JUDGE SHOULD NOT HAVE GRANTED DEFENDANT PERMISSION TO WITHDRAW FROM ADMISSIONS: CHANGE OF LAW DID NOT JUSTIFY CHANGE OF STANCE
In the judgment today in J v A South Wales Local Authority  EWHC 2362 (Admin) Mr Justice Marcus Smith overturned a decision granting a defendant permission to withdraw admissions.
“ changes in the law are to be anticipated, particularly when proceedings are intentionally being adjourned for a number of years“
The claimant issued proceedings in 2012 alleging negligence on the defendant’s part in relation to his care. The defendant made various admissions. The defendant argued that an assessment of damages should not take place until the claimant was 16.
THE CONFLICT OF INTEREST
The situation here was unusual in that the defendant was, at that time, responsible for the claimant’s care (as well as being the defendant). It argued, in its defence, that a stay of proceedings was the best course of action for the claimant.
(1) The defendant to a claim brought by J. As such, the Local Authority was entitled to resist the claim, and put J to proof; and
(2) The entity having care of J pursuant to a care order made on 30 November 2007, with an obligation to act in J’s best interests.
Of course, a defendant is perfectly entitled – as the Local Authority did – to put in issue causation and quantum, and to advocate for a delayed assessment of quantum. However, where the defendant – as here – also owes a duty to the claimant himself, it is incumbent upon the defendant to behave with extraordinary care given the conflict of interest that arises.
In this case, the Local Authority chose to make a number of averments expressly on behalf of J: in particular, that it was not in J’s interests that the issue of quantum be determined in short order, which is the usual approach. The Local Authority, as the entity having care of J, was in a position effectively to enforce its view as to what was in J’s best interests even though it was the defendant to J’s claim. Paragraph (6) of the Defence makes very clear that even if J’s own advisers were of the view that the question of quantum ought to be resolved at once, that would be opposed by the Local Authority, advancing not its own interests but those of J.”
The action was stayed, and that stay continued on a number of occasions.
THE CHANGE IN THE LAW
THE DEFENDANT’S APPLICATION
The defendant, mindful of the change in the law, applied for permission to withdraw the admissions it had made several years previously. That application was allowed by the Circuit Judge.
THE CLAIMANT’S SUCCESSFUL APPEAL
The claimant’s appeal on this issue was successful.
(1) Ground 1. The Judge failed properly to consider and apply the overriding objective and/or to consider the interests of the administration of justice as required by CPR PD 14 paragraph 7.2(g).
(2) Ground 2. The Judge failed properly to consider the prejudice that would be caused to J by allowing the admission to be withdrawn as required by CPR PD 14 paragraph 7.2(c).
(3) Ground 3. The Judge failed properly to consider the stage in the proceedings at which the application to withdraw was made as required by CPR PD 14 paragraph 7.2(e).
(1) The Local Authority submitted that the appeal should be dismissed because this was an appeal from a discretionary case management decision, which an appellate court should be slow to interfere with. The appeal court should not interfere merely because it might have reached a different conclusion to that of the judge. In AEI Rediffusion Music Ltd v. Phonographic Performance Ltd, Lord Woolf MR articulated the threshold test for interference by an appellate court with the exercise of discretion by a judge in the following terms:
“Before the court can interfere it must be shown that the judge has either erred in principle in his approach or has left out of account or has taken into account some feature that he should, or should not, have considered, or that his decision was wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale.”
I entirely accept this statement of the law. I cannot allow the appeal simply because I disagree with the Judge’s decision. I can only revisit the Judge’s decision if I am satisfied that the Judge made what amounts to a material error of law in the exercise of her discretion, in the manner articulated by Lord Woolf MR in Rediffusion.
(2) In this case, on the face of it, the Judge directed herself entirely correctly on the law that informed her discretion. J did not contend otherwise. Thus, the Judge paid specific regard to the overriding objective in CPR Part 1 and to the specific provisions in CPR PD 14 regarding the withdrawal of admissions. As I have described, the Judge considered these factors in turn in the Judgment.
(3) Furthermore, in this case, according to the Local Authority, the Judgment at least referenced and, on the face of it, took into account all of the points articulated by J in opposition to the application to withdraw the admission. Thus, paragraph 5 of the Local Authority’s written submissions on this appeal lists the points set out in J’s written submissions before the Judge, which the Judge summarised in her Judgment and which (as set out in paragraph 6 of the Local Authority’s written submissions on this appeal) “the Judge took into account and weighed in the balance”.
As I have noted in paragraph 21(5) above, the Judgment does not specifically address the stage of the proceedings at which the application to withdraw the admission was being made. For the reasons I give in paragraph 21(5), I do not consider that the Judge can be criticised for failing specifically to consider this factor. In the circumstances of this case, withdrawing the admission could have no effect on the management of the case. The case had been stayed for a number of years because of J’s age and the effect on him of seeking to quantify his claim whilst a minor. Withdrawing the admission could have no significant effect on the proceedings and no effect at all on the date or period fixed for trial. What is more, it cannot be said that the application to withdraw the admission was made late or could have been made earlier by the Local Authority. The application was intimated by the Local Authority as soon as the significance of the decision of the Court of Appeal in CN was clear; and the parties very sensibly decided that the application should only be heard once the Supreme Court had heard and determined the appeal from the decision of the Court of Appeal. For all these reasons, Ground 3 must fail and I dismiss the appeal insofar as it is based on Ground 3.
