D&G Cars Ltd v Essex Police Authority

This is an appeal from a decision of Nicholas Braslavsky Q.C., sitting as a Deputy Judge of the High Court, Queen’s Bench Division, dismissing an appeal brought by D&G Cars Ltd (‘D&G’) from the refusal of Deputy Master Rose to permit specific substantial amendments to the Particulars of Claim in proceedings brought against Essex Police Authority (‘the police authority’). A second appeal, it is brought by leave of Rafferty LJ.

The background to the litigation concerns the commercial relationship between D&G, a vehicle recovery business, and the police authority in connection with the collection and disposal of motor vehicles some of which having been damaged in road traffic accidents, others used unlawfully. The police force area was divided: separate commercial relationships, involving different operators, existed for each.

Having worked for the police authority since 1998, on 3 March 2006, D&G entered into a new contract for five years relating to vehicle recovery from Basildon, Brentwood, Chelmsford, Maldon and the M25 west from junction 28. This followed a tender competition when the number of contractors was reduced from about twenty to five, giving rise to complaints from a number of those who had been unsuccessful; those complaints led to a report (to which I return below) being commissioned.

In 2008, another contractor withdrew from its contract relating to vehicle recovery in three other parts of Essex and, in order to find a replacement, acting as a ‘contracting authority’ within regulation 3(m) of the Public Contracts Regulations 2006 (‘the Regulations’), the police authority placed this contract out to tender. On 10 June 2008, D&G was one of seven companies invited to tender for the new contract: in the event, five companies (including D&G and two relevant competitors, Boyton Cross and BJG) did. One tenderer was disqualified for using the incorrect label.

On about 28 July 2008, before the contract was awarded, the police authority received an anonymous letter alleging that D&G had acted contrary to its general obligations under the existing contract. In short, it was alleged that a Land Rover which had been recovered for the police authority and should have been crushed had, instead, been effectively exchanged for an existing vehicle owned by D&G: it was said that the D&G vehicle had been scrapped in place of the seized vehicle, a process known as ‘ringing’.

It is clear that the police authority took this allegation seriously and immediately sent an officer to investigate, giving notice of suspension of the earlier vehicle recovery contract of March 2006. On the following day, by e mail, D&G’s directors explained that, as an exercise, apprentices had exchanged the bodies of the two Land Rovers, repaired, refurbished and repainted their own vehicle and sent the condemned vehicle to be crushed. This account was later found not to be accurate.

Investigation subsequently revealed (and it does not appear to be disputed) that between October 2007 and January 2008, a recovered Land Rover S731 SLS which should have been crushed, had been refurbished with parts from another Land Rover L89 THP owned by D&G, repainted and marked with the livery of a D&G vehicle. The vehicle identification plate from L89 THP had been transferred to S731 SLS and the vehicle registration number plates exchanged, so that to all appearances, what was S731 SLS had become L89 THP and vice versa. What had been L89 THP (but badged as S731 SLS) was then crushed and its destruction under that description certified and proved to the police authority as demonstrating performance of its obligations. In the meantime, what had become L89 THP was taxed as usual.

Although by letter from its solicitors, D&G acknowledged that the way in which the vehicle had been misappropriated had “some of the hall marks of ringing” and, indeed, their initial explanation was not wholly accurate, the directors of D&G emphatically deny any knowledge of this activity. They ascribe the refurbishment to a training exercise involving the workshop manager and two apprentices (none of whom any longer worked for D&G); those involved in the re-painting would not have been in a position to appreciate what had been done.

In any event, on 28 August 2008, the police authority gave notice of termination of the 3 March 2006 contract and, on 11 September 2008, notified D&G that it had been excluded from the tender competition. D&G responded by arguing that this exclusion was in breach of the relevant Regulations and invited the police authority to delay the award of contracts pending the determination of the lawfulness of that exclusion. The police authority refused to do so and awarded the contracts to two of the other tenderers.

D&G then commenced two sets of proceedings. The first was for damages for breach of contract in terminating the 2006 contract; the second arose from the termination of the consideration of the tender for the new contracts. The Particulars of Claim in both proceedings deal with the vehicle exchange incident at some length. It was asserted that D&G (by its managing director) had initiated a legitimate bodywork project for apprentice training confined to the exchange of bodies between an existing and recovered vehicle and, importantly, for the disposal of the correct, recovered, vehicle in accordance with its obligations: it was conceded that, in error, the consent of the police authority was not sought. Further, it was further asserted that the inherent identities of the two vehicles were exchanged without authority but, in any event, without financial advantage to D&G. In both sets of proceedings, it is also made clear that

“[D&G] will invite the court to infer that disaffected ex-employees set out to injure [D&G] and jeopardise its prospect of successfully tendering for the balance of the contract for the Epping Forest, Castlepoint and M11 areas to the advantage of a competitor of [D&G].”

In the proceedings in relation to the 2006 contract, it is pleaded that the notice of suspension was in breach of contract and that further breaches of contract have been the purported termination of the contract and the removal of all vehicles then being stored by D&G. The defence relies upon the incident concerning the Land Rovers as giving rise to a fundamental breach of contract within H2(1) of the contract alternatively a repudiatory breach. In the alternative, that incident, together with other specified complaints amounts to such a breach of contract.

As for the proceedings relating to the exclusion from the tender, it is baldly alleged that the refusal to consider the tender, despite requests, is in breach of the Public Contracts Regulations 2006 which govern the tender process (“the Regulations”). In particular, it is said that D&G were not treated “equally and in a non-discriminatory way” as required by Reg. 4(2(a). By way of defence, the police authority rely on Reg. 23(4)(e) as justifying their treatment of D&G as ineligible on the grounds that it had committed an act of grave misconduct in the course of its business. The misconduct alleged was knowingly to exchange number plates, disguising the condemned Land Rover as its own and lying about what it had done or instructing apprentices to remove the body work from the condemned Land Rover to use on its vehicle without obtaining the consent of the police authority “knowing that it would not get such consent or that it was most unlikely to do so”. Alternatively, the police authority reasonably believed that to be the case and D&G failed to obey instructions to crush the vehicle, did not have reliable systems in place and gave an account which was not true such as to give reasonable grounds to doubt its integrity. In the circumstances, it was not to the economic advantage of the police authority to contract with D&G.

