Convergence Group Plc & Anor v Vellacott

This is an appeal by The Convergence Group PLC (“PLC”) and Convergence Group International SA (“SA”) from an order made by Lloyd J on 25 June 2004.

The appellants are the defendants in a consolidated action brought against them by Chantrey Vellacott, chartered accountants (“CV”). In the action, CV sues the appellants for fees in respect of work carried out by it for the group of companies of which PLC and SA are members, known as the Convergence Group (“the Group”). The work in question related to a proposed reorganisation of the Group structure, with a view to attracting investors and/or funders for major international telecommunications projects.

By their Defence and Counterclaim in the action, the appellants admit that they have not made any payment in respect of CV’s fees for the work in question, but they allege that they are not obliged to do so since CV was guilty of negligence both in relation to the content of the advice which it gave and in relation to allegedly substantial delays for which it was responsible in providing and implementing its advice. In consequence, so it is alleged, the work done by CV was worthless. In addition, by their Counterclaim the appellants claim substantial damages, including damages for the loss of an opportunity to take advantage of a window in the market to progress a substantial international project referred to as the Marco Polo Project.

The claim form in the action was issued on 14 May 2001. The Particulars of Claim are dated the same day.

The Defence and Counterclaim was served on 14 August 2001, and re-served as amended in October 2002.

By an application notice dated 8 March 2004 the appellants applied for permission to re-amend the Defence and Counterclaim in a large number of respects.

The application was heard by Master Price in the course of a case management conference on 12 March 2004. In the time available, the Master was unable to deal with all the proposed amendments. He did, however, deal with a number of them, which, in the result, he disallowed.

The appellants appealed to the judge against Master Price’s order, with the permission of Lightman J.

The hearing of the appeal took place before Lloyd J on 25 June 2004. At the hearing, the appellants renewed their application for permission in respect of the remainder of the proposed re-amendments which Master Price had not had time to consider.

By paragraph 1 of his order dated 25 June 2004, Lloyd J dismissed the appellant’s appeal against Master Price’s order dated 12 March 2004. By paragraph 3 he granted the appellants permission to re-amend their Defence and Counterclaim in a number of specific respects. By paragraph 3 he gave the appellants liberty to submit to CV revised drafts of certain further paragraphs in the pleadings which the appellants had sought to re-amend. By paragraph 4, he dismissed the appellant’s application in relation to the remainder of the proposed re-amendments.

Lloyd J refused permission to appeal to this court (in so far as he was in a position to do so, given that in respect of paragraph 1 of his order the appellants sought permission for a second appeal within the meaning of CPR 52.13).

The appellants applied to this court for permission to appeal. The application was dealt with by Chadwick LJ on paper. He adjourned the application to an oral hearing on notice, with the substantive appeal to follow should permission be granted. He expressed his reasons as follows:

“The application for permission to appeal is advanced on the basis that the appropriate test is that in CPR 52.3(6)(a) – see paragraph 9 of the Skeleton argument. That seems to overlook the fact that, in the first part of his judgment (paragraphs 1-32) Mr Justice Lloyd was plainly treating the matter before him as an appeal from the Master – so that any further appeal from paragraph 1 of the Order (as it appears in draft) would be within CPR 52.13. Permission to appeal cannot be granted by this court unless it considers that the appeal would raise some important point of principle or practice or that there is some other compelling reason for the court of appeal to hear it. The applicants have not addressed that requirement; and have not explained why they do not need to do so.

At first sight, at least, the appropriate test on the application for permission to appeal from paragraph 4 of the order (as appears in draft) is that in CPR 52.3(6) – but, as it seems to me, the proposed respondents should have the opportunity to argue the contrary if so advised. Further, it would be unsatisfactory to determine an application for permission to appeal from paragraph 4 without having, first, reached a conclusion whether there is to be an appeal from paragraph 1.”

This, then, is the adjourned hearing of the application for permission to appeal against Lloyd J’s order. In the light of the direction given by Chadwick LJ, we considered it sensible to hear full argument on all the proposed amendments before turning to the question whether (and if so, to what extent) permission to appeal should be granted.

CPR 17.1(2) provides that a statement of case, once served, may be amended only with the written consent of all the other parties (subparagraph (a)) or with the permission of the court (subparagraph (b)).

CPR 17.4 provides as follows (so far as material):

“(1)

This rule applies where –

(a)

a party applies to amend his statement of case in one of the ways mentioned in this rule; and

(b)

a period of limitation has expired under –

(i)

the Limitation Act 1980; …

(2)

The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings. ….”

It is common ground in the instant case that if the proposed re-amendments would, if allowed, add a “new claim”, within the meaning of CPR 17.4, the requirement in CPR 17.4(1)(b)(i) will be met, and CPR 17.4(2) will accordingly apply.

The Group is engaged in the international telecommunications business. The appellants allege that in or about November 1996 the Group, via Mr Robinson of PLC, retained CV to provide tax and accountancy advice in relation to a proposed reorganisation of the Group structure intended to lead to current and future international business projects being carried forward in a tax efficient and effective way, with particular reference to the obtaining of third party funding for the Marco Polo Project. The appellants allege that it was only after much chasing and complaining in correspondence that CV progressed matters sufficiently to enable the appellants to approach third party investors with a group structure suitable to attract investment.

