WHEN THE PLEADINGS APPEAR TO HAVE BEEN PUT IN THE PAPER BIN AT TRIAL (SHADES OF THE OFFICE)

The judgment in Premier Paper Group Ltd v Buchanan McPherson Ltd [2018] EWCA Civ 15 contains some interesting observations about the way in which the parties departed from their pleadings.  Although the claim succeeded this case how important it is that a statement of case is reviewed and checked against the evidence.

“As the judge noted in his judgment at [1], at trial “[e]ach party has advanced a case radically different from its pleadings and each side has engaged in significant arguments based on the inadequacy of the other’s pleadings”.”

THE CASE

The claimants sued for £14,243.63, being the sum due on a credit note that the defendant paper merchant had issued. The defendant asserted that the credit note in question was “unauthorised and illegitimate” and issued as a result of a conspiracy between the claimant and the defendant’s local branch member to defraud the appellant.

THE TRIAL

1. As the judge noted in his judgment at [1], at trial “[e]ach party has advanced a case radically different from its pleadings and each side has engaged in significant arguments based on the inadequacy of the other’s pleadings”.

2. The allegation of a fraudulent conspiracy was going to be a major issue at the trial but early in the hearing, counsel for the appellant announced that it would not be pursued and that the appellant’s case would be confined to a denial of any settlement agreement and to its averment that the local branch manager lacked authority to agree on behalf of the appellant to pay compensation or to issue the credit note

HOW THINGS CHANGED DURING THE TRIAL

1. 1. The claim pleaded by the respondent was that, in breach of the settlement agreement, the appellant purported in May 2012 to cancel the compensation credit note by issuing an invoice for the same amount. The respondent had by then used the credit note to the extent of £5,147.44 and its claim was for the balance of £14,243.63, with an alternative claim for damages for breach of the supply contract.

   2. Counsel for the respondent opened the case on the basis of the pleaded settlement agreement.

   3. However, the pleaded case was not supported by the evidence, written or oral, of the respondent’s witnesses. The departure from the respondent’s pleaded case was clear from the witness statement of Mr Buchanan. He did not support the pleaded case but set out the essential features of its case at paragraph 27 of his statement:

“There was no doubt that very soon after the complaint Andy accepted liability and accepted that Premier Paper had to put this right. I accept that time did then drag on whilst Andy and Martin contacted the Mill. The manner of payment of the settlement sum was not concluded until much later as Martin was trying to claw back some sums in respect of the paper and to reduce Premier Paper’s liability. However, it was agreed fairly early on that we would be compensated.”

1. 1. That the appellant appreciated that the respondent’s evidence differed from its pleaded case is apparent from the cross-examination of Mr Buchanan. Counsel for the appellant took Mr Buchanan to paragraph 27 of his witness statement and drew attention to the fact that he did not state that there was an agreement in November 2010 for compensation in a particular figure or that the respondent would be credited with the price of the paper. Mr Buchanan answered: “Well, there was no agreement at that time. What had happened, we had complained about this. Mr Armstrong had gone in and actually visited our customer and witnessed it happening on his high speed laser printer…We entered into no monetary agreement as far as I can remember. There was no discussion of how much at that period…It was agreed fairly early on that we would be compensated, but there’s no figure there.” Mr Buchanan agreed with counsel’s summary of his evidence that “there was an agreement that there would be some compensation, but there wasn’t any agreement as to precise figures…in November 2010.”

   2. Following this evidence, counsel for the appellant said to the judge that “the evidence that this witness is giving is of a different case than the case pleaded in the particulars of claim. It is of a case that there was a settlement in principle in November 2010 and then that there was a later settlement or agreement as to figures I think in December 2011”. As it was, he said, a new and unpleaded case, he asked for five minutes to take instructions. The judge agreed and, on the hearing resuming, counsel told the judge that “the way in which the evidence has been put does change this case quite considerably” and that “there are other points I will need to think about in my cross-examination because of that change in the case”. The judge observed that it was a departure from the pleading, not the witness statement. Counsel said that he would come back to this topic after the short adjournment. At the start of the hearing in the afternoon, counsel told the judge that he had read the pleadings over the short adjournment and “following that review, I don’t need to revisit the topic”.

