Late Amendments to Statement of Case After the expiry of the Relevant Limitation Period

In the first part to this briefing, our Commercial Litigation experts looked at the test that the Court would apply when considering applications to amend pleadings at a late stage of the proceedings where limitation is not an issue. We now examine the test for applications to amend pleadings after the limitation period has expired.

Part 2

Different considerations apply in circumstances where amendments to pleadings are introduced after the expiry of the relevant limitation period. This is due to the so-called doctrine of “relation back”, whereby the re-amended claim would be deemed to have been commenced on the date of issue of the original claim form (and within the applicable limitation period), provided that it (i) either did not introduce a new cause of action, or if it did, (ii) the new cause of action arose out of the same or substantially the same facts as the original claim.

We consider the application of this test by reference to the Court of Appeal judgment in Blue Tropic Ltd and another v Chkhartishvili [2016] EWCA Civ 1259 (“Blue Tropic“), as well as the more recent decisions in Morley v Royal Bank of Scotland Plc [2019] EWHC 270 (Ch) (“Morley“), Samba Financial Group v Byers [2019] EWCA Civ 416 (“Samba“) and Hyde v Nygate [2019] EWHC 1516 (Ch) (“Hyde“).

In Blue Tropic, the Court of Appeal considered an appeal against an order permitting the late amendment of a claim after the expiry of the foreign limitation period. The case concerned a dispute between two Georgian businessmen regarding the transfer of assets from non-trading companies. The claimant claimed that the transfer of assets had resulted in actionable harm to the companies under article 992 of the Georgian Civil Code. The claim was based on the allegation that the defendant had caused harm by procuring a third party to act in breach of duty.

Shortly before trial, the High Court judge granted permission to amend the pleadings, concluding that the amendment did not introduce a new claim, and even if it did, it arose out of substantially the same facts as the original claim. The amendment introduced a new direct claim under Georgian law, that the defendant had directly caused the claimants harm. The case proceeded to trial and succeeded on the amended basis but, based on the judge’s findings of fact and foreign law, it would have failed on its originally pleaded basis.

In determining whether the amendment was properly granted, given the expiry of the limitation period, the Court of Appeal had to determine the following issues (applying the tests under section 35 of the Limitation Act 1980 and rule 17.4 of the Civil Procedure Rules):

1. Did the direct claim introduce a new cause of action?
2. If so, did the new cause of action arise out of the same facts or substantially the same facts as were already in issue on the claim as pleaded before the proposed re-amendment.

Henderson LJ considered the definitions of what constitutes a cause of action, namely “every fact which is material to be proved to entitle the plaintiff to succeed – every fact which the defendant would have a right to traverse” (per Brett J in Cooke v Gill (1873) at 116). Having closely examined the facts that had to be proved in the pre- and post- amendment pleadings, he concluded that personal dishonesty on the part of the defendant was an essential ingredient of the amended claim but not of the original. On the facts, the proposed amendment introducing a new allegation of intentional wrongdoing constituted the introduction of a new cause of action which did not arise from the same or substantially the same facts as those already in issue. The trial judge therefore had no jurisdiction to allow the amendment. As on the findings of fact by the trial judge the originally pleaded claim would have failed, the Court of Appeal concluded that the action had to be dismissed.

In considering the question of whether new causes of action introduced by way of amended pleadings arose out of the same or substantially the same set of facts as the existing claim, the Court in the case of Morley concluded that it should consider the extent to which the Defendant would be required to go beyond the scope of matters which it had already investigated on the existing pleadings. If the newly pleaded matters were outside that scope, then they did not arise out of the same, or substantially the same, facts.

In Samba, the Court of Appeal held that in order to determine whether a proposed amended claim arose out of the same or substantially the same facts as the original claim, a real evaluation of the new claim against the facts in issue in the old claim was necessary. The judge held that “what is “in issue” in an existing claim will usually be determined by examination of the pleadings alone”. However, in some cases, albeit rarely, it may also be possible to consider evidence adduced in interlocutory applications, which might not have been included in the pleaded case, such as for example on a summary judgment application or a jurisdictional challenge.

Most recently in the case of Hyde, the Court usefully broke the test that must be applied before granting permission to amend a statement of case after the expiry of the limitation period into the following four stages:

1. Stage 1: Is it reasonably arguable that the opposed amendments are outside the applicable limitation period? If the answer is yes, go to Stage 2. If the answer is no, then the amendment falls to be considered under the Civil Procedure Rules (“CPR“) 17.1(2)(b)[1].
2. Stage 2: Do the proposed amendments seek to add or substitute a new cause of action? If the answer is yes, go to Stage 3; if the answer is no, then the amendment falls to be considered under CPR 17.1(2)(b).
3. Stage 3: Does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim? If not, the Court has no discretion to permit the amendment.
4. Stage 4: If the answer to Stage 3 is yes the Court has discretion to allow the amendment.

Comment

The above cases provide useful guidance of the test applicable on applications to amend claims after the expiry of a relevant limitation period and highlight the importance of closely analysing a pleaded case before the expiry of the relevant limitation period. In determining whether a proposed amendment outside the limitation period constitutes a new cause of action, the Courts will closely scrutinise the facts which need to be proved under the pre- and post- amendment claim.

[1] CPR 17.1(2)(b) provides that a party may amend its statement of case at any time during the proceedings with the permission of the Court. For guidance on the test applicable by the Court in determining late applications to amend pleadings, where limitation is not an issue, please see Part 1 to our briefing.

This article has been co-written by Valya Georgieva and Sarah Rees.