Mandrake Holdings Ltd. & Anor v Countrywide Assured Group Plc

I have before me an opposed application for permission to amend the Particulars of Claim to add an additional head of damage (“the New Claim”). It is common ground that as a judge at first instance I am bound by authorities to hold that in law the New Claim is not maintainable. Only the Court of Appeal and the House of Lords can be free, and probably only the House of Lords is free, to uphold the New Claim. The principal issue before me is whether I am free nonetheless to give permission to amend and (if not and if I am bound to refuse permission to amend) whether I can and should give permission to appeal. There is also a further issue whether I should in any event refuse permission on conventional discretionary grounds.

In October 1994 the Securities and Investment Board (“the SIB”) launched its pension mis-selling review which encompasses (with certain exceptions) all pension opt-outs and transfers executed between the 29^th April 1988 and the 30^th June 1994. As part of the review the SIB issued guidance to the front-line regulators directing them to require firms which had sold the pension products to participate in the review, identify the mis-selling cases and agree to compensation. The SIB review was carried out in two phases. Phase 1 related to the obvious and more important cases which had to be prioritised. Phase 2 commenced in 1998 and comprised a number of further categories which then had to be prioritised.

Before the 1^st March 1996, the second claimant Mandrake Associates Limited (“Mandrake”) was a wholly owned subsidiary of the defendant Countrywide Assured Group Plc (“Countrywide”). Mandrake and Countrywide were in the business of providing advice to individuals on pension transfers and opt-outs.

By an Agreement made between Countrywide, Mandrake and the first claimant (formerly called and here for convenience called Plusnet) and dated the 1^st March 1996 Countrywide sold the issued share capital of Mandrake to Plusnet. At the time of the Agreement it was apprehended that Mandrake might be liable to pay compensation to investor clients in consequence of its pensions advice. Accordingly by a deed also dated the 1^st March 1996 (“the Deed”) Countrywide covenanted with Plusnet to pay to Mandrake or the relevant investor any “Pension Liability” as there defined. There is a dispute between the parties whether the covenant in the Deed extends to liabilities incurred by Mandrake under Phase 2. In these proceedings commenced on the 18^th June 2003 the Claimants seek: (1) a declaration that the covenant does so extend; (2) in the alternative rectification of the Deed; (3) an account and inquiry; and (4) costs.

On the 25^th November 2004 this action was set down for hearing in a trial window starting the 11^th July 2005 with a time estimate of 10 days. It is apparent from the evidence that at this date the Claimants were actively considering the amendment now proposed to their pleading and indeed it is apparent from a letter dated the 22^nd December 2004 that it was considered in January and November 2002. But no mention was made of it at the time. The Claimants first revealed the proposed amendment on the 1st December 2004 and sought Countrywide’s consent to an order giving the necessary permission to amend. The request was promptly refused.

The Particulars of Claim (as they stand) pleads in paragraph 14 that the Phase 2 liabilities are “Pension Liabilities” within the meaning of the Deed and that Countrywide is liable to pay the claimants a sum equivalent to those liabilities; in paragraph 15 that wrongfully and in breach of contract Countrywide has failed to make any payment in respect of such liabilities and has stated that it was not liable; and in paragraph 16 that by reason of the foregoing the Claimants have suffered the loss and damage there particularised. The two particulars given are a sum equivalent to the sum which Countrywide ought to have paid to the Claimants and any and all increased costs and liabilities occasioned by Countrywide’s default.

The proposed amendment adds as a third head of loss the New Claim which is for £15.5 million. The New Claim(so far as material) reads as follows:

“16.3

Loss of opportunity to develop and to realise the value of Mandrake.

As was either known or reasonably foreseeable to the parties at the date of the Deed: (1) the Claimants’ intention was to expand Mandrake’s business; (2) to do so, they would need to raise capital; and (3) the Defendant’s refusal to meet its liabilities under the Deed made it impossible to raise the necessary capital and thereby caused the Claimants to lose the opportunity of such expansion. If the Claimants had been able to expand the business, they would have been able to realise, and would have realised, Mandrake’s increased value by selling it (or its business and assets) to a product provider (for example, to one of the large life assurance companies).”