Not surprisingly, the proceedings were consolidated. By application dated 5 October 2010, D&G sought specific disclosure of the documents relating to the 2008 tender process. Master Eyre took the view that on the pleadings, nothing amounted to a wholesale re-run of the tender process would be permitted and he refused to make the order. On 15 July 2011, Timothy Straker Q.C. sitting as a deputy judge of the High Court, allowed the appeal on the basis that it was necessary to examine the rival bids within the process in order to assess (a) the prospects of D&G in that process and (b) the potential loss to them of exclusion. In other words, this disclosure related to issues of quantum.

Having seen those documents (and, in particular, the report), D&G sought to make comprehensive amendments to the Particulars of Claim, making wide allegations against the police authority (covering some 41 as opposed to 9 pages). In short, the case which is sought to be advanced is that ‘relevant servants or agents’ of the police authority were consciously biased in favour of other tenderers and against D&G, in effect, so that the tender was rigged to ensure that D&G lost. It is also alleged that the tender process was conducted in bad faith. In reality, as Mr Platford conceded, this was an allegation both of misconduct in public office and conspiracy to injure.

Thus, the case now proposed first starts with a lengthy account of the earlier tender process in 2005-6 which was covered by the report (and in which, in fact, D&G was successful), alleging that Boyton Cross was shown favouritism thereby generating the inference that the 2008 tender was similarly improper. Second, in relation to another tenderer (Ontime), which was suspended, it is alleged that this firm was guilty of more serious breaches than those alleged against D&G. Third, as to the Land Rover incident, it develops the inferences from the fact that this information came to the attention of the police authority by means of an anonymous letter and alleges that the ‘persistence in prosecution’ of two directors of D&G was motivated by ‘a desire in one or more of the servants or agents [of the police authority] to remove [D&G] from the tender competition until after’ the contracts had been awarded to BJG and Boyton Cross. Fourth, it is said that Boyton Cross continued to demonstrate inadequacies even after the conclusion of the tender assessment but before the award of contracts. Finally, derived from the disclosure process, it alleges within the police authority, concealment, suppression and destruction of documents.

Critical to the application to amend the proceedings for breach of the Regulations relating to the exclusion from the tender process is the issue of limitation. Regulation 47(7)(a) of the Regulations requires that proceedings for breach must be brought within 3 months of the alleged breach (with power to extend ‘for good reason’). The context is Article 1 of Directive 89/665 which requires review of the award of public contracts to take place “effectively and, in particular, as rapidly as possible”: see the explanation in Uniplex (UK) Ltd v NHS Business Services Authority [2010] 2 CMLR 47 and Sita UK Ltd v Greater Manchester Waste Disposal Authority [2011] EWCA Civ 156.

In the event, Deputy Master Rose (before whom the application to amend came) concluded that the amendment came after the expiry of a period of limitation within the meaning of CPR 17.4 (ie three months) and that it amounted to a ‘new claim’ within the meaning of s. 35 of the Limitation Act 1980 and, on the basis that such a claim did not arise out of the same facts or substantially the same facts as a claim in respect of which D&G had already claimed a remedy it would or could defeat an arguable limitation defence: see see CPR 17.4(2).

On appeal, Mr Braslavsky QC agreed that the essential issue was whether the amendment constituted a ‘new claim’ against the police authority; if it did, an amendment would defeat a limitation defence. It is not suggested that he was wrong in that regard and it is unnecessary to rehearse the authorities to that effect. Having analysed the law and recited the arguments, however, he dismissed the appeal, concluding (at paras. 49-51):

“In essence, the claimant’s case is no longer that the defendant omitted to consider the claimant’s tender by way of appropriate process to its natural conclusion. It is now the claimant’s case that the defendant positively sought to destroy the claimant’s prospects in the process for entirely dishonest, corrupt and unconscionable reasons.

It seems to me that by its proposed amendments the claimant seeks to significantly alter the factual basis supporting the allegations of breach. In doing so, therefore, I have considered whether upon appropriate analysis of the facts to be prosecuted by amendment, a ‘new case’ arises. I have concluded that it does. At the same time I have given consideration to the overall impression gained from the amendments and have reached the clear conclusion that they do indeed create an unequivocally different impression of the breakdown of the commercial relationship between the parties.

If I was in any doubt of the proper conclusions to reach on the above analysis, the destiny of this appeal is, in my judgment, sealed by the dicta of the Court of Appeal in Paragon Finance and find that the move from the factual basis underpinning the alleged breach of Regulation 4 in the original case to the clear and unashamed allegations of conspiracy and corruption in the amended case gives rise to a new claim against the defendant.”

After Mr Braslavsky had circulated a draft judgment, the parties asked whether the allegations of bad faith (i.e. dishonest rigging of the tender process) could be pleaded by way an amendment to the Reply. In the final judgment, although mistaken in believing that a draft Amended Reply had not been placed before him, Mr Braslavsky refused to do so on the basis that there was no application to amend the Reply and, furthermore, the result would not necessarily turn solely on whether D&G was seeking to introduce a new claim which was the basis of the argument before him. He said that if permission was sought to do so, it should be by way of fresh application.

In this court, Mr Graham Platford for D&G argues that both the Deputy Master and the judge failed to appreciate that the ‘fundamental issue’ was whether the matters upon which D&G sought to rely were sufficiently relevant to the defence and any answer to the defence. As a result the judge ‘allowed form to obscure substance’. In short, the defence had contended that D&G had committed an act of grave misconduct (Reg. 23(4)(e) of the Regulations), or alternatively, it was reasonably believed that it had, and that it was not economically advantageous (Reg. 30(1) and (2) of the Regulations) for the police authority to contract with D&G whose integrity was doubtful. In so doing, the police authority had positively asserted its bona fides. D&G took issue with these assertions and the facts upon which it sought to rely tended to disprove the defence and were relevant and admissible whether or not they might also constitute a new claim: there could be no risk of the latter if they were contained within a Reply.