(1) The Judge did specifically consider this factor: I have summarised her approach as set out in the Judgment in paragraph 21(3) above.
(2) It is evident that the Judge considered the question of prejudice to J narrowly, in the sense of the extent to which J’s ability fairly to pursue his claim would be compromised if the admission were to be withdrawn. The Judge did not – under this head – consider the broader circumstances in which the admissions by the Local Authority were made. In this, I consider that the Judge was right. The broader considerations of the circumstances in which the admissions were made seem to me to fall within the broader ambit of the “interests of the administration of justice”.
(3) The Judge’s evaluation of the extent to which J would be prejudiced by the withdrawal of the admissions appears, on the face of it, to be sound:
(a) The Judge considered that it was significant that the Local Authority’s records remained intact.
(b) The Judge also considered the effluxion of time between the breach of duty alleged and the commencement of J’s claim. As she rightly noted, the course of time would affect witness evidence (not documentary evidence), but the delay between alleged breach of duty (in 2000) and articulation of claim (in 2012) – a period of some 12 years – was not something the Local Authority was responsible for in seeking to withdraw the admissions it had made only in 2012.
(c) Given this significant passage of time, the Judge considered that whilst there would be additional prejudice to J in the period between the making of the admissions (in 2012) and their withdrawal (in 2019), this was by no means as extreme as J was contending. The Judge concluded:
“Of course, time will impact upon witness evidence, but that goes into the balance overall. I do not have any direct evidence here of any specifics whereby the passage of time has directly affected the evidential cogency of [J’s] case if they need to investigate the matter afresh.”
(4) Notwithstanding the apparent soundness of the Judge’s reasoning, as I have described it, I do not consider that the Judge’s conclusion that she lacked “any direct evidence here of any specifics whereby the passage of time has directly affected the evidential cogency of [J’s] case if they need to investigate the matter afresh” to be sustainable. Looking at the entirety of the material before the Judge, whilst it is true that there was no specific evidence of prejudice, the Judge should have asked herself why this was the case:
(a) J did not – entirely understandably – seek to re-plead his case in light of the law propounded in CN in advance of the Local Authority’s application to withdraw the admissions it had made. J was – as I have described – contending that those admissions should not be withdrawn, and that his case (as pleaded) could stand. The consequence of this was that the Judge was in no position to understand what factual averments J might seek to plead, if the Local Authority’s application were to succeed.
(b) The Judge might have required J to articulate his case on the assumption that the Local Authority’s application succeeded: she wuld then have been in a position understand the potential prejudice to J, for J would have then had to plead his new case. She did not do so. I do not criticise her for that. But the upshot was that she was in no position to assess the prejudice to J if the Local Authority’s admissions were withdrawn.
(c) Additionally, the Judge would have had a better idea of the potential prejudice to J if the Local Authority had fully pleaded out its case on liability in its original (unamended) Defence. The Judge would then have had some feel for the extent of the factual dispute between J and the Local Authority, albeit on the basis of a duty of care pleaded by reference to superceded law.
The Judge was thus in no position to assess the extent to which the evidential cogency of J’s case was affected by the withdrawal of the Local Authority’s admissions on liability. Furthermore, the Judge (like J) had no means of knowing the extent to which the Local Authority’s file – which exists, but which has not been disclosed – might or might not render the evidence of factual witnesses important or redundant. There was no warrant for concluding that the prejudice was insubstantial; and it was not the fault of J that there was no evidence before the court specifically directed to the question of prejudice.
(5) Accordingly, I consider that Ground 2 is made out. The threshold conditions for interfering with the Order are met. The Judge failed to appreciate that she was in no position to assess the prejudice to J of the admissions being withdrawn, because the very withdrawal of those admissions transformed the ambit of the factual dispute between J and the Local Authority.
(6) Of course, I appreciate that the Judge might have said that the change wrought by the decision of the Supreme Court in CN rendered any factual inquiry by J redundant. The Judge was clearly of the view that, as the law now stands, no relevant duty was owed by the Local Authority to J, and it may be that this absence of a duty could not be made good by any investigation of the facts. However, the Judge did not approach the balancing exercise which informed her discretion in this way. Instead, she considered that she was able to conclude that there would be no prejudice to J because the facts could, if necessary, be investigated even at this late date. In this, for the reasons that I have given, I consider that she was clearly wrong.
(1) This is a factor again specifically considered by the Judge. The Judge concluded that this was a cogent factor in favour of permitting the admissions to be withdrawn, because otherwise J would have the benefit of a judgment “untenable on the law”.
