Mersey Docks Property Holdings Ltd & Ors v Birse Construction Lrd & 4 Orsy

This is the claimant's application for permission to amend the Particulars of Claim to include the claims identified in A to D of the schedule to the order at the case management conference of 18th June 2004. The draft amended Particulars of Claim amount to a substantial reorganisation of the Particulars of Claim. Some of the defendants allege that the allegations amount to new causes of action which are time-barred.

Paragraph 1 of the schedule to the order of case management identifies the following issues to be considered at this hearing:

The claim arises out of a fire at a cold storage and distribution centre at Spade Lane, Hartlip, Sittingbourne, Kent, that on 4th August 1997, as a result of which the building owner and tenant suffered losses estimated at about £16.5 million.

The plant was constructed in 1995/1996. Birse Construction Limited (Birse) were the head contractors, and the other defendants were subcontractors. The second defendants, Broadway Malyan, were a firm of chartered architects. The third defendants, Fordham Johns, were the consulting civil structural and highway drainage engineers. The fifth defendants, Frank Graham, practised as consulting engineers. The fourth defendant,

The defendants contend that various parts of the draft amended Particulars of Claim should not be permitted by reason of the Limitation Act 1980 and CPR Part 17.4.

There was at the start of the hearing, also a more general objection that, as a matter of good case management, I should not permit, as a matter of discretion, any of the amendments. I shall deal with the question of discretion after considering the Limitation Act defences.

Section 35 of the Limitation Act 1980 (the Act) provides in so far as is relevant to this application:

Part 17.4 of the Rules applies to amendments of statements of case after the end of the limitation period and follows the guidance in the Act. Part 17.4(2) is the material provision. It provides:

The precise meaning of 17.4(2) is in issue in this case. No-one has been able to find an authority directly in point on the question of whether or not the claim referred to relates to that party to which the amendment relates, or to any party in the proceedings.

There are in law three separate questions:

The general question "What is a new cause of action?" was answered by Diplock LJ in Letang v. Cooper [1965] 1QB 232, where he said,

In Steamship Mutual Underwriting Limited v. Trollope & Colls Ltd [1986] 6 CLR 11, page 36, May LJ said,

In Steamship Mutual at pages 33 and 34, May LJ canvassed the argument that one possible test would be whether a plea of res judicata would succeed in subsequent proceedings. My understanding is that while this might be a useful cross-check in certain circumstances, it is not a definitive test. The test is whether the issues realistically before the court in the hypothetical second action, were before the court in the hypothetical first action.

In Savings & Investment Bank v. Finken [2001] EWCA (Civ 1639) the Court of Appeal considered what facts could be taken into account in considering whether the new cause of action arose out of the same facts or substantially the same facts as an existing claim. It reinforced the decision in Paragon Finance v. Thakerar [1999] 1 AllER 400, page 405, where Millett LJ emphasised that,

In paragraph 30 of his judgment, Peter Gibson LJ said,

I should also bear in mind paragraph 22 of the judgment of the Court of Appeal in Hemmingway v. Smith-Rodham [2003] EWCA (Civ 1324) which quotes the dictum of Hobhouse LJ,

In relation to the question of construction, I should also bear in mind the decision in Goode v. Martin [2002] 1 ALL ER 620, where the Court of

The Court of Appeal had to consider the law afresh after the Human Rights Act 1998 had come into force. In Aldi Stores v. Holmes Buildings [2003] EWCA (Civ 1882), the leading judgment was given by Dyson LJ. In relation to question (a), he reaffirmed Diplock LJ's definition of cause of action in Letang v. Cooper. He also affirmed the existing law in relation to the second question. He said that,

Dyson LJ went on at paragraph 31 of the judgment to consider the question of discretion. He reaffirmed the general principles governing the courts' approach to an application to amend pleadings set out by Bowen LJ in Cropper v. Smith (1884) 26 CLD 700 at 710-11, which has been cited on many occasions:

Dyson LJ went on to cite the passage in Clampede v. Commercial Union (1883) WR 262 at 263, where Brett MR said,

At paragraph 37 of his judgment, Dyson LJ said that,

The defendants have taken account of Dyson LJ's judgment in Aldi Stores, but say that the Civil Procedure Rules require the court to consider all the amendments within CPR Part 3.1(2)(m), which empowers the court to,

CPR Part 1.4 requires the court to manage cases with the overriding objective. The defendants contend that active case management in the context of this case, requires the proposed amendments to be considered with great care. Originally they wished to argue, in the course of this summons, that the amendments should be refused as a matter of discretion on these grounds.

However, in the course of the hearing, they set out what was a compromise proposal, and since in general terms that is the approach which I propose to follow, I do not propose to say more, except at the end of this judgment, in relation to the question of discretion. I shall therefore not make rulings on the individual items on the question of discretion, but I will indicate at the end of the judgment what seems to me to be the appropriate way forward.

This summons that permission to allow amendments to the Particulars of Claim should be refused, arises, as I have already said, out of litigation resulting from a fire on 4th August 1997 at a cold storage and distribution centre at Spade Lane, Hartlip, Sittingbourne, Kent. The claim is a complicated one.

I have already identified the defendants. I should now identify the claimants in the Particulars of Claim. The first claimant, Wakeley, provided storage, grading, packaging and distribution facilities for the fruit industry. By an agreement dated 3rd December 2001, its assets and liabilities were transferred to the second claimant, Sheerness Cool Stores Limited (Coolstores). The third claimant, Sheerness, is a subsidiary of the fifth claimant, Mersey Docks. By an agreement dated 23rd November 2001, the assets and liabilities of Sheerness were transferred to the fourth defendant, Mersey Docks Property Holdings Limited (Holdings).

