LATE APPLICATION TO AMEND DEFENCE AND WITHDRAW ADMISSION REFUSED: EVE OF TRIAL APPLICATIONS USUALLY CAUSE PROBLEMS

There is a second reason to look at the judgment today  by Mr Justice Arnold in Freshasia Foods Ltd v Lu [2019] EWHC 638 (Ch).  There was a decision in the judgment on a late application to amend and withdraw from an admission.  The defendant made an application to amend its defence, and withdraw an admission, 48 hours before trial.   It is an example of a late application being refused.  It is also (with the benefit of the wonderful wisdom that hindsight always give us) an example of the need to review the pleadings well before trial.  A party attempting to change its mind shortly before, or at trial, is always going to have major difficulties.

“Taking all the factors into consideration, it seemed to me that the key factors were the lateness of the application and the consequent prejudice to Freshasia if Mr Jing was permitted to withdraw his admission, and accordingly permission should be refuse”

THE CASE

The claimant brought an action claiming that the defendant had breached restrictive covenants in his employment contract where he sold Chinese food, particularly dumplings .  Part of the claimant’s case was that it had, therefore, suffered financial loss due loss sales following the defendant leaving its employment and working for a competitor.  The claimant’s pleaded case relied on the Restrictive Covenants that were in the employee handbook.  In the initial defence it was admitted that these terms were incorporated into his contract.  Shortly before trial the defendant gave notice that he wished to amend his defence in that regard.

THE JUDGMENT ON THE APPLICATION TO AMEND/WITHDRAW THE ADMISSION

The judge considered the defendant’s application to amend its defence to withdraw an admission.

Application to amend the Defence
    1. As noted above, Freshasia relied in its Particulars of Claim on the Restrictive Covenants, which are contained in the Employee Handbook. Freshasia alleged that the provisions of the Employee Handbook had been incorporated into Mr Jing’s contract of employment by virtue of an acknowledgement signed by Mr Jing on 25 July 2016 stating that he had read and understood the Employee Handbook and that it formed part of his contract of employment. In the alternative, Freshasia relied upon clauses 18 and 19 of the contract Mr Jing signed on 26 January 2015.
    2. In his Defence served on 14 December 2018 Mr Jing admitted that the provisions in the Employee Handbook had been incorporated into his contract of employment as alleged by Freshasia. The argument before Mr Alexander QC proceeded on that basis. Likewise, counsel for Mr Jing proceeded on that basis in her skeleton argument for trial dated 1 March 2019.
    3. By an application sent by email at 11:10 on 5 March 2019, just under 48 hours before the trial commenced, Mr Jing applied for permission to amend his Defence to withdraw the admission that the provisions of the Employee Handbook had been incorporated into his contract of employment. I heard argument on this application at the start of the trial. At the conclusion of the argument, I announced that the application was refused for reasons to be given later. My reasons for refusing this application were as follows.
    4. Paragraph 7.2 of Practice Direction 14 – Admissions provides as follows:
“In deciding whether to give permission for an admission to be withdrawn, the court will have regard to all the circumstances of the case, including –

(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made;

(b) the conduct of the parties, including any conduct which led the party making the admission to do so;

(c) the prejudice that may be caused to any person if the admission is withdrawn;

(d) the prejudice that may be caused to any person if the application is refused;

(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial;

(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the admission was made; and

(g) the interests of the administration of justice.”

  1. So far as (a) is concerned, the ground upon which the application was made was that Mr Jing wished to contend that the terms contained in the Employee Handbook had not been incorporated into his contract of employment because there was no consideration from Freshasia to support a variation of the contract in July 2016. Counsel for Mr Jing candidly explained that the reason for the application was that Mr Jing’s legal team had not previously spotted this point.
  2. As to (b), there is no suggestion that Mr Jing was led to make the admission by any conduct of Freshasia. Counsel for Mr Jing did point out, however, that Freshasia had not fully pleaded its case that Mr Jing’s contract of employment had been varied on 25 July 2016, and in particular had not pleaded how the variation was supported by consideration. I do not consider that this is of any significance. Mr Jing could have made a Part 18 request directed to this point before making any admission, but instead he simply admitted incorporation of the Employee Handbook.
  3. Turning to (c), counsel for Mr Jing accepted that, if Mr Jing was given permission to withdraw the admission, Freshasia would have to be given the opportunity to adduce further evidence in relation to the consideration issue. She suggested that Freshasia would not be prejudiced, or at least not significantly prejudiced, because it would be able to lead oral evidence on the point from its witness Mr Lan (as to whom, see below). Furthermore, she pointed out that Freshasia’s solicitors had referred in a witness statement made in opposition to the application to taking urgent instructions from Mr Lan on this point. As counsel for Freshasia pointed out, however, it remained the case that Freshasia had been deprived of the opportunity of dealing with the question in a witness statement. Moreover, there was no realistic possibility of Freshasia searching for and giving any further disclosure that might be relevant prior to Mr Lan giving evidence. Finally, Freshasia would be required to deal with a new and not straightforward legal point at very short notice in an expedited trial which already involved the parties being under considerable pressure. (He made it clear, however, that Freshasia did not contend that it had had the power unilaterally to incorporate the Employee Handbook into Mr Jing’s contract of employment.)
  4. As for (d), counsel for Freshasia submitted that there was no significant prejudice to Mr Jing for three reasons. First, Mr Jing had been content to proceed on the basis that the Employee Handbook was incorporated into his contract of employment, and had plenty of arguments predicated on that premise. Secondly, if Freshasia could not rely upon the Employee Handbook, that was not the end of its case because it would rely in the alternative upon the restrictive covenants in Mr Jing’s 26 January 2015 contract. Thirdly, Mr Jing had a potential remedy against his lawyers.
  5. So far as (e) is concerned, counsel for Freshasia submitted that the application was made extremely late, on the eve of trial. Although Mr Jing was not suggesting that the trial be adjourned, the absence of an adjournment was what led to the prejudice to Freshasia discussed above. If Mr Jing had suggested an adjournment, that would have been prejudicial to Freshasia since it was trying to enforce time-limited restrictive covenants and a speedy trial had been ordered by Snowden J for that reason.
  6. As to (f), counsel for Freshasia did not dispute that the point on consideration had a real prospect of success (although he submitted that Freshasia would have a good answer to it).
  7. No additional point was raised by either side under (g). Taking all the factors into consideration, it seemed to me that the key factors were the lateness of the application and the consequent prejudice to Freshasia if Mr Jing was permitted to withdraw his admission, and accordingly permission should be refused.