Master Clark:
Applications
- This is my judgment in two applications by the third defendant ("D3"), Christopher Attwood Messenger (formerly trading as Messenger & Company), who was joined to this claim by the order dated 9 September 2016 of Deputy Master Lloyd ("the joinder order"). The first application dated 14 September 2016 ("the set aside application") seeks to set aside the joinder order. The second application dated 11 October 2016 seeks a declaration that the court has no jurisdiction to try the claim and to set aside service of the Amended Claim Form and Amended Particulars of Claim. I have doubts about whether the second application is necessary and as to its jurisdictional basis; but both sides were agreed that the two applications stand or fall together.
Claim, parties and the background to the application
- The main claim to which D3 has been added is for breach of an agreement ("the agreement") to sell a property called Lane End Cottage in Bracknell, Berkshire. The claimants are the buyers. The first and second defendants (respectively "D1" and "D2", collectively "D1-2") are the sellers. The agreement was entered into by an exchange of contracts in the usual way on 20 November 2009. D3 was the conveyancing solicitor who acted or purported to act on behalf of D1-2 in the transaction, and in particular in the exchange of contracts.
- Before issuing the claim, the claimants' solicitors wrote to D3 asking him to confirm that he had acted for both D1 and D2 in the sale of the property. In an email dated 23 December 2014, D3 stated
"I confirm that I signed the Contract on behalf of both Buyers with their authority."
- The claim was issued on 5 March 2015. In her Defence dated 7 April 2015, D2 denied that she was a party to the agreement and denied that D3 had authority to act on her behalf.
- This caused the claimants' solicitors to write on 3 May 2016 a formal pre-claim letter to D3, alleging that he was in breach of his implied warranty of authority to act on D2's behalf. There was no response. The claimants personally wrote to D3 on 19 May 2016; and the claimants' solicitors wrote to D3's professional indemnity insurers on 23 May 2016 seeking clarification of whether he admitted that he had not been instructed by D2.
- Solicitors acting on behalf of the PI insurers, Ozon Solicitors ("Ozon"), replied with a holding letter on 26 May 2016. On 22 July 2016 those insurers were intervened upon by the Financial Services Commission in Gibraltar, and Ozon wrote to confirm this on 3 August 2016. However, neither D3 or Ozon ever replied to the pre-claim letter.
- The joinder application was issued on 2 September 2016, and the court listed it for hearing. Although the application notice identifies D3 as a party to be served, it is unclear whether this was done. D1-2 consented to the joinder order. The Deputy Master approved it on paper without enquiring whether D3 consented, and vacated the hearing on 12 September 2016.
- The set aside application is made under CPR3.1(7) (the court's power to vary an order). Both sides were agreed that this hearing should be treated as a full rehearing of the joinder application, with D3 entitled to put forward all the arguments he could have put forward if that application had been heard by the Deputy Master (by analogy with the guidelines in Chandra v Brooke North (A Firm) [2013] EWCA Civ 1559 at para 60).
Joinder – relevant principles
- The procedural rules governing joinder of parties are found in CPR Part 19.
- CPR 19.2 provides:
"(2) The court may order a person to be added as a new party if –
(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or
(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue."
This application falls within CPR 19.2(2)(b).
- CPR 19.4 provides that once the claim form has been served, the court's permission is required to remove, add or substitute a party, notwithstanding that the claimant would not have required the permission of the court to bring a fresh claim against a new defendant. It is clear from CPR 19.4 that, unless the application is made under CPR 19.2(4) (substitution of a new party where an existing party's interest or liability has passed), the application to join must be made on notice in accordance with Part 23. This is confirmed by CPR PD19A, para 4, which provides that the application may (and implicitly, may only) be dealt with without a hearing where all the existing parties and the proposed new parties in agreement. This is no doubt because, in addition to case management issues that may arise as a result of the joinder, there may also be limitation issues of the type arising here.
Joinder where there are limitation issues
- Section 35 of the Limitation Act 1980 ("the 1980 Act") provides, so far as relevant:
"(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;
and "third party proceedings" means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings.
(3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor the 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."
- As can be seen, the section divides new claims into two categories: third party proceedings and other new claims. For limitation purposes, third party proceedings are deemed to have commenced on the date on which they were in fact commenced; there is no doctrine of "relation back" and no advantage in respect of limitation in bringing third party proceedings within an existing claim.
- This may be contrasted with "other new claims". These, once added, do "relate back"; and are deemed to have commenced on the same date as the original action. They are thereby capable of defeating a limitation defence which would have been available to the defendant had the claim been brought as a separate claim. Section 35(3) therefore provides that subject to certain exceptions, the court may not permit these new claims to be added if they would have that effect i.e. claims sought to be added after the relevant limitation period has expired. Those exceptions (which have no application in this case) are set out in subsections (5) and (6).
- Subsection (3) provides for rules of court to be made in respect of new claims within s.35(1)(b), but not for third party proceedings within s.35(1)(a).
- CPR 19.5 is one of two rules (the other is CPR 17.4) made under s.35(3) and (4) of the 1980 Act. It provides, so far as relevant:
"Special provisions about adding or substituting parties after the end of a relevant limitation period
19.5
(1) This rule applies to a change of parties after the end of a period of limitation under –
(a) the Limitation Act 1980;
…
(2) The court may add … a party only if –
(a) the relevant limitation period was current when the proceedings were started; and
(b) the addition … is necessary.
(3) The addition … of a party is necessary only if the court is satisfied that –
[none of the exceptions apply in this case]
- It is to be observed that CPR 19.5 goes beyond the requirements of section 35(3) of the 1980 Act, in that on its face it extends to all new claims, including third party proceedings; and is not confined to new claims other than third party proceeding. The rule also makes no provision for situations where it is unclear whether or not the limitation period has expired.
- Where the new claim falls within s.35(1)(b), so that relation back applies, guidelines as to the court's approach are found in Chandra v Brooke North (A Firm) [2013] EWCA Civ 1559:
"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."
Issues in the application
- The issues which arise in the application are:
(1) Whether or not the claim against D3 plainly falls outside CPR 19.5: whether D3 has an arguable limitation defence;
(2) Whether the claim against D3 falls within s35(1)(a) ("third party proceedings") or s.35(1)(b) ("other new claims") of the 1980 Act;
(3) Whether the claimants have an arguable case that the limitation period of the claim against D3 has not expired;
(4) If so, the approach that the court should take and in particular, whether the guidelines in Chandra apply.
Whether D3 has an arguable limitation defence
- The primary limitation period applying to the claim against D3 is 6 years (under s.5 of the 1980 Act). Since the event giving rise to the alleged breach took place on 20 November 2009, this period ended on 19 November 2015 – after the issue of the claim, but before the joinder application was made.
- The claimants' position is that that limitation period in respect of their claim against D3 has not expired, and that time did not begin to run until they received D2's Defence dated 1 April 2015. They rely upon s.32 of the 1980 Act which, so far as relevant, provides:
(1) …, where in the case of any action for which a period of limitation is prescribed by this Act, either—
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; …
the period of limitation shall not begin to run until the plaintiff has discovered the… concealment… or could with reasonable diligence have discovered it…
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.
- Their counsel's skeleton argument sets out the basis on which they will assert that D3 deliberately concealed the fact that he was in breach of his warranty of authority. However, reliance on s.32 (and the facts giving rise to it) is not pleaded in the Amended Particulars of Claim.
- D3's counsel submitted that the claimants could not rely on s.32 of the 1980 Act in the joinder application, because it has not been pleaded.
- In my judgment, the claimants are not precluded from relying on s.32 by reason of not having pleaded it in their claim. Limitation is a point that must be pleaded specifically by a defendant – the court will not take the point of its own initiative that a claim is out of time: see McGee, Limitation Periods, 7th edn, para 21.001. In the absence of the defence being raised, therefore, the claim will succeed. It follows that the claimants in this case were not obliged to pre-emptively plead s.32, but entitled to wait until D3 pleads that the limitation period has expired, before pleading in their Reply that it has not, because of deliberate concealment by D3 of his breach. This does not preclude them from relying on s.32 in the joinder application.
- D3's counsel also submitted that D3 could in any event show an arguable defence. In the witness statement dated 12 October 2016 of D3's solicitor, Anthony Hill, he states that D3
"has expressly confirmed to me that he believes he was acting with the second defendant's authority in signing the contract for sale dated 20th November 2009."
