McLouglin v Jones & Ors

J U D G M E N T

1. LORD JUSTICE MOORE-BICK: This matter comes before the court by way of an application for permission to appeal against an order made by Mr Justice Eady on 12 May 2005 striking out part of the applicant's schedule of loss. This case has a long and tortuous history. It arises out of a criminal prosecution in January 1993 in respect of which the claimant was represented by the defendant firm of solicitors.

2. The following brief description of the background to the criminal proceedings is taken mainly from the applicant's statement of claim, but as far as it goes it is not controversial. For some time prior to 1992 the applicant carried on business as a builder and a private landlord owning a number of houses which he rented out as flats. In June 1992 he was arrested and charged with offences of robbery and causing grievous bodily harm with intent. The complainant was a Mr Martin who was one of the applicant's tenants. He alleged that the applicant had assaulted him when seeking to collect arrears of rent and had forced him to hand over £60 which he had in his car. The applicant denied the allegations. He admitted that he had visited Mr Martin on the morning in question, but said that he had found him already suffering from a severe beating. He admitted that he had received £60 from Mr Martin, but said that he given it to him voluntarily. The defendants acted as his solicitors in relation to the prosecution.

3. In January 1993 the applicant was tried at Manchester Crown Court and was convicted on both counts. He was sentenced to a term of four years' imprisonment. However, in the light of the evidence of a witness who came forward after the trial, the Court of Appeal quashed his conviction and ordered a retrial. The applicant was released on bail, but by then he had spent three-and-a-half months in prison. In August 1993, after a retrial, the applicant was acquitted of both charges. He was aggrieved at the way in which the defendants had conducted his defence, but he took no steps to issue proceedings against them until 1998.

4. On 3 July 1998 he issued a writ claiming damages for professional negligence in advising him and subsequently representing him in relation to the prosecution. The writ was served in October 1998.

5. On 13 November 1998 a statement of claim was served, the principal allegation being that he had instructed the defendants to carry out investigations as appropriate with a view to finding out who had beaten up Mr Martin on the day in question. In particular, he says that he instructed the defendants on no less than three separate occasions that he wanted an investigation carried out by an inquiry agent and an advertisement placed in the Manchester Evening News asking for any witness to an assault on Mr Martin to come forward. He says the defendants failed to make those inquiries. He also complains that they told him that his trial, which by then had been fixed for 4 January 1993, would be adjourned because his case was not ready. However, he says no steps were taken to adjourn the trial, that the defendants failed to warn him that he should attend court and that in the event he had to rush to court in a state of unpreparedness. After a three-day trial he was convicted of both offences. He goes on to allege that only after his conviction did the defendants place an advertisement in the newspapers which led to the witness coming forward on the basis of whose evidence his convictions were later quashed. He claims damages for the loss of his liberty, stress, humiliation, psychiatric harm and loss of earnings.

6. Together with the statement of claim there was served a document described as a schedule of special damage and future loss which contained a claim for £211,786.10 and interest of £105,893.05 in respect of three heads of loss. First, there was a claim for loss of rental income caused by adverse publicity and consequent difficulty in finding tenants and the need to sell one property to pay for legal fees. It is right to say that a breakdown of that claim was given on a yearly basis, but that otherwise no details were given of how the sums were calculated. Secondly, there was a claim in respect of legal fees. Thirdly, there was a claim in respect of loss of income as a builder. That was also broken down on an annual basis, but apart from that no particulars were given of how the figures were calculated. The applicant also claimed what are described as post-trial losses in the sum of £238,796 by way of loss of future income. The schedule contains a helpful summary on the last page in which the total claim is put at £556,475.

7. On 15 January 1999 the defendants served a defence in which they denied that they had been instructed at any time before the trial to employ an inquiry agent or to place an advertisement in the papers. They admitted that an advertisement had been placed in the papers at the applicant's request after the trial. They took issue with the implicit allegation in the statement of claim that if an advertisement had been placed earlier it would have produced the same response. They took issue with all the allegations of psychiatric harm and damage. They also pleaded a limitation defence in relation to the claim insofar as it was a claim for personal injury and consequential loss.

8. Between 2000 and 2002 both the statement of claim and the defence were amended, but the amendments did not alter the essential shape of the proceedings and do not matter for present purposes, although it is right to point out that the applicant made no attempt at any stage to serve an amended schedule of loss.

