Donovan & Anor v Grainmarket Asset Management LLP

This is an application by the Claimants for permission to amend their Amended Claim Form, their Amended Particulars of Claim and their Re-Amended Reply and Defence to Counterclaim. The trial of the action is due to begin on 10 May and the application is opposed in relation to some but not all of the proposed amendments.

I will say no more about the unopposed amendments, which I allow.

The opposed amendments are as follows:

Without these amendments, the Claimants’ case is a claim for payments due under an alleged contract (the contract being referred to as “the New Fund Agreement”) or alternatively as a quantum meruit claim. The opposed amendments, however, introduce as the Claimants’ new primary case a claim that the First Claimant and the Defendant were partners within the meaning of the Partnership Act 1890 (“the 1890 Act”) and that

Counsel for the Claimants, Mr Howells, who has argued the application powerfully and clearly, frankly admits that this alternative case could have been made at any time, and that the only reason why it is made at this late stage, shortly before the trial is due to begin, is that his predecessor as junior Counsel was not available for the trial due to begin on 10 May; that he himself was recently instructed as a replacement (on 3 March this year); and, bringing his fresh eyes to the case, he suggested putting the case as an 1890 Act partnership case. He did say that, very early on in the litigation, before he was involved, consideration had been given to the point, but at that stage the decision was to focus on the case as an ordinary contract claim. Although he has appeared alone today, his clients have at all times been, and still are, represented by leading as well as junior Counsel.

After his instruction, proposed amendments were submitted to the Defendant under cover of a letter dated 25 March. The letter somewhat mischaracterised the amendments, however, as “intended to narrow and clarify the quantum issues and to make minor factual and legal clarifications”, rather than stating that they included substantive amendments to the cause of action and the relief claimed. This was unfortunate, because the Defendant, being fully engaged in preparations for the imminent trial, did not immediately appreciate that there was any urgency in engaging with the proposed draft given the other demands of its trial preparation.

By 28 March, the Defendant’s solicitors had realised that the amendments were not “minor factual and legal clarifications” as alleged, and said so in a letter, observing that the drafts would be considered with Counsel.

By letter of 1 April, the Defendant’s solicitors asked the Claimants’ solicitors to state their position in relation to a timetable for service of the amended pleading and consequential amended pleadings, and in relation to a timetable for “Supplemental witness statements on the issue of whether the relationship between the parties was one of partnership, the nature and scope of that partnership, and whether or not the partnership was dissolved in February 2015 (or since)”; and for “Evidence for the purposes of a partnership account as at February 2015 (or such other date of dissolution that your clients might contend for)”; and for “Evidence as to the value of each party’s contribution to the partnership alleged.”

In a reply dated 2 April, the Claimants’ solicitors proposed that the Re-Re-Amended Defence and Counterclaim should be served by 15 April, and denied that any further evidence would be necessary even if the amendments were allowed.

The Defendant’s solicitors sent a holding response on 3 April, stating that their leading and junior Counsel were not available until the evening of the next day, and followed up with a substantive objection to the opposed amendments in a detailed letter of 4 April, setting out the difficulties and unfairness which (they said) would be caused by the addition of a partnership claim to the Particulars of Claim at such a late stage.

The application to amend was issued on 5 April 2019 and listed before me as a matter of urgency because of the closeness of the trial date, which is just over 3 weeks from now.

Since timing is one of the factors relevant to the exercise of deciding whether an amendment should or should not be allowed, I will set out the procedural history which has led to this point.

The relationship between the Claimants and the Defendant is contested, but it is common ground that, whatever it was, it arose out of an oral agreement. The Claimants say that the agreement (which they call the New Fund Agreement) was reached in early 2013, and subsequently varied, whereas the Defendant says that, while terms began to be discussed in November 2012, the parties had by conduct entered into a contract “at some point between December 2012 and June 2014” (paragraph 9.1 of the Re-Amended Defence). The terms of the agreement are disputed, but they concerned some sort of collaboration in relation to the development of five properties through special purpose vehicles, the properties being identified in paragraph 17 of the Amended Particulars of Claim and paragraph 17 of the Re-Amended Defence as Slough, Farnborough, Elstree, Reading and High Wycombe.

It seems that the relationship between the First Claimant and the principal partner at the Defendant (Mr Crader) broke down in early 2015 and the First Claimant stopped collaborating. The various projects proceeded, and the Claimants now claim monies which they say are due to them as a result. A letter of claim was written by the Claimants solicitors in September 2016. Correspondence followed, but did not resolve the dispute.

The Claim Form and Particulars of Claim were dated 22 May 2017, and were followed by a Defence (in June 2017) and a Reply (in September 2017).

A Case Management Conference took place before His Honour Judge Waksman QC on 1 December 2017, which provided for amendment of pleadings (including the addition of the Second Claimant as a party) and a 5-day trial not before October 2018. Disclosure was ordered, to cover documents relied upon and responsive to any requests for specific disclosure. A date for exchange of evidence of fact was set, as was a timetable for expert evidence.