The appellants further allege that the structure devised by CV was incorrect and unsuitable, and that the implementation of the necessary steps to create that structure was slow, careless and incomplete. They go on to allege that due to the delays which had occurred, together with foreseeable changes in the availability of funding opportunities in the international telecommunications market, the window of opportunity for obtaining such funding was lost. As a result (so they allege) very substantial costs were wasted and had to be written off, and the appellants lost the chance to bring a potentially lucrative project to the market.

For their part, CV denies almost every element in the appellants’ case. It denies that it was ever asked to formulate or implement an international restructuring of the Group, or to do so for the purpose of obtaining funding for the Marco Polo Project. In any event, it denies that it performed any services negligently, and it denies that any loss has been suffered by the appellants as a result of any advice or other service provided by CV.

By the proposed re-amendments, the subject of this appeal, the appellants seek to add to their Amended Defence and Counterclaim numerous allegations of negligence which relate, in whole or in part, and either directly or indirectly, to the period between November 1996 (the admitted date of CV’s retainer) and November 1997. For convenience, we will refer to the period from November 1996 to November 1997 as “the first year”.

The appellants contend (by Mr Anthony Temple QC, leading Mr Sean Brannigan) that the court should exercise its discretion under CPR 17.1(2)(b) by allowing the proposed re-amendments on the usual terms as to costs, since it has not been suggested that to do so would cause any prejudice to CV.

CV, on the other hand, contends (by Mr Michael Crane QC, leading Mr John Taylor) that there is no claim on the pleading as it stands in relation to the first year; and that the proposed re-amendments accordingly introduce a new claim. On that basis, it contends that the proposed re-amendments do not meet the requirements of CPR 17.4(2) in that they do not arise out of the same facts or substantially the same facts as the claim already pleaded.

The appellants respond to CV’s reliance on CPR 17.4(2) by contending that the proposed re-amendments, if allowed, would not add a new claim but would serve merely to particularise a claim (that is to say a claim of negligence by CV during the first year) which, on the true construction of the Amended Defence and Counterclaim, is already pleaded. In the alternative, they contend that if and in so far as the proposed re-amendments would, if allowed, add a “new claim”, the requirement of CPR 17.4(2) is met, in that such new claim arises out of the same or substantially the same facts as the claim already pleaded.

Further issues may arise as to the extent to which certain of the proposed re-amendments are sufficiently particularised. In addition, by a Respondent’s Notice CV contends that the proposed re-amendments are in some respects embarrassing and on that ground alone should not be allowed. However, the parties are content that we should confine our decision on this appeal to the issues raised by CV’s reliance on CPR 17.4(2).

Against that background, we can now turn to the pleading as it stands, without the proposed re-amendments. In the course of reviewing the pleading we will indicate the paragraphs which are sought to be re-amended and the general nature of the proposed re-amendments.

Paragraphs 1-5 of the pleading contain the appellants’ defence to CV’s claim. No contentious re-amendments are sought to be made to these paragraphs.

The next section of the pleading (comprising paragraphs 6 to 51) falls under the main heading: ‘The defective nature of the services provided by CV’. This section of the pleading is in turn sub-divided, under various sub-headings.

The first sub-heading (which covers paragraphs 6 to 10 of the pleading) is: ‘The original advice provided by CV in 1996.’ Under this sub-heading it is alleged (in paragraph 7) that in November 1996 Mr Robinson, as director and sole shareholder of PLC and a director of other members of the Group, approached CV on behalf of PLC and of the Group in general, and asked CV for the tax and accountancy advice to which we referred earlier. Paragraph 8 sets out various particular matters to which, so it is alleged, Mr Robinson drew CV’s attention. Paragraph 9 alleges that on 11 November 1996 Mr Heath of CV “purported to provide” advice in response to Mr Robinson’s request. (In argument before us Mr Temple has not sought to attach any significance to the expression “purported to provide”.)

Paragraph 9 goes on to allege that the core of the advice provided in November 1996 was that the Group should set up an intermediate holding company in Cyprus to acquire further offshore companies to own or run each international project as it arose.

The appellants seek to re-amend paragraph 9 to plead that CV’s original advice (given in November 1996, at the start of the first year) was “cursory in nature and insufficient to enable the Group to make an informed decision”.

Paragraph 10 of the pleading alleges that during the rest of November and the early part of December 1996 that advice was reconsidered in the light of further details of the proposed project and of the tax regulations in force in other jurisdictions. It is alleged that the result of that reconsideration was that CV advised, and the Group agreed, that the proposed intermediate holding company should be formed in Luxembourg rather than in Cyprus. Paragraph 10 goes on to allege that on 12 December 1996 a company – namely SA – was incorporated in Luxembourg.

The appellants seek to expand the pleading at this point (in a paragraph to be numbered 10.1) to include specific allegations of negligence in relation to the advice referred to in paragraph 10.

The next sub-section of the pleading (comprising paragraphs 11 and 12) is sub-headed ‘The further advice provided by CV in 1997’. The first sentence of paragraph 11 reads as follows:

“On 14 November 1997 CV provided further advice as to how the structure of the group could be further altered to fulfil the objectives set out in paragraphs 7 and 8 above.”

Paragraph 11 goes on to allege that “in simple terms” CV advised that various specific steps be taken in order to create the proposed structure, key aspects of which are listed in paragraph 12. In broad terms, the proposed structure involved the insertion of an intermediate offshore holding company between SA (as its holding company) and PLC (as its subsidiary).

