LITIGATE IN HASTE AND YOU WON'T NECESSARILY BE ALLOWED TO AMEND AT LEISURE: SU-LING -v- GOLMAN SACHS INTERNATIONAL

March 26, 2015 · by · in Applications, Civil evidence, Civil Procedure, Second set of proceedings, Statements of Case

In the judgment today in  Quah Su-Ling -v- Goldman Sachs International [2015] EWHC Mrs Justice Carr DBE refused a claimant permission to amend her particulars of claim at a late stage. The judgment contains a succinct review of the law and principles relating to applications for late amendment and the application of “modern” principles of amendment particularly (but not exclusively) in the Commercial Court.

THE CASE

The claimant was described as a “sophisticated private investor”. She was bringing an action against the defendant following the calling in of a loan facility, alleging negligence in the sale of shares.

KEY POINTS.

  • In last minute applications to amend the correct approach is not that a very late amendment should be allowed.
  • There is a heavy burden on a party seeking a very late amendement.
  • Parties have a legitimate expectation that trial fixtures will be kept.
  • It is not enough to state that the other party can be compensated in costs.
  • It is more readily recognised that costs may not be adequate compensation.
  • It is incumbent on a party seeking the indulgence of the court to raise a late claim to provide a good explanation for the delay.
  • A much stricter view is taken of non-compliance with the CPR and directions of the court.
  • Parties can no longer expect indulgence if they fail to comply with their procedural obligations.

THE ISSUE OF PROCEEDINGS

The judge commented that the claimant had issued proceedings using leading counsel and commercial solicitors.

  1. Ms Quah has been represented throughout by leading counsel (although there was a change of leading counsel in or about late December 2014) and commercial London solicitors (namely Wiggin LLP until 21st July 2014 when her current solicitors, Devonshires, came on the record for her and who have remained on the record for her ever since). In late December 2014 she appears also to have instructed solicitors in Singapore to advise her on these proceedings.
  2. Ms Quah issued proceedings in the Queen’s Bench Division on 5th November 2013. This was the same day as she was informed that GS was considering bringing bankruptcy proceedings against her. Particulars of Claim were served on 20th November 2013. The proceedings were commenced without Ms Quah first having obtained any expert advice. According to her third witness statement, they were issued simply on the basis of her “own experience and opinions“. By March 2014 at the latest, however, she was aware that the obtaining of expert advice was “crucial” to her case, having been so advised by her lawyers (as set out in her second witness statement).

The  matter progressed and was listed for trial on the 20th March 2014.  The claimant was given permission to rely upon expert evidence but did not adduce a report and her solicitors confirmed, in writing, their intention not to call expert evidence. The defendant served evidence which indicated that the claimant’s case was misfounded.

Shortly before the trial date the claimant made an application for an adjournment, on the basis she was involved in arbitration proceedings elsewhere.  There was no indication of a change in cases. Shortly afterwards the claimant made an application to amend her particulars substantially.

THE AMENDMENT

The  proposed amendments were substantial.

  1. The claim which Ms Quah has pursued at all times up to and indeed beyond the pre-trial review (“the original case”) is, in summary, as follows :

a) GS “dumped” the Shares on the market from 2nd October 2013. This caused a dramatic fall in their price;

b) GS failed to use reasonable efforts to obtain the best price available for the Shares because it should not have sold the Shares on the SGX at all from 2nd October 2013, or should have ceased any sale of the Shares from 4th October 2013;

c) the only reasonable course of action open to GS in the circumstances was a sale of the Shares by way of private placement. GS should have sold the Shares to a third party purchaser, Vicario Investments, found by Ms Quah;

d) had GS not sold the Shares from 2nd October 2013, the proposed sale to Vicario Investments would have completed and enabled Ms Quah to repay the sum demanded, thereby avoiding the loss caused by selling the Shares from 2nd October 2013.

  1. By the proposed new case (“the new case”) Ms Quah seeks to allege that :

a) GS acted in breach of Clause 15 in failing to give her a reasonable time to effect the mechanics of payment before issuing a notice of default and termination. A period of 48 hours’ notice was required;

b) GS ought to have immediately and aggressively sold the Shares on the SGX from 2nd October 2013 so that the loan was repaid in full before the collapse of the price of the Shares on 4th October 2013; alternatively

c) GS ought to have warned Ms Quah on 2nd October 2013 that the price of the Shares was about to undergo a significant market correction. She alleges that, in those circumstances, she would have immediately given instructions to sell the Shares aggressively on the SGX.

