LATE APPLICATION TO AMEND DEFENCE RIGHTFULLY REFUSED: LATE APPLICATION TO AMEND NOTICE OF APPEAL ALSO GOT THE BARNSLEY CHOP

In First Tower Trustees Ltd & Anor v CDS (Superstores International) Ltd [2018] EWCA Civ 1396 the Court of Appeal upheld a decision by the trial judge to refuse a late amendment to the defence.  An application to amend the Notice of Appeal was also refused.

” I do not consider that it is a fair criticism of the judge that he assessed damages in the way in which he had been invited to assess them without dissent on behalf of the landlords.”

THE CASE

The claimants brought an action alleging misrepresentation when certain leases were taken out in premises in Barnsley. The premises were contaminated with asbestos, information that the defendant failed to pass on when specific enquiries were made.  At trial no one gave evidence for the defendant and the claimants obtained judgment and damages for £1.4 million. The defendants appealed.

THE APPLICATION TO AMEND

At the initial trial the defendants made an application to amend  their defence. This was heard on the morning of the trial. The trial judge refused that application. The Court of Appeal upheld that decision to refuse to amend.

“Amendments
    1. I will deal first with the proposed amendments. The first of these concerns the judge’s refusal to permit the landlords to amend their statement of case to plead reliance on Article 32 of the Trusts (Jersey) Law 1984. The argument is that Article 32 would limit the landlords’ liability to the value of the assets of the Barnsley Unit Trust which they say is insolvent. It must be said at once that if permission to appeal were to be granted on this point, it would be an appeal against a case management decision by the trial judge. In Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537[2014] 1 WLR 795, at [52], this court said:
“We start by reiterating a point that has been made before, namely that this court will not lightly interfere with a case management decision. In Mannion v Ginty [2012] EWCA Civ 1667 at [18] Lewison LJ said: ‘it has been said more than once in this court, it is vital for the Court of Appeal to uphold robust fair case management decisions made by first instance judges.'”
    1. If I may repeat something else I have said before (Broughton v Kop Football (Cayman) Ltd [2012] EWCA Civ 1743 at [51], approved in Prince Abdulaziz v Apex Global Management Ltd [2014] UKSC 64[2014] 1 WLR 4495):
“Case management decisions are discretionary decisions. They often involve an attempt to find the least worst solution where parties have diametrically opposed interests. The discretion involved is entrusted to the first instance judge. An appellate court does not exercise the discretion for itself. It can interfere with the exercise of the discretion by a first instance judge where he has misdirected himself in law, has failed to take relevant factors into account, has taken into account irrelevant factors or has come to a decision that is plainly wrong in the sense of being outside the generous ambit where reasonable decision makers may disagree. So the question is not whether we would have made the same decisions as the judge. The question is whether the judge’s decision was wrong in the sense that I have explained.”
    1. This was a very late application to amend to introduce a legal argument based on the law of a jurisdiction other than that of England and Wales. The judge directed himself by reference to the decision of this court in Swain-Mason v Mills & Reeve LLP [2011] EWCA Civ 14[2011] 1 WLR 2735. It is not and could not be suggested that he had the wrong principles in mind. The first matter that he considered was why the application had been brought so late. He clearly took the view that the decision not to rely on Article 32 at an earlier stage in the case was a deliberate one. That was the inference that he drew from the landlords’ solicitors’ email of 10 January 2017 in which they said:
“The reason the application is only being made at this stage is that it was not thought necessary to plead issues which were irrelevant to the merits of the claim and counterclaim but are only relevant to enforcement of any judgment.”
    1. No explanation was given to the judge about why the proposed amendment was relevant to the merits of the claim or counterclaim. It is, however, suggested that the value of the assets of the Barnsley Unit Trust are far below the extent of the liabilities attaching to that Trust. But as the judge observed, if that contention were to have been maintained CDS would have been entitled to investigate the factual accuracy of that assertion. The landlords had adduced some evidence to support their assertion, but the judge ruled that it was either inadmissible or that it was too late for it to be adduced. As the judge rightly observed, he could see no reason for imposing on CDS the need to counter any of that evidence. Counsel appearing for the landlords at the time accepted that position.
    2. The judge went on to say that the argument based on Article 32 was an argument based on foreign law. He decided that even if it were possible for an English court simply to construe the Law, CDS were at least entitled to an opportunity to investigate Jersey law before having to confront the argument. Having identified that there was a real problem about the admissibility of the Law he said that there was also a “real problem about fairness to the defendant in dealing with the matter.”
    3. He also recorded that counsel for the landlords stated that he was not seeking to say that it was known to CDS before entering into the transactional documents that they were dealing with trustees in one capacity or another. Thus the point taken on Article 32 was no extension of the legal effect in English law of the description of the trustees in the lease and agreement for lease. The judge expressed his ultimate conclusion by saying:
“I make the decision because I am satisfied that, in this respect, there is real prejudice from the late amendment and the absence of either agreement or Civil Evidence Act 1972 notices in relation to foreign law.”
    1. He repeated this in his substantive judgment at [51]:
“I refused that further amendment, since the extreme lateness of the application clearly prejudiced the Defendant, who was unable to research Jersey law in the time available.”
    1. By way of ancillary application in this court the landlords seek to reintroduce not only the evidence that the judge rejected, and whose rejection counsel accepted as the price of permission to amend, but additional evidence on top which was neither in the trial bundle nor even disclosed. The purpose of the additional evidence is to run an argument that CDS did know that the landlords were trustees of the Barnsley Unit Trust before entry into the transactional documents, which is flatly contrary to the position that the landlords adopted before the judge. The additional evidence was plainly available at trial, and therefore fails to satisfy the first criterion in Ladd v Marshall [1954] 1 WLR 1489. Mr Steinfeld QC, on behalf of the landlords, also accepted that his point on Article 32 would fare just as well without the additional evidence which, he said, should be admitted “to complete the picture”. On that basis it fails to satisfy the third criterion in Ladd v Marshall as well. I would dismiss that ancillary application.
    2. That, then, leads to the question whether an appeal against the judge’s decision to refuse permission to amend would have a real prospect of success. The argument is that under the terms of section 1 of the Evidence (Colonial Statutes) Act 1907 the court can construe the Trusts (Jersey) Law without the benefit of any expert evidence; and that the proposed amendment simply raises a question of law.
    3. In the first place I do not consider that this point simply raises a question of law. The fact that the trustees are companies registered in Guernsey does not establish that the proper law of the trust is Jersey law. Second, at least at the time of the hearing before the judge there was considerable doubt about the effect of Article 32. Even now there are questions difficult enough to have divided opinions in the Judicial Committee of the Privy Council: Investec Trust (Guernsey) Ltd v Glenalla Properties Ltd [2018] UKPC 7[2018] 2 WLR 1465. That case decides at [61] (ii) that Article 32 does not cap a trustee’s liability; and at [79] that all it does is to limit the class of assets to which a creditor may have recourse for enforcement of a debt. But since the landlords have in fact paid all sums that the judge ordered to be paid, the question of enforcement no longer arises. In addition clause 8.1 of the lease contains a choice of law clause (choosing that of England and Wales) expressed in very wide terms. That says (among other things) that both contractual and non-contractual liability in connection with the lease are to be governed by the law of England and Wales. One question that would have arisen is the effect of Article 32, as a matter of Jersey law, faced with a clause of that kind. Is it, for example, possible to contract out of or waive limited liability? In English law it is often possible to waive statutory protection, of which the waiver of a defence under the Limitation Act 1980 is the most obvious example. The position under Jersey law may not be simply a question of construction of the Jersey Law itself; but may require investigation of a Jersey court’s general approach to the ability of a party for whose benefit protective laws are passed to waive that protection. The question may also arise whether it is sufficient for a counterparty simply to know that the trustees are trustees, or whether the counterparty must also know that they are trustees of a Jersey trust. Third, the judge’s decision was essentially driven by what he perceived as fairness to CDS. That perception cannot, in my judgment, be characterised as perverse. On the assumption that an English court is entitled to construe a Jersey law without the benefit of expert evidence, a party who is faced with an argument based upon foreign law must be entitled to sufficient time to carry out any necessary research into the effect of that foreign law in the jurisdiction to which it pertains. In addition I do not consider that the fact (if it be a fact) that the court is entitled to construe a foreign law put in evidence under the 1907 Act without expert evidence positively forbids a litigating party from relying on expert evidence about the effect of that foreign law. I note in this connection the unequivocal statement by Lady Hale (with whom the other justices agreed) in R (Barclay) v Lord Chancellor [2014] UKSC 54[2015] AC 276 at [36]:
“It is not for the courts of England and Wales to interpret the law of the Channel Islands or decide what is law there. In so far as that task rests with the courts, it rests with the Island courts, culminating ultimately in the Judicial Committee of the Privy Council.”
  1. In my judgment, the judge was entitled to conclude that to deprive CDS of the opportunity of investigating (and if necessary calling expert evidence about) the effect of Article 32 was unfair. I do not consider that there are grounds upon which an appeal court could interfere with the judge’s exercise of discretion.
  2. Accordingly, I would refuse permission to appeal against the judge’s case management decision.”

 

THE LATE APPLICATION TO AMEND THE NOTICE OF APPEAL

The defendant also applied to amend the Notice of Appeal. This was an unusual application in that the proposed amendment raised issues that had not been argued before the trial judge and which, indeed, had been largely conceded at trial (or certainly not put in issue).