In any event, Mr Platford argued that the amendments did not introduce a new claim. The action was based on the following provisions of the Regulations, the contracting authority being the police authority and the economic operator D&G:

“4(3) A contracting authority shall ... (a) treat economic operators equally and in a non-discriminatory way; and (b) act in a transparent way. ...

47(1) The obligation on a contracting authority to comply with these Regulations ... is a duty owed to an economic operator. ...

47(6) A breach of the duty owed in accordance with paragraph (1) ... is actionable by any economic operator which, in consequence, suffers or risks suffering loss or damage and those proceedings shall be brought in the High Court.”

The breach alleged was a refusal to consider the tender. The lack of justification for that treatment is not a fact necessary to establish the cause of action but, in any event, the Land Rover incident did lack justification. It was the unequal and discriminatory treatment itself (i.e. excluding D&G from the competition ‘purportedly’ on the ground of the Land Rover incident) that was the necessary and sufficient breach of the Regulations. Motive is relevant only to the defence of justification.

Mr Patrick Lawrence Q.C. for the police authority argues that where a claimant seeks by amendment to allege the breach of a new duty, there is no question but that a new cause of action arises. Where different facts are relied on as constituting the breach of duty, “it is more difficult to decide whether a new cause of action is pleaded” (Darlington Building Society & anor v O’Rourke James Scourfield & McCarthy [1999] Lloyds Rep PN 33 at 36 per Sir Iain Glidewell). He also relies (as did the judge) on the observations of May LJ in Steamship Mutual Underwriting Assn Ltd v Trollope & Colls (City) Ltd (1986) 33 BLR 77 at page 98:

“I do not think one can look only to the duty on a party, but one must look also to the nature and extent of the breach relied upon, as well as the nature and extent of the damage complained of in deciding whether, as a matter of degree, a new cause of action is sought to be relied upon. The mere fact that one is considering what are, as it is said, after all only different defects to the same building does not necessarily mean that in any way they are constituents of one and the same cause of action.”

The claim now advanced, he argues, involves allegations of bad faith and dishonesty which is clearly a new cause of action not least because “there is no sharper dividing line than that which separates cases of fraud and dishonesty from cases of negligence and incompetence” (Paragon Finance plc v D B Thakerar& Co [1999] 1 All ER 400 per Millett LJ at 418h). It is also worth citing the observations of Pill LJ (at 420e):

“To allege that an injury is caused intentionally is to add a new allegation of fact which gives the allegations of fact as a whole a substantially different character.”

Mr Lawrence characterises the way in which Mr Platford puts the matter as submitting that the duty is to treat tenderers equally and in a non-discriminatory way, the test being objective: there is no need to prove malice or bad faith so that the question of bad faith has nothing to do with the cause of action. That ignores, he argues, the observations of May LJ in Steamship Mutual. Neither does it help to put the observations in a reply: if D&G is alleging that the police authority consciously and deliberately rigged the tender process, for the purposes of deciding whether a new claim is advanced, it matters not whether it appears in the Particulars of Claim, the Reply or in Further Information. In any event, given the way in which the argument had been advanced before him, the judge was perfectly entitled to decide that he should leave the issue of whether the matters could be pleaded in a Reply to be determined by the Master.

The factual matrix comprehended by the pleadings issued prior to the expiry of the limitation period of three months was clear. The Particulars of Claim alleged that their exclusion of their tender from the process was in breach of the Regulations and the material upon which reliance was placed was the circumstances surrounding the approach of the police authority to the anonymous information about the recovered Land Rover having been ‘ringed’. In short, it was contended that their conduct (which it was sought to explain, mitigate and put into context) did not justify the decision.

The police authority, on the other hand, took issue with the explanation and the mitigation and, among other provisions, relied on Reg. 23(4) of the Regulations which provided that:

“A contracting authority may treat an economic operator as ineligible or decide not to select an economic operator in accordance with these Regulations on one or more of the following grounds namely that the economic operator ...

(e)

has committed an act of grave misconduct in the course of his business or profession; ...”

Further, the police authority contended that it was not to their economic advantage ‘to contract with an economic operator whose integrity was doubtful to any material degree’ or who had ‘demonstrated the lack of skill and/or efficiency and/or reliability evidenced by [D&G]’s handling of the condemned vehicle’ (whether the story in relation to the Land Rover was true or not). The focus of the Particulars of Claim was on the way in which what I might describe as the Land Rover incident should be characterised. Objectively, did it constitute grave misconduct such that it was entitled to exclude D&G from the process?

What the amendment seeks to do is to divert the forensic spotlight away from D&G onto the police authority and its handling, over many years, of these contracts. That is not what these claims, as originally pleaded, were about. In relation to liability, the issues were clearly defined and fell within a comparatively small compass. What conclusions could the police authority legitimately have reached about what they learnt? If it was open to the authority fairly to conclude that D&G was guilty of grave misconduct, the decision to exclude them from the tender process (whomsoever might remain) could not be impeached and the claim would fail; if not, the claim would succeed.

It is trite law that it is necessary only to plead facts rather than law and it is unarguable that the way in which the amended Particulars of Claim is cast generates a far more wide ranging case; this may involve conspiracy to injure but, in any event, it is not how the amendments have been pleaded or how the matter has been argued at any of its three hearings. That it is said to go to the rebuttal of the allegation that the police authority relied on the Land Rover incident to justify refusing to permit D&G to participate in the tender is not to the point. Thus, to permit the amendments to the pleadings sought does, in my judgment, constitute pleading a new cause of action under the Regulation which, it is conceded, is, at least prima facie, statute barred. I appreciate that D&G may be able to commence new proceedings alleging conspiracy (the time limit for which is 6 years): if it does so and those proceedings are not demurrable, they could be consolidated. It does not change my view about this proposed amendment. In the circumstances, I conclude that the judge came to the correct decision in relation to this amendment.

As for the Reply, the position is less straightforward. As Mr Platford submits, a decision as to ineligibility pursuant to Reg. 23(4) (and, equally, a decision not to select under the same provision) has to be reached treating those who tender (the ‘economic operators’) equally and in a non-discriminatory way in accordance with Reg. 4(3). Thus, it must be open to D&G to argue that the conclusions reached in relation to this particular tender did not involve equal or non-discriminatory treatment as evidenced by the more favourable treatment afforded to other tenderers. Even if to do so as part of the claim could generate a new cause of action (only prohibited in these actions because of limitation issues), as a response to the denial of unequal or discriminatory treatment, D&G must be able to rely on facts which disclose how the police authority dealt with the other proposed tenderers and, in particular, issues concerning their suitability.

I accept the force of this submission provided that the ambit of the investigation is appropriately restricted to relevant material. I am far from satisfied that the allegations which Mr Platford has, effectively, copied from the Amended Particulars of Claim to the Amended Reply meet that test and would doubt that material from a tender in which D&G were one of only 5 who succeeded from about 20 who applied can be used to justify the inference that the police authority had demonstrated bad faith in their dealings with them. Much more relevant may be the specifics of the way in which this particular tender operation was conducted (whatever might have happened in the past).

At this level, I do not believe that it is appropriate to go further than that. In the circumstance, given the way in which the argument in the lower court appears to have developed, I therefore also sympathise with the decision of the judge to leave any amendment to the Reply for further application to the Master. In this court, lengthy arguments were deployed on this issue but the only draft which was offered does not seek to address the more limited way in which the issue between D&G and the police authority can be joined. In the circumstances, I would dismiss the appeal.

Following sight of this judgment in draft, representations have been made as to costs. For my part, I conclude that D&G have brought this appeal and failed; although, along with Briggs LJ, I have been prepared to indicate how the Master should approach an application in relation to the Reply, I have concluded that the judge was entitled to leave that issue to the Master (before whom the question of a Reply was not ventilated). I recognise that, although generally successful, on this issue, the police authority has not prevailed. If the claim ultimately fails, the police authority should be able to recover all its costs; if the claim succeeds, D&G should not recover the costs of this exercise; I therefore would order the police authority’s costs to be in the case. I would not disturb any of the orders for costs in the courts below.

The claimant’s proposed amendments to the particulars of claim to plead and rely on what I shall refer to as conscious bias on the part of the Police Authority were held by the Deputy Master and subsequently by the Deputy Judge to be statute-barred because the substance of the amendments amounted to a new claim which did not arise out of the same or substantially the same facts as the claim already pleaded. A new claim is defined by s.35(2) of the Limitation Act 1980 as any claim involving either:

“(a)

the addition or substitution of a new cause of action; or

(b)

the addition or substitution of a new party.”

Section 35(3) goes on to provide that the rules of court shall not allow a new claim to be made in the course of any action after the expiry of any limitation period which would affect a new action to enforce that claim. The only relevant exception is where the new cause of action arises out of the same or substantially the same facts as are already in issue in the existing action: see s.35(5)(a). These provisions are carried into effect by CPR 17.4(2) which imposes the restriction contained in s.35(5)(a). It is common ground in this appeal that the conscious bias allegations do not arise out of the facts already pleaded so that if the claimant’s reliance upon them to establish a breach of the duty contained in regulation 4(3)(a) of the Public Contracts Regulations 2006 (“PCR 2006”) does constitute the pleading of a new claim as defined then the Deputy Master was correct to refuse permission to amend. The incorporation of a new cause of action into the existing claim would result in the new claim being treated as having been brought when the proceedings were first issued thereby defeating the prohibition in s.35(3) and rendering the new claim immune from challenge by the Police Authority on limitation grounds.

In these circumstances, the only course available to the claimant would be to commence a new action based on conscious bias which would allow the Police Authority to contend that it was statute barred. Whether such a defence would succeed in the present case is not something which has been argued on this appeal.

Regulation 47(7)(b) PCR 2006 provides that:

“Proceedings under this regulation must not be brought unless—

(a)

…

(b)

those proceedings are brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period within which proceedings may be brought.”

There is therefore power in the Court to extend time and the Court of Justice has already decided that what is now regulation 47(7)(b) contravenes the EU principle of effectiveness if and so far as it precludes the bringing of a claim before the claimant has sufficient knowledge of a breach of duty on the part of the commissioning authority. In Uniplex (UK) Ltd v NHS Business Services Authority (Case C-406/08) [2010] PTSR 1377 the CJEU (at paragraphs 35 and 48) ruled that:

“35.

The answer to the first question accordingly is that Article 1(1) of Directive 89/665 requires that the period for bringing proceedings seeking to have an infringement of the public procurement rules established or to obtain damages for the infringement of those rules should start to run from the date on which the claimant knew, or ought to have known, of that infringement.

…..

48.

If the national provisions at issue do not lend themselves to such an interpretation, that court is bound, in exercise of the discretion conferred on it, to extend the period for bringing proceedings in such a manner as to ensure that the claimant has a period equivalent to that which it would have had if the period provided for by the applicable national legislation had run from the date on which the claimant knew, or ought to have known, of the infringement of the public procurement rules.”

If, therefore, (as I shall assume) the claimant had no knowledge of and was therefore unable to formulate a claim based on conscious bias until after it received the disclosure of the documents relating to the 2008 tender process ordered by Mr Timothy Straker QC on 15^th July 2011 or possibly later when disclosure of other documents was complete, it might be supposed that time would not have begun to run under regulation 47(7) until the latter half of 2011 and the service of amended Particulars of Claim pursuant to Master Eyre’s order of 16^th November 2011. In these circumstances, a new claim based on conscious bias might not have been statute barred and, by the same token, there could be no objection under s.35(3) of the Limitation Act to the inclusion of the new claim in the existing action.

