Harbour Castle Ltd v David Wilson Homes Ltd

The claimant, (now appellant), is a company based in the Isle of Man. It has but two shares which have been issued and paid, and they are both held by Mr Phillip Jeans. He acts as a director of the company, when required, to represent its interests in court.

On 26 October 2004, the claimant and the defendant, (now respondent), a house-building company, entered into an “Option Agreement” in relation to potential development land, owned by the claimant, called Park Mill Farm. This litigation began life in June 2009 as a simple claim for recovery of debt resulting from that agreement of a precise sum, namely £308,827.39 plus interest.

The Particulars of Claim ran to two pages and alleged that, under the Option Agreement, the defendant was obliged to pursue a planning application in relation to the farm and to meet the costs thereof; further that, at a meeting in 2008, the defendant agreed that the claimant should continue the planning application on the defendant’s behalf and at the defendant’s expense. Accordingly, the claimant pursued the planning application and, it was said, incurred significant costs in so doing. The claimant then sent three invoices to the defendant demanding payment of those costs, only one of which, the first, was paid. The claimant sued on the last two invoices, which remained outstanding and together amounted to £308,827.39.

A Defence was served in which the defendant denied any obligation to pay the claimant’s costs and put the claimant to proof of the reasonableness and genuineness of the claims made. In its Reply, the claimant relied upon the terms of the written of the Option Agreement, including one to the effect that the claimant would “use reasonable endeavours to assist the [defendant] (at the [defendant’s] cost) to obtain Acceptable Planning Permission.” Further, the claimant provided a breakdown of the costs it claimed to have incurred. Thus, battle was joined on a relatively simply issue.

The trial was listed for three days before HHJ Seymour QC, starting on 20 April 2010. Both sides were represented by solicitors and counsel up until the night before. On the morning of the trial, Mr Jeans arrived at court and informed the judge that he had sacked the claimant’s entire legal team the previous evening. He requested an adjournment to allow the claimant to instruct fresh legal advisors, including leading counsel to whom he said he had already spoken, and to explore the possibility of increasing the scope of the claim by millions of pounds.

During the course of submissions the judge indicated to Mr Jeans that, in his view, the original claim and the Particulars lacked clarity. The judge declared himself unsure whether the claimant was relying upon the original written agreement and/or any subsequent oral agreement or variation. He wanted to know how long it would take Mr Jeans to instruct his new lawyers, to advise the claimant on the claims it wished to pursue and to prepare and serve any new Particulars of Claim. Mr Jeans asked for more time so that, if he was to expand the action, there would be time to take the proper steps.

The judge advised him that, in his opinion, it might be “a good thing rather than a bad thing” if the claimant brought all claims against the defendant in one action and therefore allowed Mr Jeans a rather longer time than he originally had in mind for the serving of the Particulars of Claim. He warned Mr Jeans that he would only grant an adjournment on strict terms. Although the defendant made representations as to the nature of those terms, it did not invite the judge to make an order striking out the claim. On his own initiative in this respect, therefore, the judge made the following unless order:

“2.

the Particulars of Claim be struck out and unless within 56 days new particulars of claim are served on the Claimant [sic] the claim be dismissed, in which case the Claimant shall pay the Defendant’s costs of the action, such costs to be assessed on the standard basis if not agreed.

3.

if the particulars of claim are filed and served within 56 days all further proceedings be stayed until such time as the Claimant pays to the Defendant in cash or some equivalent form (eg by electronic transfer) the costs thrown away by the said adjournment, such costs to be assessed on the standard basis if not agreed.”

Pausing there, I should say, I have my doubts as to the appropriateness of making an order in those terms and in these circumstances. Nevertheless, as Mr Robert Howe QC for the respondent observed, no challenge was made to the order and, if the claimant wished to pursue its claim and/or any broader claim against the defendant, it had 56 days to comply with it.

The period of 56 days was extended to 18 June 2010 by Master Eyre on an ex parte application by Mr Jeans in person. The day before, 17 June 2010, the claimant served a document signed by Mr Jeans and headed “Particulars of Claim,” which purported to be the new Particulars of Claim as directed. These Particulars ran to some five pages. Paragraphs 4 and 5 identified the agreement upon which reliance was placed as follows:

“4.

