had not been negligent. There followed the particulars of loss and damage.[14]One question is how broad is the allegation of the retainer in those particulars of claim? Mr Jackson has submitted, as he submitted to the judge, that the allegation emphasised in paragraph 5d "failing to advise not to purchase the business", had to be construed narrowly. He says that its only sensible meaning was that it alleged that the defendants should have advised the claimants not to commit themselves to the purchase because of matters which were being complained of earlier in paragraph 5. From paragraphs 5 and 6 of the judge's judgment, it would appear that he accepted that submission. Mr Jackson has pointed to the skeleton argument of Mr Brown before this court in which he suggests that Mr Brown has not criticised that finding of the judge.[15]However, the matter is one of construction. I am not so clear that the pleading should have been understood to be as narrow as that. If I had been pleading a defence, I would have been concerned by the breadth of some of the language as to whether a broader retainer was not being asserted, and as to whether amongst that broad retainer it was not being asserted that there was not a duty of a more general nature to advise the claimants not to purchase the business.[16]Although Mr Jackson would not be prepared to accept it at this stage (for understandable reasons), when he came to plead the defence he took the same cautious view. It is this pleading in one sense that has placed the defendants in difficulty. Mr Jackson dealt with the retainer first in paragraphs 6 and 7 of the defence where he details what the claimants instructed the defendants to do. He says in paragraph 7:
"Save as aforesaid, paragraph 2 is denied. The scope of the Defendants' retainer was confined to the proposed purchase of the business and the proposed transfer of the leasehold interest in the premises."
That can only properly be understood to be saying that, if the claimants were going further in their particulars of claim alleging a broader retainer, the defendants say that it is not that broad.[17]In paragraph 14.4 it was pleaded:
"It is denied that the Defendants were under any obligation to advise the Claimants not to commit themselves to the purchase of the business, or not to purchase the business. The Defendants by their servant or agent, Miss Smith, gave a number of warnings to the Claimants during the course of the transaction, including 14.4.1 a warning, given verbally during a telephone conversation between Miss Smith and the Second Claimant in or about October 1994, that if things were not going right with the business, the Claimants should get out while the going was good; 14.4.2 a warning, given verbally during a meeting between the Claimants and Miss Smith at the Defendants' offices on 3 February 1995, that she did not like the figures and the hefty outlay; 1.4.4.3 a warning, given verbally during the same meeting between the Claimants and Miss Smith at the Defendants' offices on 3 February 1995, of the seriousness of the fact that Yorkshire Bank plc were taking the Claimant's home as 'backing security'; and 14.4.4 a warning, given verbally during the same meeting between the Claimants and Miss Smith at the Defendants' offices on 3 February 1995, that if something went wrong the Claimant's home could be gone too. The Claimants were determined to proceed with their proposed purchase, in spite of Miss Smith's warnings. They were clients who were or appeared to be in full command of their faculties and aware of what they were doing, and the Defendants were under no duty to go beyond the scope of their instructions by proffering unsought advice on the wisdom of the transaction."
[18]That paragraph clearly puts in issue whether there was an obligation to advise the claimants to purchase the business.[19]Secondly, it pleads that Miss Smith gave certain warnings; first a warning in a telephone conversation in October 1994 and three warnings at the meeting of 3 February 1995. It finally asserts that the claimants were clients who were (or appeared to be) in full command of their faculties and were aware of what they were doing. In that context it asserts that the defendants were under no duty to go beyond the scope of their instructions by proffering advise on the wisdom of the transaction.[20]If that plea had stood without any amendment, what was being alleged in the defence would have been in issue. The claimants do not need to serve a reply to put it in issue. There would have been an issue as to:(i) whether the defendants were under any obligation to advise the claimants not to commit themselves;(ii) whether the warnings had been given and as to precisely what warnings had been given;(iii) whether these claimants were persons in full command of their faculties and aware of what they were doing such as to confine the duty of the defendants within the normal scope (or what has been described during argument as the normal scope) of a solicitor's duty in relation to a conveyancing transaction.[21]It is thus strongly arguable that the proposed amendments do not actually allege a new cause of action. But having regard to the view formed by the judge and the fact that there is no challenge to it, I must deal with Mr Jackson's submission that what is now sought to be pleaded does raise a new cause of action. He has a powerful argument to that effect, I accept. But even if that was right, it seems to me that part of this plea went at least to the defendants' case on causation. I take Mr Jackson's forceful point that, in that context, it would have been less likely that the judge would have allowed a lengthy cross-examination to delve into the question as to whether some further warning should have been given by the defendants. But on any view, those conversations, the breadth of the retainer and the contents of the warning would have been factual issues at any trial that was to take place on those old pleadings.[22]I cannot, therefore, see that there can be any real argument that what the claimant now seeks to plead by way of amendment is other than a claim which arises out of the facts in issue on the old pleadings. I find it difficult to see how the warnings or the breadth of the retainer would not have been in issue. In the phrase of Hobhouse LJ:
"The policy of the section is that, if factual issues are in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arises from those facts."
Paragraph 3(A) goes to the special factors which might broaden the duties of solicitors; 3(B) and 3(C), as it has now become, makes clear how broad that duty should be, or be taken to be; paragraph 5(c)(xxx) is a response to the warning pleaded in paragraph 14.4.1; 5(c)(xxxi) is a response to the warning of 14.4.2; and 5(c)(xxxii) is a response to all the warnings pleaded, alleging that warnings were not given to discourage the claimants but things were said which actually encouraged them; and 5(d) is a general assertion making the position clear.[23]In my view, the judge did not carry out a full analysis by reference to the original pleadings. He was obviously persuaded to take a narrow view of the points of claim by Mr Jackson's advocacy. (One would not be too surprised by that because he has been extremely persuasive before us). But the judge does not ask, following his analysis of the defendants' defence, precisely what facts would have been litigated at a trial on the old pleadings before considering what amendments should be allowed.[24]It is harsh to criticise the judge on the basis that he did not consider each amendment individually. Both sides placed the amendments into categories and sought to persuade the judge to deal with the matter in that way. I differ from the judge in his holding that it was clear on the original pleading that it was as narrow as Mr Jackson was submitting. I do not believe it to have been that clear, and I would differ from the judge in not analysing the old pleadings in a way which would have led him to the view that factual issues on the old pleadings would have arisen, or substantially the same facts would have arisen, as now form the basis of the amended pleadings. In my view accordingly the court has jurisdiction to allow these amendments.[25]I turn then to the question of discretion. At first sight there is a great deal of force in Mr Jackson's submissions as to what the judge obviously felt about this case. I outlined at the beginning the appalling history. One must have every sympathy with the defendants, and in particular Miss Smith, having to face this very stale claim. But it was stale before the amendments were on the scene. The brutal fact is that this is a claim that they have to face. It is a claim in relation to which Miss Smith would have to give evidence. When she gives evidence the extent of delay in bringing the claims is something no doubt the judge at the trial will take into account in giving her any benefit of the doubt as may be appropriate when she has to try to recall events from so long ago.[26]In my view the critical point is that this litigation could not be tried satisfactorily unless the real issues between the parties, by reference to the facts as they would substantially have appeared at the trial even without the amendments, can be resolved. There can be no doubt that the judge at a trial would be faced with serious difficulties if what he was faced with was these conversations, the defendants' file, the memos and all that took place during that period, and if he then had to divide up those matters which could have affected liability, but which in some way or other would have been in issue before him on causation.[27]I also do not shrink from recognising that, having allowed the amendments, if proper particularisation of those is given, it may bring in one or two other factual aspects in relation to which permission up until now has been refused. But that is only because of the rather different view that I take in relation to what this litigation would factually have been about on the old pleadings.[28]Once one takes a different view as to what the factual allegations would have been at a trial without these amendments, that puts the exercise of discretion in an entirely different context from that which the judge placed it. In that entirely different context, and although very sympathetic to the care with which the judge addressed this matter, I would allow these amendments and allow this appeal.