The claimant has not, however, advanced its case in this way and we have therefore to decide this appeal on the basis that, by the time the matter came before Deputy Master Rose on 30^th March 2012, it was at least reasonably arguable that the limitation period prescribed by regulation 47(7)(b) had expired if the amendment amounted to a new claim. Therefore, applying the approach recommended by this Court in Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409, the proper course was for the Deputy Master to refuse permission to amend and to preserve the ability of the Police Authority to rely on a limitation defence by compelling the claimant to incorporate the allegations of conscious bias in a new claim form. The only issue for the Deputy Master, and therefore for us, is whether the amendments amount to a new claim.

The identification of a new claim is a matter for domestic law as prescribed by s.35 of the Limitation Act. One therefore has to ask whether the allegations of conscious bias, although factually very different from the claimant’s existing case, raise a new cause of action or merely provide additional grounds upon which it can be said that the core duty of equal treatment and non-discrimination embodied in regulation 4(3) and made actionable by regulation 47(6) has been breached. The English authorities on what constitutes a new claim inevitably provide more assistance in identifying the problem than in resolving it. In Darlington Building Society v O’Rourke James Scourfield & McCarthy [1999] Lloyd’s Rep PN33, an action against solicitors for negligence and breach of fiduciary duty, Glidewell LJ (at p. 36) said that:

“Where as in this case the claim is based on a breach of duty, whether arising from contract or in tort, the question whether an amendment pleads a new cause of action requires comparison of the unamended pleading with the amendment proposed in order to determine:

(a)

whether a different duty is pleaded;

(b)

whether the breaches pleaded differ substantially; and where appropriate

(c)

the nature and extent of the damage of which complaint is made.

See the judgment of May LJ in Steamship Mutual Underwriting Association v Trollope & Colls (City) Ltd (1986) 33 BLR 77 at pages 97 and 98.

In my view where an amendment pleads a duty which differs from that pleaded in the original statement of claim it will, or certainly will usually, raise a new cause of action. If there is no allegation of a different duty but different facts are alleged to constitute a breach of the duty it is more difficult to decide whether a new cause of action is pleaded. Several of the cases to which we were referred during the course of argument seem to me to come into this category, namely:

Brickfield Properties Ltd v Newton [1971] 1 WLR 862

Steamship Mutual v Trollope & Colls (referred to above)

Hamlin v Edwin Evans [1996] PNLR 398.”

Steamship Mutual Underwriting Association Ltd v Trollope & Colls (City) Ltd [1986] 33 BLR 77 was an action by some employers against their contractors, architects and structural engineers in relation to a building project in London. As in many such cases, various defects became apparent over time and the claimant sought permission to amend its claim to include allegations of breach of contract in respect of the brickwork of the building. Prior to that, the action had largely been concerned with the state of the air conditioning. The judge held that these amounted to new causes of action but the claimants contended that they were merely further particulars of breaches by the defendants of their contractual and statutory duties.

Having reviewed the earlier authorities, May LJ at page 98 said that:

“In the present case, if one remembers what a cause of action is (for instance, to refer back to the dictum in Letang), if one looks to the size of this particular building, to its complexities, to other matters of degree, to the statement of claim before the proposed reamendment, to the attitude of the appellants' solicitors in the correspondence at the material time, to which I have referred, and avoids what I think are unnecessary subtleties, I feel bound to agree with the learned judge where he concluded, having referred to the cases on what is a cause of action, the statement of claim in both its original and amended form related only to the air conditioning. I think that its effect was to narrow the causes of action so that they became confined to breaches of contract concerned with air conditioning and negligence resulting in damages to the air conditioning. In the light of the definitions of a cause of action already referred to, I do not think one can look only to the duty on a party, but one must look also to the nature and extent of the breach relied upon, as well as to the nature and extent of the damage complained of in deciding whether, as a matter of degree, a new cause of action is sought to be relied upon. The mere fact that one is considering what are, as it is said, after all only different defects to the same building, does not necessarily mean in any way that they are constituents of one and the same cause of action.”

Although the additional claims in respect of the brickwork did not involve a different breach of duty (they were all claims under the same contract for a failure to provide a properly constructed building), they were separate breaches of that duty, each of which gave rise to an additional claim in damages in respect of that breach. But in the present case, although the allegations of conscious bias raise a very different case as to whether the Police Authority has acted in breach of its regulation 4(3) duty, they do, if proven, provide no more than other grounds upon which it can be said that the same duty was broken. They do not give rise to separate and additional claims for damages as in the Steamship case. If they are to be treated as new claims, it can only be on the basis that they establish additional breaches of the same duty which can properly be treated as new causes of action.

Although, as I have said, the question whether they are new claims for Limitation Act purposes is obviously a question of national or domestic law, that characterisation depends upon an analysis of what legal rights and duties are conferred by PCR 2006. This inevitably takes one not merely to the regulations themselves but also to Council Directive 89/665/EEC of 21 December 1989 (“the Directive”) which they were intended to give effect to and which necessarily governs their meaning and effect on Marleasing principles: see Case C-106/89; [1990] ECR I-4135, ECJ.

Articles 1 and 2 of the Directive provide that:

“Article 1

1.

The Member States shall take the measures necessary to ensure that, as regards contract award procedures falling within the scope of Directives 71/305/EEC and 77/62/EEC, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in the following Articles, and, in particular, Article 2 (7) on the grounds that such decisions have infringed Community law in the field of public procurement or national rules implementing that law.

2.

Member States shall ensure that there is no discrimination between undertakings claiming injury in the context of a procedure for the award of a contract as a result of the distinction made by this Directive between national rules implementing Community law and other national rules.

3.

The Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular public supply or public works contract and who has been or risks being harmed by an alleged infringement. In particular, the Member States may require that the person seeking the review must have previously notified the contracting authority of the alleged infringement and of his intention to seek review.

Article 2

1.

The Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for the powers to:

(a)

take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority;

(b)

either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure;

(c)

award damages to persons harmed by an infringement.”

The purpose of the Directive is therefore to ensure that there are remedies in the field of public supply and public works contracts for any infringement of EU law in the award of the contracts. These include most obviously the principles of equal treatment and non-discrimination. The Directive does not therefore introduce any legal duties specific to its subject matter. It simply provides for the direct application of the Community law principles I have identified to the national legislation governing this field of activity.

Consistently with this, regulation 4 PCR 2006 requires a contracting authority not to treat an economic operator (as defined) who is not a national of the relevant state and established in that relevant state more favourably than one who is and (more generally) to treat all economic operators equally and in a non-discriminatory way. The claim in both its original and its amended form alleges a breach of this latter duty under regulation 4(3)(a). Consistently with EU law principles, once that duty is engaged and found to have been breached then the burden passes to the contracting authority to justify the inequality in treatment. For this purpose, PCR 2006 contains a derogation in the form of regulation 23 which entitles the authority to treat an economic operator as ineligible to tender if it comes to the knowledge of the authority that the operator has committed any of a number of specific offences or has committed an act of grave misconduct in the course of his business or profession: see regulation 23(4)(e). This is what the Police Authority has relied on in this case as the justification for excluding the claimant from the 2008 tender process on the basis of the “ringing” allegations which Leveson LJ has described.

Mr Platford for the claimant based part of his argument on the conscious bias allegation being merely an answer to or rebuttal of the reliance by the Police Authority on regulation 23(4)(d) and hence not for that reason a cause of action in itself. His claim is, he submits, established by the mere fact of the claimant’s exclusion from the tender process unless the defendant is able to justify it within the terms of regulation 23(4)(e). He therefore seeks in the alternative to be able to introduce the amendments into the reply on the basis that they are relevant only to the defendant’s plea of justification and do not for that reason amount to a new cause of action. The fact that they are properly matters for a reply rather than for inclusion in the particulars of claim is relied on in itself as confirmation that they do not constitute a new claim

I am not persuaded that the introduction of the proposed amendments into the reply as opposed to the particulars of claim can be treated as determinative in itself of whether they constitute a new cause of action. As Mr Lawrence QC has submitted, once the allegations are in play in the action on liability they are there for all purposes. Although it is correct to say that the burden does fall on the Police Authority to justify the exclusion of the claimant, evidence that the “ringing” offence was little more than window dressing to conceal a pre-determined bias in favour of another contractor must inevitably establish that there was for that reason alone also discrimination and unequal treatment. We have therefore, in my view, to approach the matter more generally and to decide whether the new allegations can be introduced at all as relevant to the issue of liability.

My own view is that they can. The principles of equal treatment and non-discrimination embodied in regulation 4 go to the legality of the act of exclusion. They do not provide separate causes of action for breach of the contracting authority’s duty. If the contracting authority has committed an act of exclusion which cannot be justified under regulation 23 because it cannot show that one of the grounds there specified was in fact the reason for exclusion, then it cannot matter that its actual reasons for exclusion may be many and various. Those reasons are legally irrelevant except to prove that the alleged ground for justification was not in truth the reason for exclusion and cannot, for that reason alone, justify it. They do not constitute new or additional causes of action in themselves. So, at this stage of the argument, Mr Platford’s submission that the fact that the claimant may be able to particularise the reasons why it was excluded only as the case develops and disclosure is obtained does not result in it adding to its existing cause of action becomes highly material and is right. Its case is and always has been that it has been unlawfully excluded in breach of regulation 4(3). There is a single duty and a single breach. It follows in my view that even after the amendments there is still only one cause of action.

Although this point does not appear to have been directly considered before now, the decision of this Court in SITA UK Ltd v Greater Manchester Waste Authority [2011] EWCA Civ 156 is not unhelpful. The issue in that case concerned the manner in which the Court should give effect to the decision of the Court of Justice in Uniplex (supra) in cases where the claimant contractor was unaware of the circumstances giving rise to a claim until more than three months after the breach of the regulations occurred. Mann J had given effect to the decision by disapplying what is now regulation 47(7)(b) until the point in time when the claimant had actual or constructive knowledge sufficient to identify the grounds for bringing the proceedings as specified in that regulation. One of the arguments raised by the claimant was that each separate ground for alleging breach of the regulations should be treated as a separate cause of action so as to postpone the running of time under regulation 47(7)(b) until the claimant has sufficient knowledge of that particular breach. Elias LJ refers to this argument in his judgment as follows:

“88.

I turn to the alternative basis, namely that even if Sita had enough knowledge to bring its claim sooner, it should have been allowed to pursue a case based on those breaches which did not emerge until July 2009. Ms Rose submits, relying on the decision of this court in Brent London Borough Council v Risk Management Partners Ltd [2009] EWCA 490 that there is but one duty under these procurement regulations, namely to comply with the required procedure. Once a prospective claimant had sufficient evidence to establish a clear indication of breach, time began to run and no further information could ever be relevant, save with respect to the discretionary extension. (Ms Rose accepted that the position with anticipated breaches was different and constituted a separate cause of action. But that issue does not arise here.) Mr Bowsher submitted that this was a misreading of the Brent decision, and that time should run afresh from each breach. So Sita could still rely on the matters pleaded in paragraphs 73(b) and (c) even if it was too late to take proceedings with respect to the other breaches.

89.

I do not think it necessary to resolve the question whether Ms Rose's submission was correct or not. This is because I am satisfied, as was the judge below, that time does not start afresh where what is being relied upon to start time running again is a further breach of the same duty, whether it in fact occurred before or after the breaches already known. The position may be different if a number of distinct duties can be spelt out of the procurement obligations; it may be said that time runs separately with respect to each duty. But Mr Bowsher properly did not contend that these further breaches could be said to relate to a different duty. They all went to the failure to reopen the bidding process. As I have said, in my judgment the matters being relied on as constituting the fresh breaches are simply further particulars of the infringement which could already be pursued. They do not constitute separate causes of action in their own right.”

In my judgment, the new allegations in this case fall to be treated in the same way. I would therefore allow the appeal and permit the claimant to amend the particulars of claim.

For the reasons given by both Leveson and Patten LJJ, the question whether the allegations which D&G wish now to pursue should be permitted as amendments to the Particulars of Claim depends upon whether they involve the addition of a new cause of action. It is not suggested that, if they do, they arise out of the same or substantially the same facts as the claim already pleaded. The well-known phrase “cause of action” has, notwithstanding its long life and well known attempts to do so, defied precise definition. I agree with Patten LJ that the authorities tend to identify rather than resolve the problem.

It is easy, but not sufficient in the context of section 35 of the Limitation Act 1980, to think of causes of action by reference to well-known types such as contract, tort, breach of fiduciary duty or breach of statutory duty. This is part of what the phrase means in section 35, since subsection 5(a) contemplates that a new cause of action may arise out of the same facts as those in issue on any claim previously made. Thus, in a professional negligence action where the parties were in a contractual relationship, the same facts will commonly give rise to causes of action both in contract and in tort. But s.35 also contemplates that a new cause of action of the same type as that already pleaded may arise from the introduction of new facts.

In the present case, both the claim as originally pleaded and the claim as now sought to be introduced by amendment allege the same type of cause of action, namely breach by the Police Authority of the statutory duty to conduct the tender process in accordance with the principles of equal treatment and non-discrimination. Furthermore, in both formulations the act of the Police Authority alleged to constitute the commission of that breach of duty was the exclusion of D & G from the tender process. To that extent I agree with Patten LJ that both the original and the new case plead the same duty and the same breach.

The characteristic feature of the proposed amendments, taken as a whole, is that they plead a new case as to the state of the corporate mind of the Police Authority in excluding D & G from the process, namely that its intention was deliberately to prefer other tenderers in preference to D & G in circumstances amounting to bad faith, whereas the original case had merely alleged that the exclusion amounted to unequal and discriminatory treatment of D & G, objectively viewed, regardless of the Police Authority’s subjective intention. Adopting the language of Millett LJ in Paragon Finance plc v DB Thackerer & Co [1999] 1 All ER 400, at 406, the new case alleges, for the first time, “conscious impropriety” and “the … addition of an allegation of intent”.

In my judgment the Paragon case is powerful, if not quite binding, authority to the effect that, regardless whether an allegation of intent introduces some different type of cause of action (such as fraud rather than negligence), the allegation of intentional misconduct of itself asserts a new cause of action because of the new factual assertion of intent. An assertion of intent may be strictly irrelevant in the sense that the type of cause of action relied upon may be established without proof of it, as in negligence. Nonetheless, the assertion of intent amounts to a new claim, because it is, by definition, a new cause of action.

In the Paragon case, the claim was originally pleaded in breach of contract, negligence and breach of fiduciary duty. The claim sought to be introduced by amendment asserted that the breaches had been intentional, fraudulent and dishonest. The judge’s decision to refuse permission to amend was upheld on appeal (in the first of the two conjoined cases) not merely because a new type of cause of action was alleged, namely fraud, but because the allegation of breach of fiduciary duty was to be transformed by the assertion that the breach had involved conscious impropriety. It remained, nonetheless, a claim based upon the same fiduciary duty, and the same breach.

At page 406(c) Millett LJ said:

“In my judgment, it is incontrovertible that an amendment to make a new allegation of intentional wrongdoing by pleading fraud, conspiracy to defraud, fraudulent breach of trust or intentional breach of fiduciary duty where previously no intentional wrongdoing has been alleged constitutes the introduction of a new cause of action.

…

Paragraphs 10A and 15A(2) allege intentional breach of fiduciary duty. Breach of fiduciary duty was already pleaded, but in terms which did not involve any conscious impropriety. The plaintiffs submit that the mere addition of an allegation of intent does not amount to a new cause of action. In my judgment this is contrary to the authorities already cited, which show that intentional and unintentional wrongdoing give rise to distinct causes of action. Moreover the existing pleading disclosed no cause of action for the reasons given in Bristol and West Building Society v Mothew (t/a Stapley & Co) [1996] 4 All ER 698, [1998] Ch 1. A sufficiently pleaded allegation of breach of fiduciary duty is made for the first time by the amendment, and this to my mind unquestionably amounts to the introduction of a new cause of action.”

It may be said that the precise ratio to be found in that passage was that breach of fiduciary duty, although asserted, had not until then been properly pleaded at all. Nonetheless I consider it to be implicit in the passage that, even if it had been, the result would have been the same. At page 418 (h) Millett LJ continued:

“In the Thakerar case Chadwick J observed that it would be ‘contrary to common sense’ to hold that a claim based on allegations of negligence and incompetence on the part of a solicitor involved substantially the same facts as a claim based on allegations of fraud and dishonesty. I respectfully agree. In all our jurisprudence there is no sharper diving line than that which separates cases of fraud and dishonesty from cases of negligence and incompetence.”

At page 420 (d) Pill LJ said:

“Where it is sought to add allegations of wrongdoing which is intentional, the position is in my judgment different. The change cannot be categorised as a technicality. I accept the submission made on behalf of the plaintiffs that the critical question is the extent to which the facts on which the new cause of action is based depart from those already pleaded (and not the seriousness of the new allegation). However, to allege that an injury is caused intentionally is to add a new allegation of fact which gives the allegations of fact as a whole a substantially different character.”

Were it not for the fact that, as Leveson LJ has set out in detail, the new case which D & G wish to advance plainly alleges deliberate wrongdoing and bad faith, I would have been inclined to agree with Patten LJ that the new allegations might have been categorised as particulars of an existing cause of action, constituted by exclusion of D & G from the tender process in breach of the equal treatment and non-discrimination duty. In a sense, they are particulars of that breach. But because they assert for the first time intentional wrongdoing and bad faith, they seem to me to give rise to a new cause of action, albeit not a new type of cause of action, to no lesser extent then did the new allegations in the Thackerer case. It matters not for the purposes of my analysis whether those allegations might also be capable of giving rise to a new type of cause of action, such as conspiracy to injure, with a longer limitation period, as Leveson LJ has concluded that they might. The amendments have not been formulated in that way, nor pursued that way in argument. As they stand, the amendments amount to the assertion of a new cause of action for the reasons which I have given.

The next question is whether the same or similar allegations should be permitted to be raised by way of Reply to the Police Authority’s defence under Reg. 23(4)(e). In the language of the Regulation, this involved the Police Authority pleading and proving that they treated D & G as ineligible, or decided not to select D & G in accordance with the Regulations because D & G had committed an act of grave misconduct in the course of its business or profession, by ‘ringing’ the Police Authority’s Land Rover.

In my judgment, on the true interpretation of Reg. 23(4) that involved an assertion not merely that the conduct of D & G in ringing the Land Rover was sufficiently grave to entitle the Police Authority to treat D & G as ineligible, but also that it was for this reason (whether alone or among others) that the Police Authority did so.

If D & G can make good the allegations of bad faith and deliberate discrimination which it seeks to introduce by its proposed amendments, then it seems to me that this would afford a basis for defeating the Police Authority’s Reg. 23(4) defence. That much is not seriously challenged, although of course the new case sought to be introduced is vigorously denied.

Mr Lawrence QC submitted nonetheless that the introduction of that new case, even by way of Reply, was impermissible since, however pleaded, it would constitute a new claim. But it would seem to me to be a denial of justice if material obtained on disclosure (after close of pleadings) which could be sufficient to destroy a pleaded defence had to be excluded, merely because it was sought to be introduced after the expiry, or arguably after the expiry, of a relevant limitation period, where the claimant had no wish to rely upon it as part of its claim.

The mischief at which section 35(5) is aimed is that which is commonly called ‘relation back’, namely that the introduction of a new claim by amendment relates back to the date of the commencement of the original proceedings: see section 35(1). It is in my view no answer to this conundrum simply to permit a claimant to respond to a defence by allegations of deliberate wrongdoing and bad faith, but without having to plead them, so as to avoid relation back. It has always been, and remains, a fundamental principle of fair procedure that such serious allegations must be fully and precisely pleaded, if they are to be pursued at a trial.

In my judgment the answer to the conundrum is to permit those allegations, to the extent relevant to rebut the Police Authority’s Reg. 23(4) defence, to be pleaded by amended Reply, rather than by amended Particulars of Claim. Section 35(1) applies relation back to “any new claim made in the course of any action”. The rules of pleading prohibit new claims being made in the Reply whether originally or by amendment: see note 16.7.3 in vol.1 of the 2013 Supreme Court Practice at page 498, where it is stated:

“A reply must not contradict or be inconsistent with the claim; for example it must not bring in a new claim. If the claimant wishes to depart from the case set out in their claim they should seek to amend that claim rather than serve a reply.”

It is perhaps unfortunate that this important principle of pleading is set out only in an editorial note, rather than in a Rule or Practice Direction, but counsel was agreed as to the principle. No doubt its main purpose is to limit what may be pleaded by way of Reply, but it encapsulates what is for present purposes the useful principle that nothing which is pleaded solely in Reply can amount to a new claim.

It follows that, in agreement with Leveson LJ, I consider that D & G ought in principle to be at liberty to introduce, by way of Reply, and as particulars of the denial of the Police Authority’s Reg.23(4) defence, all those parts of the proposed new case as are properly relevant for that purpose, excluding only allegations of misconduct which are irrelevant, and therefore an abuse.

The draft amended Reply upon which both parties belatedly invited the judge to rule at the end of the appeal from the Master seeks on its face to do precisely that, but only by the wholesale transfer into the Reply of the new case which had originally, and on appeal, sought to be introduced by way of amendment to the Particulars of Claim. It was, in particular in the light of the wish of both parties that he should rule, perhaps unfortunate that he declined to do so, leaving D & G to make a fresh application to the Master. Nonetheless, I am not persuaded that this appeal should be allowed on that ground alone. It may be that questions as to the relevance of the detail of the new case to D & G’s denial of the Police Authority’s Reg.23(4) defence were not examined in any sufficient detail (any more than they were on this appeal) to enable the judge to make a satisfactory ruling at the late stage at which he was invited to do so. I would regard his refusal to accept the invitation as lying within, although perhaps at the edge of, his case management discretion.

Nor would it be right in my judgment for this court to give D & G prospective permission to amend its Reply in a manner conforming with the requirement to limit its new case to particulars relevant to its denial of the Reg.23(4) defence, despite Mr Lawrence’s invitation that we should do so. All I would say for the assistance of the Master on a renewed application (if the matter cannot, even now, be agreed) is that, once it is apparent that material introduced in the Reply cannot give rise to a new claim, then relevant allegations of bad faith ought to be pleaded with the fullest particularity, consistent with giving the party so accused a proper opportunity to respond at trial. This will inevitably involve pleading alleged facts about the Police Authority’s conduct from which the alleged bad faith can properly be inferred, but it is not to be taken as carte blanche to plead material which is merely embarrassing rather than relevant.

In concluding, I have not lost sight of the possibility that permission to introduce these matters by way of Reply would mean that their contents become “facts as are already in issue on any claim previously made in the original action” within the meaning of section 35(5)(a) of the Act, so as to afford a stepping stone to a later attempt to re-introduce the same material as part of D & G’s claim. All that can usefully be said in advance of the making of any such attempt is that it would so transparently undermine the purpose and intent of section 35 (and the rules which implement it) that the court should find no difficulty in construing that phrase as excluding facts introduced solely by way of Reply.

The result is that like Leveson LJ I would dismiss this appeal, but not on terms which exclude the introduction into the Reply of the parts of the new material which are relevant to the rebuttal of the Police Authority’s Reg 23(4) defence. I also agree with his proposals as to costs.