As co-venturers the Claimant and the Defendant entered into the call Option Agreement dated 26 October 2004, as amended (‘the Agreement’).

5.

The Agreement is and was the underlying written document which identified the respective obligations of the parties in relation to the promotion and development of the Land as co-venturers. It remains in force. For the purposes of clarity the Seller is the Claimant and the Buyer is the Defendant.”

The 2008 meeting that had been referred to in the earlier pleading was relied upon later in this document as proof of an admission “that the Defendant was contractually bound to continue with and fund the new planning application.” The claimant also relied upon an open letter from solicitors acting for the defendant in which it was said that another admission to similar effect had been made.

The material clauses, as averred, were then rehearsed. Paragraph 7 read as follows:

“In the premises the Agreement makes clear that the option could only be exercised if an acceptable planning application has been approved and the defendant is solely responsible for preparing and submitting the planning application (and any appeals insofar as relevant) and is liable for all the costs in relation to the planning element of the co-venture.”

The defendant was accused of breaching their contractual obligations in a number of respects. Under paragraph 9, for example, the Particulars rather curiously alleged:

“(1)

There was no application by the Defendant within 6 months, or in a timely manner in accordance with its contractual obligations;

(2)

There was an adverse determination of the planning appeal in 2007 which was lodged against the District Council’s non-determination of the application.”

In paragraphs 10 and 11 it was said that the defendant’s failure had resulted in a breach of its obligations to maximise the open market value of the land and the claimant had suffered substantial loss. The claimant had been forced, it was said, to undertake at its own expense the obligations the defendant had refused to discharge. The loss in relation to the value of the land was described as “not ascertainable but likely to exceed £50 Million.” In addition the claimant claimed the original sum of £308,827.39 plus interest as costs incurred by the claimant in pursuing the planning application and appeals.

The issue of the payment of the defendant’s costs as a result of the aborted trial took a long time to resolve, during which time the action remained stayed and nothing was done about this document. However, on 3 March 2011 the claimant’s solicitors wrote to those representing the defendant announcing that they had undertaken a comprehensive review of the document of June 2010, (version 2 of the Particulars of Claim), and advised the claimant that its case had been inadequately pleaded. As a result, they wished to present a wholesale re-amendment of the Particulars of Claim, which they hoped would replace the previous document in its entirety.

Thus on 22 July 2011 HHJ Seymour QC was faced with two applications: an application dated 16 May 2011 by which the claimant sought permission to re-amend the Particulars of Claim, as it had declared its intention so to do, and an application by the defendant to enforce the “unless” order, arguing that version 2 of the Particulars of Claim did not comply with its terms. Accordingly, it argued that the action should stand dismissed.

The Re-Amended Particulars of Claim (version 3) run to some 29 pages of text with further considerable documentation annexed to it. In version 3 the Option Agreement is rehearsed in considerable detail, with a lengthy description of events leading up to the Option Agreement and following it. Under the heading “Particulars”, it is now averred that the claimant has incurred costs of just over £1.692 million pursuant to -the agreement, a considerable advance on the previous two invoice claim. A number of breaches of the Option Agreement are alleged, some of which echo the previous Particulars of Claim. However, the breaches are expanded. They include an alleged failure to obtain acceptable planning permission, which it is claimed would otherwise have been forthcoming. It is said that the claimant can only provide a best estimate of loss under this head, which varies from between just over £28 million to just under £30 million.

HHJ Seymour QC conducted a thorough analysis of version 2 of the Particulars of Claim and compared it with versions 1 and 3. In deciding whether version 2 complied with his unless order he considered the requirements of part 16.4 of the CPR as to the content of a Particulars of Claim and applied the test of whether or not the document was susceptible to being struck out under part 3.4(2) of the CPR. He found in favour of the defendant on the basis that the so-called new Particulars of Claim did not in fact meet the requirements of the CPR and that they were susceptible to being struck out in their entirety. Therefore, he concluded they did not comply with his order and the action must stand dismissed.