  1. In more detail, the proposed amendments allege :

a) further express terms of the contract;

b) a new plea as to the true construction of Clause 15, in particular as to what “a reasonable time in all the circumstances to effect the mechanics of payment” meant. There is also a new plea as to the circumstances in which a close-out notice can be given on the same day as a demand;

c) statutory duties owed by GS under section 138(D)(2) of the Financial Services and Market Act 2000 (“FSMA”) and the Conduct of Business Sourcebook (“COBS”) rules, said to be imported into the contract either by force of law by that section or by clause 1.5 of GS’ General Terms and Conditions;

d) new facts as to what GS is said to have known or believed about the imminent crash of the prices of the Shares, but did not tell Ms Quah, immediately prior to the making of the demand and the issuing of the default notice and close-out notice. Ms Quah states that the core of the complaint is that given (i) the fact that the concerns about the Shares had been escalated to senior management in New York (ii) the sudden and unexpected nature of the instruction given by Mr Lane to Mr Moo, (iii) the circumstances and timing of that instruction (at 2.30 am); (iv) Mr Lane’s decision and instruction to Mr Moo to call in Ms Quah’s loan and start liquidating her entire position immediately, and (v) the fact that, on the information that they had, GS Singapore personnel had not made such a decision themselves, but had had it imposed on them from New York, it is to be inferred that GS was in possession of critical information about Asiasons, Blumont and LionGold which would show or suggest (a) not only that the market value of the companies was too high but that it was so over-valued that if a market correction were to occur it would leave GS seriously exposed to losses, and (b) that such a market correction was or was likely to be imminent, such that there was an urgent need to sell the shares in the companies immediately;

e) a plea that had she known the relevant facts, Ms Quah would not have sought to delay the sales of the Shares but on the contrary, she would not have feared that GS would have dumped her shares and taken steps to prevent dumping, but would have actively encouraged or initiated an immediate and urgent liquidation of as many shares as possible based on an aggressive selling strategy (consistent with maintaining the price in the market) as soon as possible before the imminent market correction that GS feared could occur. That would have produced sales proceeds in excess of SG$40 million instead of the SG$7 million that was in fact achieved by GS ;

f) new allegations of breach of contract, namely :

i) breach of clause 15.2 of GS’ General Terms and Conditions by :

failing to give Ms Quah reasonable time to effect the mechanics of payment before issuing a default notice and close-out notice. The period should have been 48 hours, and on any view 1 hour 42 minutes was not reasonable. The notices were not contractually compliant and therefore invalid and the sales carried out in breach of contract;

issuing a notice of default and termination on the same day as the demand notice;

ii) breach of clause 5.4 and Part E of GS’ General Terms and Conditions by failing to warn or advise Ms Quah of their information and belief as to the true values of the Companies and their imminent collapse and failing to take all reasonable steps to obtain the best possible result for her on realisation in the light of those concerns;

iii) breach of clause 4.4 and 4.6 of GS’ General Terms and Conditions by specifically failing to sell any shares in LionGold or in Blumont at all on 2nd and 3rd October 2013;

g) allegations of breach of statutory duty, namely under COBS, in failing to act fairly and professionally in Ms Quah’s best interests, failing to take reasonable steps to ensure that its recommendations or her trade decisions were suitable for her, and failing to warn her that based on the information GS had, that the service was no longer appropriate for her, and in particular by failing to tell her what it knew, failing to take all reasonable steps to get the best prices and failing to sell any shares in Blumont or LionGold at all on 2nd and 3rd October 2013;

h) new pleas of loss and damage flowing from these breaches, namely loss of sales proceeds of either S$49,883,445 or S$38,882,995 depending on what participation rates for what shares would have been used;

i) new claims for relief, namely damages representing the difference between the realised value of the shares and the value of the shares had either of the selling strategies which GS should have adopted been adopted, in the sum of either SG$28,286,392, or SG$17,285,942. These exceed the amount of GS’ counterclaim.

