Chandra & Anor v Brooke North (a firm) & Anor [2013] EWCA Civ 1559

[2013] EWCA Civ 1559Case No A2/2013/1027
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, QUEEN'S BENCH DIVISION
HIS HONOUR JUDGE THORNTON QC
HQ09X002074
HQ09X002077
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 05/12/2013
Before
LORD JUSTICE LAWSLORD JUSTICE JACKSONLORD JUSTICE MCFARLANE
Between
(1) MR BALA CHANDRAClaimants/(2) MRS MARIA CHANDRARespondents(1) BROOKE NORTH (A FIRM)Defendants/(2) BROOKE NORTH LLPAppellantsBPC HOTELS LIMITEDClaimant/(1) BROOKE NORTH (A FIRM)Defendants/(2) BROOKE NORTH LLPAppellants
Mr Jamie Smith (instructed by DAC Beachcroft LLP) for Defendants/AppellantsMr and Mrs Chandra appeared in person. Mr Chandra appeared for BPC Hotels Ltd.Hearing Hearing date: Thursday 24th October 2013
Judgment
[1]This judgment is in eight parts, namely: Part 1. Introduction, Part 2. The facts, Part 3. The present proceedings, Part 4. The appeal to the Court of Appeal, Part 5. Was the judge right to refuse to set aside the claimants’ amendments in reliance upon section 14 A of the Limitation Act 1980? Part 6. Could the amendments be justified on the basis that they fell within the scope of the original claim forms? Part 7. The remaining issues Part 8. Conclusion. Part 1. Introduction[2]This is an appeal against a decision allowing amendments to be made to the particulars of claim in two solicitors’ negligence actions. The central issue in this appeal is whether those amendments raised new causes of action after expiry of the limitation period.[3]The resolution of this appeal will involve a review of Court of Appeal decisions under the former Rules of the Supreme Court (“RSC”) and consideration of whether the principles stated in those decisions remain valid under the Civil Procedure Rules (“CPR”).[4]The claimant in the first action is BPC Hotels Ltd (“BPC”). The claimants in the second action are Mr Bala Perampalam Chandra and his wife, Mrs Maria Perpetua Chandra. Mr and Mrs Chandra (“the Chandras”) own and control BPC.[5]The defendants in both actions are Brooke North (“BN”) and Brooke North LLP (“BNLLP”). BN is a firm of solicitors which acted for BPC and the Chandras during the period 2001 to 2003. BNLLP is a successor firm, which subsequently took over the business of BNLLP. Mr Stephen Lopeman was the partner of BN who was principally involved in the matters in issue.[6]In this judgment I shall refer to Royal Bank of Scotland Plc as “RBS” or “the bank”. I shall refer to the building contractors Costain Ltd as “Costain”. I shall use the familiar abbreviation “SPV” for special purpose vehicle.[7]I shall refer to the Limitation Act 1980 as “the 1980 Act”. Section 14 A of the 1980 Act provides: “Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual.E+W(1) This section applies to any action for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued.(2) Section 2 of this Act shall not apply to an action to which this section applies.(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.(4) That period is either — (a) six years from the date on which the cause of action accrued; or (b) three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above.(5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.(6) In subsection (5) above “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge both— (a) of the material facts about the damage in respect of which damages are claimed; and (b) of the other facts relevant to the current action mentioned in subsection (8) below.(7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.(8) The other facts referred to in subsection (6)(b) above are— (a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and (b) the identity of the defendant; and (c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.(9) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above.(10) For the purposes of this section a person’s knowledge includes knowledge which he might reasonably have been expected to acquire — (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek; but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.” (a) six years from the date on which the cause of action accrued; or (b) three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above. (a) of the material facts about the damage in respect of which damages are claimed; and (b) of the other facts relevant to the current action mentioned in subsection (8) below. (a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and (b) the identity of the defendant; and (c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant. (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek;[8]Section 35 of the 1980 Act provides:
“New claims in pending actions: rules of court.E+W (1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced— (a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and (b) in the case of any other new claim, on the same date as the original action. (2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either — (a) the addition or substitution of a new cause of action; or (b) the addition or substitution of a new party; … (3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim. … (4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose. (5) The conditions referred to in subsection (4) above are the following — (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; and (b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.” (a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and (b) in the case of any other new claim, on the same date as the original action. (a) the addition or substitution of a new cause of action; or (b) the addition or substitution of a new party; (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; and (b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.”
[9]I shall refer to the deeming process prescribed by section 35 (1) as “relation back”.[10]Until 25th April 1999 the rules of court referred to in section 35 (4) of the 1980 Act were contained in RSC Order 20 rule 5. This provided:
“(2) Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so. … (5) An amendment may be allowed under paragraph (2) notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.”
[11]Since 26th April 1999 the rules of court referred to in section 35 (4) of the 1980 Act have been contained in CPR rule 17.4.

(i) the Limitation Act 1980 1; …

[12]I shall use the phrase “arises out of similar facts” as shorthand for “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”.[13]CPR rule 23.10 provides:
“Application to set aside or vary order made without notice (1) A person who was not served with a copy of the application notice before an order was made under rule 23.9, may apply to have the order set asideor varied. (2) An application under this rule must be made within 7 days after the date on which the order was served on the person making the application.”
[14]I shall need to refer in some detail to two separate judgments, namely the judgment of His Honour Judge Anthony Thornton QC (which is under appeal) and the judgment of Mr Justice David Richards in a related action. Where there is any risk of confusion I shall refer to each judge by name rather than by the usual phrase “the judge”.[15]After these introductory remarks, I must now turn to the facts.

Part 2. The facts

[16]During the 1990s the Chandras built up and then sold a chain of nursing homes. As a result of this venture they made a profit of some £5.3 million, which they decided to invest in a hotel business. They arranged for their company, BPC, to carry out the new project. They and BPC engaged BN to act as solicitors in connection with the project.[17]In 1998 BPC bought Princess Court, which was a Victorian office building in Manchester. The Chandras planned to convert this building into a four star hotel. They selected Costain as main contractor to carry out the conversion works. They made arrangements with RBS for the financing of the project.[18]By a finance agreement dated 20th September 2000 RBS agreed to lend £10.65 million to BPC as finance for the project. On 2nd October 2000 Costain started work on site. BPC and Costain entered into a formal building contract on 30th April 2001. This contract contained the usual provisions for termination in the event of default by either party.[19]The first drawdown under the finance agreement was made towards the end of July 2001. As pre-conditions to drawdown, BPC granted on 23rd July 2001 a debenture creating fixed and floating charges over BPC’s business and assets, with the usual power to appoint administrative receivers, and a first legal charge over the property. As a further pre-condition, a deed of warranty (“the deed of warranty”) was executed on 18th July 2001 by Costain, BPC and RBS. On 12th July 2001 the bank provided overdraft facilities, limited to £300,000 and repayable on demand, to assist the company with VAT timing differences.[20]By clause 8.1 of the deed of warranty Costain undertook to give 21 days notice before serving any notice of termination. Clause 9 of the deed of warranty provided:
“9.1 Subject to Clause 8.3, the Beneficiary [i.e. RBS] shall give notice to the Main Contractor within that period of not less than 21 days specified in the notice under Clause 8.1: 9.1.1 requiring it to continue its obligations under the Main Contract in relation to the Project; and 9.1.2 acknowledging that the Beneficiary is assuming all the existing and future obligations of the Employer under the Main Contract; then upon determination of the Main Contractor’s employment under the Main Contract the provisions of Clause 9.2 shall apply. 9.2 Subject to Clause 8.3, and in the event that a notice is served in accordance with Clause 9.1, notwithstanding determination of the Main Contractor’s employment as specified in Clause 9.1 the Main Contract shall be deemed (as between the Main Contractor and the Beneficiary or the Beneficiary’s nominee) to continue in full force and effect as if the right of determination on the part of the Main Contractor had not arisen and in all respects as if the Main Contract had been made between the Main Contractor and the Beneficiary to the exclusion of the Employer whereby: (a) the Beneficiary assumes all the existing and future obligations of the Employer under the Main Contract; and (b) the Main Contractor acknowledges all of is obligations under the Main Contract in favour of the Beneficiary.” 9.1.1 requiring it to continue its obligations under the Main Contract in relation to the Project; and 9.1.2 acknowledging that the Beneficiary is assuming all the existing and future obligations of the Employer under the Main Contract; (a) the Beneficiary assumes all the existing and future obligations of the Employer under the Main Contract; and (b) the Main Contractor acknowledges all of is obligations under the Main Contract in favour of the Beneficiary.”
[21]All parties have referred to the provisions of clause 9 of the deed of warranty as the “step-in” provisions. I shall adopt the same convention.[22]On 30th October 2001 a second finance agreement was made between RBS and BPC, whereby further loan finance of £700,000 was to be provided by the bank. It was a term of this further agreement that Mr and Mrs Chandra should give personal guarantees of BPC’s borrowings, limited in amount to £700,000 and secured by a second charge on their matrimonial home. The guarantee and charge were executed by them on 30th October 2001. It was an all monies guarantee, limited to £700,000, and did not therefore secure any specific or particular borrowing from RBS.[23]By early 2003 the project was experiencing difficulties. There were delays and cost overruns, for which each party blamed the other. BPC needed further funds to complete the development.[24]In May 2003 BPC requested a further loan of £485,000 from RBS. The bank agreed to provide this on condition that the Chandras increased their personal guarantees to the bank to £1.15 million, secured by a charge on their matrimonial home. Mr and Mrs Chandra duly signed their guarantees on 20th May 2003. RBS then advanced the agreed funds. BPC used the money to make the next payment which was due to Costain. The parties have referred to the additional loan of £485,000 made in May 2003 as “emergency funding”. I shall use the same term.[25]Unfortunately the problems with the project continued to mount. BPC needed further finance from the bank, which was not forthcoming. The bank lost confidence in the Chandras’ ability to manage the project. RBS demanded repayment from BPC. BPC was unable to satisfy those demands. On 28th August 2003 RBS appointed administrative receivers over the business and assets of BPC. BPC’s total indebtedness to the bank then stood at some £12.3 million.[26]In those circumstances Costain gave 21 days notice of its intention to terminate the building contract. That notice triggered the provisions of clause 9 of the deed of warranty. RBS was required to, and did, step in to complete the building project. Pursuant to clause 9.2 the bank nominated an SPV owned by the receivers to act as employer for the remainder of the project. The bank guaranteed the SPV’s liabilities to Costain.[27]It was agreed between BPC (now acting under the direction of the receivers) and the SPV that the SPV was acting as agent for BPC. BPC agreed to indemnify the SPV against all its liabilities.[28]Once the new structure had been put in place, RBS advanced to BPC in receivership the necessary funds to complete the development and settle Costain’s various claims.[29]By early 2004 the building works were complete. In March 2004 the hotel was sold for £13.5 million. This left a shortfall of £4.118 million owed by BPC to RBS.[30]The bank commenced proceedings in the Chancery Division of the High Court against Mr and Mrs Chandra to recover the amount of BPC’s indebtedness which they had personally guaranteed. I shall refer to this as the “Chancery action”.[31]Mr and Mrs Chandra’s principal defence in the Chancery action was that by reason of the terms of the deed of warranty, BPC was released from any further obligation to Costain; RBS was obliged to fund the remaining building works; any increase in value resulting from the completion of the building development would accrue to the benefit of BPC; the structure devised by RBS was an attempt to re-impose upon BPC a continuing liability for the cost of the building works. Mr and Mrs Chandra argued that these legal manoeuvres by RBS were not legitimate.[32]Mr and Mrs Chandra advanced a number of other defences in the Chancery action. These included the proposition that Mrs Chandra’s additional personal guarantee had been procured by her husband’s undue influence and the bank had notice of this fact.[33]The Chancery action came on for trial in October 2009 before Mr Justice David Richards. On 28th January 2010 Mr Justice David Richards handed down his judgment. He held that the arrangements made by the bank for the completion of the building project were lawful and effective. He rejected all of the defences advanced, except for Mrs Chandra’s defence based on undue influence. Accordingly he gave judgment in favour of RBS on all issues, except for its claim against Mrs Chandra on her additional personal guarantee.[34]Whilst the litigation in the Chancery Division was moving forward the Chandras considered the role which their solicitors, BN, had played in the hotel project. They concluded that the advice and/or lack of advice from those solicitors had caused the project to founder. Accordingly BPC, Mr Chandra and Mrs Chandra commenced the present proceedings.