The claimant has permission to appeal his order. The point at issue is a simple one: did version 2 of the Particulars of Claim comply with the 2010 unless order?

Mr Howe QC for the defendant has attempted to support the judge’s conclusion and his reasoning by a careful analysis of the conduct of this litigation by the claimant and the pleadings proffered. He pointed out that, whether or not HHJ Seymour QC expressly used the word “indulgence”, the fact that he allowed Mr Jeans a belated application for an adjournment of the trial on the morning of the trial was in fact an act of exceptional indulgence. It is in that context one should examine the Particulars of Claim with considerable care.

The purport, he insisted, of the judge’s order was clear: the claimant was to put its house in order. Stringent conditions had to be met. It was not a routine order for directions. Three requirements, he suggested, had to be complied with: (1) the document must not be susceptible to being struck out; (2) the document had to comply with part 16.4 of the CPR and contain the necessary concise statement of facts; (3) and, in the particular context of this case, the claim had to be fully pleaded so that the defendant would know the case it had to meet. At the very least, Mr Howe submitted, the document had to have sufficient content and substance to merit the description “Particulars of Claim”; on which basis, the claimant was obliged to provide a document which was comprehensible from the new document alone and which set out exactly what the case was that the claimant desired to pursue.

Mr Howe referred the court to the general principle that pleadings are meant to inform the parties of the case they have to meet, so that they may know and properly understand how they can respond. In the particular circumstances of this case, namely a very late adjournment, he submitted that the document provided in purported compliance with the order should not require extensive redrafting and particularisation, of the kind the claimant’s lawyers now recognise is necessary required. Version 2 fell significantly short of what was required.

Mr Howe relied upon a number of decisions of this court and at first instance to support his argument, the details of which I do not need to rehearse, because, for the most part, they were simply examples of judges applying the CPR to the facts of a particular case.

As to the principles to be applied to a late amendment to a pleaded case, he derived support for his argument from Mason & Others v Mills & Reeve [2011] EWCA Civ 14. Lloyd LJ, with whom Patten and Elias LJJ agreed, at paragraph 73 observed:

“A point which also seems to me to be highly pertinent is that, if a very late amendment is to be made, it is a matter of obligation on the party amending to put forward an amended text which itself satisfies to the full the requirements of proper pleading. It should not be acceptable for the party to say that deficiencies in the pleading can be made good from the evidence to be adduced in due course, or by way of further information if requested, or as volunteered without any request. The opponent must know from the moment that the amendment is made what is the amended case that he has to meet, with as much clarity and detail as he is entitled to under the rules.”

Mr Howe also relied upon Mason at paragraph 69 for approval of the following proposition:

“ In the modern era it is more readily recognised that in truth the payment of the costs of an adjournment may well not adequately compensate someone who is desirous of being rid of a piece of litigation which has been hanging over his head for some time, and may not adequately compensate him for being totally (and we are afraid there are no better words for it) ‘mucked about’ at the last moment. Furthermore the courts are now much more conscious that in assessing the justice of a particular case the disruption caused to other litigants by last minute adjournments and last minute applications have also to be brought into the scales."

Thus, Mr Howe placed considerable emphasis on the modern approach to litigation and the fact that any culture of delay and non-compliance is a thing of the past.

It is now common ground that the April 2010 order must be construed objectively and that the question of whether version 2 of the Particulars of Claim complies with the 2010 unless order should be judged by reference to its contents (to ascertain if it meets the requirements of a Particulars of Claim) and to the contents of version 1 (to ascertain if it is indeed new). Version 3 is irrelevant for these purposes. Whether or not the claimant is given permission to amend to produce a third version and to what extent, if any, it is given permission to amend are separate questions from whether the Particulars comply with the 2010 order.

It is also common ground that the unless order of April 2010 must be construed in the context in which it was made. Mr Howe, understandably and rightly, placed heavy reliance upon the context. He reminded the court of the history of how the application for a very last-minute adjournment came to be made and he was highly critical of the conduct of this litigation by the claimant and Mr Jeans.