    1. The second proposed amendment is the amendment to the grounds of appeal in order to argue that the judge applied the wrong measure of damages to the misrepresentation in relation to Bay 4. It will be apparent from the extracts of the judgment that I have quoted that this is a complete volte face from the stance that the landlords took at trial, where the relevant heads of damage were not disputed. The argument for the landlords is that damages for misrepresentation recoverable under section 2 of the Misrepresentation Act 1967 are to be assessed on the tortious measure of damages, and that the judge in effect applied the contractual measure of damages. Moreover, the damages thus recoverable are limited to the loss caused by entry into the contract: Taberna Europe CDO II plc v Selskabet AF1 [2016] EWCA Civ 1262[2017] QB 633 at [47]. If CDS had been told immediately before entry into the agreement for lease that there was asbestos in Bay 4 and in consequence had decided not to enter into the contract, it would still have been faced with the cost of acquiring storage space at very short notice. Thus the cost incurred in obtaining storage space at short notice is not a recoverable head of damage. It could only have been recoverable as damages in contract. In order for CDS to recover substantial damages it would have had to have pleaded and proved that by entry into the lease it had lost an opportunity to have acquired alternative storage space. That in turn would have required CDS to have identified what opportunities were available immediately before entry into he agreement for lease, and why those opportunities were unavailable thereafter. None of this was argued before the judge.
    2. An amendment to an appellant’s notice requires the permission of the court under CPR Part 52.17. This court’s general approach to such an application was authoritatively described by May LJ in Jones v MBNA International Bank (30 June 2000) at [52]:
“Civil trials are conducted on the basis that the court decides the factual and legal issues which the parties bring before the court. Normally each party should bring before the court the whole relevant case that he wishes to advance. He may choose to confine his claim or defence to some only of the theoretical ways in which the case might be put. If he does so, the court will decide the issues which are raised and normally will not decide issues which are not raised. Normally a party cannot raise in subsequent proceedings claims or issues which could and should have been raised in the first proceedings. Equally, a party cannot, in my judgment, normally seek to appeal a trial judge’s decision on the basis that a claim, which could have been brought before the trial judge, but was not, would have succeeded if it had been so brought. The justice of this as a general principle is, in my view, obvious. It is not merely a matter of efficiency, expediency and cost, but of substantial justice. Parties to litigation are entitled to know where they stand. The parties are entitled, and the court requires, to know what the issues are. Upon this depends a variety of decisions, including, by the parties, what evidence to call, how much effort and money it is appropriate to invest in the case, and generally how to conduct the case; and, by the court, what case management and administrative decisions and directions to make and give, and the substantive decisions in the case itself. Litigation should be resolved once and for all, and it is not, generally speaking, just if a party who successfully contested a case advanced on one basis should be expected to face on appeal, not a challenge to the original decision, but a new case advanced on a different basis. There may be exceptional cases in which the court would not apply the general principle which I have expressed.”
    1. It will be noted that May LJ treated both factual issues and legal issues in the same way, and that permitting an amendment to advance a new case on appeal is exceptional. Where the point in question would raise new questions of fact, or where it is possible that the course of evidence would have been different if the point had been made, the appeal court will almost always refuse to allow a new point to be taken on appeal: Mullarkey v Broad [2009] EWCA Civ 2 at [49]. But even where the new point raised is a pure point of law, the court retains a discretion to refuse to allow it to be taken. The court’s reluctance to allow a new point to be taken is all the greater where the point was conceded or accepted before the trial courtGlatt v Sinclair [2013] EWCA Civ 241[2013] 1 WLR 3602. The mere fact that the appellant has changed legal advisers following trial does not, in my judgment, bring the case into the exceptional category. Mr Steinfeld points out that on the pleadings CDS was put to proof of the loss and damage alleged. That is perfectly true. But in the skeleton argument prepared on the landlords’ behalf for the trial itself, the only point taken by the landlords related to the length of time it had taken to start the remedial works. No separate point was taken about the measure of damages applicable to Bay 4. At [48] the judge encapsulated his approach to damages. He said:
“The fact that the agreement was not terminated expressly for breach does not mean that there was no misrepresentation inducing the contract. Absent the misrepresentation, the defendant would not have proceeded with the agreement for a lease at all. By entering into it, they have suffered losses so far as they have been unable, for some period at least, to make alternative warehousing arrangements.”
  1. From this passage it seems to me to be clear that the judge was applying what he considered to be the tortious measure of damages: namely the loss that CDS suffered by entering into the agreement for lease. That is precisely the measure of damages vouched by Taberna. What loss was suffered as a consequence of entry into the agreement was essentially a question of fact. Whether the judge should have accepted that the loss claimed was in fact caused by entry into the agreement for lease is a different question which depended on the evidence. Since the factual basis for the claim was not challenged, it is difficult to fault the judge for having accepted it.
  2. In addition had the point now sought to be raised been argued at trial the judge would have had to explore the question whether the damages he awarded could have been claimed as consequential losses which may be recoverable in a claim of this kind: McGregor on Damages (20th ed) paras 49-061 to 49-065. I do not consider that it is a fair criticism of the judge that he assessed damages in the way in which he had been invited to assess them without dissent on behalf of the landlords. Nor do I accept that he had any obligation to question the parties’ joint position. As May LJ said, a court will not normally decide issues that are not raised. I would refuse permission to amend the grounds of appeal.