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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Senior & Anor v Pearson & Ward (A Firm) [2001] EWCA Civ 229 (26 January 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/229.html Cite as: [2001] EWCA Civ 229

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
(His Honour Judge Behrens)

		Royal Courts of Justice Strand London WC2 Friday, 26th January 2001

1. MR. JUSTICE HOLMAN: This is an appeal from the decision and order of His Honour Judge Behrens sitting in Leeds as a Deputy High Court Judge on 29th September 2000. He refused permission to the claimants to amend their particulars of claim on the basis that to do so would involve adding a new cause of action after the limitation period had expired. The claimants now appeal with the permission of Kay LJ who considered that their grounds of appeal were arguable. The trial of the action is fixed for 8th and 9th February 2001, just under two weeks from today.
2. The essential facts are as follows. The claimants owned a hotel and public house known as The Coachman Inn, near Scarborough. They occupied part of the premises known as The Cottage as their personal home. In 1990 there was a decline in their business due to the recession at that time and certain problems of ill-health. They decided to sell the business. They instructed the defendants to act as their solicitors on the sale. Eventually a prospective purchaser was found called Mr. Mort. Ultimately, a price was agreed of £366,000. However, it was known that Mr. Mort would not be able to raise such a sum initially, although it was believed that he would be able to increase his borrowings later, after he could demonstrate a period of successful trading at The Coachman Inn. It was agreed, therefore, that upon completion the claimants would only receive part of the purchase price and that they would continue to live rent free in The Cottage until the full price had been paid. It is not in dispute that this broad scheme was clearly made known to Mr. Tulloch, the partner in the defendants who was acting on the transaction. However, over the summer of 1992 there was considerable communication and negotiations between the solicitors for Mr. Mort and the defendants, and also between the defendants and a tax adviser instructed by the claimants, as to how to cast the scheme in legal terms. Mr. Tulloch was extremely anxious that the position of the claimants should be properly secured. Mr. Mort was proposing to borrow money with both a first and second mortgage. His solicitors said that, if the mortgagees knew that there was to be a third mortgage in favour of the vendors for the unpaid balance of the purchase price, those mortgagees would not proceed. There was a proposal that the vendors might be formally granted an assured shorthold tenancy or some other enforceable right to remain in the residential part of the property. However, by a letter dated 7th October 1992 Mr. Mort's solicitors asked for confirmation that the vendors would give vacant possession of the whole property upon completion. This was completely contrary to all that had been proposed and negotiated up until then.
3. It is common ground in these proceedings that on 12th October 1992 there was a meeting between the claimants and Mr. Tulloch at the defendants' office. There is very considerable dispute as to what was said at that meeting. What cannot be disputed, however, is that on 12th October 1992 Mr. Tulloch wrote a letter to the purchaser's solicitors, saying simply:

"Further to our letter of 12th October we confirm that our client will give full vacant possession on completion."

4. Completion did in fact take place on 16th October but the claimants remained in possession of the residential part and, indeed, are still residing there now, over eight years later. Mr. Mort never made the balancing payment of £171,000 due to the claimants, and it is said that he now has no prospect of doing so. His own mortgagees have repossessed the premises and they have now been sold, albeit subject to the continuing occupation, as a matter of fact, of the present claimants.
5. By an action commenced in 1996 the claimants sued Mr. Mort and also the two mortgagees of the property. They obtained judgment against Mr. Mort for the balance due to them but that judgment is apparently worthless. As against the two mortgagees they claimed a lien on the property for the balance of the price as vendors in possession. That claim was struck out, also, as it happens, by His Honour Judge Behrens, and one of the main reasons for his decision was, or is said to have been (no note or transcript is currently available), that the letter from the present defendants of 12th October 1992 created some form of estoppel against the claimants or otherwise defeated the lien.
6. That point having been taken against them in the pleadings in their action against the mortgagees, the claimants began in April 1998 their present action against the defendants. At the heart of the particulars of claim in their original form they allege that the letter of 12th October 1992 was written without or contrary to their instructions and that it was written in breach of the defendants' duty and/or negligently, in that, by writing such a letter, the defendants made a representation on behalf of the claimants which they knew was false and which jeopardized their ability to enforce their alleged lien.
7. It is clear from the subsequent written statements of Mr. Senior on the one hand, and Mr. Tulloch on the other hand, that there is a huge dispute as to what was said at the meeting on 12th October 1992. Mr. Senior says:

"At no time did we tell Mr. Tulloch that we would be vacating the premises, nor did we agree that he should advise third parties that this was the case. The letter apparently sent by Pearson & Ward, dated 12th October 1992, 'confirming' this conversation was without our authority or consent. We simply do not understand how Mr. Tulloch could have thought that we were willing to give up vacant possession."

8. Mr. Tulloch says:

"Whilst my note relating to this meeting of 12th October is a brief one, my recollection of this meeting even at this stage 6 years on is very clear. The reason being that this is one of the most unusual transactions I have ever been concerned in . . . The whole crux of this meeting as far as I was concerned was the question of vacant possession and the loss of any equitable lever we might have had with regard to Mr. and Mrs Senior continuing to reside at the premises. . . There were at that time no circumstances in which I would have been prepared to give the confirmation requested without the explicit and tacit agreement of Mr. and Mrs Senior bearing in mind that up until that point in time they had been indicating an intention to remain resident within the premises. . . . Whatever may have been the intention of Mr. and Mrs Senior before that meeting of 12th October or indeed since that meeting of 12th October I am certain that on that day they told me that they would give vacant possession otherwise I would never have confirmed they would."

9. It is common ground that the limitation period for any rights of action expired in October 1998, six years after these events and after the date of completion of the sale when, at the latest, any right of action accrued. In August 2000 the claimants applied for permission to amend their particulars of claim. Some of the proposed amendments are what Judge Behrens described as "cosmetic". They clearly do not add a new claim but rather flesh out or, as a matter of style or draftsmanship, improve the pleading of the existing claim. So far as those particular proposed amendments are concerned, it may almost be said to be a matter of indifference or no consequence whether the amendments are made or not.
10. There are, however, three respects in which the proposed amendments are more profound. Before turning to them, it is perhaps convenient to set out the essential structure of the relevant statute and rules of court. Section 35 of the Limitation Act 1980 provides as follows:

"(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 -

. . .

(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 involving either -

(a) the addition or substitution of a new cause of action. . .

(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. . . 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...."

11. The relevant rule of court, made pursuant to section 35(4), is rule 17.4(2) of the Civil Procedure Rules, which provides as follows:

"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."

12. During the course of argument today our attention has also been drawn to the provisions of the previous Rules of the Supreme Court, O.20,r.5(5). It suffices to say that, at any rate for the purposes of this appeal, although there are slight differences in the language employed by RSC O.20,r.5(5) and the current rule, 17.4(2), I am unable to discern any relevant difference in meaning or effect. The overall effect of those provisions is that, if a claimant seeks to amend his pleadings after the limitation period has expired, the court needs first to consider whether or not that involves the addition of a new claim or new cause of action. If it does, then the amendment cannot be allowed unless the claimant can bring himself within the exception provided for by a combination of section 35(4) and (5) and rule 17.4(2). If the claimant can bring himself within that section, then the court has a discretion whether or not to allow the proposed amendment.
13. Having thus set out the statutory framework, I turn to the essence of the amendments that the claimants wish to make in this case. The first arises under the proposed amendments to paragraph 13 of the original particulars of claim that would now be renumbered as paragraph 12. As originally pleaded that paragraph provided:

"The letter [viz the letter of 12th October 1992] was written in breach of the said duty and/or negligently in that by so writing the defendants made a representation on behalf of the claimants which they knew was false . . . "