The appellants seek to add a new paragraph immediately following paragraph 11 (to be numbered 11.1) alleging culpable delay in relation to the provision of advice “throughout 1997” (i.e. during the first year). They also seek to allege (in the following paragraph, numbered 11.2) that the advice given by CV in November 1997 was “over-simplified and lacked appropriate details”; and (in a further paragraph numbered 11.3) that such advice “reflected a piecemeal and unstructured approach”. Finally, so far as this sub-section of the pleading is concerned, the appellants seek to add new paragraphs (to be numbered 12.2 to 12.5) alleging continuing negligence “throughout 1997 and early 1998”.

The next sub-section of the pleading (comprising paragraphs 13 to 16) is sub-headed: ‘The Advice Provided from March 1998’. Paragraph 13 begins:

“From 14 November 1997 onwards CV purported to implement that advice….”

Paragraph 13 goes on to allege that further advice was given by CV on 9 March 1998, and that at this point CV suggested that the intermediate holding company might be a company formed in Gibraltar or in Luxembourg.

The appellants seek to expand paragraph 13 by alleging deficiencies in the advice given by CV in March 1998, and to add an additional paragraph (to be numbered 13.1) alleging that in March 1998 CV requested that a Jersey shelf company be provided, leading to the formation of a company called Amalfi Holdings Ltd on 16 March 1998.

Paragraph 14 alleges that shortly thereafter, on 13 March 1998, CV further advised that a tax-exempt Gibraltar company would be suitable as the proposed intermediate holding company, and that, in the light of that advice, CV was instructed to implement the reorganisation of the Group using an off the shelf Gibraltar company called Fergana Holdings Limited.

The appellants seek to add a new paragraph immediately following paragraph 14 (to be numbered 14.1) alleging that on or about 16 March 1998 CV “provided paperwork ostensibly implementing the restructuring in accordance with advice they had given from November 1997”.

Paragraph 15 of the pleading alleges that on or about 23 March 1998 the Group reiterated to CV that it was the Group’s intention to use Fergana Holdings Ltd as a vehicle for seeking investment in the Group as a whole, and in particular in relation to the Marco Polo project. Paragraph 16 pleads that CV gave further advice about the proposed Group structure in April, May and June 1998.

The next sub-section of the pleading (comprising paragraphs 17 to 19) is sub-headed: ‘The Request for Clarification in June 1998’. In summary, these paragraphs allege that by June 1998 the Group was becoming concerned about the amount of time which CV was taking in clarifying and implementing the proposed reorganisation, and that on 23 June 1998 Mr Robinson requested CV to provide explanations as to the effectiveness of the proposed reorganisation.

The next subsection of the pleading (comprising paragraphs 20 to 22) is sub-headed: ‘The Information supplied in July 1998’. In these paragraphs it is alleged that in July 1998 the Group forwarded to CV full details of the proposed Marco Polo Project, and made clear that the Group wished, if possible, to create a ‘European Economic Interest Group’ (otherwise known as EEIG), on the footing that the use of such a structure would carry with it substantial financial advantages including the sharing of costs.

The next sub-section of the pleading (comprising paragraphs 23 to 51) is the last sub-section of the pleading under the main heading referred to in paragraph 19 above. It is sub-headed: ‘The Discovery of defects in the Structure in September 1998’.

Paragraph 23 alleges that in September 1998 the Group became aware that significant aspects of the Group reorganisation supposedly being implemented by CV had either not taken place or had been implemented incorrectly. The pleading goes on to refer to various communications between Mr Robinson of PLC and CV, in the course of which Mr Robinson stressed that time was of the essence in relation to the progress of the reorganisation.

Paragraph 34 alleges that on 15 October 1998 CV “finally” supplied to the Group a report setting out the tax strategy to be followed. Paragraph 35 alleges that on 20 October 1998 Mr Ladimeji of CV sent to the Group a letter raising a question in relation to one particular aspect of the proposed reorganisation. Paragraph 36 alleges that the Group responded by expressing alarm that the particular matter in question had not previously been considered. Paragraph 36 goes on to plead that the Group then wrote to the senior partner of CV informing him that Price Waterhouse Coopers (“PwC”) had been appointed to review CV’s advice.

Paragraph 37 alleges that on 28 October 1998 PwC produced a report. Paragraph 38 alleges that PwC’s report caused the Group to be even more concerned about the advice which had been given by CV. Paragraphs 40 to 43 of the pleading refer to an allegedly admitted error by CV in relation to a proposed management fee of £5.2 million.

The appellants seek to add two new paragraphs immediately following paragraph 43 (to be numbered 43.1 and 43.2) relating to valuations of PLC and SA allegedly made by CV in March 1998 and a further valuation of SA allegedly made in 1999.

Paragraph 44 of the pleading alleges that in March 1999 the Group’s solicitors requested full copies of all documentation from CV, so that the Group could ascertain what steps had actually been undertaken by CV. Paragraph 45 alleges that upon receiving that documentation the Group’s solicitors discovered that “many, if not the majority, of the steps needed to implement CV’s own advice did not appear to have been actioned by CV”. Paragraph 46 pleads that on 16 April 1999 the Group’s solicitors requested CV once again to set out precisely the steps which CV considered were then required “in order to complete the reorganisation process in accordance with your firm’s original advice to the company”. Paragraph 47 alleges that no proper answer has ever been received by the Group to this last-mentioned request. Paragraph 48 alleges that accordingly from April 1999 the Group proceeded on the basis that it should follow the advice of PwC where that advice conflicted with the advice of CV.

Paragraph 50 is in the following terms:

“As a result, the Group structure was sufficiently in place by late December 1999 to allow it to issue the placing document which it had intended to place [sic] since March 1998. By that stage, however, market conditions were such that the Group/the Defendants were unable to obtain appropriate investment for the [Marco Polo] project…”

The appellants seek to insert five new paragraphs (numbered 50.1 to 50.6) immediately after paragraph 50 under the heading ‘Further particulars of the effect of CV’s actions on the Defendant’s attempts to have the Project funded’. These paragraphs contain allegations that but for CV’s negligence the Group would have been able to obtain internet funding for the Marco Polo project in March/April 1998, and that “the delays caused by CV’s failings frustrated that objective”.

Paragraph 51 pleads as follows:

“As a result of CV’s negligence and breaches of contract the Group has not been able to proceed with the Marco Polo Project and will never be able to do so.”

Then follows a main heading: ‘The duties owed by the claimant’. This heading covers paragraphs 52 and 53 of the pleading. Paragraph 52(a) pleads a duty on the part of CV to provide accountancy and tax services to the Group so as to enable it:

“…. to complete the Group structure and its placement documents within a reasonable period from March 1998.”

Paragraph 53 is in the following terms:

“For the sake of clarity the Defendant’s case is that such a reasonable period was, by the very latest, March 1999.”

The appellants seek to re-amend paragraph 52 so as to plead a duty to provide accountancy and tax services “by March/April 1998” and to delete paragraph 53. The effect of these re-amendments (if allowed) will be to bring forward the deadline for the provision of advice and services by CV by a year, from March 1999 to March 1998.

The appellants also seek to expand the allegations as to CV’s duties so as to include (in a paragraph to be numbered 52.2) an allegation that CV knew that the appellants were “reliant on CV for the timely and competent conduct of their duties”, and by including a new paragraph (numbered 53) in which it is alleged that CV’s duties arose by reason, among other things, of CV’s continuing assumption of responsibility towards PLC and SA “in the light of their knowledge and conduct as pleaded herein”.

Paragraph 54 of the pleading is headed: ‘Foreseeability’. In paragraph 54 it is alleged that CV was at all material times aware that any default on its part which caused delay would cause loss to the appellants if market conditions changed in a manner which rendered the Marco Polo project less attractive to investors; and that it was “entirely possible” that the buoyant telecommunications market in existence during 1998 and 1999 could materially change for the worse. Then follows the next main heading: ‘Breach of contract and/or negligence’. Under this heading, paragraph 55 pleads as follows:

“By reason of the above the services provided by the Claimant were provided in a manner which was negligent and/or in breach of the terms of its contract with the Group and/or the Defendant.”

Under paragraph 55 is the main heading ‘Particulars’. This heading covers paragraphs 56 to 74 of the pleading. Paragraphs 56 to 74 are in turn sub-divided, under a number of sub-headings. The first sub-heading (which covers paragraphs 56 to 58) is: ‘The Defects in the Services provided up to June 1998’. The opening words of paragraph 56 are important for present purposes. The paragraph begins:

“From November 1997 to March 1998 the Claimant continually advised that the Group adopt a re-organised structure which was defective in that …” (Emphasis supplied)

Paragraph 56 goes on to allege a number specific deficiencies.

The appellants seek to insert a new paragraph (numbered 55.1) immediately under the heading ‘The defects in the services provided up to June 1998’ containing a specific allegation of negligence in relation to CV’s conduct during the first year. The proposed new paragraph is in the following terms:

“Up to November 1997 CV failed to consider properly the requirements of the Group or the international structure most appropriate to meet those requirements or advise the Group properly or at all in relation to that structure. In particular CV failed to consider and/or to advise PLC and SA as to the relevant disadvantages and advantages of the options available to them in terms of restructuring.” (Emphasis supplied)

The appellants also seek to expand the list of deficiencies in paragraph 56 by adding a new subparagraph (56(d)) alleging (among other things) that CV failed to inform the Group of the need to obtain a valuation of PLC and SA on a timely basis.

The opening words of paragraph 57 are also important for present purposes. The paragraph begins:

“Further or alternatively the advice provided during that period was incorrect and/or negligent in that: …” (Emphasis supplied)

Particulars of the allegation are then pleaded. The appellants seek to expand these particulars by including an additional subparagraph (57(e)) alleging that CV’s advice was to the effect that PLC should become a subsidiary of SA when it knew or should have known that such a step would incur an unnecessary and substantial tax liability “which would and should otherwise not arise”.

Paragraph 58 alleges, further or in the alternative, that the actions taken by CV in order to implement “that advice” were negligent in various specified respects. The appellants seek to include, immediately following paragraph 58, further allegations of negligence in relation to the formation of Amalfi Holdings Ltd (paragraphs 58.1 to 58.4).

There follows a further sub-heading ‘The Defects in the Services provided from June 1998 to 14 September 1998’. This subheading covers paragraphs 59 to 61 of the pleading. It is not necessary for present purposes to refer to the detail of those paragraphs.

The next sub-heading is: ‘The Defects in the Services provided from 21 September 1998 onwards’. This heading covers paragraphs 62 to 72 of the pleading. Once again it is unnecessary for present purposes to refer to the detail of these paragraphs.

The next sub-heading is: ‘General Defects in the Services’. This sub-heading covers paragraphs 73 and 74 of the pleading. Paragraph 73 pleads that CV failed until September 1998 to inform the Group that it had not caused Fergana Holdings Ltd to be registered as a tax-exempt company. The paragraph begins:

“Generally CV failed at all material times to provide advice within a reasonable time ….” (Emphasis supplied)

The opening words of paragraph 74 featured prominently in argument both below and in this court, in that Mr Temple relies strongly on the expression “at all material times” in support of his contention that the proposed re-amendments do not involve the addition of any new claim. He submits that, on the true construction of the pleading as a whole, the expression “at all material times” includes the first year.

The pleading then turns to the losses allegedly suffered by the appellants by reason of CV’s negligence. Essentially, three heads of loss are alleged: (1) the cost of remedying the alleged deficiencies in the services rendered by CV, (2) wasted expenditure (alleged to exceed £15 million), and (3) loss of opportunity to progress the Marco Polo project.

The next section of the pleading is headed: ‘LOSSES INCURRED by PLC and SA as a result of this breach of Contract and/or Negligence’. Once again, there are a number of sub-headings, including ‘The Delay’ (which covers paragraph 78) and ‘The Effect of this Delay’ (which covers paragraphs 79 to 86).

Paragraph 78 pleads that had CV performed its duties in a competent fashion the Group would have had a Group structure in place sufficient to allow it to seek investment through placing documentation by at the very latest 1 March 1999. Consistently with the proposed re-amendments to paragraphs 52 and 53 (see paragraph 55 above), the appellants seek to re-amend this paragraph so as to allege that had CV performed its duties in a competent fashion, the Group would have been in a position to seek “initial” investment “by March/April 1998 and/or further funding/investment” through placing documentation by at the very latest 1 March 1999.

Under the sub-heading ‘The Effect of this Delay’, paragraph 79 alleges that by reason of the pleaded delays the Group lost the opportunity to obtain investment. Paragraph 85 pleads that had the placing documentation been in place by 1 March 1999 the Group would have been able to obtain investment from third party sources. The appellants seek to re-amend paragraph 85 in order to repeat the allegation sought to be included in paragraph 78 (see paragraph 71 above) to the effect that had the structure been ready by March/April 1998 PLC and SA would have been able to raise initial funding and investment at that time.

Paragraph 86 pleads that by reason of such delays the Group was unable to proceed with the Marco Polo project.

The final sections of the pleading plead the losses incurred by PLC and by SA as a result of the alleged delays.

As indicated earlier (see paragraphs 21 to 24 above), the issues which arise for decision on the appellants’ application to re-amend are as follows: (1) Do the proposed re-amendments seek to introduce a “new claim”, within the meaning of CPR 17.4(2)? (If not, the court will exercise its general discretion under CPR 17.1(2)(b) to grant or withhold permission.) (2) If so, does that new claim arise out of the same facts or substantially the same facts as the claims already pleaded by the appellants? If, and only if, the new claim meets that requirement, the court has a discretion under CPR 17.4(2) to allow the proposed re-amendments. (Save in respect of the matters referred to in paragraph 24 above, it is not suggested on behalf of CV that if that requirement is met there is any ground on which it could be argued that the court should nevertheless decline to exercise its discretion to allow the re-amendments.)

In the time available to him, Master Price was only able to consider the proposed re-amendments contained in paragraphs 9, 10.1, 11.1 and 55.1 (using the proposed new paragraph numbering).

He concluded, as a matter of construction of the Amended Defence and Counterclaim as it stood, that it did not include any allegation of negligence relating to the first year; and, accordingly, that the proposed re-amendments, if allowed, would introduce an “new claim”, within the meaning of CPR 17.4. In particular, he rejected Mr Temple’s submission that the expression “at all material times” in paragraph 74 of the pleading, was apt to include the first year. Turning to CPR 17.4(2), he said this (in paragraph 8 of his judgment):

“It seems to me that we have a situation where these amendments, in so far as they are introducing claims going back before November 1997, do not in fact arise out of the same facts or substantially the same facts in respect of which a claim has already been made. What is happening is that an attempt is made to introduce new claims which do not arise out of facts after November 1997 ….”

The hearing before the judge occupied the whole of Friday 25 June 2004. The parties had sensibly agreed that the judge should be invited to address first the appeal from Master Price (that is to say the appeal in respect of paragraphs 9, 10.1, 11.1 and 55.1) and to deliver judgment on that appeal; and then to go on to consider the remainder of the proposed re-amendments and to rule on them. The judge acceded to that invitation, and his judgment is accordingly divided into two parts.

In the first part of his judgment, which was delivered at the conclusion of argument on the appeal from Master Price, the judge dismissed the appeal. In the second part of his judgment, delivered at the end of the day, following argument on the remainder of the proposed re-amendments, he ruled on those re-amendments.

We turn, then, to the first part of the judge’s judgment. After reviewing the pleading as it stood, and identifying the proposed re-amendments the subject of the appeal (i.e. paragraphs 9, 10.1, 11.1 and 55.1), the judge (in paragraph 23 of his judgment) expressed his agreement with the conclusion which the Master had reached, viz. that the re-amendments in question did not come within the terms of CPR 17.4(2). The judge went on to consider, and to reject, Mr Temple’s argument on the construction of the pleading. In so doing, the judge referred in particular to the opening words of paragraphs 56 and 57, and to the expression “at all material times” in paragraph 74. In the result, he concluded that on its true construction it did not include any allegation of negligence in relation to the first year, and that accordingly the re-amendments in question, if allowed, would introduce a new claim. As to the expression “at all material times” in paragraph 74 of the pleading, the judge said this:

“29.