This, D3's counsel submitted, was inconsistent with deliberate concealment, since D3 could only have acted deliberately to conceal his lack of authority if he knew or believed he did not have it. His solicitor's evidence is that even now he does not believe that he lacked D2's authority to enter into the agreement.
- The claimants' counsel submitted D3 did not have a reasonably arguable limitation defence, because he must have known that he did not have D2's authority or instructions. He relied the following facts:
(1) D3 is an experienced conveyancing solicitor (this is not disputed); and, as such, would have been aware of the need for "express authority" to sign a contract on behalf of his client(s);
(2) There is no evidence directly from D3 verified by a statement of truth as to whether he believed, at the time of signing the contract for sale, dated 20 November 2009, (or subsequently) that he had had D2's instructions, only hearsay evidence from his solicitor;
(3) The source of his claimed belief that he had D2's authority is not identified, and, had D3 had express authority from D2, he would have been able to, and would have, produced evidence of the same when invited to do so in correspondence with the claimants' solicitors.
- In my judgment, although the evidence on behalf of D3 is lacking in detail, it is clear evidence as to his belief, which, if established at trial, could defeat the claimants' allegation of deliberate concealment. It gives rise to a factual issue, which cannot be resolved without a full factual investigation, including cross examination of D3. The evidence is not wholly implausible. For example, assuming that the claimants' primary case that D3 had D2's authority fails, it is possible that D3 was misled by D1 that D2 had given her authority to D3, and that D3 did not take the steps he should have taken to satisfy himself of this (even though that failure would have been in breach the relevant regulatory requirements) In my judgment, therefore, D3 has a reasonably arguable case that he did not deliberately conceal his lack of authority, and therefore a reasonably arguable limitation defence.
Whether the claim against D3 falls within s35(1)(a) ("third party proceedings") or s.35(1)(b) ("other new claims") of the 1980 Act
- This issue arises from the claimants' counsel's second main submission that, even if D3 has a reasonably arguable limitation defence, he would not be deprived of it by joinder, because the claim against D3 falls within s.35(1)(a) of the 1980 and is "third party proceedings", in which there is no relation back to the commencement date of the original claim.
- This seems to me to elide 2 distinct points: whether the claim against D3 is "third party proceedings"; and if it is, the procedural consequences of this (considered below).
"Third party proceedings"
- It is clear that the claim against D3 satisfies the first part of the definition in s.35(2): it is "proceedings brought in the course of any action by any party to the action against a person not previously a party to the action".
- The claimants' counsel submitted that the claim also falls within the second part of the definition: in that it is not
"proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings."
In support of this, he pointed out that in s.35, the expression "claim" is distinct from "action" and "proceedings". This is shown not just by the definition in question itself, but also by the first part of s.35(2), which defines claim as "any claim by way of set-off or counterclaim" – these expressions are not apt to refer proceedings as a whole. He submitted that the claim against D1-2 is a claim for breach of contract, and the claim against D3 is for breach of his implied warranty of authority; so that D3 is not being added to the claim against D1-2.
- D3's counsel submitted that the proper construction of s.35 was a difficult, technical question; and that I should deal with the joinder application on the basis that it was unclear whether the claimants' claim against D3 fell within s.35(1)(a) or (b); it being clear that if it were the latter, D3 would be entitled not to be joined to the action. However, counsel were agreed that there is no authority on this point; and D3's counsel did not advance any reasons why the construction contended for by the claimants' counsel was wrong. I accept the claimants' submission on this issue for the reasons he advanced.
Whether the claimants have an arguable case that the limitation period of the claim against D3 has not expired
- The principles and evidence in relation to this issue are set out and discussed above. Just as D3 has an arguable case that he did not deliberately conceal the fact (if established) that he did not have D2's authority, the claimants have an arguable case that he did so conceal that fact. It will be for the trial judge to determine.
Application of CPR 19.5
- D3's counsel submitted that the joinder application plainly fell within CPR 19.5; and that the guidelines in Chandra therefore applied, requiring the court to refuse joinder and leave the claimants to bring a fresh action should they choose to do so. The application of CPR 19.5 was, he said, clear, and the claimants were seeking the court's indulgence to circumvent the rule.