14. The amendment would add into that pleading the additional pleading that the defendants "... should have realised from the terms of the claimants' instructions was false or incorrect. . . " In essence, therefore, the proposed amendment would enlarge the allegation from an allegation that the defendants, in effect Mr. Tulloch, in terms "knew" that the representation in the letter was false, to one that he "should have realised" it was false. The judge considered that that proposed amendment did add a new claim. He said at page 7E-G of his judgment:

"One notes that there is an addition of the words 'should have realised' and that enlarges the allegation from an allegation that they knew that their letter was false to one that they should have realised it was false based on the instructions which, of course, have been amended in paragraph 9 as I have indicated."

15. I, too, agree with the judge that the effect of that proposed amendment is to enlarge the allegation, and I am prepared to assume, for the purposes of this case, that it does do so to the point of adding a new claim. Nevertheless, the effect of the amendment is really to do no more than assert that, even if Mr. Tulloch did not have knowledge from something expressly said by the claimants, he at any rate had constructive knowledge from the scope of their instructions as a whole. It seems to me unarguable that that particular proposed new cause of action does arise out of the same facts or substantially the same facts as a claim in respect of which the claimants have already claimed a remedy.
16. The next proposed amendments, however, are more contentious and perhaps more formidable in their scope. By proposed paragraph 15 the claimants seek to amend their particulars of claim to add further allegations of breach of duty and/or negligence by the defendants. In summary, they would allege under paragraph 15(i) that the defendants "failed to advise the claimants fully or at all of the course and effect of their negotiations with [Mr. Mort's solicitors] and in particular that they were unable to arrange the transaction in such a way as to make it possible for the claimants to obtain a lien to secure the balance of the purchase price which would bind any mortgagee of the purchaser so that in truth they had no effective security as against such mortgagees"; by paragraph 15(ii) that the defendants "failed to advise the claimants of the extent to which the purchaser was relying upon borrowing from others to meet the payment of the sum of £195,000 to the claimants", and by paragraph 15(iii) that the defendants "failed to advise the claimants that in the circumstances they ought to continue to actively market the property in order to achieve a sale to a purchaser able to pay the full market value of the property" rather than proceeding on so risky a sale to Mr. Mort. Finally, by proposed paragraph 16(iii)(b) the claimants seek to add an alternative basis of damages. In the existing particulars of claim they have already claimed as damages the value of the lien, namely £171,000, which they claim they have lost as a result of the writing of the letter of 12th October 1992. The additional and alternative head of damages would be "damages representing the difference between the sum of £195,000 paid by the purchaser to the claimants and the actual market value of the property as at October 1992." As I understand it, there is evidence to the effect that the price agreed with Mr. Mort was a particularly good price for this property in the market in 1992 and, indeed, a valuer jointly instructed by the parties for the purpose of these proceedings has opined that a market value of the property in 1992 would have been around £270,000. Thus, under this alternative way of pleading their claim to damages the claimants, in effect, are claiming £75,000.
17. Before His Honour Judge Behrens separate and distinct consideration seem to have been given to the proposed amendments to paragraph 15 (which go to liability) and the proposed amendment to paragraph 16 (which goes to the measure of damages). To some extent His Honour Judge Behrens clearly gave them separate treatment in his judgment, probably reflecting the way in which the case had been argued before him. Before us, however, it has emerged today that it is really common ground that the proposed addition of paragraph 16(iii)(b) is concomitant with and part and parcel of the proposed amendments at paragraph 15(iii) as to liability. Both counsel have, in effect, conceded that our decision in relation to the measure of damages under paragraph 16(iii)(b) stands or falls, as the case may be, with our decision in relation to paragraph 15(iii).
18. On behalf of the claimants, Mr. Gore has not conceded that these amendments amount to adding a new claim. The judge, however, considered that they do. He said at page 11C-D of his judgment:

"It seems to me that the breaches do differ substantially from the breach which was being pleaded in the original statement of claim. The allegation of failure to advise is not, in my judgment, the same as the allegation of sending out a letter contrary to instructions. Therefore, I come to the conclusion that there are new causes of action pleaded in relation to the breach."