Part 3. The present proceedings

[35]By a claim form issued in the Queen’s Bench Division of the High Court on 18th May 2009 BPC claimed damages against BN and BNLLP for breach of contract and/or negligence in relation to the financing and the contractual arrangements for the hotel project. By a claim form issued in the Queen’s Bench Division on the same date the Chandras claimed damages against BN and BNLLP for breach of contract and/or negligence in relation to the personal guarantees which Mr and Mrs Chandra had signed on 20th May 2003. I shall refer collectively to BPC and the Chandras as “the claimants”. I shall refer to the action bought by BPC as “the BPC action”. I shall refer to the action brought by Mr and Mrs Chandra as “the Chandra action”. I shall refer to the BPC action and the Chancery action collectively as “the Queen’s Bench actions”.[36]It can be seen from the previous paragraph that the claim form in the BPC action was framed in broad terms. The claim form in the Chandra action was framed more narrowly and was specifically focused upon the guarantees which Mr and Mrs Chandra gave on 20th May 2003.[37]The two claim forms in the Queen’s Bench actions were served in September 2009. At the same time the claimants served their two particulars of claim. In neither action did the particulars of claim make any allegation against BNLLP. This is unsurprising since BNLLP did not exist at the time of the events in issue.[38]I would summarise BPC’s pleaded claim against BN as follows. BPC retained BN to advise on all aspects of the hotel project. Mr Lopeman of BN negligently advised BPC that the arrangements for emergency funding proposed by RBS in May 2003 were satisfactory. He negligently failed to advise that the emergency funding should be provided pursuant to a third finance agreement. Mr Lopeman also negligently failed to advise BPC not to make the payment due to Costain in May 2003. If BPC had refused to pay Costain in May 2003, RBS would have been obliged to step in under the mandatory step-in provisions and to complete the development. If BN had given proper advice, BPC would have(a) avoided the losses suffered and(b) gained the benefit of a successful development.[39]I would summarise the Chandras’ pleaded claim against BN as follows. BN was retained to advise Mr and Mrs Chandra personally in connection with the hotel project. BN made the same errors and omissions as set out in BPC’s particulars of claim. Also BN negligently failed to advise the Chandras not to agree to any increase in their personal guarantees.[40]In October 2009 it was agreed between the parties that the Queen’s Bench actions would be stayed until after judgment had been given in the Chancery action. That judgment was handed down on 28th January 2010. The claimants took some time to consider its implications.[41]On 14th November 2011 the claimants applied to amend their respective particulars of claim in the Queen’s Bench actions. By this stage Mr and Mrs Chandra were acting in person and Mr Chandra was acting on behalf of BPC.[42]The draft amended particulars of claim in the BPC action set out two new claims. I would summarise the first new claim as follows. BN should not have allowed BPC to enter into the deed of warranty in 2001 unless there was also a second deed of warranty. This second deed of warranty should have prevented RBS from following the course which it in fact followed (successfully as David Richards J held in the Chancery action) in order to take over the project at BPC’s expense after stepping in.[43]The second new claim related to the events of 2003. The essence of the second new claim was that in May 2003 Mr Lopeman of BN should have negotiated an exit route agreement with RBS. This exit route agreement would have neutralised the adverse effects of the deed of warranty.[44]The underlying theme of both the new claims was that the step-in provisions were capable of being operated by the bank in a manner which was extremely adverse to BPC’s interests. Mr Lopeman failed to appreciate this and to advise accordingly.[45]The draft amended particulars of claim in the Chandra action set out the two new claims in substantially the same form as they appeared in the BPC action. In order to accommodate these two new claims, Mr and Mrs Chandra applied for permission to amend the claim form in their action in order to encompass BN’s acts and omissions between 2001 and 2003.[46]On 15th November 2011 Master Eyre considered the claimants’ applications on paper. He made a manuscript annotation on both the application notices: “Order as sought”. He added that the defendant had liberty to apply under CPR rule 23.10.[47]DAC Beachcroft LLP, the defendants’ solicitors, subsequently notified Master Eyre that the claimants’ amendments were opposed and that a hearing would be required to deal with the matter.[48]On 16th January 2012 Master Eyre responded by email to Beachcrofts (with a copy to Mr Chandra):
“Many thanks, and in the circumstances the orders will not be made without a hearing. For that purpose, the claimants must complete and submit a request for a private-room appointment.”
[49]I need not recount the intricate manoeuvres which followed the despatch of that email. The claimants adopted the position that permission to amend had been given and it should not be set aside. BN contended that the permission to amend had been revoked and no fresh permission to amend should be given. Alternatively, if the order of 15th November 2011 had not been revoked, then it should now be set aside.[50]Behind the procedural wranglings between the parties there lay a formidable point of substance. This was the question whether the amendments raised new claims which were precluded by section 35 (3) of the 1980 Act.[51]In due course directions were given for the exchange of witness statements. It was also ordered that a judge, rather than a master, should deal with the matter. On 2nd July 2012 the claimants served draft re-amended particulars of claim in both actions. The proposed re-amendments brought BNLLP into the actions as second defendant. The re-amendments also elaborated upon the two new claims and asserted that they were not statute barred. The claimants relied upon section 14A (date of knowledge) and/or section 32 (deliberate concealment) of the 1980 Act.[52]The claimants served witness statements contending that their new claims were brought in time. The claimants asserted that they did not have the requisite knowledge under section 14A of the 1980 Act until the date of David Richards J’s judgment or at least until a late stage in the Chancery action. The claimants also alleged that there had been fraudulent concealment within section 32 of the 1980 Act.[53]BN and BNLLP served more limited evidence. Their evidence dealt with the circumstances surrounding Master Eyre’s order of 15th November 2011 and also the allegations of fraudulent concealment. The defendants strongly denied that they had been involved in any deliberate or fraudulent concealment.[54]The matter came on for hearing before Judge Thornton, sitting as a deputy judge of the High Court, on 6th November 2012. There was lengthy argument about the procedural issues; the scope of the hearing before the judge; whether the new claims were stature barred; whether any amendments previously allowed should be set aside and whether permission should be granted for the amendments and the re-amendments.

The judge handed down his reserved judgment on 8th March 2013:

[55]Chandra v Brooke North [2013] EWHC 417 (QB). The judge refused to set aside the amendments previously allowed and permitted the claimants to make all the amendments and re-amendments which they sought. The judge granted the following two declarations:
“a. The claims and causes of action set out in the amended Claim Forms and the amended and re-amended Particulars of Claim in the Actions were brought within 3 years of the starting date as defined in section 14A of the Limitation Act 1980. b. Both Defendants were joined into the Actions upon their commencement on 18 May 2009, both Defendants have been parties ever since and both Defendants remain parties to the Actions at the date of this Order.”

The judge ordered that the action be transferred to the Technology and Construction court.