9. On 7 December 1999 an order was made on the application of the defendants for the trial of certain issues relating to liability. The matter came on for hearing before Mr Justice Elias in Manchester in July 2000 who struck out the applicant's claim for psychiatric harm on the grounds that it was unsustainable in law.

10. The applicant appealed and in November 2001 this court allowed his appeal and reinstated that part of his case. The remainder of the period between 2000 and 2004 was taken up with amendments to the pleadings to which I have already referred and with initial preparations for trial.

11. During that period the proceedings advanced only slowly, but it is necessary to draw attention to one important step. On 28 February 2003 District Judge Hugman in Manchester made an order requiring service of witness statements by 3 June 2003, sequential exchange of experts' reports from accountants and letting agents by 22 July and 12 September respectively and service of an up-dated schedule of loss by the applicant by 27 July. None of those directions was complied with.

12. In October 2004 the defendants applied to strike out the claim on the grounds that the applicant had failed to comply with orders for disclosure and that it was no longer possible for there to be a fair trial. The matter came before Mr Justice Simon on 17 February 2005 when he dismissed the defendant's application and gave further direections for preparation of the case for trial. He ordered that witness statements should be served on 4 April; he ordered sequential service of experts' reports on 4 April and 9 May respectively and gave permission to the applicant to serve what is described in the order as an “up-dated” schedule of loss, again by 4 April. He fixed the trial to commence on 4 July. On the face of it, there was enough time for the parties to prepare for trial provided they acted diligently.

13. I have drawn attention to the history of the proceedings because, in my view, it provides important background to the application as it came before Mr Justice Eady. It is, in my view, of particular note, first, that the issues relating to liability turn almost entirely on events that took place over 12 years ago and, to a large extent, concern instructions said to have been given orally by the applicant to his solicitor. For that reason alone it was important that the trial should take place as soon as possible. Secondly, when the matter came before Mr Justice Eady the trial had been fixed some two-and-a-half months earlier to commence in two months' time. Now, of course, it is just over a month away.

14. On 4 April 2005 the claimant served a revised schedule of pecuniary loss which has been formulated by reference to a report made by one of his expert witnesses, Mr Harris. In this document he claimed, first, loss of income as a builder and landlord in the sum of £695,968 up to the date of trial. It appears that this claim proceeds on the basis that the rental business would have expanded as a result of the purchase of additional properties but that there would have been a corresponding contraction of the building business. Secondly, he claimed a loss of future income from these two sources in the sum of £106,750. Thirdly, and most importantly for present purposes, he claimed a loss of capital appreciation. That claim fell into two parts: first, the loss of the capital gain he would otherwise have made on properties that he said he had been forced to sell in the sum of £789,066; and secondly the loss of a capital gain on he would have made on properties that he says he would have bought in the course of his business as a landlord in the sum of £2,266,833. The total of those claims on my calculation comes to £3,858,617, to which is to be added a claim for interest which takes the total over the £4,000,000 mark.

15. On 22 April 2005 the defendants applied to strike out the claim for loss of earnings insofar as it was based on the acquisition of additional properties and also both limbs of the claim for loss of capital appreciation. The matter came before Mr Justice Eady on 9 May when he allowed the defendant's application and struck out those parts of the schedule of loss. He took the view that the allegation that the applicant would have purchased additional properties and the claims based on it raised entirely new matters of which the defendants had not had prior notice. He considered that they were matters for which the applicant needed permission to amend and that to introduce claims of that nature and magnitude at such a late stage in the preparations for trial was, in his words, “unacceptable and oppressive”. It is from that order that the applicant now seeks permission to appeal.

16. I begin by reminding myself that the application was one which called for the exercise by the judge of his discretion, and that this court can only interfere with his decision if it is satisfied that he misdirected himself in law or that he failed to take account of some relevant factor or took account of some irrelevant factor or that, viewed overall, his decision is obviously wrong. Mr Gibson QC, who appeared today on behalf of the defendants, referred us to the case of G v G [1985] 1 WLR 647, and in particular to the passage in the speech of Lord Fraser of Tullybelton at page 652C which is one of the many places in which that principle is to be found.

17. The judge considered that the changes to the schedule of loss involved a significant departure from the case previously advanced so that it should, for practical purposes, be treated as an amendment for which permission was required. Mr Stewart QC, on behalf of the applicant, has submitted that he was wrong about that. He contended that the applicant did not need permission to amend because he was simply providing up-dated particulars of existing heads of damage as contemplated by Mr Justice Simon's order. However, in my view the fact that the new schedule was served pursuant to the order of Mr Justice Simon takes the matter no further. That order has to be viewed in context. It was only a reiteration of the order made by District Judge Hugman in February 2003 with which the applicant had failed to comply. At the time each of those orders was made the original schedule of loss still stood and there had been no suggestion that the applicant wished to reformulate his claim in any way.

18. I doubt whether it is right to say that in formal terms the heads of damage being claimed by the applicant had not changed. The original schedule contained a claim for loss of rental income and a claim for loss of income derived from the applicant’s building business. The new schedule introduced claims for loss of capital appreciation which are quite different in nature, but even if the heads of damage remained the same in legal terms, the nature of the claim and the issues to which it gave rise were substantially different.

19. The original schedule, although not very detailed, made it clear what the nature of the applicant's case was. It did not include any claim based on the acquisition of additional properties, nor did it include any claim for the loss of capital appreciation. In my view Mr Justice Simon's order, like the order of District Judge Hugman, merely entitled the applicant to bring the original schedule served in November 1998 up to date by substituting current figures for loss of income and providing further details of the manner in which they had been calculated. It did not permit the applicant to introduce without warning a claim for a wholly new type of loss. Before allowing an amendment of that kind I think it inevitable that the court would have wished to see a draft in order to consider what the implications might be for the preparations for trial and indeed for the trial itself.

20. In my view, therefore, the judge was right to approach the application in the same way as he would have approached an application for permission to amend. As far as that is concerned, I consider that in general the court should lean in favour of giving permission to amend at any stage in the action so as to enable a party to raise any fairly arguable case provided it can do so without injustice to the other side. It is highly desirable to ensure that the whole of the dispute is before the court, both to promote finality and to ensure that the court is not hampered in reaching a fair and just conclusion by virtue of the fact that some issues are not before it. It is also I think highly desirable to ensure that as far as possible the parties to the action have the opportunity to raise any matters which they consider relevant to ensure, as far as is reasonably possible, that they do not go away feeling that they have not had an opportunity to put their cases fully.

21. However, when a party seeks to amend its case shortly before trial, it is necessary to consider whether the other party will have a fair opportunity to deal with any new issues that arise. That involves considering the implications of the new case in terms of matters such as disclosure, witness evidence and perhaps also expert evidence in order to evaluate the effect the amendment will have on the trial itself and the difficulty likely to be encountered in meeting the new case. It is also relevant to consider other factors, such as whether the party seeking to introduce the new issues has acted promptly; whether prior notice of the new case has been given to the other side and, if so, how much; what would be the consequences of an adjournment of the trial if that were necessary to provide adequate time for preparation, and so on. Considerations of this kind have to be set against the prejudice that will be suffered by the party wishing to amend if it is prevented from advancing its new case. In each case the court must take into account the particular circumstances in deciding where the interests of justice lie.

22. The question in this case is whether in all the circumstances the applicant should be allowed to raise new issues of this kind at this stage having regard to the difficulties they are likely to cause the defendants and the impact on the trial itself. Mr Gibson submitted that the applicant and his solicitors had consciously refrained from giving the defendants notice of their intention to amend as a tactical manoeuvre and if it had been the applicant's case from the outset that he would have purchased additional properties on a regular basis, it is surprising that no hint of that appears in the original schedule of loss. It would obviously have a bearing on his calculation of loss of rental income. It is also surprising in my view that no amended schedule of loss was served, formally or informally, at any time between November 1998 and April 2005 when the schedule currently under consideration first saw the light of day. I find it all the more surprising that nothing was said when the matter came before Mr Justice Simon because at that stage there was some discussion about disclosure in relation to quantum and whether there could still be a fair trial. That was obviously an opportunity to clarify the position.

23. However we have had the benefit of hearing from Mr Stephenson, who appeared before Mr. Justice Simon, and he has explained how the matter was viewed from the perspective of those acting for the applicant. He has assured us that there was at that stage no deliberate concealment of the applicant's intentions, and we accept what he says. This is one of those cases, it seems to me, in which, as Mr Stewart suggested, the position can appear very different to parties viewing it from fundamentally different perspectives. The defendants were misled as to the applicant’s intentions, but not deliberately so.

24. In my view the claim for loss of capital appreciation is fundamentally different in nature from any of the claims set out in the original schedule. In my view it gives rise to some important questions which have not yet been investigated. For example, what funds would have been available to the applicant at any particular time? How much borrowing could he sustain? How much renovation work would the properties have required? What would have been the cost of the renovations? These are all issues which, I think, are likely to prompt legitimate requests for further information and may call for further disclosure, although we have been told that all the documents in the applicant's possession have already been disclosed. They would almost certainly require careful investigation by the defendants, no doubt with expert assistance.

25. I am satisfied that even at the time when the matter was before the judge the defendants would have been placed in great difficulty in dealing with matters of this kind in time for a trial starting at the beginning of July.

26. The claim for loss of capital appreciation of the properties which the applicant says he has been forced to sell is in some respects similar. However, as Mr Stewart pointed out, and as Mr Gibson fairly accepted, most of the issues to which it gives rise will have to be investigated in any event in order to deal with the claim for loss of rental income. It is true that the current values of those properties is an issue which is now introduced for the first time, but it is not one which gives rise to the same complexities. It appears that the distinction between these elements of the claim, which are reflected in schedules 4 and 5 to the new pleading, was not drawn to the attention of the judge who cannot be criticised for having failed to address it in his judgment. However, it is a material factor to take into consideration and in those circumstances I am satisfied that his decision cannot stand and that we must now exercise our own discretion in the matter.

27. Mr Stewart submitted that the defendants are largely to blame for the fact that these proceedings have dragged on for so long and I can see some force in the suggestion that latterly the delay may have been more the fault of the defendants than the claimant, but in my view there is little to be gained by attempting to apportion blame in the matter. The tenor of Mr Justice Simon's judgment is that for most of the time neither of the parties was taking the steps required to bring the case to trial and in my view each of them had ample opportunity to ensure that it came to trial much more quickly. It is particularly relevant that the applicant failed to comply with the order of District Judge Hugman for service of witness statements, experts' reports and an up-dated schedule of loss. Therein, it seems to me, lie the seeds of the present problem. It is difficult to understand why, if the applicant thought his businesses were likely to develop in the way suggested, a revised schedule of loss could not have been served at an earlier stage. Had he done so in July 2003, it is likely that permission would have been given to introduce a new claim. It may be that if the matter had been raised at any time before the case came before Mr Justice Simon, permission would have been given and directions would have been set so as to accommodate the preparation time required, but that was not done. On that occasion the judge gave directions in the understanding that the case remained substantially the same.

28. One of the factors that we have been asked to consider on this application is the possible adjournment of the trial. It would, of course, be possible to adjourn the trial, but that would mean further delay in what is already an extremely stale case. Mr Justice Simon was not satisfied that a fair trial was impossible, but he plainly considered, quite rightly in my view, that it should be held as soon as possible and gave directions accordingly. If the trial were adjourned now it is unlikely to be relisted for several months and in my view it would not be right to take that course at this stage. I think it is essential that this matter should be disposed of as soon as possible.

29. We were also asked to consider whether the issue of damages could be determined separately from that of liability and put back to a later date. It seems that that was contemplated as a possibility by Lord Justice Brooke when the matter was before this court in November 2001, but things have moved on since then. The issues to which the new schedule gives rise are likely to call for evidence from the applicant himself and perhaps other witnesses of fact. Some of that evidence is likely to overlap with the evidence on liability and there are serious issues of credibility in this case which make it essential that all the evidence be heard together. I think the whole matter needs to be determined without delay.

30. Mr Stewart submitted that the judge failed to take into account the fact that any order striking out parts of the new schedule would give rise to a conflict of interest between the applicant and his solicitors which would inevitably lead to an adjournment of the trial. He suggested, as delicately as he could, that in those circumstances the trial would have to be adjourned which would allow the defendants additional time to prepare for the new issues. For my own part, I do find that an attractive submission. Although I would not necessarily exclude from consideration altogether such difficulties as the applicant may have with those who have acted for him hitherto, I think much greater weight should be given to considerations of the kind mentioned earlier and in particular to the prejudice likely to be caused to the defendants in being required to meet a new case of this kind very shortly before the trial.

31. I have explained why I consider it desirable that the trial be heard as soon as possible. If, however, as a result of our order an application is made for an adjournment, it will be for the judge who hears that application to consider what order he should make in the light of all the circumstances as they then stand.