19. I have to say, with respect to Mr. Gore, that I entirely agree with the judge on that issue and for the reasons given by him. It does seem to me that an allegation of failure to advise is distinctly different from an allegation of acting without, or in disregard of, instructions from the clients. It seems to me that the real issue in this case is whether the proposed amendments by paragraph 15, adding as they do a new claim or new claims, nevertheless "arise out of the same facts or substantially the same facts as a claim in respect of which the claimant has already claimed a remedy in the proceedings".
20. During the course of his submissions, Mr. Gore drew our attention to, and placed considerable reliance upon, certain passages in the defendants' existing defence, in particular, paragraphs 22, 30 and 45 of the defence, and paragraph (a)(iv) of the particulars under paragraph 45. In all of these paragraphs, as part of a lengthy narrative of their defence, the defendants have expressly averred that Mr. Tulloch gave to the claimants in substance the very advice that the claimants now wish to aver that he did not give but should have given. This has led Mr. Gore to submit that the facts in question "are already in issue on any claim previously made in the original action" within the meaning of those words in section 35(5)(a) of the 1980 Act.
21. Mr. Simpson, on behalf of the defendants, has submitted that that is an impermissible approach. He submits that the scope of rule 17.4(2) is narrower than the scope of the condition in section 35(5)(a). He submits that the effect of section 35 is to empower rules of court to permit a new claim to be made provided that the condition in subsection (5)(a) is satisfied, but empowers rules of court to be more restrictive. In support of that submission he has drawn our attention to a recent decision of Colman J in Goode v Martin, decided on 7th November 2000 and reported in the New Law Digest for 2nd January 2001. In that case Colman J expressed the view that the wording of the rule does, indeed, impose a more restrictive test than the wording of the Act and, in effect, that it precludes consideration of what may already have been alleged or put in issue by way of defence.
22. However, Mr. Simpson has properly drawn our attention to an authority of this court, Lloyds Bank Plc v Rogers and Another, decided on 20th December 1996. It appears only to have been reported in summary form in the Times Law Reports for 24th March 1997, but a full transcript has been supplied to us today. In the course of his judgment in that case Hobhouse LJ said:

"Section 35 contemplates that the introduced cause of action will be time barred. 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. There is no indication in the drafting of the Act that there should be a further limitation on section 35. If there is any relevant prejudice to the party opposing the amendment, it can and should be had regard to on the exercise of the court's discretion whether or not to allow the amendment."

23. The view expressed by Colman LJ in Goode v Martin does not perhaps lie easily alongside those observations of Hobhouse LJ.
24. For the purposes of the present case, however, it seems to me quite unnecessary for us to get drawn into these particular submissions, or into the question of whether the test in rule 17.4(2) is narrower than that in section 35(5)(a). I, for my part, am quite content to consider the present appeal on the basis of the wording as employed in the rule itself. Without taking any account at all of what has been alleged by the defendants in their existing defence, I ask myself the question: Do the new claim or claims arise out of the same facts or substantially the same facts as a claim in respect of which the claimants have already claimed a remedy? His Honour Judge Behrens considered that they do not. In the course of his judgment he said at page 12D-F:

"Mr. Gore, on the other hand, says that in order to consider what happened on the 12th October... the whole of the circumstances of that will have to be investigated including, so he now submits, the advice that should have been given. But, with respect to Mr Gore, one only has to investigate the advice that should have been given on that date if I allow the amendment. So it seems to me that that rather begs the question of whether the amendment should be allowed."

25. A little later at page 13C he said:

"I have come to the conclusion that the central allegations, that is to say the allegation in paragraph 15, do not arise substantially out of the facts which were pleaded in the original cause of action. I have come to the conclusion, therefore, that the central allegations in paragraph 15 are such that I have no jurisdiction to allow an amendment."