[56]The judge’s judgment spanned 70 pages. I would summarise his main conclusions as follows: i) Master Eyre granted permission for the claimants’ first round of amendments to the particulars of claim. Master Eyre did not subsequently revoke his order granting such permission. ii) The claimants’ new claims were being brought outside the primary limitation period. They did not arise out of similar facts. Nevertheless the claimants were saved by provisions of section 14A of the 1980 Act. The claimants only had sufficient knowledge to start time running under section 14A (5) on or soon after 28th January 2010. This was when they learnt that BN’s alleged negligence had exposed them to huge and unquantifiable liabilities. The claimants did not know this until they had read and digested the judgment in the Chancery action: see paragraph 79 of the judge’s judgment. iii) The original claim form in the BPC action was broad enough to encompass the new claims pleaded. It was arguable whether or not the original claim form in the Chandra action was broad enough to encompass the new claims brought. The proposed amendments to that claim form were appropriate. iv) Accordingly Master Eyre’s order allowing amendments would not be set aside. The proposed re-amendments would be allowed. v) Alternatively, if the foregoing analysis is wrong, the judge had a residual discretion to dismiss the applications to set aside Master Eyre’s order of 15th November 2011. He would exercise that discretion in favour of the claimants. vi) The defendants’ case on limitation having failed, the court would grant declarations to that effect.[57]The defendants were aggrieved by the judge’s decision. Accordingly they appealed to the Court of Appeal.