   3. Counsel’s statement that he did not need to revisit the topic might well be understood to mean that he was content to deal with the respondent’s case on the basis of Mr Buchanan’s evidence, but in his closing speech, he objected to the new case, saying that it was far too late to amend the particulars of claim and that the appellant would be “seriously prejudiced” by an amendment because the respondent was “presenting a case in his evidence that was fundamentally different and inconsistent with the pleaded case”. He went on to say:

“So if this had been pleaded in the first place, my Lord, there wouldn’t be a claim, because the only claim is for 19,000. The claimant has had 18,550 in credit notes and that’s agreed. It’s had £5,100 of goods that it hasn’t paid for. It’s had more than £19,381 already. So that is one of, I imagine, a number of defences the defendant would have pleaded if a different later settlement agreement on different terms had been pleaded by the claimant.”

1. The judge asked counsel whether it was still alleged that Mr Armstrong lacked authority to agree a settlement on behalf of the appellant. He replied that it would apply to the pleaded agreement in November 2010, but a case based on that agreement could not succeed on the evidence. If another, later agreement had been pleaded, counsel said that he would have cross-examined differently.

THE ARGUMENT ON APPEAL ABOUT THE “UNPLEADED” CASE

1. I have set out above in some detail the development of the unpleaded case. The disparity between the respondent’s pleaded case and its evidence was apparent from Mr Buchanan’s witness statement and was explored by the appellant’s counsel in his cross-examination of Mr Buchanan. His oral evidence confirmed his witness statement and cannot have been a surprise to the appellant. On the face of it, the appellant had a proper opportunity at the trial of dealing with the unpleaded case. Counsel for the appellant submitted to the judge, and has submitted to us, that the failure to plead the new case deprived the appellant of properly meeting it, through an amended defence, the submission of new evidence or different cross-examination. These submissions, expressed in general terms, have not been particularised. No details have been given of the amendments to the defence or of any evidence or investigation that would have been given or undertaken if the new case had been pleaded. In answer to a question in this court, counsel for the appellant said that it would have challenged Mr Armstrong’s authority to agree a compensation figure and issue the compensation credit note in December 2011. But no indication has been given of the basis on which it could be said that he lacked such authority in December 2011, the judge having rejected the appellant’s case that Mr Armstrong lacked authority in November 2010.

2. In my judgment, the appellant suffered no procedural unfairness as a result of the judge’s decision to permit the respondent to develop its case in accordance with its evidence, rather than its pleading. Nor was there any unfairness in the judge’s finding as to the content of the settlement agreement, as suggested by ground 2 of the grounds of appeal. It was a finding that was open on the evidence and the appellant had a full opportunity of dealing with the evidence.

3. Ground 3 challenges the judge’s finding of a settlement agreement as not supported either by the judge’s own findings of fact or by any evidence. It is said that the judge’s finding at [9] that “the complaint was quickly communicated to Mr Armstrong who quickly accepted that it was correct and it was then assumed that it would be sorted out in due course….no agreement was reached beyond what that I have just described” cannot support the terms of the settlement agreement found by him.

4. The judgment must, however, be read as a whole. It is clear from [20] that the judge was making findings as to the terms of the agreement reached in November 2010 and as to the subsequent assessment and acceptance of the losses of £19,381.59 advanced by the respondent. Those findings were available to the judge on the written and oral evidence of the witnesses called by both parties. Indeed, it accurately reflects the summary of Mr Buchanan’s evidence put to him by counsel for the appellant that in November 2010 “there was an agreement that there would be some compensation, but there wasn’t any agreement as to precise figures”. The issue of the credit note in December 2011 is in any event inexplicable unless it was the acceptance by the appellant of the respondent’s claim for loss.

5. Finally, under ground 4, the appellant challenges the finding of a binding settlement agreement on the ground that the basic contractual elements of offer, acceptance, consideration and certainty of terms were missing. Focusing on the finding of an agreement in November 2010, it is said that the judge made no finding of any acceptance by the respondent of any offer made by the appellant, or of any consideration emanating from the respondent, and that an agreement that the claim would be “sorted out in due course” was insufficiently certain. In my judgment, this challenge cannot succeed. First, the agreement found by the judge to have been made in November 2010 involved clear consideration on the part of the respondent in forbearing to sue and agreeing to accept a reasonable sum in respect of its losses. The judge found that the parties were agreed on the terms and, where there is agreement, it is unnecessary to identify the precise mechanics of offer and acceptance. There can be no doubt that the quantification of the respondent’s losses was subsequently agreed, through a discussion between the parties’ representatives and the issue of the credit note and its acceptance by the respondent.

6. For these reasons, I would dismiss this appeal.