THE PRINCIPLES RELATING TO APPLICATIONS TO AMEND

  1. An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment under CPR Part 24. Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or is not supported by contemporaneous documentation.
  2. Beyond that, the relevant principles applying to very late applications to amend are well known. I have been referred to a number of authorities :Swain-Mason v Mills & Reeve [2011] 1 WLR 2735 (at paras. 69 to 72, 85 and 106); Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835] 2 December 1988; Hague Plant Limited v Hague [2014] EWCA Civ 1609 (at paras. 27 to 33); Dany Lions Ltd v Bristol Cars Ltd [2014] EWHC 928 (QB) (at paras. 4 to 7 and 29); Durley House Ltd v Firmdale Hotels plc [2014] EWHC 2608 (Ch) (at paras. 31 and 32); Mitchell v News Group Newspapers [2013] EWCA Civ 1537.
  3. Drawing these authorities together, the relevant principles can be stated simply as follows :

a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;

b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;

c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;

d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;

e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;

f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;

g) a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.

  1. The Commercial Court has a long tradition of pro-actively managing litigation brought before it for the benefit of all users (as recognised, for example, in Worldwide Corp Ltd (supra)). The timetables laid out in and the requirements of the Admiralty and Commercial Court Guide, such as the requirement in D12.2 for provision of a progress monitoring information sheet, are designed precisely to avoid last minute problems which delay the start of trials or cause adjournment.

APPLYING THOSE PRINCIPLES TO THE CURRENT CASE

  1. First, the application arises in unusual circumstances. The combination of Ms Quah’s concessions that a) her current claim, the original case, is unsustainable and b) permission to replace it with the new case would inevitably lead to a substantive adjournment means that the trial dates have already been vacated. But for the first concession, however, this would be an application being made effectively on the first day of trial.
  2. Secondly, Ms Quah accepts that at least material parts of the original case which she has maintained from November 2013 to February 2015 have never been sustainable. The original case appears never to have had the support of an expert despite the fact that, as indicated above, Ms Quah knew from at least March 2014 onwards that such support was “crucial“. In her third witness statement Ms Quah states that she was not, however, aware that the original case was unsustainable until she was so advised by Mr Ruiz “sometime in late January 2015“. She refers to correspondence from GS’ solicitors tending to suggest that the absence of expert evidence was not fatal to the entirety of her case.
  3. Whatever the precise position, Ms Quah was aware from a very early stage that expert evidence was required to support central parts of her claim. This is the only fair conclusion to be drawn from her own evidence as to the advice she received in March 2014, from the content of her responses to Requests for Information, from her Case Management Information Sheet dated 27th February 2014, from the detailed directions of Popplewell J in relation to expert evidence on 6th March 2014 and from her belated attempt to secure expert evidence.
  4. For reasons which are not wholly clear, she nevertheless took the decision not to seek such expert advice at that very early stage (when there is no suggestion of any obstacle in doing so) or at any stage before early January 2015, just before the pre-trial review. Even then she did not do so in a manner which led to her being advised fully before the pre-trial review, which should have been a priority. In proceeding in this manner, she ignored the directions of Popplewell J as to expert evidence, just as she ignored the requirement for filing of a progress monitoring sheet.
  5. The question is whether or not, against this general background and in all the circumstances of the case, she should nevertheless be granted an indulgence at trial wholly to abandon her existing case and to run a new one based on facts and matters of which she either was and/or should have been aware many months, if not a year or so, earlier.

Reasons for lateness and delay

  1. Ms Quah fairly accepts that her application to amend is made very late in the day. She advances the following explanations :

a) the new case arises from disclosure and witness statements served on behalf of GS;

b) she has been under tremendous strain from other proceedings and from having been under investigation by the Commercial Affairs Department of the Singapore Police Force, (“the CAD”) with the result that she was not in the right state of mind to monitor the progress of the claim;

c) lack of funding at some stage around the summer of 2014 to some stage around late December 2014.

  1. At the outset, I am troubled by a number of deficiencies in the explanations given by Ms Quah, of which there are the following obvious examples :

a) there is no proper explanation as to why Ms Quah did not instruct an expert at the outset or at any time before her funding difficulties are said to have arisen, in circumstances when she knew that the viability of (at least central parts of) the original case depended on expert evidence;

b) Ms Quah is careful to say that there was no detailed review with her solicitors until after the pre-trial review. But she is coy about the actual scope of the review before that. She does not go so far as to suggest that GS’ witness statements were not reviewed at all on exchange. GS’ five witness statements are not long or difficult to follow. She chooses not to explain when and what review was carried out. It appears that both she and/or her solicitors must have reviewed GS’ witness statements, not least since they wrote on 6thNovember 2014 explaining the decision not to serve expert evidence by express reference to “the scope of the evidence available“;

c) she gives no proper particulars of the timeline between obtaining funding “in late December 2014” and 10th February 2015. This is a significant omission in circumstances where there was a pre-trial review on 16th January 2015. Given that, on her own case, Ms Quah was in funds in late December 2014 and there was a pre-trial review fixed for 16th January 2015, there is no proper explanation as to why Ms Quah was not in a position to have reviewed her case in detail with her solicitors before 16th January 2015. The situation was one of the utmost urgency.