32. Another matter that was canvassed before us was the significance of the defendants’ professional indemnity insurance. Mr Stewart submitted that the judge had wrongly attached significant importance to the fact that the claim as now formulated substantially exceeds the level of cover available to the defendants whereas before it had not done so.. It is true that it was given some prominence in the statement of Miss Karow, to which the judge referred in his judgment, but as I read his judgment it did not play a large part in his reasoning. In my view it is, at best, a relatively minor factor. I think there is some force in Mr Gibson's submission that the conduct of the litigation is likely to have been influenced to some extent by a consideration of the extent to which the defendants were uninsured and that there is therefore a degree of prejudice in having to come to grips with a greatly increased claim shortly before trial. However, there is a limit to how far this point can be pressed. As the litigation wore on there were increasing grounds for thinking that if the applicant were successful at trial the total amount he was likely to recover, including interest and costs, would exceed the cover available to the defendants.

33. As I read the note of his judgment, I am not persuaded that the judge was primarily influenced by the defendants’ position in relation to their insurance or that he gave it too much weight. What troubled him was the fact that claims were new, that the defendants had been given no prior notice of them and that to introduce them at that stage would be oppressive.

34. In my view he adopted the correct approach. He stated his views in succinct terms, but he clearly concluded that it would be unjust in all the circumstances to require the defendants to meet a new case of this kind so shortly before trial. However, in reaching that conclusion the judge did not have his attention drawn to the distinction between the losses reflected in schedule 4 and those in schedule 5 which he understandably failed to take into account.

35. I would therefore grant the application for permission to appeal.

36. Approaching the matter afresh, I come back to the question which I think lies at the heart of the matter, namely, whether the defendants have a fair opportunity of dealing with the new issues at the trial fixed to begin on 4 July. For the reasons I have already given, I think that even now it should be possible to deal with all the claims arising out of the sale of the properties mentioned in schedule 4 which, in any event, represents an integral part of the claim for loss of rental income. The claim covered by schedule 5 and the claim for loss of rental income insofar as it turns on the allegation that the applicant would have acquired additional new properties from time to time seems to me to raise many new issues which the defendants cannot properly be expected to grapple with satisfactorily in the time available. Since, for the reasons I have already given, I do not think it would be in the interests of justice for the trial or any part of it to be adjourned, I would allow the appeal to the extent of reinstating the applicant’s claim for loss of capital appreciation in relation to properties sold as a consequence of the defendants’ breach of duty. However, I would not disturb that part of the judge’s order which strikes out those parts of the claim that depend on the acquisition of additional properties.

37. LORD JUSTICE NEUBERGER: I agree both with the conclusions expressed by Lord Justice Moore-Bick and with the reasons he gives in their entirety. The application will be therefore allowed and the appeal allowed albeit only to an extent, namely the extent indicated by my Lord.

( A short discussion )

38. LORD JUSTICE NEUBERGER: So far as costs are concerned, there are four issues. The first is the costs below in front of Mr Justice Eady; the second is the costs in front of us; the third is the costs of the application to Mr Justice Eady for permission to appeal; and the fourth is the costs of the abortive hearing before Mr Justice Curtis.

39. So far as the third set of costs is concerned, things can seem different with hindsight from how they seemed at the time, but the application for permission to appeal could have been made at the end of the judgment of Mr Justice Eady. The costs therefore of the application hearing should be borne by the claimant in any event.

40. The costs of the abortive hearing before Mr Justice Curtis arose in this way. The claimant's bundles had not been received by the judge in time, and he adjourned the case to Mr Justice Eady on the basis that he was not prepared to deal with it having been supplied with the bundles so late. It is unclear whether the bundles failed to get to Mr Justice Curtis because of fault on the claimant's side or the fault of the court. It seems to us that where parties' bundles do not get to the judge in time then - in the absence of that party establishing that it was the court's fault - that party must take responsibility for the bundles not arriving. In the present circumstances it was not clearly the court's fault. It is unfair that the defendants should be liable for costs, and the costs thrown away before Mr Justice Curtis will therefore be paid by the claimant.

41. As for the first and second set of costs - the much more substantial set of costs - it seems to us that as Mr Stewart says and Mr Gibson fairly accepts they are to some extent the mirror image of each other. On one view it can be said that the defendants and the claimant each got something here and below in the result. It seems to us that in those circumstances one could take the course of awarding the claimant some of its costs here and the defendants some of their costs below. Alternatively - and this is the course we prefer because it will involve no assessment of anyone's costs and represents a neater and fairer solution - we could make no order for costs here and below. That is the order we propose to make.