26. Mr. Simpson has relied on a number of reported authorities, including Darlington Building Society and Abbey National Plc v O'Rourke James Scourfield & McCarthy [1999] 1 Lloyd's Law Reports 33, a decision of this court, and Bristol and West Building Society v Baden Barnes Grove & Co (a firm) [2000] Lloyd's Law Reports 788, a decision of Chadwick J. He submits that we could not take the view in the present case that the new claims arise out of the same facts or substantially the same facts without thereby contradicting the decisions in those cases, in each of which the proposed amendments were refused. It seems to me, however, that perhaps the most significant point to be drawn from either of those authorities is the observation of Sir Iain Glidewell LJ in Darlington at page 37 of the report, that

"whether or not the new cause of action arises out of substantially the same facts as that already pleaded is substantially a matter of impression."

27. The 1980 Act and the rule both focus very specifically upon the facts of the instant case. It does not seem to me helpful to try to resolve the factual situation in a given case by over-analysis of the view taken on quite different factual situations in other cases.
28. With respect to the decision of the judge, I am firmly of the view that all the new claims which the claimants seek to raise by paragraph 15, including that in (iii), do arise out of the same facts or substantially the same facts as the claims they have already pleaded. By their existing pleading the question of what instructions were given by the claimants to the defendants is clearly put in issue. In order to consider that, it will be necessary at the trial to hear evidence about, and carefully to analyze all that was said, and also what was not said as between the claimants and Mr. Tulloch on behalf of the defendants. Logically, it might be necessary to examine all the communications, both oral and written, between them throughout the whole period of the retainer. In practice, however, it is obvious that the focus will be upon the course and contents of the meeting between them on 12th October 1992. It seems to me that it will not be possible for the judge at trial to form a view as to what was the final state of the instructions from the claimants at the conclusion of that meeting and immediately before Mr. Tulloch wrote the letter of 12th October 1992, without considering all that passed both ways between them. The essence of the allegations in the new paragraph 15 is that, in what was said by Mr. Tulloch, there was an absence of advice that he should have given to them. I readily acknowledge that within the allegations as pleaded in paragraph 15 new matters or facts do arise, but the question is whether the new claim arises out of "the same facts or substantially the same facts". Although I differ from the view of the judge in this respect, I am of the clear view that they do.
29. It accordingly follows that there is a discretion to decide whether or not to permit the requested amendments. In my view, that is a discretion which should clearly be exercised in favour of allowing the amendments. It is, of course, the case that a very long time has elapsed since the events in question. On the other hand, as I have said, the existing claim will necessarily require each party to give the best evidence that they now can as to what passed between them, in particular at that meeting of 12th October 1992. I have already quoted a part of the witness statement of Mr. Tulloch, in which he said:

"My recollection of this meeting is very clear."

30. It does not seem to me that Mr. Tulloch will be at any extra disadvantage as a witness if these amendments are allowed. So far as any argument as to the scope of the duty of the defendants is concerned, that of course is a matter of law and submission and not of evidence and recollection. The trial itself is already fixed to take place on 8th and 9th February. It does not seem to me that to allow those amendments need for one moment lead to any adjournment of that hearing, nor indeed to any lengthening or any significant lengthening of it, since the evidence will be substantially the same as it any way would have been.
31. For those reasons I, for my part, would allow this appeal and would give permission to the claimants to amend their particulars of claim in the terms of the copy lodged.
32. LORD JUSTICE MUMMERY: I agree. The order will be that the appeal is allowed. Permission is granted to amend the particulars of claim as sought by the claimants.
Order: Appeal allowed; permission granted to amend particulars of claim as sought by the claimants; appellants to have their costs of the appeal; order for costs below varied to no order for costs; costs of and occasioned by the amendment to be paid by the appellant. (Order not part of the judgment of the court)