  1. Putting these matters aside and in any event, the proposed amendments relating to the express terms of the contract, the proper construction of Clause 15 and breach thereof could and should have been pleaded from the very outset if they were to be raised at all. There is no good reason for their lateness. At most they would appear to arise out of a fresh examination of possible arguments by fresh counsel. This is precisely the sort of reason that does not find favour with the courts (see Worldwide Corp Ltd (supra)). The one potential exception relates to Ms Quah’s reliance in part on an email sent by GS to Mr Chan on 25th June 2013 (at paragraph 19A(a) of the draft Amended Particulars of Claim). But Mr Chan was at all material times Ms Quah’s agent and in any event the document was disclosed as part of standard disclosure in May 2014.
  2. As to the remaining proposed amendments which are said to arise out of GS’ disclosure and witness statements, disclosure took place in May 2014 and witness statements were exchanged on 8th August 2014. On the most generous view to Ms Quah, the delay spans from 8th August 2014 to 10thFebruary 2015 when the application to amend was issued. This was of course a critical period in the life of the litigation. Expert evidence was to be served. The matter was to be prepared for trial. A pre-trial review was fixed for 16th January 2015 with trial in February 2015.
  3. The fact that the delay occurred in the context of an expeditious timetable is nothing to the point. The timetable was a reasonable one and was there to be complied with. If anything, the Court’s directions made it clear that inertia on the part of the parties in the conduct of the action at any stage was not an option.
  4. That leaves the question of whether Ms Quah’s frame of mind over the relevant period or a lack of funding can explain away the delay.
  5. It is right that Ms Quah has been under investigation by the CAD since about April 2014, her passport having been impounded on 2nd April 2014. She has been interviewed in that context on twelve occasions. It is also right that she has been the subject of margin calls and various legal proceedings following the drop in value of the Shares. She states that IPCO was also affected.
  6. Having conceded that it cannot be said that any actions on the part of GS caused the fall, Ms Quah can no longer seek to blame GS for these matters. Moreover, it is hard to see why they would have prevented her from monitoring progress of the litigation or from complying with the Court’s directions. The timetable was set in March 2014 and the trial date fixed later in the same month. She served witness statements directly by reference to the timetable. She knew that she was not complying with the directions for expert evidence, not least because of the contents of her solicitors’ letter of 6th November 2014. She was working full-time at IPCO, even if fighting fires. She was capable of engaging with the litigation had she chosen to. On her own case, she chose to prioritise other matters. Her capability to engage is demonstrated well by her re-engagement with the litigation once trial became imminent.
  7. Thus, the matters prayed in aid by reference to other events in Ms Quah’s life do not in my judgment materially assist Ms Quah in excusing her failure to progress her claim against GS properly.
  8. As to lack of funding, Ms Quah’s explanation is inadequate. In her second witness statement she states :

“27. …This was compounded by the state of my financial resources which had been drained significantly as a result of the multitude of margin calls and legal proceedings. In the light of these issues I was unable to instruct my solicitors to conduct a detailed review of the documents disclosed by the Defendant.

28. I was however able to at least work with my lawyers to file the witness statements…However, thereafter I realised that I no longer had sufficient funds to engage an expert to give evidence in support of my claim and properly pursue this claim to the end. At that stage I was prepared to just give up….

29….Due to the lack of funds I was also not in a position to discuss the Defendant’s expert report with my own expert since I could not appoint one and had not done so.