- The claimants' counsel submitted that CPR 19.5 did not apply to the joinder of D3; and only applied where it did so to prevent the doctrine of relation back under s35(1)(b) of the 1980 Act from depriving a defendant of a reasonably arguable limitation defence. However, he submitted that, in this case, D3 would not be deprived of a reasonably arguable limitation defence for the following reasons. The first reason he put forward was that D3 did not have a reasonably arguable limitation defence – I have rejected this in paras 25 to 27 above. The second reason was that s.35(1)(b) does not apply to the claim against D3. I have accepted this; but this of itself is not sufficient in my judgment to establish that CPR 19.5 does not apply, since as discussed above, the rule is not limited in its terms to new claims where relation back applies.
Application of the Chandra guidelines
- The claimants' counsel submitted in addition, however, that the guidelines in Chandra did not apply to this case, because the reasoning in Chandra was only applicable to claims falling within s.35(1)(b) and did not apply to third party proceedings within s.35(1)(a).
- The claimants' counsel drew my attention to a number of authorities, Grimsby Cold Stores Ltd (CA, 11 July 1985), Leicester Market Ltd v Grundy [1990] 1 WLR 107 at 109H and Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409 in which comments are made that the effect of s35(1) is to apply the doctrine of relation back to new claims added by amendment. However, in these cases, the new claims respectively added new claimants, added new defendants to qualitatively similar existing claims, and added new claims against existing defendants; and/or it was presupposed without argument that s35(1)(b) applied. As he submitted, they do not therefore assist in resolving the issue at hand, as to which neither counsel had found any direct authority.
- The claimants' counsel submitted that in this case it was not clear that CPR 19.5 applied, because, if the claimants succeed in showing deliberate concealment, then the limitation period will not have expired. But he submitted, where, as here, the position is unclear, then unlike the position in Chandra, there is no reason to refuse to join D3, because he will suffer no prejudice in being joined – he will be in the same position as he would have been had a fresh claim been brought against him.
- I accept this submission. In my judgment Chandra is authority for the limited proposition that amendment (and joinder) should be refused where relation back would apply, and the defendant has a reasonably arguable limitation defence. It is not authority for the broader proposition contended for by D3's counsel, namely, that whenever the defendant raises an arguable limitation defence, joinder must be refused.
- Where the position as to expiry of the limitation period is unclear, but there is no prejudice to the proposed defendant in being joined, in my judgment, there is no reason in principle or policy why s/he should not be joined. In this case, the alternative course would be separate proceedings, which would then have to be consolidated with the existing proceedings, and in which D3 would be in precisely the same position as to limitation as he is if joined to these proceedings. This would in my judgment be contrary to the overriding objective, by increasing expense and the use of the court's resources, without any resulting practical benefit.
The claimants' fall back position
- As a fall back position, on 20 January 2017, the claimant offered to D3 an undertaking in which they accepted that, the commencement date of the claim against D3 was 14 September 2016 (the date on which the amended claim form and amended particulars of claim were served on him).
- D3's counsel submitted that such an undertaking or the agreement reached by D3 accepting the undertaking would not be a lawful solution. However, it is clear that parties can and frequently do contract out of the effects of the 1980 Act, for instance, by entering into standstill agreements, and such agreements are not unlawful. He also argued that, if joinder were permitted on that basis, D3 would be exposed to the risk of the claimants later seeking to resile from the undertaking or agreement, on the basis that it was made under a mistake of law or other grounds; and that they should not be exposed to that risk.
- In my judgment, provided the undertaking or agreement was appropriately worded, I see no reason in principle why the parties cannot agree the date for limitation purposes on which a claim is deemed to have been commenced. Such an agreement would remove the possibility of prejudice to D3 of joinder, and provide an alternative basis for the guidelines in Chandra not to apply. Although it is not impossible that the claimants might seek to resile from such an agreement or undertaking, the likelihood of such a challenge succeeding seems to me to be so remote that it should be disregarded. At a broader level, the court frequently deals with claims on the basis of agreements reached between the parties, and in my judgment it would be wrong in principle to proceed on the assumption that the parties might not be bound by an agreement freely entered into by them. However, for the reasons already given, it is not necessary for such an undertaking or agreement to be offered.
- I therefore dismiss the set aside application and the applications in paras (1) and (2) of D3's application dated 11 October 2016.