LORD JUSTICE CLARKE: I add a few words of my own because of the problems faced by the judge. I assume for the purposes of these few additional remarks that the proposed paragraphs 3(B) and 3(C), 5(c)(xxx), 5(c)(xxxi) and 5(c)(xxxii) and 5(d) plead a claim or claims involving a new cause or causes of action.

[30]On this footing two questions arise. The first is whether the new causes of action arise out of the same or substantially the same facts as are already in issue on the existing pleadings: see section 35 of the Limitation Act 1980 and Goode v Martin [2002] All ER 620. The second is, if so, whether or not the court should exercise its discretion in favour of or against the granting of permission to amend.[31]It appears to me that on the unamended pleading, the appellants could have relied on all the matters alleged in paragraph 3(A) of the proposed amended particulars of claim. They would have been relevant and admissible by way of response to the allegation at the end of paragraph 14.4 of the defence:
"They [the appellants] were clients who were or appeared to be in full command of their faculties and aware of what they were doing, and the Defendants were under no duty to go beyond the scope of their instructions by proffering unsought advice on the wisdom of the transaction."
[32]Thus paragraph 3(A) could properly have been pleaded in a reply. In these circumstances I can see no objection to the allegations in paragraph 3(A). They plead facts which were in issue on the original pleadings. It seems to me that, in considering the question whether the new causes of action alleged in paragraphs 3(B), 3(C), 5(c)(xxx)-(xxxii) and 5(d) arise out of the same or substantially the same facts, those facts include the facts alleged in paragraph 3(A).[33]Paragraph 3(B) expressly arises out of the facts in paragraph 3(A) because it is pleaded as being "in the premises". Equally, the remaining paragraphs arise out of substantially the same facts as paragraph 14 of the defence, as explained by my Lord, Lord Justice Waller.[34]I therefore agree that all the new allegations arise out of substantially the same facts as those already in issue, as long as proper regard is had to the facts pleaded in the defence. I also agree that the judge did not analyse the problem in this way. In my judgment he erred in principle in not doing so, although I can understand the problems with which he was faced given the plethora of proposed amendments.[35]Given that the judge did not approach the amendments by reference to the issues raised by the pleadings, including the defence, he did not do so in deciding how he would have exercised his discretion. In those circumstances it is open to this court to consider afresh how to the discretion should be exercised. As to the exercise of discretion, I entirely agree with my Lord that the proposed amendments, including the proposed amendments to paragraphs 3(B) and 3(C) should be allowed.[36]I, too, would allow the appeal.

Order

Appeal allowed. Final formally pleaded version of the Particulars of Claim to be served with 14 days with reply to be served 28 days later. Claimants to have 60% of the costs below. Costs of appeal to be costs in the case.

Cited in 7 later judgments