Countrywide raises three objections to the proposed amendment.

“Bad in law”

The first and foremost is that the New Claim is bad in law. Countrywide’s argument runs as follows:

The authorities cited and relied on by Countrywide support these propositions. Accordingly the New Claim is not maintainable unless or until the propositions are modified by the Court of Appeal or the House of Lords. There is a body of textbook opinion that a distinction should be drawn between claims of liability insurance and claims of property insurance; that the propositions stated are applicable only to claims of liability insurance; that the decision of the Court of Appeal in Sprung that there is no distinction and the propositions apply to both is weakened by the fact that the claimant in that case was not legally represented; and that Sprung is wrongly decided. (The Claimants drew to my attention the decision of the Court of Appeal in Virk v. Gan Life Holdings Plc [1999] EWCA Civ 2047 (30^th July 1999) which drew a clear distinction between policies of liability insurance and of property insurance in respect of accrual of the insured’s cause of action.) The distinction between the two types of claim (as it appears to me) even if established, would not assist the Claimants in this case, where the claim is of liability insurance. In my view it is highly doubtful whether the established law can be changed or developed to allow the New Claim by any court below the House of Lords.

In these circumstances the first issue raised is whether I ought to refuse permission to amend or whether I can and should nonetheless give permission to amend. By giving permission to amend I would enable all the issues in the case to be determined at the trial together. Obviously the New Claim will be dismissed, but an appeal on this and all other issues could proceed together (if the necessary permissions are given) to the Court of Appeal and the House of Lords. The House of Lords would have the opportunity to decide the legal validity of the New Claim in the context of the full facts of this case. Viewed from a case management standpoint, there are advantages in taking this course.

The Claimants have argued that this approach found some support in the judgment of Waller LJ (with which Brooke LJ agreed) in Pride Valley Food Ltd v. Independent Insurance Co Ltd [1999] 1 Lloyds Rep IR 120 (“Pride Valley”). In that case the claimant claimed damages for consequential loss on the defendant’s failure to accept liability and indemnify under a business interruption policy. Jonathan Parker J struck out the action for the reasons and on the basis of the authorities set out in the propositions I have detailed. Waller LJ giving permission to appeal said:

“What Jonathan Parker J has done is to apply the authorities binding on him, and I am far from saying he was wrong in the view he took of them. But I do think it is arguable that in a strike-out context it would have been right to allow the paragraphs in question to stay in so that the matter could be considered by higher courts; or (and perhaps it comes to the same thing) it would not be right to prevent this case going to the full Court at this stage so that consideration could at least be given as to whether this court is bound to come to the same view as that of Jonathan Parker J and, even if so, in order that consideration can be given by this Court of the House of Lords as to whether the point is worthy of consideration by the House of Lords. ”

Countrywide however later referred me to the Practice Direction (Citation of Authorities) [2001] 1 WLR 1001) which prohibits citation by advocates of judgments on applications for permission to appeal unless they clearly indicate that they purport to establish a new principle or to extend the present law. Since the judgment in Pride Valley was a judgment given prior to the date of the Practice Direction there was no need for an express statement to this effect. But the indication must be present in, or clearly deducible from, the language used in the judgment. I do not think that this requirement is satisfied and accordingly the bar on citation (though breached) must by implication preclude my reliance on that judgment, even though it appears in an established and respected law report.

In any event at a later stage of the hearing Countrywide drew to my attention the decision of the Court of Appeal in the case of Baird Textiles Holdings Ltd v. Marks & Spencer Plc [2001] EWCA Civ 274 (28^th February 2001) (“Baird”). In that case the claimant (a supplier) challenged the legality of the determination by the defendant (its customer) of all supply arrangements without warning with effect from the end of the then current production season. The claimant’s case was that, notwithstanding the absence of any express contract, the defendant was precluded by contract and estoppel from determining the arrangements without reasonable notice. The defendant successfully applied for summary judgment under CPR 24.2 on the ground that the claimant had no reasonable prospect of succeeding on either part of its claim.

The Court of Appeal on the substantive appeal held: (1) that the requirement of necessity was not satisfied for implying a contract; and (2) the doctrine of estoppel as presently understood did not enable the creation or recognition of an enforceable right such as was contended for. The possibility that the House of Lords might develop or change the law was not sufficient to afford the claimant a real prospect of success or a good reason for the action proceeding to trial. The duty of the court was to apply the law as it stands.

If it was the duty of the Court of Appeal to apply the law at it stood, all the more it is my duty to do so. There is in my judgment no relevant distinction (as suggested by the Claimants) between an application to strike out the whole action (as in Baird) or an application for permission to amend (as is the case before me). I accordingly dismiss the application on this ground. Nothing in Baird however (as it seems to me) precludes from giving permission to appeal to keep alive the possibility that an appellate court may be able to do what I cannot do.

For this purpose there is in my judgment a relevant distinction between the situations where the application for permission to appeal is made to the court whose decision is intended to be appealed and where it is made to the appellate court. In the former case, the refusal of permission does not finally close the door, and the appellate court may be better equipped to decide whether a proposed appeal has the prospects required or otherwise merits being heard. After anxious consideration I have concluded that for this reason I ought to refuse permission, I ought to leave it to the Court of Appeal to decide whether the prospects of success in the Court of Appeal and the House of Lords are sufficient or whether there are other sufficient reasons to give permission.

In case I am wrong in my view that the legal merits of the new head are such as to preclude my grant of permission to amend, I must consider whether (leaving aside Countrywide’s objection on that ground) I would in this exercise of my discretion grant permission having regard to the other objections raised by Countrywide.

Delay

The principal objection is the totally unexplained delay in making any claim along the lines of the New Claim between January 2002 and December 2004 and the failure to disclose that such an amendment was in mind when the trial date was fixed. In my view this objection carries great weight, most particularly if the delay has occasioned or will occasion any significant damage or loss to Countrywide. There has been served no evidence of any such loss or damage, and Countrywide seeks only to rely on the damage and loss which (as I am told) is inherent in the situation. I cannot hold that any significant damage or loss has been occasioned or will be occasioned unless the trial date is lost or the trial is prejudiced.

Lack of Particularity

That brings me to the second objection which is total lack of particularity in the pleading of the New Claim. I pointed out to the Claimants the deficiencies and that I could not and would not give permission unless the deficiencies were made good. For this purpose the Claimants asked for an adjournment over until Monday the 6^th March 2005. The Claimants’ Further Information made good the lack of particularity, but lent further weight to Countryside’s third objection.

Effect on trial date

I turn now to the third objection which is the effect on the trial date. It is common ground that if the proposed amendment is made pursuant to permission granted by the Court of Appeal, the trial date will be lost. The timetable for trial is already tight and there is no prospect that the parties can prepare to trial on the New Claim in time or that the present time estimate can be kept to. This is so even if I were to adopt the claimants’ suggestion that I limit the issues at trial to foreseeability (and exclude the issue of causation) of damage, a course which is in my judgment very unattractive and should not be foisted on Countrywide. The list of the Chancery Division in July is already very full and there is accordingly no leeway. The loss of this trial date is a serious prejudice to Countrywide. There is also prejudice to other litigants awaiting trials of their actions. In my judgment this fact combined with the totally unexplained delay in making the claim between January 2002 and December 2004 (to which I have already referred) make it only just that, independently of the ground that the proposed amendment is bad in law, this application should be refused. My decision on this ground makes it unnecessary for the Court of Appeal to consider the question whether the New Claim is bad in law.

Accordingly I dismiss this application.