WHEN A CLAIMANT TRIES TO USE A REPLY TO INTRODUCE A NEW CAUSE OF ACTION: PERMISSION TO AMEND REPLY REFUSED

In Powis Street Estates (No 3) Ltd v Wallace LLP & Anor [2021] EWHC 3269 (Ch) Deputy Master McQuail considered that parts of a Reply was an attempt to introduce a new cause of action.  The claimant was not given permission to serve the “offending” part of the Reply out of time.

“Wallace is entitled to have all the allegations made in the proceedings in one document in order that it may answer them in its own one document. That is the expeditious and fair way of managing the content of pleadings and accords with the overriding objective.”

THE CASE

The claimant applied for permission to serve an amended Reply, considerably out of time.  The defendant consented to most of the Reply being served, but objected to one paragraph on the grounds that it represented an attempt to introduce a new cause of action.

THE DISPUTED AMENDMENT

The Deputy Master found that the proposed amendment was an attempt to introduce a new cause of action.  The application was refused on that basis.

The Disputed Amendment to the Reply to Wallace’s Defence
    1. Proposed paragraph 25A.2 of the amended reply reads as follows:
“If Wallace provided such confirmation or if Powis provided such confirmation with Wallaces’ knowledge or approval, Wallace thereby acted negligently and in breach of contract insofar as this prevented or arguable prevented Powis from terminating the Dagmar contract or treating it as terminated. Wallace is not entitled to avoid liability for negligence or breach of contract by relying on its own negligence and breach of contract.”
    1. In order to understand Wallace’s objection, it is necessary to track the point through the statements of case:
(i) Para 45 of the RAPOC pleads that the claimant suffered loss as a result of the first defendant’s failure to advise that the Dagmar contract had terminated on 21 or 22 May 2013 so that the claimant was free to re-market or renegotiate with Dagmar;
(ii) Paragraph 54.3 of Wallace’s amended defence pleads an allegation, not contained in the original defence, viz. that Wallace confirmed the completion date of 13 June 2013 to Dagmar in an email of 9 May 2013 (54.3.2) with the consequence that, had Powis sought to terminate on or after 21 May 2013, Dagmar would have been likely to resist in reliance on rectification, estoppel, waiver or bad faith (54.3.3);
(iii) Mr Halpern for Powis says that his client is entitled to answer this in one of two ways. Either Powis may dispute by its reply that Wallace may run this defence because it depends on relying on its own negligence in making such a representation to Dagmar. Or it may allege a further head of negligence by a further amendment to the RAPOC;
(iv) Mr Halpern says that paragraph 25A.2 of the proposed amended reply concerns the first way of putting the point and he offers to add words to clarify the amendment by expressly confirming the words of the reply do not plead any additional ground of negligence;
(v) If the point is to be put in the second way Mr Halpern acknowledges that a further application for permission to amend the RAPOC would be required.
    1. In response Mr Smith for Wallace points out that the allegation in paragraph 37.5 of the RAPOC is of a breach of duty in failing to advise in the period from 21 or 22 May 2013 to 6 June 2013 that the Long Stop Date had occurred and that the allegation confined to that period is answered by paragraph 54.3.1 of the Amended Defence.
    1. Mr Smith says that the new fact pleaded in paragraph 54.3.2 of Wallace’s amended defence is that a particular email was sent on 9 May 2013, a date outside the period of the breach of duty alleged in the RAPOC. He says it is only the fact of the email that is newly in issue and that the terms of Wallace’s amended defence do not put in issue the wider factual question whether the sending of the email amounted to a breach of duty.
    1. Mr Smith therefore says that Powis’s proposed 25A.2 seeks to plead by way of reply a new claim or cause of action not founded on facts which are all presently in issue and therefore is not permissible.
The Rules and the Law
    1. CPR 16.7 and the White Book (“WB”) commentary at 16.7.2 makes clear that in the absence of express admissions by the claimant the defendant will be required to prove the facts raised in the defence whether the claimant files a reply (r.16.7(2)) or does not do so (r.16.7(1)).
    1. 16PD.9 paragraph 9.2 provides that:
“A subsequent statement of case must not contradict or be inconsistent with an earlier one; for example a reply to a defence must not bring in a new claim. Where new matters have come to light the appropriate course may be to seek the court’s permission to amend the statement of case.”
    1. The WB commentary at 16.7.3 refers to the rule in paragraph 9.2 of PD 16 and reads as follows:
“It states that a reply must not contradict or be inconsistent with an earlier one, for example it must not bring in a new claim and adds that, if the claimant wishes to depart from the case set out in their claim, they should seek to amend that claim rather than serve a reply. In D&G Cars Ltd v Essex Police Authority [2013] EWCA Civ 514, the question whether amendments to particulars of claim not allowed under r.17.4 (amendment after expiry of limitation period) could be pleaded by way of amended reply to defence was raised but not determined.”
    1. In my judgment the proposed paragraph 25A.2 contains a new claim not founded on facts which are all presently in issue. It pleads a new and distinct breach of duty from the breaches already pleaded, not least because the breach of duty presently pleaded in relation to termination of the Dagmar Contract occurred no earlier than 21 May 2013 and the email pre-dates that.
    1. The WB commentary makes clear that a reply may not include a new claim and that the proper course is for Powis to seek the court’s permission to amend the RAPOC. To the extent that it succeeds in any such application it might then be permissible for Powis to seek to deploy its new claim in a further amendment to its reply. I do not accept Mr Halpern’s argument that the amendment comprising a new allegation of negligence and breach of contract may simply be permitted by way of response, even if caveated as he suggests.
    1. Wallace is entitled to have all the allegations made in the proceedings in one document in order that it may answer them in its own one document. That is the expeditious and fair way of managing the content of pleadings and accords with the overriding objective.
  1. If I had not concluded that the proposed amended paragraph 25A.2 should not be permitted to be included in the amended reply because it pleads a new claim, I would have refused relief from sanction in relation to that paragraph as it raises a new claim very late and without any evidence explaining why it, as opposed to the purely responsive parts of the amended reply to Wallace’s defence, should be the subject of relief.