(2) I entirely accept that change in the law occasioned by the decision in CN was not only the reason for the Local Authority’s application to withdraw the admissions but also a relevant factor to take into account in determining the application in the Local Authority’s favour. The change in the law wrought by CN was taken into account by the Judge on multiple occasions: it features in the Judge’s consideration of the first, fourth, sixth and seventh of the factors listed in paragraph 23 above.
(3) This “double-counting” is, perhaps, suggestive of the Judge placing too much weight on the importance of the Local Authority being allowed to take advantage of the change in the law wrought by CN. Questions of weight are, however, matters for the Judge, and I leave them out of account for the purposes of this appeal.
(4) What is significant, however, is that the Judge entirely failed to consider the importance of other factors going to the interests of the administration of justice. Although the Judge made abstract reference to the importance of “finality” and the interest of parties “not to have matters reopened at late stages”, the Judge failed to consider the importance of this factor in the context of this case:
(a) In Kleinwort Benson Ltd v. Lincoln City Council, the House of Lords espoused a “declaratory” theory of the common law, whereby a re-statement of or change in the law has an inevitable retrospective effect. Lord Goff stated the position thus:
“… when judges state what the law is, their decisions do…have a retrospective effect. That is, I believe, inevitable. It is inevitable in relation to the particular case before the court, in which the events must have occurred some time, perhaps some years, before the judge’s decision is made. But it is also inevitable in relation to other cases in which the law as so stated will in future fall to be applied …”
One consequence of this is that compromises or settlements of disputes can – where the law informing the settlement has changed – be challenged on the ground that the settlement was concluded under a mistake of law. The courts have generally sought to preserve the finality of settlements and only rarely will they be set aside on grounds of mistake of law. In Kleinwort Benson, the House of Lords emphasised the importance of protecting “the stability of closed transactions”.
(b) Of course, where a settlement is premised on a particular view of the law, and the law then changes, one party to the settlement is likely to be advantaged and the other disadvantaged. Yet, as I have noted, the disadvantaged party will only rarely successfully challenge the settlement.
(c) The facts of this case bear many of the hallmarks of a settlement, and the interests of the administration of justice are served by protecting the stability of closed transactions of this sort. It is important to see the admissions made by the Local Authority in their proper context:
(i) I have no doubt that the admissions made by the Local Authority were informed by a very real appreciation that (on the law as it then stood) the Local Authority owed J a duty of care, which it had breached.
(ii) However, the Local Authority did not have to concede liability and could have required J to make good his case, namely that had the Local Authority behaved as it ought to have done, J would have been placed for adoption in the first month of his life.
(iii) The admission of liability obviously meant that J was spared a trial on liability. It also meant that the Local Authority could properly decline to plead its defence to J’s claim; and also – acting as the entity having the care of J – assert that it would be in J’s best interests to postpone the final assessment of quantum until after J’s 16th birthday.
(iv) It is important to note that the postponement of the quantum hearing was insisted upon by the Local Authority in its capacity as J’s carer. In other words, the Local Authority – even though it was the defendant – was purporting to act in J’s best interests. Had the Local Authority not asserted J’s interests in this way, then it is very likely that quantum would have been resolved sooner, and before the decision in CN. Certainly, had the Local Authority sought to adjourn quantum because of its own interests, there would have been no question of putting that assessment off for seven years.
The admission thus forms an important component in the overall management of the dispute between J and the Local Authority. It obviated the need for a hearing in short order: had the Local Authority not conceded liability, then I cannot see how an early trial, at least of liability, could have been avoided. It enabled the Local Authority to advance J’s best interests by putting off the quantum hearing. The dispute was managed in this way for a number of years, with the parties presenting a common front to the court in maintaining the stay of the proceedings.
(d) As I have said, this was not a settlement: but it bears many of the hallmarks of a settlement, and the Judge should have considered the importance in this case of stability in closed transactions. In this case, the issue of liability was closed off in 2012, and the implications of permitting the Local Authority to resile from this postion should have been, but were not, considered by the Judge. The Judge failed to consider that the admission was part of a broader context, and that its withdrawal meant that J lost:
(i) First, the opportunity in 2012 to press for an early and full particularisation of the Local Authority’s case on liability.
(ii) Secondly, the opportunity in 2012 to press for an early trial, certainly of liability and probably of quantum. Had this occurred, J would have had the benefit of a judgment on the merits well before the decision of the Court of Appeal in CN.
THE EXERCISE OF THE DISCRETION AFRESH
The discretion was considered afresh, the defendant’s application to resile dismissed and judgment entered for the claimant.
It follows that the Order must be set aside, and the question of withdrawing the admissions made re-visited. I have already set out the factors relevant to this question in earlier parts of this judgment, and I do not seek to repeat that has already been said. In my judgement, the application of the Local Authority to resile from the admissions it had made should have been dismissed and judgment for damages to be assessed entered against the Local Authority and in favour of J. These reasons for this conclusion can be shortly stated: