“THE FUNDAMENTAL IMPORTANCE OF ADEQUATE PLEADINGS”: CASE REFERRED BACK FOR A SECOND TRIAL BECAUSE CLAIMANT’S PARTICULARS DID NOT STATE THE CASE IT ADVANCED

Anyone who thinks that the rules relating to pleadings are now more relaxed and less important should read the decision of Mr Justice Cotter in Charles Russell Speechlys LLP v Beneficial House (Birmingham) Regeneration LLP [2021] EWHC 3458 (QB).  This case, in fact teaches two things: (i) the importance of a solicitor having a written retainer before starting any work; (ii) the importance of fully pleading the case.

“Given the fundamental importance of adequate pleadings, the Judge should have made a ruling on the issue of what case could be advanced and ensured the parties knew where they stood. In my view, he was wrong to proceed with the issue unresolved.”

RELEVANT WEBINAR

On the 18th February 2022 I am presenting a webinar “Statements of Case, Drafting, Dangers and Pitfalls 2022”.  Booking details are available here.

THE CASE

The claimant firm of solicitors issued proceedings for its fees.  The claim form was a simple claim for work done. The defence denied liability to pay and alleged that the claimant had not been instructed by anyone with authority to act for the defendant.   The existence of a retainer was denied.  The claimant, by way of reply (not settled by counsel), relied on a written retainer dated 11th November 2016. However most of the work was done prior to this written retainer being sent.  There was no specific reference in the particulars or reply to an implied contract or a case based on quantum meruit.

THE TRIAL

At trial the claimant succeeded on the basis of there being an implied contract.  However this was not a case that was pleaded.  The judge considered the submissions on these issues.

1. 1. On appeal, Mr Raffin submitted that his submissions clearly included reference to an implied retainer. In my judgment, the submissions covered a number of legal issues; they did not simply argue for an implied contractual retainer up to 11 November 2016 and an express written contractual retainer thereafter. They were far from straightforward submissions to follow without the ability for prior consideration of the issues raised.

1. 1. The Judge raised the possibility of the Respondent running an alternative or secondary case with Mr Stockler. In response Mr Stocker argued that para 2(a) of the reply did not cover a request as para 2(b); indeed, it referred to reliance on the Engagement Letter. He argued that the alternative case was not before the Court. The exchange was as follows:

“JUDGE SEPHTON: The particulars of claim, Mr Stockler, do not rely on any written agreement, do they?

MR STOCKLER: No, they do not. The particulars of claim themselves simply claim the money.

JUDGE SEPHTON: If Mr Raffin were to base his case in the alternative on the basis that the claimant’s services were supplied at the request of the defendant and establishes that the defendant had the right to make that request, that whoever asked on behalf of the defendant had a right to make that request, that gets him home on a claim for quantum meruit, does it not? There may then be issues about quantum and whether the various items of work were for the benefit of the LLP or for some other person. That arises in any event, but, if there is a proper request by an authorised member of the LLP and the claimant responded to that request, that is work done at the request of the defendant and therefore, at the very least, the subject of a quantum meruit. Or have I got that wrong?

MR STOCKLER: Sir, are you addressing that question to me?

JUDGE SEPHTON: I certainly am, yes.

MR STOCKLER: Oh, I am so sorry. I beg your pardon. I thought you were asking Mr Raffin to comment.

JUDGE SEPHTON: I am sure Mr Raffin would agree. What do you say?

MR STOCKLER: The answer is it is not pleaded, of course, and in fact quite the opposite is pleaded because, if you look at the amended reply to the defence, paragraph 2(b) says the claimant does rely on the client care letter incorporating the claimant’s terms of business.

JUDGE SEPHTON: My question was: if Mr Raffin put, as a second plank, reliance upon quantum meruit, what can you say about that?

MR STOCKLER: This whole case has not been fought on that basis and I have not taken any steps to assess what work was done, why and at whose request, because that was not the claimant’s case. The claimant’s case was simply that it was instructed by the engagement letter, and my answer was “You weren’t”. But, if he is now going to start a completely different case, then that is something which needs to be fought, but, at the moment, that is not part of the documentation in this trial at all.”

1. 1. Mr Stockler was making his view clear: that the alternative case, on a quantum meruit basis, was not before the Court. The exchange continued as follows:

“MR STOCKLER: Paragraph 2(a) is a reply to 2(a) of the defence, which is “It is denied that the defendant entered into any contract or retainer with the claimant and/or that the claimant provided any services to the defendant”, and the answer is not “It did provide services”. The answer is that it is averred that it was instructed to act by the designated members.

JUDGE SEPHTON: Well that is a request for services, is it not? Paragraph 2(a) constitutes averment that authorised persons asked the claimant to act, and that, of itself, is sufficient to recover quantum meruit, is it not?

MR STOCKLER: No, your Honour, if I may say so. I do not think it is.

JUDGE SEPHTON: Explain to me why not.

MR STOCKLER: Sorry?

JUDGE SEPHTON: Please explain to me why not.

MR STOCKLER: Yes. The first issue on quantum meruit is who asked –– I mean, this has not been pleaded and therefore I have to reserve my position on it. If you, for example, go back to the section on Chitty which the claimant relies on, the issue is whether the request camefrom the promisor. The promisor in this case is the LLP, and therefore the whole issue of whether the designated members had the authority to issue any request, let alone to sign the engagement letter, is put at issue.

JUDGE SEPHTON: I accept that. I understand that point.

MR STOCKLER: So that is the first point. But the second point is that the answer to paragraph 2(a) of the defence ought to have been, “But yes, we did provide services at your request”, but that is not —-

JUDGE SEPHTON: Is that not exactly what paragraph 2(a) of the reply said – exactly that?

MR STOCKLER: With great respect to your Honour, I read that –– If you look at paragraph 2(b) where it says that the claimant relies on the client care letter, that says “I am relying on the client care letter” which, by definition, means “I am not relying on any other request”. Because if you rely on the client care letter, what is the point of relying on it if in fact you have already got a duty to provide services? It does not make sense. One excludes the other.

JUDGE SEPHTON: Thank you. I have your point on that, thank you. Shall we have some evidence then?

MR STOCKLER: I have no more to say in opening and I would be happy to go straight on to the evidence if your Honour wishes.

JUDGE SEPHTON: Thank you. Let us do that. Mr Raffin, call your evidence.”

1. The learned Judge was faced with a Claimant seeking to rely on a claim for an implied retainer and/or quantum meruit as a “secondary plank”, as the Judge put it, and the Defendant objecting as the existing pleading did not enable a secondary case to be run and reserving its position as to its arguments (i.e. until Mr Stockler saw the amended case). Notwithstanding the importance of resolving this issue, and determining the limits of the claim, the Judge moved to the evidence without having made any ruling, leaving both sides unsure as to what his view was.

THE HIGH COURT JUDGMENT ON THE ISSUE OF PLEADINGS

The defendant appealed. On appeal the judge highlighted the importance of a case being fully pleaded.

Analysis – Ground 1

1. 1. I start with the issue of whether the claim was adequately pleaded so as to enable the Claimant to run a case based on an implied contractual retainer.

1. 1. The learned Judge correctly noted that there was no express or explicit reference to an implied retainer, but appears to have been the view that the claim, being pleaded in very basic terms was not limited in relation to a timeframe and/or it was somehow implied or caught within the very limited averment contained in paragraph 2(a) of the Reply.

1. 1. It has long been a fundamental rule of litigation that a Claimant’s statement of case must include all relevant facts. CPR 16.4.1(a) states that particulars of claim should include a concise statement of the facts relied upon. Relied in this context upon must mean relied upon as establishing and supporting a cause of action. CPR 16.4(1)(e) sets out that particulars of claim should also include any matters required by a PD. Relevant to the issue of an implied retainer CPR PD 16 paragraph 7.5:

“7.5 Where a claim is based upon an agreement by conduct, the particulars of claim must specify the conduct relied on and state by whom, when and where the acts constituting the conduct were done.”

1. 1. Here the pleading not only failed to comply with paragraph 7.5 as regards the material facts, it did not mention an implied retainer at all. Pleadings are meant to set matters out clearly; they should not contain hidden arguments within generalised averments. It is clear, and in my view entirely understandable, that Mr Stockler (although qualified as a solicitor acting as litigant in person) did not arrive at the hearing anticipating that he would face an alternative argument of an implied retainer. That is because the pleading gave him no adequate notice. He was caught by surprise and was unprepared for the alternative case. That simply should not have happened.

1. 1. In my judgment the learned Judge fell into error by proceeding on the basis that the pleading adequately raised the issue of an implied retainer.

1. 1. The next question is, faced with a pleading which did not adequately raise an implied retainer, what options were open to the Judge?

1. 1. In his skeleton argument, Mr Barclay submitted that if a Judge proceeds to decide a case on an un-pleaded issue, that decision will be reversed on appeal. However, he rightly conceded in oral exchanges that such a submission, without more, is far too wide.

1. 1. The overarching principle is that the pleadings frame the limits of the action. They identify the issues and the extent of the dispute between the parties; see Blay v Pollard [1930] 1 KB 628 per Scrutton LJ at 624 and McPhilemy v Times Newspapers Ltd [1999] 3 All ER 775 per Lord Woolf MR. As Mummery LJ stated in Boake Allen Ltd & others v HMRC [2006] EWCA Civ 25 at [131]:

“While it is good sense not to be pernickety about pleadings, the basic requirement that material facts should be pleaded is there for a good reason – so that the other side can respond to the pleaded case by way of admission or denial of facts, thereby defining the issues for decision for the benefit of the parties and the court. Proper pleading of the material facts is essential for the orderly progress of the case and for its sound determination. The definition of the issues has an impact on such important matters as disclosure of relevant documents and the relevant oral evidence to be adduced at trial.”

1. 1. Lord Justice Rimer referred to the role of pleadings in providing advance notice of what a party has to address at trial in Lombard North Central v Automobile World (UK) Ltd [2010] EWCA Civ 20:

“It remains a basic principle of our system of civil procedure that the factual case the parties wish to assert at trial must ordinarily be set out in their statements of case (‘pleadings’). That is not a principle based on mere formalism. It is essential to the conduct of a fair trial that each side should know in advance what case the other is making, and thus what case it has to meet and prepare for. It is the function of the pleadings to provide that information.”

1. 1. More recently in UK Learning Academy v Secretary of State for Education [2020] EWCA Civ 370, Lord Justice Richards sought to dispel any notion that the role of pleadings had diminished (at [47]):

“I would add here that I endorse the view expressed by the judge to the parties at the trial and repeated in his judgment at [11] that the statements of case ought, at the very least, to identify the issues to be determined. In that way, the parties know the issues to which they should direct their evidence and their challenges to the evidence of the other party or parties and the issues to which they should direct their submissions on the law and the evidence. Equally importantly, it enables the judge to keep the trial within manageable bounds, so that public resources as well as the parties’ own resources are not wasted, and so that the judge knows the issues on which the proceedings, and the judgment, must concentrate. If, as he said, there was “a prevailing view that parties should not be held to their pleaded cases”, it is wrong. That is not to say that technical points may be used to prevent the just disposal of a case or that a trial judge may not permit a departure from a pleaded case where it is just to do so (although in such a case it is good practice to amend the pleading, even at trial), but the statements of case play a critical role in civil litigation which should not be diminished.”

1. 1. In Satyam Enterprises Ltd v Burton [2021] EWCA Civ 287, Nugee LJ similarly held:

“35.  This is not therefore a case, as sometimes happens, where one or other of the parties seeks to run a different case at trial from that pleaded. That itself is unsatisfactory and can cause difficulties, as has been said recently by this Court more than once: see UK Learning Academy Ltd v Secretary of State for Education [2020] EWCA Civ 370 at [47] per David Richards LJ where he said that statements of case play a critical role in civil litigation which should not be diminished, and Dhillon v Barclays Bank plc [2020] EWCA Civ 619 at [19] per Coulson LJ where he said that it was too often the case that the pleadings become forgotten as time goes on and the trial becomes something of a free-for-all. As both judges say, the reason why it is important for a party who wants to run a particular case to plead it is so that the parties can know the issues which need to be addressed in evidence and submissions, and the Court can know what issues it is being asked to decide. That is not to encourage the taking of purely technical pleading points, and a trial judge can always permit a departure from a pleaded case where it is just to do so (although even in such a case it is good practice for the pleading to be amended); in practice the other party often, sensibly, does not take the point, but in any case where such a departure might cause prejudice he is entitled to insist on a formal application to amend being made: Loveridge v Healey [2004] EWCA Civ 173 at [23] per Lord Phillips MR.”

Mr Barclay relied on the final sentence for the proposition that a party need only show that a departure from the pleaded case “might” cause prejudice before an application to amend is required.

1. 1. Mr Barclay also referred to the CA decision in Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041. In that case an employee had been injured when she was struck on the shoulder by a reel of wrapping paper which had fallen from a machine. Her pleaded case was that the reel of wrapping paper had been placed on the machine by an identified fellow employee, B. In the course of her opening, the Claimant’s counsel made it clear that her case was that the reel had fallen because it had been wrongly placed on the machine by B; the defendant’s case was that the Claimant herself had placed the reel on the in-feed conveyer to the machine. The Judge then floated the possibility of a third man having placed the reel. Claimant’s counsel did not take up the third man theory and apply to amend. In her closing submissions during she sought to advance the third man theory as an alternative to her primary case. She submitted that the particulars of negligence in the particulars of claim were wide enough to encompass the third man theory. In the further alternative she said, without developing the point, that the claimant could rely on res ipsa loquitur: the thing speaks for itself. The judge accepted B’s denial of responsibility and concluded that another unidentified employee must have placed the reel on the machine. On that basis, he gave judgment in the employee’s favour. The appeal was allowed. The Court of Appeal held that the Judge had not been entitled to find for the employee on the basis of the “third man theory”. Dyson LJ relevantly stated:

“21.  In my view the judge was not entitled to find for the claimant on the basis of the third man theory. It is fundamental to our adversarial system of justice that the parties should clearly identify the issues that arise in the litigation, so that each has the opportunity of responding to the points made by the other. The function of the judge is to adjudicate on those issues alone. The parties may have their own reasons for limiting the issues or presenting them in a certain way. The judge can invite, and even encourage, the parties to recast or modify the issues. But if they refuse to do so, the judge must respect that decision. One consequence of this may be that the judge is compelled to reject a claim on the basis on which it is advanced, although he or she is of the opinion that it would have succeeded if it had been advanced on a different basis. Such an outcome may be unattractive, but any other approach leads to uncertainty and potentially real unfairness.

22.  The starting point must always be the pleadings.”

1. In the present case, the pleadings did not allow the reader to discern an alternative case to what was clearly the primary case: that the retainer letter covered work from February to November 2016. Given the fundamental importance of adequate pleadings, the Judge should have made a ruling on the issue of what case could be advanced and ensured the parties knew where they stood. In my view, he was wrong to proceed with the issue unresolved.

WHAT SHOULD BE DONE IF THERE IS AN IMPERFECTLY PLEADED CASE

Mr Justice Cotter then considered what should be done when it became clear, at trial, that the case was imperfectly pleaded.

1. 1. When faced with an inadequate pleading, the available options are ordinarily as follows:

i) If the other party takes no point, the court may proceed to consider the case beyond or outside the pleaded case. As Lord Phillips observed in Loveridge & Loveridge v Healey [2004] EWCA Civ 173 at [23]:

“Where one party advances a case that is inconsistent with his pleadings, it often happens that the other party takes no point on this. Where the departure from the pleadings causes no prejudice, or where for some other reason it is obvious that the court, if asked, will give permission to amend the pleading, the other party may be sensible to take no pleading point.”

ii) If an application to amend is made, it must be determined on its merits;

iii) If a point is taken that the pleading does not cover the case to be advanced, and no application to amend is made, the court should consider what the issues are in the case are and specifically whether the issue said not to be covered is one that falls for determination. This is necessary so that the parties know where they stand. To do so, it is first necessary to determine whether and to what extent the departure may cause prejudice. As Lord Phillips further observed in Loveridge:

“Where, however, departure from a pleading will cause prejudice, it is in the interests of justice that the other party should be entitled to insist that this is not permitted unless the pleading is appropriately amended. That then introduces, in its proper context, the issue of whether or not the party in question should be permitted to advance a case which has not hitherto been pleaded.”

1. 1. As Richards LJ observed in UK Learning Academy Ltd v Secretary of State for Education [2020] EWCA Civ 370, a Judge may in appropriate circumstances allow a party to depart from its pleaded case where it is just to do so, although it is always good practice to amend pleadings, even at trial. However, I accept Mr Barclay’s submission, set out above, that the prejudice threshold is a low one and a party need only show that a departure from the pleaded case “might” cause prejudice before an application to amend is required. If that threshold is met, it would ordinarily not be just to allow a party to depart from the pleaded case advanced up to trial. Context is important. A party who has prepared for trial not anticipating that a particular point will arise may not have the ability at the outset of the trial to fully assess the implications of a point, whether evidential or in terms of applicable law, without time, something that an adequately pleaded case would have afforded him. What Mummery LJ referred to as the orderly progress of the case in Boake Allen has been disrupted and too require more than the potential for prejudice would be unfair.

1. 1. The court should also bear in mind that a litigant in person may be at a greater disadvantage than a represented party in this regard. In the present case it is not surprising that Mr Stockler sought to reserve his position until he had chance to assess the factual and legal basis of the new case to be advanced.

1. 1. Mr Raffin submitted that Mr Stockler did not force the issue of an amendment. However, this submission fails to recognise the primary importance of pleadings and the entitlement to have the case adequately set out. In any event he made his view plain; that a secondary argument was not in issue on the basis of the pleadings.

1. 1. It was incumbent on the Judge to address the issue and given that Mr Raffin did not apply to amend he should have considered whether the case could be advanced without an amendment. To do so, he had to address whether there was the risk of prejudice to the Defendant.

1. 1. Mr Raffin submitted that Mr Stockler could not point to anything when the Judge asked what prejudice there could be if the alternative case was run. He argued that Mr Stockler could have requested more time to research the law and then made submissions. He also relied on the fact that Mr Stockler was also unable to identify prejudice when asked by the Judge during his closing submissions. By way of example, Mr Stockler did not say that he would have placed further evidence before the court and/or asked further or different questions of Mr Thomson had he known an implied retainer was being relied upon. However the problem with this submission is that Mr Stockler did not know exactly what alternative case he was facing and had not had the ability, which he should have had, to comprehensively assess the factual and legal basis of the new case before the hearing, so he was at an obvious disadvantage when asked by the Judge during opening to identify what prejudice he faced.

1. 1. As the case was never pleaded, the position was not materially different at the time of closing submissions. I accept that Mr Stockler submitted remained uncertain as to the full extent of the case advanced by the Claimant when he stood up to make his closing submission. Mr Raffin’s note of the submission records that Mr Stockler:

i) Understood that counsel for the Claimant might want to make submissions on ‘quantum meruit’ and that he was surprised that in a claim where there were pleadings and a summary judgment application, that the first time a ‘quantum meruit’ claim was heard was about five minutes before the end of closing submissions;

ii) Was of the view that it was clear that any action for quantum meruit had to be pleaded, and whilst the Judge might think that it was, quantum meruit was not pleaded, and the pleadings did the opposite and it was not pleaded as an alternative. That the trial was not prepared on that basis.

iii) If a claim was implied into the pleadings then the Claimant would have to prove how Mr Thomson was instructed, what work was done, to what extent the work created unjust enrichment in favour of the person who had instructed a solicitor, and show what the value was to him of the work done. He submitted there was no evidence of this, and that quantum meruit needed the facts on which the claim is based and these were not proved. He referred to the case of Benedetti v Sawiris [2014] AC 938 for the proposition that quantum meruit claims were very complex.

1. 1. I accept Mr Barclay’s submission that these extracts showed Mr Stockler was confused as to the case that he had to meet and wrongly thought it was based on unjust enrichment.

1. In my view, the unsatisfactory progress of the trial created procedural unfairness and with it the obvious risk that Mr Stockler could not make fully considered submissions and as a result, suffer prejudice, as he did not know the full extent of the case he had to meet. This should have been foreseen at the outset of the hearing, and the Respondent should have been put to an election of either applying to amend or accepting that an alternative case based on an implied retainer was not properly before the court.

THE OUTCOME

1. 1. Mr Barclay submitted that as the Judge had not found for the Respondent upon the argument that the letter of engagement had retrospective effect, if the finding in relation to the implied retainer is removed, then the result should be judgment for the Appellant (as the fees incurred after the letter of engagement were de minimis). He argued that it was incumbent on the Respondent to apply to amend and the decision not to do so was its choice, and that it should face the consequences.

1. 1. In my view, in this case (and unlike the position in Al-Medenni v Mars UK Ltd [2005] EWCA Civ 1041), the Judge effectively encouraged the Claimant not to apply to amend its pleadings through his comments and subsequent finding that the pleadings were adequate. Although it would nevertheless have been the safer course to have amended notwithstanding the Judge’s comments, his approach significantly contributed to the Respondent’s decision not to do so as he viewed it as unnecessary. As Mr Raffin set out in his skeleton for the appeal:

“Further to the position adopted by the Judge as to the construction of the pleading the Claimant did not apply to amend its pleadings to stipulate payment of a reasonable fee under an implied retainer.”

1. Given that I accept that the Judge’s error in relation to the pleadings did influence the Respondent not to apply to amend, it is my view that it would not be the proper course to enter judgment for the Appellant. Rather, the proper course is to remit this matter for a re-trial before a different Judge. The application to amend can be determined on its merits and, if permitted, the Respondent’s case can be fairly challenged.