Late Amendments to Statement of Case – Where Limitation is not an Issue

A number of recent cases provide a useful reminder of the test that the Court would apply when considering applications to amend pleadings at a late stage of the proceedings. Our Commercial Litigation experts have prepared a two-part briefing considering some of those recent cases.

Part 1

The first part of the briefing below considers the principles applied by the Court when considering late applications for amendment to statements of case where limitation is not an issue, by reference to the recent decisions of Rose and others v Creativityetc and others [2019] EWHC 1043 (Ch) (“Rose“), Slater & Gordon (UK) 1 Limited v Watchstone Group Plc (formerly Quindell Plc) [2019] EWHC 2371 (Comm) (“Slater & Gordon (UK) 1 Limited“) and Salt Ship Design AS v Prysmian Powerlink SRL [2019] EWHC 2308 (“Salt Ship Design AS“).

Rose provides a comprehensive summary of the balancing factors and key principles which the Court must consider when deciding whether to allow the amendments, as follows:

1. Where amendments to pleadings are introduced at an early stage in the proceedings, the key factor in determining whether to allow an application is allowing the real dispute between the parties to be determined.
2. The later in the litigation process the amendments are introduced, the more likely the Court is to place more weight on the prejudice to the other party and the effect on court time.
3. In determining whether or not an application to amend is “late”, the Court will consider (i) the reason for the delay, (ii) whether the amendment could have been introduced earlier, (iii) whether it requires the responding party to revisit any significant steps of the litigation which have already been completed, and (iv) whether allowing the amendment would threaten the trial date.
4. Any amendments to the pleadings must be properly articulated and have a real prospect of success.
5. Whether the amendment is in the interest of justice for both parties, i.e. any prejudice to either party by either allowing or not allowing the amendments.

Having applied the above test, the Court concluded that the proposed amendments would take the case back “if not to “square one”, then to a stage very close to that“, requiring substantial new work to be undertaken, which could in turn prejudice the trial date. In addition, the judge concluded that the new case which the claimant sought to advance was “arguable” but “weak“. In disallowing the key elements of the proposed re-amendments, the Court placed significant importance on the fact that the re-amendments were not based on factual matters which the claimants had only recently discovered or on fresh assessment of the merits of the case.

In contrast to Rose, the recent cases of Slater & Gordon (UK) 1 Limited and Salt Ship Design AS demonstrate the circumstances in which late amendments to pleadings would be allowed by the Court.

Slater and Gordon (UK) 1 Limited  was a claim for £630 million in damages in respect of an alleged deceit and breach of warranty on the basis of Quindell Plc (now Watchstone Group Plc) making dishonest representations regarding the company’s financial position at the time of its acquisition by Slater & Gordon. The proposed amendments to Watchstone’s pleading stemmed out of evidence, discovered as part of disclosure, that at the time of the acquisition, the claimant had established a backchannel with the defendant’s advisor, PwC, whereby PwC provided the claimant with confidential information about the defendant.

The Court considered Watchstone’s application to amend its defence and add a counterclaim against Slater & Gordon, claiming breach of confidence, inducing breach of contract and unlawful means conspiracy. At paragraph [34], Mr Justice Bryant confirmed that “Watchstone must show that they have a real, as opposed to fanciful, prospect of success which is more than merely arguable and carries some degree of conviction“. The test was similar to that in a summary judgment application or an application to set aside a judgment in default. Applying this test, the Court granted the defendant permission to amend, on the basis that there was a real prospect of success in relation to the amendments sought. The Court further determined that there had been no delay in making the application, which had been made as soon as possible after disclosure was given. On the question of whether the counterclaim should be determined at the same time as the other issues at trial, the judge decided that it should, on the basis that (i) it was possible to respond to the counterclaim in a short period of time, (ii) the trial judge would be making relevant fact-findings in any event and (iii) the trial timetable could accommodate further witness evidence.

Salt Ship Design AS concerned a contract for ship design services provided by the claimant to the defendant in relation to a proposed new cable laying vessel (the “Contract“). The Claimant’s originally pleaded claim was for damages for breach of the Contract. The Claimant’s proposed amendments sought to add a claim for breach of confidence, a claim for unlawful means conspiracy, and claims for additional remedies including exemplary damages, an injunction and inquiry as to damages.

The Defendant objected to the application on the following basis:

1. The proposed amendments were “very late” (per Quah v Goldman Sachs International [2015] EWHC 759) as they would have caused the fixed trial date of 14 January 2020 to be lost.
2. The proposed amendments were defective in nature or lacked clarity in certain respects;
3. The proposed amendments did not pass the merits threshold, including the ordinary threshold (having reasonable prospects of success) or the heightened threshold applicable in cases of very late amendments;
4. The overall balance of justice pointed in favour of permission to amend being dismissed.

Having undertaken the necessary balancing exercise and taking into account the overriding objective, the Court granted permission to amend, on the following basis:

1. Although the amendments were to be regarded as “very late” causing the trial date to be lost, the prejudice caused to the defendant by the lateness was not extreme as the trial was still six months away and there remained issues as to disclosure as well as factual evidence to be resolved.
2. The amended case had sufficiently reasonable prospects of success to be allowed to go forward.
3. This was not a case where substantial costs were likely to be thrown away nor was it a case where the defendant was being “mucked around” at the last moment.
4. There was a substantial overlap between the issues raised by the new claims and those already in issue. It was therefore sensible for the new claims to be dealt with at the same time.
5. Although the current trial date in January 2020 had to be vacated, the additional period of time required was comparatively modest.
6. Finally, in light of the trial being more than six months away, the prejudice and disruption to the Defendant and to the administration of justice was likely to be limited.

Comment

The above cases provide useful guidance on the circumstances which the Courts will take into account when considering late applications to amend pleadings. It is important to ensure that any amendments to a statement of case are introduced as soon as reasonably practicable during the proceedings and undertaking a detailed assessment of the prospect of success of any new proposed cause of action.

In the next part to this briefing, we will look at the circumstances in which a late amendment of a claim would be allowed after the expiry of the relevant limitation period, by reference to the Court of Appeal judgment in Blue Tropic Ltd and another v Chkhrtishvili [2016] EWCA Civ 1259 and the recent cases of Morley v Royal Bank of Scotland Plc [2019] EWHC 270 (Ch), Samba Financial Group v Byers [2019] EWCA Civ 416 and Hyde v Nygate [2019] EWHC 1516 (Ch).

Part 2 – Late Amendments to Statement of Case After the expiry of the Relevant Limitation Period.

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