PLEADINGS, APPEALS AND THE DROP OF A HAMMER: A HIGH COURT DECISION

In SPS Groundworks & Building Ltd v Mahil [2022] EWHC 371 (QB) Mr Justice Cotter reiterated the point that statements of case are important. Any issue as to the scope of the pleadings should be determined at the outset of the trial.

 

I repeat that it is unfortunate (and I assume Counsel are correct in their recollections on this matter) that the Judge did not provide a ruling at the outset of the case as to whether the pleaded case adequately covered the Respondent’s case as to incorporation of the terms and conditions so that the issue fell for determination. He should have done so”

THE CASE

The dispute related to a property bought at action in which the defendant/appellant had agreed to buy from the claimant/respondent at auction. The defendant refuse to complete.  The claimant sold the property at a lower price at a later auction and claimed the difference in price from the defendant.  The claimant succeeded at trial. The defendant was successful on appeal.   Mr Justice Cotter considered an argument based on the failure to plead certain points, the defendant did not succeed on these particular issues, but did succeed overall.

THE “PLEADING POINT”

The issue was whether terms in the auction contract had been incorporated into the contract at the drop of the hammer. The claimant relied on these points, the defendant objected on the grounds that this was not pleaded.

THE ISSUE AT TRIAL

    1. At the outset of the hearing it was clear that the Respondent’s case was that the contract incorporated terms set out in the auction catalogue and was formed at the drop of the hammer. Mr Taylor submitted that this had not been pleaded; rather that the pleaded case was that the contract was formed by signing the memorandum of sale; which he submitted was clearly wrong (as he had pleaded). I have no transcript of the exchanges on the issue and Mr Taylor states the Judge did not give a judgment as to the adequacy of the pleading at the outset of the case. If this is so it is unfortunate as Mr Taylor has argued on appeal that had he known that the Judge’s view was that the Respondent’s case was that the brochure terms were incorporated into the contract at the time the hammer fell he would have conducted the case differently. By way of example he would have requested the video of the auction to ascertain what was said by the auctioneer.
    1. The Learned Judge dealt with the issue in his Judgment as follows:
“41. What do I draw from the evidence and the submissions? I am going to deal with those in turn. If I turn first to what I am going to call the pleading point. Counsel for the Defendant submits that the Claimant pleads that the memorandum of sale incorporated the common auction conditions found in the auction brochure, SDL’s auction conditions, and the terms and conditions set out in the memorandum of sale. The Defendant submits that this cannot be right because the contract was formed at the fall of the hammer and the memorandum of sale was only produced thereafter.
42. The Claimant submits that it is common ground that the contract is formed at the fall of the hammer. The Claimant puts it that the Claimant’s case has been obviously set out in the particulars of claim, that the terms and conditions are incorporated into the contract within the auctioneer’s brochure, that the notice to complete was served in accordance with the terms and conditions, that the Defence adequately deals with the notice to complete without raising the issue that there was no contractual ability to file and serve a notice to complete, and that the Claimant’s case has been obviously set out. The Defendant submits that the whole tenor of the Defendant’s evidence would have been different if the claim had been pleaded differently. In my judgment the particulars of claim adequately set out the Claimant’s case.”

THE PLEADINGS POINT ON APPEAL

Mr Justice Cotter reiterated the importance of pleadings.  The matter should have been dealt with as a preliminary issue at the trial. However this did not form the basis for

  1. It is the fourth ground of appeal that alleges the Judge fell into error in his approach to the pleadings and I will return to the issue.
    1. The fourth ground was what the Judge described as the pleading point. Specifically it is argued that the Judge was wrong to exercise his discretion to allow the Respondent to argue (the matter not having been pleaded) that the common auction conditions and/or SDL’s auction conditions had been incorporated into the contract of sale.
    1. Mr Taylor submitted that the only way that the Respondent expressly pleaded that the terms and conditions were incorporated was as a result of the Appellant signing the memorandum of sale. However, as the contract was concluded when the hammer fell, this argument was clearly wrong.
    1. Mr Diggle submitted that the Respondent’s case that the terms and conditions set out in the brochure were incorporated into the contract which was formed when the hammer fell was set out with paragraph 9 of the particulars of claim. He relied on the use of the words “together with the terms and conditions” and argued that the Appellant well knew that incorporation was through the content of the auction catalogue. As a result the Judge was correct to find that the issue was properly before the Court and no amendment was needed. Further the Judge specifically stated that he did not accept that the Appellant’s evidence would have been presented differently “if the pleaded case was more obviously saying that. The Defendant has been able to address the issues in relation to the terms and conditions”.
    1. It is unfortunate that the arguments as to the adequacy of the pleading did not lead to a determination by the Judge at the outset of the case. Both parties would then have known where they stood. As I understand matters (and no transcript is before me) it was left unresolved until the Judgment within which the Judge found that the pleadings were adequate and even if they had been he would have allowed an amendment.
    1. The ground refers to an exercise of discretion, but the Judge’s primary finding was that the pleading was adequate. Mr Diggle (who did not settle the pleading) concedes that it was not as clear as it might have been but adequately raised the issue. If the Appellant was in doubt as to what was being advanced further information could have been requested.
    1. Mr Taylor submitted that he conducted the case on the basis that the incorporation of the terms and conditions in the brochure at the fall of the hammer was not a pleaded issue and so not one that he needed to address. He did not seek extra evidence before the trial such as video recording of what transpired at the auction and did not cross-examine the Defendant’s witnesses on the point. As I have set out the Judge, who had the benefit of hearing all the submissions and questioning of witnesses expressly rejected that submission.
    1. I have recently reviewed the importance of pleadings and the principles to be applied when a dispute arises at the outset of a case as to whether a case is being advanced beyond what is in the pleadings in Charles Russell Speechly PLC-v- Beneficial House ( Birmingham) Regeneration LLP [2021] EWHC 3458 (QB). As I stated in that case 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 means 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 the formation of a contract CPR PD 16.5 sets out;
“7.4 Where a claim is based upon an oral agreement, the particulars of claim should set out the contractual words used and state by whom, to whom, when and where they were spoken
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. As I set out in Charles Russell Speechly PLC
“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.”
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. I repeat that it is unfortunate (and I assume Counsel are correct in their recollections on this matter) that the Judge did not provide a ruling at the outset of the case as to whether the pleaded case adequately covered the Respondent’s case as to incorporation of the terms and conditions so that the issue fell for determination. He should have done so. As for his ruling as set out in the reserved judgment, whilst I can see considerable force in the submission that the pleading could have been clearer and “more obvious” and, despite the fact that he pleading did not expressly cover the matters required in Practice Direction, given the relevant factual circumstances in this case I do not accept that he fell into error in finding that the issue was adequately raised so as to be before the Court. It is also clear that if the Judge had been of the view that the issue was not properly pleaded he would either permitted a departure from the pleaded case or allowed an application to amend.