Late amendments to statements of case: helpful guidance from the Court of Appeal

A recent Court of Appeal decision clarifies how the court should exercise its discretion in considering an application to amend that is brought late, but not very late in the sense that the amendment would cause loss of the trial date: CNM Estates (Tolworth Tower) Ltd v Carvill-Biggs [2023] EWCA Civ 480.

The decision emphasises that, so long as the proposed amended case has a real prospect of success, the perceived strength or weakness of the case should not be taken into account in balancing the respective interests of the applicant and other parties and litigants more generally. The court should not conduct a mini-trial. In practice, however, it may not always be clear to a court whether a claim has overcome the "real prospect of success" hurdle, as illustrated by the dissenting judgment in this case.

The Court of Appeal also had to consider whether the claimant was in breach of an "unless order" and therefore required relief from sanctions to proceed with its case. The decision illustrates the importance of precise drafting in a court order, and particularly an unless order, to ensure that it is clear whether a party has failed to comply with it.

Background

CNM Estates Limited ("CNM") acquired a property for development in 2015 with the support of a loan of £54 million. In 2017 it defaulted on the loan and receivers were appointed. CNM subsequently brought proceedings against both the lender and the receivers but the claim against the lender was settled.

CNM alleged that the receivers breached their duty to exercise proper skill and care to obtain the best price reasonably obtainable on the sale of the property. In June 2020, the court tried a preliminary issue, and held that the receivers would only be liable for breach of their duty of care where the liability in question was directly caused by their gross negligence or wilful misconduct. It would therefore be necessary for CNM to amend its claim to include these causes of action if it was to have any prospect of succeeding.

CMN took no immediate steps to amend its case. In November 2021, it agreed with the receivers the terms of an unless order (the "Unless Order") to the effect that it would serve amended particulars of claim by 14 January 2022, failing which its claim would be struck out. CNM served a draft amended claim on that day but it only contained a claim for wilful misconduct, not gross negligence. It did not at that stage make a formal application to amend.

In May 2022, CNM applied to amend its particulars of claim to include pleas of both gross negligence and wilful misconduct, alleging that the receivers deliberately suppressed interest on the part of potential buyers in order to enable another party to secure the property at the lowest possible price.

The High Court (Julia Dias QC sitting as Deputy Judge) dismissed the application to amend:

(i) Relief from sanctions: The deputy judge held that CNM was in breach of the Unless Order and required relief from sanctions before it could advance its case on gross negligence. She considered that the unless order gave CNM a final chance to advance a case which would not be precluded by the judgment on the preliminary issue. CNM could not avoid its claim being struck out by serving an amendment in one form but then seeking permission to raise a completely different claim. She refused the application for relief on the grounds that CNM had done nothing to progress its claim since the judgment on the preliminary issue.

(ii) Permission to amend: The deputy judge noted that her essential task was to balance the prejudice to the parties if the amendments were allowed or disallowed. She identified the principal factors as being the lateness of the application, any reasons for delay, the adequacy of the pleading and whether it had a real prospect of success, of which the latter two were the most important.

In her view, the proposed claim of wilful misconduct was "decidedly weak" and  "lacked conviction". Weighed against other factors, including that it was a very serious allegation to make against professional people and had been raised at a late stage (even though the trial was still some way off), she concluded that it would not be right or in accordance with the overriding objective to allow the claim to continue to occupy court time for another two or three years.

CMN appealed against both the finding that it required relief from sanctions and the refusal of permission to amend. The parties reached a settlement just before the Court of Appeal's decision was to be provided to them in draft, but the court handed down its judgment in any event.

Decision

The Court of Appeal (Sir Geoffrey Vos MR, Newey and Males LJJ) would have allowed the appeal on both counts, Males LJ dissenting on the question of permission to amend.

(i) Relief from sanctions

The Court of Appeal held that the Unless Order undoubtedly imposed a sanction, namely that in the event of non-compliance CNM's claim would be struck out. That meant that its whole claim would be struck out. There was no scope for the halfway house adopted by the Deputy Judge, which was to hold that the order prevented CNM from pursuing a claim which was not included in the initial draft amendment (gross negligence) while allowing it to pursue the claim it had pleaded in time (wilful misconduct). The correct position was that either CNM had complied with the Unless Order, in which case no question of relief from sanction arose, or it had not, in which case (subject to relief from sanction) its whole claim was struck out.

CNM had complied with the terms of the Unless Order by serving a draft amended particulars of claim. As such it was not in breach of the order.

(ii) Permission to amend

It was common ground that CNM was seeking to make a late amendment, though it could not be classified as a "very late" amendment since it did not put the trial date at risk.

The principles that apply to such amendments were not in dispute, including that the amended claim must have a reasonable prospect of success (the same test as for summary judgment) as there is no point in granting permission for an amendment that is fanciful. When assessing whether an amended claim is more than fanciful, the court should focus on the pleadings and should not attempt to resolve disputed matters of evidence – ie it should not conduct a "mini-trial".

Even if an amendment has a real prospect of success, the court has a discretion whether to allow the amendment. In general (and save perhaps in the case of “very late” amendments) the strength or weakness of the claim should not be taken into account in exercising that discretion. Unless a claim has no real prospect of succeeding, its merits should be determined at a full trial.

In the present case, the majority of the Court of Appeal found that, whether or not CNM's proposed amendments were weak, they were not fanciful.

Since the proposed amended case had a real prospect of success, the deputy judge had been wrong to take into account the perceived strength or weakness of the case when undertaking the necessary balancing exercise. It would therefore be for the Court of Appeal to exercise the discretion afresh.

On that question, the majority held that it would have been unjust to refuse permission to amend given that the trial date would not be lost, disclosure had not yet taken place and the proposed amendments would not cause substantial duplication of cost and effort.