LATE AMENDMENT: COURT OF APPEAL DECISION

We looked at the decision in  Nesbit Law Group LLP -v- Acasta European Insurance Company Limited (Leeds Mercantile Court 15.9.16) in an earlier post.  The defendant appealed to the Court of Appeal  Nesbit Law Group LLP v Acasta European Insurance Company Ltd [2018] EWCA Civ 268. The defendant’s appeal, heard yesterday, was unsuccessful.   The Court of Appeal also had something important to say about late amendment.

“There is a heavy burden on the party seeking a late amendment to justify the lateness of the application and to show the strength of the new case and why justice requires him to be able to pursue it.”

THE CASE

The defendant had provided insurance to the claimant solicitors.   The agreement was terminated in 2009 with large sums still owing. The hearing was held to determine what sums, if any, the insurer was liable to pay the insurers under the terms of the policies. It was agreed that the primary question of construction did not require witness evidence.  The claimant’s case was that payment was due under the policies, the defendant argued that it had no liability to pay.

THE DECISION ON APPEAL

The Court of Appeal upheld the construction that was accepted at first instance. The defendant’s appeal on this issue was unsuccessful.  However the Court also commented on the appeal that the defendant made in relation to late amendment.

AMENDMENT

The defendant made an application to amend its defence. This was done after  they had obtained permission to appeal and after receipt of a Respondent’s Notice pointing out that a point taken on appeal had not been pleaded.

THE JUDGMENT ON THE AMENDMENT ISSUE

“The amendment issue

1. 1. In the light of my decision on the construction issue, the amendment issue does not in fact arise. Since the application for permission to amend was fully argued, however, I will deal briefly with it.

   2. The principles relating to the grant of permission to amend are set out in Swain-Mason and in a series of recent authorities. The parties referred particularly to Mrs Justice Carr’s summary in Quah Su-Ling v. Goldman Sachs International [2015] EWHC 759 (Comm) at paragraphs 36-38 of her judgment. In essence, the court must, taking account of the overriding objective, balance the injustice to the party seeking to amend if it is refused permission, against the need for finality in litigation and the injustice to the other parties and other litigants, if the amendment is permitted. There is a heavy burden on the party seeking a late amendment to justify the lateness of the application and to show the strength of the new case and why justice requires him to be able to pursue it. These principles apply with even greater rigour to an amendment made after the trial and in the course of an appeal.

   3. Mr McLaren did not seek to justify Acasta’s delay in making the application. He acknowledged that the application could and should have been made before the trial. He argued, however, that the judge treated the breach argument as being “in play” as was evidenced by paragraphs 49 and 58 of his judgment. In any event, the position was no worse for Nesbit than it would have been if the application had been allowed before the trial, because even then the judge would still most likely have decided the construction point first and then, if necessary, adjourned the case for the breach issues to be tried at a later date. There was some argument about whether Nesbit could or should have raised substantive factual arguments in resisting the contention that it had acted in breach of the Refinancing Agreements. It seems to me, however, that we must assume that there would have been arguments available to Nesbit that might have required either or both of new evidence and an adjournment of the trial.

   4. In these circumstances, and striking the relevant balance, in my judgment, the application to amend was far too late. Whilst I accept that, had Acasta been right on construction, it would have had a strong case for establishing breaches of the Refinancing Agreement, we cannot pre-judge the outcome. The point here is that we are dealing with an insurer whose own policy terms were in issue. It should pre-eminently have been expected to plead the exclusion clause on which it wished to rely at an early stage in the proceedings and certainly well before trial. The new argument was an afterthought.

   5. If the amendment were allowed, the litigation would have been thrown open and would have been back almost to square one. Acasta had no justification for its delay, or for asking the Court of Appeal to allow an amendment that would effectively mean (if it had won the construction point) that the courts would be clogged up with a re-run of this litigation so that finality would be much delayed. The new approach to late amendments epitomised in Swain-Mason would be set at nought if an amendment in these circumstances were to be allowed. Effectively, the court would be saying that, because costs might be able to compensate Nesbit, the amendment should be allowed. That is not the correct approach on current authority. For these reasons, I would have refused the amendment to plead breaches of the Refinancing Agreement, even if I had been with Acasta on construction.

   6. Accordingly, the application for an amendment can be allowed only insofar as it is common ground, and must be refused on the crucial breach issue.

Conclusions

1. For the reasons I have sought briefly to give, I would dismiss Acasta’s appeal. I would allow the amendment to plead the construction point, but refuse it insofar as Acasta seeks to amend to plead breaches of the Refinancing Agreement.”