It seems to me that for two reasons that is not a proper or permissible reading of para.74. Without wishing to intrude into the mind of the pleader, I cannot believe that Mr. Brannigan thought at para.74 when he drafted it that he was alleging anything in respect of negligence before November 1997.

30.

There are two reasons for construing it in that way. One is that if one asked what are the material times in the context of a general allegation of negligent advice and negligent delay, both of them allegations which have been dealt with in considerable detail previously in the pleading, it seems to me that the material times are the times that have already been alleged to have been material as regards the periods of breach.

31.

The second is that if that is not right, nevertheless it would be a highly misleading way of alleging negligence both as regards the substance of the advice and the time of the advice for a whole year prior to the absolutely specific allegations of negligence from November 1997.”

The judge accordingly dismissed the appeal. It is to be noted that, whilst he expressed his agreement with the Master’s conclusion that the re-amendments in question did not come within CPR 17.4(2), the judge did not in terms address separately the question whether the new claim arose out of the same or substantially the same facts as the claim already pleaded.

As to the second part of the judge’s judgment, given the conclusion which he had reached in dismissing the appeal from Master Price (viz. that re-amendments in question would, if allowed, introduce a new claim) his ruling on the remainder of the proposed re-amendments was in large measure a foregone conclusion.

The remainder of the proposed re-amendments which the judge considered in the second part of his judgment fall broadly into three groups, although it is accepted by Mr Temple and by Mr Crane that they are all raise, to a greater or lesser degree, the issues raised on the appeal from Master Price (viz. whether CPR 17.4(2) applies, and if so, whether the requirement of the rule is met). The first of the three groups comprises those proposed re-amendments which seek to bring forward the deadline for the provision of advice and services by CV from March 1999 to March 1998. The second group comprises those which relate to alleged failures of CV in relation to the valuation of PLC and SA. The third group comprises those which relate to the formation of Amalfi Holdings Ltd.

In the result, the judge disallowed substantially the entirety of the proposed re-amendments which fell for consideration in the second part of his judgment (in some instances he granted permission on terms that the re-amendment in question be modified so as so exclude any allegation of negligence in relation to the first year). Save in relation to one proposed re-amendment (paragraph 11.2, which he disallowed for want of particularity) he did so on the principal ground that the re-amendments in question sought to introduce a new claim or new claims which did not come within CPR 17.4(2).

The judge expressed his general conclusion as to the proposed re-amendments which fell for consideration in the second part of his judgment at paragraph 66, as follows:

“66

My conclusion on those matters, as with the valuation point and the Amalfi point to which I will come, is that those are new matters. They are, at least in part and I think in the relevant respects, statute barred. They do not arise from the same or substantially the same matters that are already in issue. Of course, in a general way they do, because they arise from the relationship between the claimants and the defendants. But it seems to me that the introduction of the new case is quite distinct from the existing case as regards the time by which the documents should have been got ready. Likewise, the introduction of the case based on the Amalfi element, and also likewise the case based on an allegation that valuations should have been produced by March 1998, those are new and distinct matters which would, on the face of it, be time barred if they were the subject of a new action brought now and which are not saved by the rule. ”

By their grounds of appeal, the appellants contend that the Amended Defence and Counterclaim as it stands pleads a case of “cumulative delay” over a period which includes the first year; that this is made clear by the expression “at all material times” in paragraph 74; that in any event any new claim arises out of the same or substantially the same facts as the claim already made; and that in reaching his conclusions the judge failed to consider the pleading as a whole.

So far as permission to appeal is concerned, Mr Temple submits that given (a) that in relation to those proposed re-amendments which were not considered by Master Price this is a first appeal, and (b) that all the proposed re-amendments raise common issues, the applicable test for the grant of permission to appeal is not the test for a second appeal prescribed by CPR 52.13(2) but the lower test prescribed by CPR 52.3(6). Mr Crane, however, contends for the opposite result, on the basis that the appellants have twice been unsuccessful on the common issue whether the proposed re-amendments are caught by CPR 17.4(2).

The arguments on the substantive issues which arise on this appeal were to a large extent a rerun of the arguments deployed before the judge and (as the case may be) before Master Price. We can therefore summarise them shortly.

Mr Temple submits that on a consideration of the pleading as a whole the pleaded claim covers the first year. He relies in particular on the main heading above paragraph 6: ‘The defective nature of the services provided by the claimant’, taken in conjunction with the first sub-heading under the particulars of negligence (‘The defects in the services provided up to June 1998’) and, most significantly (as he would have it), the expression “at all material times” in paragraph 74. He submits that the expression “at all material times” is apt to “sweep up” (as he put it) an allegation of negligence in the first year, notwithstanding that that allegation had not been adequately particularised, or even possibly not particularised at all. He submits that, in context, the reference to CV’s “services” in paragraph 55 is apt to include CV’s original advice in November 1996.

Mr Temple points out that the proposed re-amendments, if allowed, do not lead to any additional claim of loss, nor to they require the addition of any other party. He submits that in re-amending in the manner proposed the appellants are doing no more than “infilling” the existing pleading.

He further submits that in considering whether the proposed re-amendments came within CPR 17.4(2) the judge failed to address the prior question whether they would, if allowed, introduce a new claim.