Mr Driscoll QC for the appellant accepted that context is plainly a relevant factor in construing a court’s order. It must remain at the forefront of the court’s mind. However, the context here reveals first that version 2 is “new” in the sense that it is different from version 1. Version 1 contained but one cause of action. The Particulars of Claim in version number 2 contain two. The two documents differ in a number of other respects. Further, the fact that version 2 contains two causes of action means that both aspects to the claim require careful consideration as to whether they meet the requirements of the CPR and constitute Particulars of Claim within the meaning of the unless order.

I have my doubts as to whether the correct test to be applied to the question of whether version 2 amounts to Particulars of Claim is whether they are susceptible to being struck out, but I am prepared for present purposes and on the facts of this case to act on the basis that it is. If so, in my judgment, the error in the approach of the parties in the court below and in the judge’s approach was to conflate the two claims, namely the expenses/two invoices claim and the claim for diminution in the value of land and to apply the “strike out” test to the document as a whole rather than to each claim individually. They have been effectively treated as standing or falling together when they do not.

Thus, I see considerable force in Mr Howe’s arguments that the broader diminution in value of the land claimed was far from well-drafted and that it may well be vulnerable to attack on an application to strike out; but we do not need to decide that point because it did not stand alone. Even if the diminution in the value of land claim or part of it fails to withstand a strike out application, there remains the original claim: the expenses/two invoices claim. The original claim was sufficiently robust to proceed to trial. It met the requirements of the CPR and no-one suggested otherwise. Version 2 may have been redrafted in an attempt to provide greater clarity and qualify as “new” but, in essence, it is the same robust claim for precisely the same amount.

Criticism, I accept, can validly be made of the draftsmanship of this claim too. However, I am satisfied that it has met the requirements of the CPR sufficiently to qualify for the description “Particulars of Claim”. As Mr Driscoll observed, it identified the cause of action, it claimed relief and it contained a precise statement of the facts, which enabled the defendant to know the case it had to meet. Trying at least that part of the claim would not amount to an abuse of the process of the court and the claim in that respect at least was perfectly coherent.

A defective Particulars of Claim may nevertheless amount to Particulars of Claim for the purposes of the CPR. The fact that as a whole the document does not meet the exacting standards of a properly qualified and experienced pleader does not mean that the Particulars are a nullity. The fact that some parts of the claim may face a strike-out challenge does not render the whole document a nullity. Thus, I am driven to the conclusion that the judge was wrong to conclude that the document served, version 2, did not comply with the terms of his unless order. The order required a new Particulars of Claim to be served and a document which I am satisfied can sensibly be described as a new Particulars of Claim was served.

Thus, I have every sympathy with the approach adopted by HHJ Seymour QC, confronted with three versions of the Particulars of Claim, none of which to my mind is entirely satisfactory and one of which has inflated what began as a simple claim on two invoices for just over £300,000 to claims on a much wider scale for approximately £30 million; but, in my judgment, there has been compliance with the order of April 2010 and I would allow the appeal.

I agree.

I agree. The sole and simple issue on this appeal is one of interpretation of the order made by HHJ Seymour QC on 20 April 2010. The question is whether the document served by the claimant in purported compliance with that unless order was “new Particulars of Claim” within the meaning of the order.

I make two comments. First, it was undoubtedly a “new” document. It was not the same document as the Particulars of Claim that had been struck out by the judge on his own initiative in the same order. Secondly, they are “Particulars of Claim” because they plead a case by the claimant against the defendant. The pleading may be open to criticisms, as Hallett LJ says, but, as she also says and for the reasons she gives, the document can sensibly be described as “Particulars of Claim”.

For the reasons given by Hallett LJ, I would also allow this appeal. I would add a further point: that, in view of the time and money which have been spent on the disputed interpretation of this order, I would strongly recommend that it is not used in this form by any judge in any other case in the future. There are other well known ways of dealing with litigants who attempt to make extensive amendments to their pleadings on the first day of the trial and they are, in general, less likely to give rise to the trouble that this form of order has given rise to in this case. The appeal will be allowed.