Part 4. The appeal to the Court of Appeal

[58]By an appellants’ notice dated 17th April 2013 the defendants appealed against the order of Judge Thornton on six grounds, which I would summarise as follows: i) Master Eyre had revoked his order of 15th November 2011. Therefore the primary issue before Judge Thornton was the claimants’ application to amend, not the defendants’ application to set aside. ii) The judge wrongly treated the hearing as the trial of a preliminary issue on limitation rather than an application to make or set aside amendments to pleadings. iii) Applying the correct approach the judge ought to have held that the claimants’ amendments arguably raised new causes of action outside the limitation period. Therefore those amendments could not be allowed. iv) The claim form in the Chandra action did not encompass the new claims raised by amendment. The BPC claim form was broader. However, BPC narrowed the scope of their original claims by the particulars of claim which they served in September 2009. Therefore the claimants cannot rely upon their claim forms in order to justify the amendments to the particulars of claim. v) The re-amendments should not have been allowed because(a) those concerning BN were statute barred;(b) those concerning BNLLP raised no cause of action against that party. vi) In those circumstances the judge had no residual discretion to allow the amendments and he should not have done so.[59]It is important to note that no party challenges the judge’s finding that the claimants’ new claims did not arise out of similar facts. Therefore the amendments could only be allowed if they fell within the scope of section 14A of the 1980 Act; see paragraph 94 of the judgment. In this regard, the judge’s helpful and unchallenged analysis of the pleadings has enabled both parties to focus on the real issues in the appeal.[60]So far as the first ground of appeal is concerned, I incline to the view that the judge was wrong. Properly construed, Master Eyre’s email of 16th January 2012 appears to be a revocation of his order made on 15th November 2011. In the circumstances of this case, however, nothing turns on the point. If an order is made ex parte and the opposing party subsequently learns of the order and applies to set it aside within the time allowed, that circumstance cannot cut down the rights of the opposing party. The opposing party must be entitled on an application under CPR rule 23.10 to put before the court all the arguments which would have been available to it originally.[61]Mr Jamie Smith, on behalf of the defendants, was content to advance most of his arguments on the assumption that the judge’s analysis of the various endorsements and emails was correct. In other words, Mr Smith assumed without conceding that the main issue before the court was whether Master Eyre’s order of 15th November 2011 should be set aside. I shall make the same assumption and will not give further consideration to the first ground of appeal.[62]Having cleared away those preliminary matters, I must now address the second and third grounds of appeal. These two grounds are both directed to the following question. Was the judge right to refuse to set aside the claimants’ amendments in reliance upon section 14A of the Limitation Act 1980? Part 5. Was the judge right to refuse to set aside the claimants’ amendments in reliance upon section 14A of the Limitation Act 1980?[63]The starting point for consideration of this issue is the Court of Appeal’s decision in Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409. In that case the Welsh Development Agency (“WDA”) engaged engineers to design the sub-structure of twelve factory units. Subsidence later occurred in the floors of two units. WDA commenced proceedings in negligence against the engineers for negligent design of the floor units. Two years after commencing proceedings WDA applied for leave to amend their statement of claim(i) to add a claim in respect of floor settlement in the other ten factory units and(ii) to add separate claims for negligent mis-statement. The official referee allowed the amendments in respect of the other ten factory units, holding that this new claim arose out of similar facts. He refused leave to add the new claims for negligent mis-statement. The official referee held that, having regard to section 14A of the 1980 Act, it was unclear whether the claims for negligent mis-statement were barred by limitation.[64]The Court of Appeal dismissed appeals by both parties and upheld the official referee’s judgment. In particular, the Court of Appeal endorsed his approach to new claims which do not arise out of similar facts. The Court of Appeal held that where it was arguable that a new claim was statute barred, leave to amend should not be given. The plaintiff should not gain the benefit of relation back under section 35 (1) of the 1980 Act. On the other hand if the plaintiff could show that the defendant did not have a reasonably arguable limitation defence which would be prejudiced by the operation of section 35 (1) of the 1980 Act, then the court may give leave to amend. See the judgment of the court at 1425 G-H.[65]WDA was a case which proceeded under the old Rules of the Supreme Court, which were swept away in April 1999. Nevertheless the provisions of the former RSC Order 20 rule 5 are, for present purposes, substantially the same as CPR rule 17.4: see Part 1 above. Both the old rules and the new rules are intended to implement section 35 of the 1980 Act. The guidance given by the Court of Appeal in WDA remains effective, as is correctly stated in paragraph 17.4.2 of the commentary in Civil Procedure (the White Book).