30. Fortunately, sometime late December 2014, I managed to secure funding to pursue my claims against the Defendant…”

  1. Ms Quah has had solicitors on the record for her without interruption. They were positively acting on the case on, for example, 6th November 2014. She gives no particulars of precisely when funding first became necessary, what attempts she made to secure it and when and why it took until “sometime late December 2014” to obtain it. Ms Quah appears to be someone with substantial contacts and a variety of possible financing options. The lack of full explanation is all the more notable given that Ms Quah’s funder has been identified as Mr Lim who, as indicated above, had provided a witness statement for Ms Quah in support of her claim on 8th August 2014. Mr Lim states that he is a “business associate” of Ms Quah and the managing partner of Yangtze Investments Partners Limited. There is no evidence as to when he was first approached or explanation as to why he was not approached earlier for funding (if he was not approached earlier).
  2. In summary, there has been no proper explanation of the reasons for delay, nor has any good reason for the delay been identified.

THE STRENGTH OF THE AMENDED CASE

The judge examined the proposed amended case and concluded

 “…the new case is at best a difficult one on the merits. It is speculative. The documents which Ms Quah has said in the past would be critical to success on the new case do not exist. The new case is inherently implausible, involving as it does not only defiance of instructions from GS in New York but also GS acting against its own interests which, in terms of realising the best value from the Shares in the face of an imminent crash, would have coincided with those of Ms Quah. There are hurdles on causation (in terms of credibility) and quantum (in terms of the claimed rates of participation).”

PREJUDICE

The judge found that there was a loss of the trial date.

  1. The submission that GS would suffer no prejudice that cannot be compensated for by way of costs is unsustainable. Even ignoring the fact that an opposing party is never fully compensated for the costs which it incurs (or for business disruption and loss of management time) and even ignoring the doubts as to Ms Quah’s ability to pay GS’ costs (beyond any interim payment), the submission ignores the fact that GS’ fully legitimate expectation of trial and disposal of this matter this month will be (and indeed has been) thwarted. But for Ms Quah’s claim, Ms Quah’s default on the demand would have been disposed of summarily in Singapore. It has always been GS’ case that Ms Quah’s claim was no more than an attempt to delay or avoid repayment of her debt to GS, albeit that this is something that Ms Quah denies.
  2. The complaint by GS of delay is consistent with its approach to the litigation. It has acted throughout with the clear intention of prosecuting the action as quickly and pro-actively as possible. The interparty correspondence, amongst other things, demonstrates the efficiency with which its solicitors sought to have the action fully and properly prepared for trial in February/March 2015. I do not accept that GS’ failure earlier to apply for strike-out or summary judgment undermines its complaint of delay. There was a swift timetable to full trial which may in any event have been seen as the best and most cost-effective method of determination of the action.
  3. In those circumstances, GS would suffer real and meaningful prejudice through loss of the trial date on the ground of delay alone. Additionally, there has been, or would be, disruption to the Court and to other court users, with the last-minute loss of a longstanding trial date and the need for a new trial date to be accommodated in 2016.

Striking the balance

  1. Against these findings, I consider how the balance should ultimately be struck or, as it was put in submission, how the “moving parts” should be put together.
  2. In the light of the scope and nature of the proposed amendments, the weakness of the new case, the poor quality of the explanations for the delay in advancing it and in any event the lack of any good reason for such delay, and the prejudice resulting to GS, I am not persuaded that it is a just and proportionate outcome, nor consistent with the overriding objective, that amendment should be permitted. The prejudice to Ms Quah in losing the opportunity to raise a difficult new case is not sufficient to overcome the prejudice to GS as set out above in circumstances where there is no good reason properly explained to justify her failure to bring the new case forward in proper time and where that failure is the result of her own decision not to investigate the merits of her case timeously.

THE RESULT: APPLICATION TO AMEND REFUSED;  CLAIM STRUCK OUT; JUDGMENT FOR DEFENDANT ON THE COUNTERCLAIM

  1. For all these reasons, I dismiss the application for permission to amend. This may be seen as a harsh decision given its consequence for Ms Quah. But this is modern-day commercial litigation. Very late applications for permission to amend in circumstances where a) there is no good reason for the delay and b) amendment would result in real disruption or prejudice to the parties and/or the Court are unlikely to be allowed, irrespective of the merits of the proposed amendment. This is such an application. But additionally and in any event, on the facts here the merits of the proposed amendment are not sufficiently compelling as to justify granting permission in all the circumstances.
  2. It follows from Ms Quah’s concessions that I strike out the claim pursuant to CPR 3.4(2) and also grant judgment in favour of GS on the Counterclaim pursuant to CPR 24.2 in the amounts certified by GS on 5th March 2015 together with interest as appropriate.
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