The pleadings were duly amended, starting with an Amended Claim Form and Amended Particulars of Claim on 4 December 2017, and continuing with an Amended Defence and Counterclaim (February 2018) and Amended Reply and Defence to Counterclaim (March 2018). At this point, the case was still a contract claim, with a quantum meruit claim in the alternative. There was no reference in any pleading to an 1890 Act partnership.

There were some disputes in relation to disclosure, but they were resolved without recourse to the Court, with the Defendant eventually accepting more limited disclosure from the Claimants than it had asked for. The Defendant now says that, had the Claimants’ case been put on the basis of an 1890 Act partnership at that point, the Defendant would not have made the concessions that it did, but would have insisted upon disclosure which, in consequence of its concession, it has not had.

A year after the CMC, there was a Pre Trial Review before His Honour Judge Pelling QC on 14 December 2018 attended by Leading Counsel on both sides. Shortly before the hearing, the Claimants withdrew their objection to a Re-Amended Defence and Counterclaim. The Re-Amended Defence and Counterclaim was formally served on 10 December 2018.

At the PTR, the Claimants sought, and the Defendant did not oppose, an adjournment of the trial date from 11 February 2019 to the current fixture starting on 10 May 2019. A revised date was set for witness statements, and I understand that they have now been exchanged. A revised timetable was set for the expert evidence, and I understand that has also now been completed.

In relation to pleadings, the PTR Order of 14 December (following the Re-Amended Defence and Counterclaim dated 10 December), made no provision for amendments, but the Re-Amended Defence and Counterclaim was followed, not surprisingly, by a Re-Amended Reply and Defence to Counterclaim from the Claimants dated 21 December 2018, to which no objection was taken, or is taken. I will return to the implications of that, below.

The principles to be applied when an application is made to amend, particularly when it is made late, have been considered in a number of cases. They are not in dispute before me. Two particularly helpful recent summaries are in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) and in CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 1345 (TCC).

Per Carr J in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) at paras 37-38:-

“…the relevant principles applying to very late applications to amend are well known. I have been referred to a number of authorities: Swain-Mason v Mills & Reeve [2011] 1 WLR 2735 (at paras. 69 to 72, 85 and 106); Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835] 2 December 1988; Hague Plant Limited v Hague [2014] EWCA Civ 1609 (at paras. 27 to 33); Dany Lions Ltd v Bristol Cars Ltd [2014] EWHC 928 (QB) (at paras. 4 to 7 and 29); Durley House Ltd v Firmdale Hotels plc [2014] EWHC 2608 (Ch) (at paras. 31 and 32); Mitchell v News Group Newspapers [2013] EWCA Civ 1537.

Drawing these authorities together, the relevant principles can be stated simply as follows:

a)

whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;

b)

where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;

c)

a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;

d)

lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;

e)

gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;

f)

it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;

g)

a much stricter view is taken nowadays of non-compliance with the CPR and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.”

In CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 1345 (TCC), Coulson J was referred to 20 authorities on amendments, from which he conducted a review of the law at paras 14-19 of his judgment, placing particular emphasis on more recent cases and what he noted as a change in attitude following the introduction of the overriding objective. He summarised the principles in para 19 as follows:-

“In summary, therefore, I consider that the right approach to amendments is as follows:

a)

The lateness by which an amendment is produced is a relative concept (Hague Plant). An amendment is late if it could have been advanced earlier, or involves the duplication of cost and effort, or if it requires the resisting party to revisit any of the significant steps in the litigation (such as disclosure or the provision of witness statements and expert's reports) which have been completed by the time of the amendment.

b)

An amendment can be regarded as ‘very late’ if permission to amend threatens the trial date (Swain-Mason), even if the application is made some months before the trial is due to start. Parties have a legitimate expectation that trial dates will be met and not adjourned without good reason (Brown).

c)

The history of the amendment, together with an explanation for its lateness, is a matter for the amending party and is an important factor in the necessary balancing exercise (Brown; Wani). In essence, there must be a good reason for the delay (Brown).

d)

The particularity and/or clarity of the proposed amendment then has to be considered, because different considerations may well apply to amendments which are not tightly-drawn or focused (Swain Mason; Hague Plant; Wani).

e)

The prejudice to the resisting parties if the amendments are allowed will incorporate, at one end of the spectrum, the simple fact of being ‘mucked around’ (Worldwide), to the disruption of and additional pressure on their lawyers in the run-up to trial (Bourke), and the duplication of cost and effort (Hague Plant) at the other. If allowing the amendments would necessitate the adjournment of the trial, that may be an overwhelming reason to refuse the amendments (Swain Mason).

f)

Prejudice to the amending party if the amendments are not allowed will, obviously, include its inability to advance its amended case, but that is just one factor to be considered (Swain-

Mason). Moreover, if that prejudice has come about by the amending party's own conduct, then it is a much less important element of the balancing exercise (Archlane).”

In applying the principles gathered from the authorities to the present case, I will start with the lateness of the proposed amendments and the explanation given for that (points (a) and (c) in Coulson J’s summary above).

I do not think it can seriously be disputed that this application to amend is made late, only weeks before the start of the trial, although Mr Howells made a valiant attempt. As Coulson J says, “An amendment is late if it could have been advanced earlier” and

I also accept that allowing the amendment would force the Defendant (again quoting Coulson J) “to revisit any of the significant steps in the litigation (such as disclosure or the provision of witness statements and expert's reports) which have been completed.” Although Mr Howells says that the same factual enquiries should have been made whether or not there was a partnership case, I do not agree. The re-characterisation of the relationship as an 1890 Act partnership represents a substantially different case analysis and will require the evidence to be explored and examined afresh, and may also require the witness statements to have a different emphasis. The quantum issues already covered by the experts on the basis of the ordinary contract and quantum meruit claims will also have to be reviewed. I have already mentioned that the Defendant would also want to revisit the scope of disclosure. In the very short time remaining before trial, and in conjunction with the intense preparation already required even if there is no amendment, that imposes a burden on and a disadvantage to the Defendant which amounts to substantial prejudice. The burden is increased by the fact that this Sunday is Easter Day and the Defendant’s leading Counsel is, not unreasonably, away next week.

So far as the explanation for the lateness of the application is concerned, it is not a very good one. The explanation given for the change is the “fresh eyes” brought to the case by recently instructed junior Counsel. However, “a fresh examination of possible arguments by fresh counsel” was said by Carr J to be “precisely the sort of reason that does not find favour with the courts”: Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm) at para 47, citing Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835] 2 December 1988. Similarly, in Wani LLP v Royal Bank of

When the explanation for the lateness of the application is weak, as here, the amount of prejudice to the other side that may justify refusal of the application, in the exercise of the Court’s discretion and balancing the factors identified in the authorities, will be less than if the explanation has greater merit. It is true that in Worldwide the application was made in the course of the trial, and threatened the trial, but in Quah the trial date was lost regardless of the result of the amendment application (see para 21 of the judgment) and, in Wani, the proposed amendment was argued 7 weeks before the start of the trial and was not, by itself, going to threaten the trial date (see paras 2-3 of the judgment). If a late amendment made without good explanation threatens the trial date, the applicant’s position is worse than if it does not, but the lack of a good explanation is relevant to the exercise of discretion and to the balancing exercise even if the trial date can be maintained.

That brings me to the effect of allowing the amendments on the trial date (points (b) and (e) in the summary of Coulson J).

In the present case, the Defendant maintains that it is prejudiced by the amendment in the ways that I have explained, and that it would need more time than the time remaining before the start of the trial in 3 weeks’ time to get itself back into the position

Although the case is not as extreme as if the trial would have to be vacated, therefore, it is a case in which the imminence of the trial increases the prejudicial effect of the proposed amendment.

The Defendant’s leading Counsel also criticises “The particularity and/or clarity of the proposed amendment”, maintaining that the opposed amendments which I have set out

“are not tightly-drawn or focused” (quoting point (d) of Coulson J’s summary of principles). The amendments do not state what the partnership shares were to be, whether equal or otherwise. They do not set out the terms of the partnership and, in particular, they do not make it clear what was to happen to partnership profits upon a departure if they were receivable after the departure. There is a tension between the pleading in the proposed Re-Amended Particulars of Claim, which suggests a partnership that is still extant, and in paragraph 27A.5 of the Re-Re-Amended Reply, which advances an alternative case based upon a partnership which has now been dissolved. There is no pleading of the duties of the alleged partners towards each other in consequence of the alleged 1890 Act partnership. There is no pleading of the extent of the alleged partnership and, in particular, which properties it covered. For example, it is not clear which if any of the projects entered into after the breakdown of the relationship in February 2015 are said to be covered by the partnership.

Finally, I must place in the balance the prejudice to the Claimants if they are not allowed to advance their newly chosen case based on partnership, which (Mr Howells suggests to me) is, they consider, better than their current case. However, this prejudice to the Claimants, although relevant, “is just one factor to be considered (Swain-Mason)” and “Moreover, if that prejudice has come about by the amending party's own conduct, then it is a much less important element of the balancing exercise (Archlane).” (quoting point (f) in Coulson J’s summary).

Taking all these factors into account, and striking the balance as fairly as I can in all the circumstances, I have decided to refuse the Claimants’ application for permission to make the amendments which are opposed.

The Re-Amended Reply and Defence to Counterclaim dated 21 December 2018, although prepared before Mr Howells was instructed, and signed by his predecessor as junior Counsel, introduced wording which, Mr Howells says, would entitle the Claimants to ask the Court to find that there was a partnership, and possibly even, at a later stage, to issue a Part 8 claim for the taking of a partnership account if such a finding were made, even if I do not allow the opposed amendments to the Particulars of Claim.

This wording is in two places in the Re-Amended Reply and Defence to Counterclaim:- i)In paragraph 7.2.5 (introduced in the amendment of 21 December 2018, after the PTR, and now to be deleted only if I allow the opposed amendments in the

A Reply must be responsive to a Defence. It cannot raise a new claim for new relief: