SHOULD AN ISSUE IN THE REPLY BE IN THE PARTICULARS OF CLAIM? A WORKING EXAMPLE

In Griffiths & Anor v Gilbert [2022] EWHC 3122 (TCC) HHJ Sarah Watson considered a pleading issue.  Should a point made in a Reply have been pleaded in the Particulars of Claim.  She held that, on the facts of that case, the claimant could pursue the issue. However the fact that a specific allegation was left until the Reply went on to have a considerable impact on the judge’s overall findings.

 

THE CASE

The claimants brought an action alleging that the defendant had fraudulently misrepresented that NHBC cover had been taken out for £2 million on a property that a limited company, that the defendant had been a director of, had built for the claimants. The claimants had recovered £1 million from the NHBC in relation to the property.   They had an arbitration award against the company, but it had gone into insolvent liquidation.

The claim in relation to the representations was set out in general terms in the Particulars of Claim.  Further details were set out in the Reply.

 

PRELIMINARY PLEADING POINT

The judge considered a preliminary issue taken by the defendant.  The defendant argued that the central specific allegation was only made in the Reply and not the Particulars of Claim.

    1. Mr. Khangure KC argues that, as the allegation that Mr Gilbert represented that the NHBC cover would be for the full build costs is contained only in the Reply and not in the Particulars of Claim, it does not form part of the Claimants’ case for trial and, without that allegation, the claim must fail. He argues that the allegations set out in the Particulars of Claim were true, and it is only if Mr Gilbert represented that the NHBC warranty that CEG would obtain would cover the full build costs that the Claimants might succeed in their claim.
    1. Mr Khangure relies on the case of Martlet Homes Limited v Mulalley and Co Limited [2021 EWHC 296 (TCC) in support of the argument that it is not open to the Claimants to argue the case by reference to allegations which appear only in the Reply.
    1. The Re-amended Particulars of Claim include allegations that Mr Gilbert represented that CEG would procure Buildmark cover. Paragraphs 6 and 7 of the Re-amended Particulars of Claim include allegations of representations that CEG would put in place cover for the “full cost of putting right damage“. In the Defence, Mr Gilbert pleaded that that he had stated that the Property would have the same £1 million Buildmark cover as CEG had procured for Braggington, which was a comparable development. The Claimants provided more detailed allegations of the allegations as to the representations in the Reply. They alleged that the Defendant had represented that the NHBC cover would be “for the full value or full build cost of the Property” or “for the full value of the Property, the build cost of which was just under £2 million” and that “the Company would take out and charge a fee for NHBC cover for the full value of the Property at the price set out in [the draft costings document]“. At trial, the Claimants did not pursue the case that Mr Gilbert had represented that the warranty would be for the “full value of the Property“. The Claimants’ case at trial was that representation was for the full value of the work or the full build cost, which was £2 million.
    1. No application was made to amend the Particulars of Claim to include the allegations in the Reply.
    1. Mr Woods argued that the Defendant had understood the Claimants’ case from the Reply for a considerable length of time, the parties had dealt with the allegations in the Reply in their evidence and also that HHJ Grant, when making case management directions, had directed that amendments be made to the Particulars of Claim and given permission for the Reply.
    1. I do not consider the question of any directions given by his HHJ Grant affect the question of whether the alleged representations are properly pleaded so as to form part of the Claimants’ case for trial. When the court gives case management directions, it does not advise the parties or alter the rules of pleading. The court sometimes directs that a statement of case that lacks clarity should be better particularised. Its failure to point out that an allegation in a Reply should be in the Particulars of Claim does not mean the court has made any ruling that affects the issues for trial.
    1. Mr Woods also argued that the allegations in the Reply were responsive to the Defence, which pleaded that warranty offered was limited to £1 million, and was clarification of the existing cause of action, not the introduction of a new cause of action.
    1. In my judgment, Mr Khangure is correct that allegations as to the representations relied on should be in the Particulars of Claim. However, in this case, the Particulars of Claim do include the allegations of a representation that there would be cover for the “full cost of putting right damage“. It is clear that the particulars in the Reply were intended to clarify the case in the Particulars of Claim, and not set out a new or separate cause of action. The claim was not argued on the basis that there were separate representations, those set out in the Particulars of Claim and those set out in the Reply. The allegations in the Reply were clearly intended as clarification of what was meant by “full cost of putting right damage“.
    1. The Defendant pleaded in his Rejoinder to the particulars in the Reply. He and Nathan Gilbert gave evidence on the allegations in the Reply. The parties have clearly proceeded on the basis that the Claimants’ case includes the allegations in the Reply and that the representations on which the Claimants rely are those set out in the Particulars of Claim, as clarified in the Reply.
    1. Further, without the clarification in the Reply, the Re-amended Particulars of Claim could be read as meaning that an unlimited warranty would be provided, rather than that any warranty would be sufficient, no matter what its limit. Whilst that was not the Claimants’ case at trial, as their case was that the representations made were that there would be NHBC cover for the full build costs (and not that there would be an unlimited warranty or that there would be a warranty for any other amount), I do not agree with Mr Khangure’s argument that, without the allegations in the Reply, the claim must fail.
  1. In my judgment, whilst it would have been preferable for the Particulars of Claim to be amended to include the allegations set out in the Reply, in the circumstances of this case, it would be wrong to exclude from consideration the allegations in the Reply, which serve to distil and clarify the cause of action pleaded in the Particulars of Claim rather than introduce a new cause of action.

 

HOWEVER THE CHRONOLOGY OF THE PLEADING DOES HAVE CONSEQUENCES

However the fact that the specific issue was not pleaded in the Particulars of Claim did have an impact on the judge’s consideration of the claimant’s case as a whole.   The fact that it was a late addition played a factor in the rejection of the claimant’s evidence.

    1. In the Particulars of Claim, the allegation that was made was that Mr Gilbert had represented that CEG would “obtain an NHBC warranty in the Claimants’ name to put right damage caused by defects in the building works in the event that the Company failed to complete the works satisfactorily”; and that “the Company would take out the NHBC product called NHBC Buildmark Cover”. It also contained an allegation that the draft costings included provision for fees including a line for NHBC and the quotation was “a representation that under the building contract the Company would take out NHBC insurance cover to cover the full cost of putting right damage caused by defects in the building works at the property. It is noteworthy that there was no reference to any oral representation that the cover would be for £2 million, for the full costs of the work or for the value of the Property, at that stage.
    1. Further, the wording of the alleged allegations in the Particulars of Claim appear closely to echo the wording of the NHBC warranty, giving the impression that, rather than being informed by Mr and Mrs Griffiths’ recollections as to discussions held at the time, they were informed by the terms of the NHBC warranty documents.
    1. In the Reply the Claimants alleged that “the Defendant represented that the Company would procure an NHBC warranty for the full cost of building works at the Property“; that the Defendant represented the Claimants would have cover “for the full value of the Property, the build cost of which was just under £2 million“; that “the Company would take out and charge a fee for NHBC cover for the full value of the property at the price set out in [the draft costings document]” and that the Defendant knew he would not obtain a warranty “for the full value or full build cost of the Property
    1. These allegations as to the discussions including references to build costs or full build costs or the value of the Property were not made until the Reply was served. Even then, the allegations are not clear, in that they refer both to the value of the Property and build costs, which would appear to be inconsistent allegations. The value would usually be a higher figure than the build costs. Mr Gilbert estimated £2.5 million as the selling price when he spoke to NHBC to effect the cover; Mr Griffiths put the total price at £3 million, being £2 million for the cost of the work and £1 million for the land, when he accepted NHBC’s offer of cover. An allegation that there would be cover for the value of the Property would presumably mean cover in excess of the build costs. The case that the cover should be to the value of the Property was not pursued at trial, but I note that it was pleaded despite its inconsistency with the Claimants’ evidence at trial.

 

Conclusion as to oral representations
  1. For the reasons set out above, I find that Mr Gilbert did not orally represent to Mr and Mrs Griffiths that CEG would obtain NHBC cover for the full build costs or for £2 million. I find that the only representations he made were those he admits, being that CEG was an NHBC registered builder about to acquire A1 status, that the Property would be built to NHBC standards and that CEG would obtain an NHBC Buildmark warranty which would offer the same, standard, cover of £1 million as CEG had obtained for its development at Braggington.