[66]If a claimant seeks to raise a new claim by amendment and the defendant objects that it is barred by limitation, the court must decide how to proceed. There are two options. First the court could deal with the matter as a conventional amendment application. Alternatively, the court could direct that the question of limitation be determined as a preliminary issue.[67]If, as is usually the case, the court adopts the first option, it will not descend into factual issues which are seriously in dispute. The court will limit itself to considering whether the defendant has a “reasonably arguable case on limitation”: see WDA at 1425 H. If so, the court will refuse the claimant’s application. If not, the court will have a discretion to allow the amendment if it sees fit in all the circumstances.[68]If the court refuses permission to amend, the claimant’s remedy will be to issue separate proceedings in respect of the new claim. The defendant can plead its limitation defence. The limitation issue will then be determined at trial and the defendant will not be prejudiced by the operation of relation back under section 35 (1) of the 1980 Act.[69]This leads on to a separate and important point. If a claimant applies for permission to amend and the amendment arguably adds a new claim which is statute barred, then the claimant should take steps to protect itself. The obvious step is to issue separate proceedings in respect of the new claim. This will have the advantage of stopping the limitation clock on the date of the new claim form. If permission to amend is granted, then the second action can be allowed to lapse. If permission to amend is refused, the claimant can pursue his new claim in the second action. The two actions will probably be consolidated and the question of limitation can be determined at trial.[70]I turn now to the second option. This is for the court to determine the question of limitation as a preliminary issue at the same time as considering whether to give permission to amend. In practice, this course will seldom be appropriate. Before ordering any trial of preliminary issues, the court must carefully consider the ramifications of such an order. Will the same witnesses have to give evidence on related topics at two different trials? What will be the consequence if there is an appeal on the preliminary issue? Will the separation out of preliminary issues ultimately lead to a saving or a wastage of time and costs? Particular problems attach to an order for the trial of preliminary issues before the pleadings are complete. Having said all that, I must accept that there are some rare cases where the court will order trial of the limitation issue before deciding whether to give permission to amend.[71]In the present case there was no order for a trial of preliminary issues. Instead there was an order for hearing before Judge Thornton to resolve a number of procedural issues. These included determination of the effect of Master Eyre’s order and his subsequent email; the claimants’ application to amend and re-amend; BN’s application to set aside amendments. A deputy master ordered the exchange of witness statements for the purpose of the various applications. There was no order, however, for the trial of limitation as a preliminary issue. Nor was there any suggestion either before or at the hearing in front of Judge Thornton that oral evidence should be given or any witness cross-examined.[72]Against that background, let me turn to the judgment under appeal. The judge began by recognising that he could not reach a final and binding decision on the limitation issues (judgment paragraph 40). Unfortunately the judge’s approach shifted as he worked his way through the drafting of a long and careful judgment. By the end the judge did that which he had eschewed 43 pages earlier. He made definitive findings on the limitation issue and he even made a declaration that the new claims were not statute barred. See paragraph 116 (5) of the judgment.[73]This approach was erroneous. The judge should not have embarked upon a trial of the limitation issue. Mr Smith cited WDA to the judge and invited him to approach the limitation issue in the manner set out in that case. The judge ought to have adopted that approach, but he did not do so.[74]If the judge had adopted the correct approach, he would have been bound to conclude that BN had at least a properly arguable case on limitation. It is quite true that the Chandras did not know for certain what was the effect of the contractual arrangement made in 2001 and 2003 until David Richards J gave judgment in the Chancery action. On the other hand, the Chandras well knew what the bank’s case was. On any view it was possible that the bank’s case would prevail. Mr and Mrs Chandra were separately represented by experienced leading and junior counsel in the Chancery action. With the benefit of all that expert advice, it is difficult to argue that they remained unaware of the effect of the contractual arrangements throughout the course of the Chancery litigation.[75]The judge took the view that David Richards J was an “expert” within the meaning of section 14A of the 1980 Act: see paragraphs 84 to 87 of the judgment. At the hearing in this court Mr Chandra, who represented all the claimants, valiantly strove to uphold that finding. In my view there are formidable difficulties in treating the judge in the Chancery action as if he were, unwittingly, an “expert” in relation to the Queen’s Bench actions.[76]I am only concerned with the question whether BN had a properly arguable limitation defence to the new claims. In my view it did have such a properly arguable defence. Mr Chandra placed heavy reliance on documents disclosed in October 2009, revealing legal advice previously given to RBS. That material does not affect my view of the issue.[77]The Chandras knew what contracts they and BPC had entered into. They knew what advice Mr Lopeman had given or, more importantly, not given. The Chandras were in receipt of much expert advice from counsel as to the effect of the contractual arrangements. On any view it is arguable that their date of knowledge for the purposes of section 14A (5) the 1980 Act fell before 15th November 2008. Accordingly permission to amend should not have been given on 15th November 2011. Any order giving such permission ex parte should have been set aside. My answer to the question posed in Part 5 of this judgment is no. Part 6. Could the amendments be justified on the basis that they fell within the scope of the original claim forms?[78]A possible inference from paragraphs 64-66 of Judge Thornton’s judgment is that there is a separate justification for the amendments. This is that they fell within the scope of the original claim forms. Mr Smith rightly acknowledged that this is a separate hurdle which he must surmount if he is to succeed in the appeal.[79]In relation to this issue the starting point is the Court of Appeal’s decision in Steamship Mutual Underwriting Association Ltd v Trollope and Colls (City) Ltd (1986) 33 BLR 77. The plaintiffs in that case issued a writ against contractors, architects and engineers alleging breaches of duty in connection with the design and construction of a commercial property in Bishopsgate. The law report does not reveal the actual wording on the writ, but we know it was “in wide terms” (see page 96). The plaintiffs served a statement of claim on the contractors and architects, alleging that they were responsible for defects in the air conditioning. The plaintiffs did not serve any statement of claim on the engineers. The inclusion of the engineers on the writ had been essentially a protective measure.[80]Three years later the plaintiffs applied for leave to amend their statement of claim to allege that the contractors, the architects and the engineers were responsible for defects in the brick wall. The official referee refused leave to amend, because the proposed amendments would raise a new cause of action outside the limitation period. He also struck out the claim against the engineers as an abuse of process. The Court of Appeal upheld that decision.[81]May LJ gave the leading judgment, with which Lloyd LJ and Caulfield J agreed. May LJ noted that the wording on the generally endorsed writ was wide enough to encompass both the brickwork and the air conditioning. (Probably the writ simply referred to “defects”, since that was the common practice.) May LJ then considered whether the plaintiffs, by serving a statement of claim limited to air conditioning, were abandoning any claim in respect of the brickwork. At page 97 May LJ said:
“For my part I am doubtful whether there is any sufficient legal basis for holding in favour of the simple doctrine of ‘abandonment’ which was referred to in the Lewis case. Cargill’s case, as I think, was different. That was one, properly looked at, of election between two inconsistent remedies, and of course when one looks at it in that way, there was an abandonment of that which one has not elected. Be that as it may, I would wish to avoid these subtleties in this sort of context. When a plaintiff seeks leave to serve a re-amended statement of claim, and one has to consider and contrast it with the earlier amended statement of claim for the purposes, for instance, of s.35 of the Limitation Act 1980, one realistically looks at the two statements of claim. One does not look truly to the endorsement on the writ – in which the plaintiff by Order 6,r2(1)(a) need not ‘plead’ any cause of action at all (if ‘plead’ is the correct word).”
[82]There was some discussion during the hearing of the present appeal as to whether the first sentence was inconsistent with the latter part of this passage. For reasons which will appear below, I do not think that it is.[83]The latter part of the passage quoted from May LJ’s judgment sets out the normal approach which was adopted in dealing with amendment applications under the RSC. One simply compares the original statement of claim with the proposed amended statement of claim, in order to see whether the latter raises any new claims. The Court of Appeal adopted that approach in WDA. The writ in that case was drafted in broad terms: see 1413C. The plaintiffs’ subsequent statement of claim was treated as narrowing the scope of their claim. The Court of Appeal adopted the same approach in two later cases. See Darlington Building Society v O’Rourke James Scourfield & McCarthy [1999] PNLR 365 at page 370b and Savings and Investment Bank v Fincken [2001] EWCA Civ 1639 at [30].[84]Steamship Mutual and the other cases cited above were decided under the RSC. In should be noted, however, that the functions of a writ under the RSC were very similar to the functions of a claim form under the CPR. RSC Order 6 rule 2 required a generally endorsed writ to contain “a concise statement of the claim made or the relief or remedy required in the action begun thereby”.

(b) specify the remedy which the claimant seeks;

[85]Likewise the function of statements of claim under the RSC and particulars of claim under the CPR are similar. RSC Order 18 rule 7 required a statement of claim to contain “a statement in summary form of the material facts on which the party pleading relies for his claim”. CPR rule 16.4 (1) (a) requires particulars of claim to include “a concise statement of the facts on which the claimant relies”.[86]From this comparative exercise I deduce that the principles stated in Steamship Mutual and the subsequent cases remain applicable under the new rules.[87]The next relevant authority is Tetra Pak Ltd v Biddle & Co [2010] EWHC 54 (Ch); [2010] 1 WLR 1466. In that case the claimants were the sponsoring employers and the trustees of an occupational pension scheme. The first defendants were a firm of solicitors retained to advise in relation to the scheme from 1992 to 1995. The fourth defendants were a firm of actuaries retained to provide consultancy services and the fifth defendants were a successor firm. The claims against all the defendants related to an alleged failure to advise adequately and to draft effective documentation in respect of equalisation of members’ retirement ages. Unaware until 2007 of problems in relation to the scheme, the claimants issued the claim form in 2008.[88]The first defendants were agreeable to a stay, but the fourth and fifth defendants were not. In those circumstances the claimants initially served particulars of claim on the fourth and fifth defendants only. Those particulars of claim were specifically limited to the breaches of duty by those two defendants. Subsequently the claimants sought to proceed against the first defendants as well. They applied for permission to amend their particulars of claim so as to add in their claims against the first defendant.[89]The first defendants objected to the amendments on the basis that they raised new claims after expiry of the limitation period. Warren J held that as between the claimants and the first defendants the amended particulars of claim was not raising any new claims at all. This was the first particulars of claim served on the first defendants and the claims made fell within the ambit of the claim form. Following the decision of the Court in Appeal in Steamship Mutual the particulars of claim served on the fourth and fifth defendants could not be taken as an abandonment of all causes of action embraced by the claim form but not included in that particulars of claim.[90]I respectfully agree with that conclusion and indeed with Warren J’s decision. I should not, however, be taken as agreeing with Warren J’s detailed analysis of Steamship Mutual. I have reservations about that analysis, but this matter has not been the subject of argument in the present appeal.[91]It seems to me that there is an analogy between the position of the engineers, who were fifth defendants in Steamship Mutual, and the position of the solicitors who were first defendants in Tetra Pak. The mere fact that the plaintiffs/claimants served a statement of claim or particulars of claim against other defendants did not automatically constitute an abandonment of all claims against the defendant who was not served. In Steamship Mutual, if the plaintiffs had served an amended statement of claim including claims against the engineers a few days after their original statement of claim against the contractors and architects, there would have been no problem. In that sense I agree with the first sentence of the passage in May LJ’s judgment in Steamship Mutual quoted in paragraph 81 above.[92]On the other hand once the claimant serves particulars of claim on a defendant, he pins his colours to the mast as against that defendant. Particulars of claim are normally narrower in their scope than the original claim form. Those particulars then constitute the ongoing claim against that defendant. If the claimant applies to amend as against that defendant, what the court has to do it to compare the original particulars of claim with the proposed amendments. If the claimant is seeking to add a new claim after expiry of the limitation period, he cannot escape from the tentacles of section 35 (3) to (5) of the 1980 Act by relying upon the broad wording contained in his original claim form.[93]Let me now turn to the present case. Mr and Mrs Chandra’s claim form was expressly limited to BN’s services in respect of the personal guarantees signed on 20th May 2003. That claim form is not broad enough to encompass the new claims raised by the amendments.[94]On the other hand BPC’s claim form is much more broadly drafted. It alleges negligence and/or breach of contract by the defendants whilst acting as solicitors for BPC between 1999 and 2004. For the reasons set out above BPC cannot rely upon the breadth of its original claim form as justification for the amendments. The court must compare the proposed amendments with the original particulars of claim, not the claim form.[95]In the result, therefore, my answer to the question posed in Part 6 of this judgment is no.

Part 7. The remaining issues

[96]I can deal with the remaining issues more briefly. Since the amendments cannot stand, it follows that the proposed re-amendments cannot be permitted. Some of the proposed re-amendments are elaboration of the disallowed amendments. Others of the re-amendments relate to BNLLP. BNLLP is a successor firm, which came into existence after the events in issue. The proposed re-amendments do not allege any separate cause of action against BNLLP. None of the re-amendments can be permitted.[97]Finally, there is the judge’s statement that, even if the new claims were statute barred, he had a residual discretion to allow the amendments to stand. The judge based this conclusion on the Supreme Court’s decision in In re L (children) [2013] UKSC 8; [2013] 1 WLR 634.[98]In In re L (children) Baroness Hale delivered a single judgment with which the other four members of the court agreed. Baroness Hale held that a judge’s power to reverse his/her decision before his/her order was drawn up and sealed was not limited to exceptional circumstances. The judge’s overriding objective was to deal with the case in question justly. I do not see anything in this judgment which enables the court to allow amendments which raise new causes of action outside the limitation period and which do not arise out of similar facts. The position is no different if the court is considering whether to set aside an ex parte order allowing such amendments.[99]In my view, therefore, the judge did not have the residual discretion which he sought to exercise.

Part 8. Conclusion

[100]For the reasons set out in Parts 5, 6 and 7 above, I conclude that this appeal must succeed.[101]The claimants’ applications to amend and re-amend the particulars of claim must be refused. In so far as any order has been made permitting those amendments, that order must be set aside.[102]Likewise the declarations made by the judge must be set aside.[103]The order made by the judge transferring the action to the Technology and Construction court will stand. That was an eminently sensible case management decision, which neither party has criticised.[104]No doubt the terms of this court’s order can be agreed between Mr Smith and Mr and Mrs Chandra.[105]If my Lords agree, this appeal will be allowed and orders will be made as indicated above.

Lord Justice McFarlane:

[106]I agree.[107]I also agree.

Cited in 33 later judgments

and 24 more of the most senior