In the alternative, Mr Temple submits that if and to the extent that the proposed re-amendments would amount to a new claim, such new claim arises out of substantially the same facts as the claim already pleaded. He stresses that the case is one of cumulative delay over a period of years, pursuant to a single retainer, and in relation to a specific matter.

Mr Crane reminded us of Diplock LJ’s well-known description of a cause of action in Letang v. Cooper [1965] QB 232 at 242 as being simply:

“…. a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.”

Mr Crane submits that, properly construed, the pleading as it stands contains not a single allegation or complaint relating to the first year. He points to the opening words of paragraphs 56 and 57 (quoted in paragraphs 58 and 62 above), and to the fact that the two of the five specific allegations of negligence in paragraph 61 (i.e. the allegation relating to the use of an EEIG and the allegation relating to the use of a company registered in Gibraltar) can only relate to the period from early 1998 onwards. He makes the same point in relation to paragraph 73, pointing out Fergana Holdings Ltd was not bought until March 1998.

As to the expression “at all material times” in paragraph 74, he submits that the judge was right to construe “material” as meaning “material as regards the periods of breach” (see paragraph 30 in the first part of his judgment, quoted in paragraph 80 above).

Accordingly, Mr Crane submits that the judge was right to conclude that the proposed re-amendments would, if allowed, introduce a “new claim” within the meaning of CPR 17.4(2).

As to whether such new claim arises out of the same or substantially the same facts as the claim already pleaded, Mr Crane submits that in that context the proposed re-amendments cannot be considered as a whole. As to those re-amendments which seek to introduce specific allegations of negligence relating to the first year, and those which seek to bring forward the deadline for the provision of services by CV to March 1998, he submits that it cannot be said that such re-amendments arise out of substantially the same facts as the allegations of negligence relating to a later period. He submits that the re-amendments relating to valuation and to the formation of Amalfi Holdings Ltd are a fortiori in this respect.

Mr Crane relies in this context on the following passage from the judgment of Millett LJ in Welsh Development Agency v. Redpath Dorman Long [1994] 1 WLR 1409 at 1418D-E:

“[A]s Judge Hicks said, whether or not the new cause of action arises out of substantially the same facts as that already pleaded is substantially a matter of impression. It is not suggested that the judge misdirected himself in any way, and, since it is clear that he took all the relevant factors into account, we are of the opinion that he was entitled to come to the conclusion to which he did come on this issue. We cannot fault this part of his judgment in any way and we would therefore dismiss the defendants’ appeal.”

Mr Crane does not go so far as to rely on those observations of Millett LJ for the proposition that in deciding whether a new claim falls within CPR 17.4(2) the court is undertaking an exercise which is tantamount to the exercise of a discretion. He does submit, however, that they are authority for the more limited proposition that where what is required of the court at first instance is essentially a qualitative judgment an appellate court should be slow to interfere with such a judgment unless the decision at first instance was clearly wrong.

We agree with Mr Temple that in the unusual circumstances of this case the applicable test for permission to appeal in relation to the totality of the proposed re-amendments is that prescribed for a first appeal by CPR 56.3(6), that is to say a real prospect of success or some other compelling reason. In our judgment it would be an odd result, to say the least, if the fact that there is a second appeal in relation to some of the proposed re-amendments means that the applicable test in relation to the remainder should be the higher test for a second appeal prescribed by CPR 52.13(2). In any event, if that be wrong, we have heard full argument on this appeal and if, having done so, we were to come to the conclusion that the appeal should be allowed, we would regard that as a “compelling reason” within the meaning of CPR 52.13(2). As will appear, we have come to such a conclusion. We have considered the recent decision of this court in Uphill V BRB (Residuary) Ltd [2005] EWCA Civ 60 (3 February 2005), in which reference is made to the exceptional nature of the jurisdiction conferred by CPR 52.13(2). We do not regard our interpretation of the expression “compelling reason”, in the context of the instant case, as being in any way inconsistent with that decision.

Accordingly we grant the appellants permission to appeal under CPR 52.3(6), alternatively under CPR 52.13(2) (if applicable).

We respectfully agree with the Master and with the judge that the pleading as it stands, properly construed, does not plead a claim in relation to the first year. Not only is there no express complaint in relation to the first year, but the opening words of paragraphs 56 and 57 indicate clearly that the pleaded claim relates to the period from November 1997 onwards. As for the expression “at all material times” in paragraph 74, once again we agree with the judge that “material” means “material to the periods of breach”. A general “sweeping up provision” (to use Mr Temple’s expression) can, by definition, only sweep up what is left on the floor: it cannot create a claim which has not been previously pleaded. Nor do the headings on which Mr Temple relies provide any support for his construction of the pleading.

In our judgment, therefore, CPR 17.4(2) applies to the proposed re-amendments.

We accept Mr Crane’s submission that in order to the answer this question it is necessary to make what is essentially a qualitative judgment (“a matter of impression” to use Millett LJ’s expression in the Welsh Development Agency Case: see paragraph 98 above). Be that as it may, we have come to a clear conclusion on this question which is contrary to the conclusion reached by the Master and by the judge.

Of course it is right that, as Mr Crane pointed out, the proposed re-amendments make allegations of fact which are not already pleaded: that is more or less inevitable in a case of this factual complexity. But it does not follow that the new claim does not arise out of substantially the same facts as the claim already pleaded.

In the instant case, we think it does. Standing back from the mass of factual detail which is pleaded, one sees on the pleading a continuous course of conduct by CV in providing advice and services over a period of three or more years pursuant to a single retainer in November 1996 which is limited to one specific matter, namely the proposed restructuring of the Group. The case pleaded is, as Mr Temple described it, one of “cumulative delay” causing losses as at the end of the period.

Viewing the new claim in that general context, it seems to us that although the proposed re-amendments inevitably allege facts not already pleaded, nevertheless the allegations arise out of substantially the same facts as the existing claim. They stem from the same retainer and they relate to the same matter, viz. the proposed restructuring of the Group.

Paragraphs 2 and 3 of the Defence and Counterclaim admit the terms of the retainer upon which the CV’s claim is based and assert the relevant duties owed by CV which form the basis of the counterclaim as originally pleaded. Thus the duties relied upon in support of the amendments are the same as those already pleaded. The amendments add no new allegations of loss.

The first set of new breaches of duty alleged relate to the first year. The facts underlying the new allegations have already been pleaded. In paragraphs 28 to 35 above we have briefly referred to the appellants’ pleaded case in the first year. The case as pleaded sets out in detail the intentions of the appellants from the outset and identifies first the nature of the advice initially given and the subsequent reconsideration of that advice in the light of further information. It appears to us that with or without the amendments evidence as to the advice given will be put before the court.

Thus, for example (as appears from paragraphs 28 to 32 above), the appellants have already pleaded the advice given on 11 November 1996 and subsequently reconsidered and developed in November and December 1996. The new allegations in paragraph 9 and 10.1 make allegations about the quality of that advice. Then, as summarised in paragraphs 33 to 35 above, the existing pleading sets out the advice given on 14 November 1997. The new allegations in paragraphs 11.1, 11.2, 11.3 and 12.2 assert that that advice was a development of the earlier advice, seek to put it in the context of the earlier advice and allege that it was in some respects negligent.

It seems to us that with or without the new allegations the nature of the advice throughout 1997 will be under scrutiny at the trial because it forms the beginning of the process of advice already complained of. It is no doubt for that reason that the advice itself is already pleaded. It is to our minds likely to be artificial to scrutinise the quality of the later advice without any scrutiny of the quality of the earlier advice, which almost certainly formed the basis of the later advice. We have therefore reached the clear conclusion that the allegations of negligence in the first year, that is from November 1996 to the end of November 1997 arise out of the substantially the same facts as those already pleaded.

The same is true of the new allegations from the beginning of 1998 which we have referred to in paragraphs 36 to 48 above. Again it is, we think, plain that much of the advice given in 1998 will be considered by the court in any event and will inevitably have to be analysed in the context of all the related advice being given at that time. For essentially the same reasons as in the case of the first year allegations, it seems to us that the new allegations in relation to 1998 in paragraphs 12.2 to 12.5, 13, 13.1 and 14.1 arise out of substantially the same facts as those already pleaded.

Substantially the same considerations seem to us to apply to the proposed re-amendments relating to the formation and the role of Amalfi Holdings Limited (“Amalfi”).

It is plain from the summary of both the existing pleading and the proposed re-amendments (see paragraphs 49 to 74 above) that, once it is concluded that the first year allegations, the new allegations from the beginning of 1998 and the Amalfi allegations arise out of substantially the same facts as those already pleaded the remaining proposed amendments also satisfy that test.

We recognise that this court will be slow to interfere with a decision of a judge on an issue of this kind: see, for example, in addition to the Welsh Development Agency Case, Assicurazioni Generali Spa v Arab Insurance Group [2002] EWCA 1642, [2003] 1 WLR 577 and Bessant v South Cone Inc [2002] EWCA 763. However, this court has all the information which was available to the master and the judge and, at any rate in relation to the issues which were before the master, the master gave very short reasons and the judge gave no independent reasons for his conclusion on this issue. Although, as Millett LJ indicated, the issue whether the new claim arises out of substantially the same facts as that already pleaded is substantially a matter of impression, the impression must nevertheless be derived from a reasoned assessment of the relevant factors; not least because, absent a reasoned assessment, it is not possible to know whether the judge took all relevant factors into account.

It is clear from the passage from the judgment of Millett LJ (quoted in paragraph 98 above) that in the Welsh Development Agency Case the court was able to conclude that the judge took all relevant considerations into account. In the instant case, however, it is not clear whether the Master and the judge took account of the considerations which have persuaded us that the new allegations of breach of duty arise out of substantially the same facts as already pleaded.

In these circumstances, we have concluded that this court is entitled to form its own view on the question whether the new claim arises out of substantially the same facts as the old. For the reasons we have already given we have reached the clear conclusion that, if all relevant considerations are taken into account, the answer to that question is: Yes.

As to the second part of the judge’s judgment, we have already expressed the view (in paragraph 82 above) that in the light of his ruling on the appeal from the Master his ruling on the remainder of the proposed re-amendments was in large measure a foregone conclusion. The conclusions which the judge reached in paragraph 66 of his judgment (quoted in paragraph 85 above) were, inevitably, reached against the background of the conclusions which he had reached earlier. In these circumstances, this court is once again entitled to form its own view on the critical question.

Accordingly, we respectfully disagree with the judge and with the Master on this issue. We hold that the proposed re-amendments meet the requirement of CPR 17.4(2) in that, whilst they amount to a new claim, the new claim arises out of substantially the same facts as the claim already pleaded.

We grant permission to appeal and allow the appeal.