In the proposed amended Particulars of Claim, Holdings is the first claimant. It has contracts under seal with Birse and Frank Graham. These claims are therefore not statute barred and do not come within the Limitation Act. Wakeley and Sheerness do not have contracts under seal, and the claims against them are made in tort.

The original claim is that by a contract dated 1st September 1995, Sheerness engaged the first defendant, Birse, to design and construct the storage centre. In the Particulars of Claim, (paragraph 9) it is alleged that Birse gave various collateral warranties to Sheerness. The other defendants are alleged to be Birse's subcontractors. Paragraph 9 sets out the terms of Birse's warranty between Birse and Wakeley, relating to the exercise

In paragraph 10 it is alleged that all the remaining defendants gave similar collateral warranties to both Wakeley and Sheerness. The paragraph went on to contend that the design work should have been carried out with skill and diligence, and that subcontract works would comply with any specification in the building contract.

In paragraph 12, it is alleged further and in the alternative, that it was an implied term of the contract and/or the collateral warranties, that the defendants would exercise reasonable skill and care in the design and construction of the premises.

It is alleged in paragraphs 14 and 15 of the Particulars of Claim that the severity and extent of the damage caused by the fire (which spread throughout the premises in one and a half hours) was caused by the breach of contract and/or negligence of the defendants.

Paragraph 15 identified as a particular of the general allegation, that it was the claimant's case that where applicable, the defendants breaches of contract and/or negligence, extended to a failure to warn the claimants of the potential consequences of the matters set out below.

There then followed specific allegations in relation to fire curtains and fire walls. Paragraph 15.(i) relates to the unsuitability of the curtains, and alleges that the fire walls should have been extended to roof height. Paragraphs 15(ii) and 15(iii) are not relevant. Paragraph 15(iv) alleges that the fire curtains were fixed to the underside of the roof sheeting by a metal angle which was of inadequate/insufficient strength, causing the fire curtain to collapse more quickly. Paragraph 15(v) alleges that the compartment wall sandwich panels were secured by steel angles fixed with aluminium alloy rivets. These rivets were unsuitable, in that they would have melted at an early stage of the fire, causing the compartment walls to collapse more quickly. Paragraph 15(vii) alleges that the fire curtain material, used at the top of the compartment walls, was not of an adequate robustness and/or insulation and/or integrity, to be properly used as part of a compartment wall.

The claimants allege that the allegation goes wider than the Particulars, and on a proper reading is an allegation that the fire walls were inadequate from bottom to top, so that they failed to stop the fire as they should have done.

The Claimants argue that the draft amended Particulars of Claim does no more than endeavour, to set out the existing allegations of negligence and the obligations of the parties with much greater clarity and precision. It is conceded by the claimants that the words "and its customers", must be deleted from the fourth line of draft

Wider limitation objections were taken originally by various defendants to parts of paragraphs 31 and 34 of the draft amended pleading. As I understand it, the objections are now confined to paragraph 34, although there are objections which are in one sense reserved in relation to the pleading in paragraph 31.

There are contracts under seal between Holdings and Birse. In respect of Holdings, the issue under the Limitation Act does not apply. Birse originally took objection to paragraphs 31(iv) and (v) as well as paragraph 34(iv) of the draft. It is accepted that paragraphs 31(1) to (iii) are similar to the relevant subparagraphs, in paragraph 15 of the pleading. Birse offered a compromise in relation to paragraph 31. That compromise was not, as I understand it accepted by the claimants.

I shall therefore refer briefly to paragraph 31, but since I propose to exercise management powers in relation to the whole case along the lines proposed by the defendants, I shall not, as I have said, give a ruling on it specifically at this stage, subject to hearing any submissions at the end of the judgment.

The relevant sections are as follows;

Draft paragraph 34 alleges that the severity

The claimants case is that none of the amendments, except paragraph 34, raise a new cause of action. In relation to paragraph 34(4), they contend that it does raise a new cause of action, but the claim arises out of the same or substantially the same facts and matters as those already in issue in the proceedings.

The issue in relation to paragraph 34(4) is whether it arises out of the same or substantially the same facts as those already pleaded. Mr. Stuart QC helpfully summarised the point in oral argument as follows:

In seeking to make good the point, the claimants say the original points of claim included claims by Spade Lane for breach of a collateral warranty from Birse, and by Wakeley Brothers/Spade Lane, for breach of collateral warranties from Broadway Malyan and Fordham Johns (paragraph 10).

The claimants contend that the trial of these claims would involve resolution of the following facts: first, whether the collateral warranties were executed; secondly, in what terms they were executed; thirdly, whether they were breached as alleged, and; fourthly, the consequences in factual and financial terms of the breaches. The new claim against Birse would require consideration of the same facts.

In relation to the new claim, they say that while it is clear that there will be a dispute as to whether Birse owed a duty of care to Wakeley Brothers or Spade Lane, it is difficult to see that substantially new facts would require investigation in order to resolve the dispute.

In response, Mr. Reed says that the statute is not intended to refer to the causes of action against all the defendants, but the cause of action against the particular defendant, i.e. Birse. Facts against the other defendants are of no concern to Birse. It does not have to plead to them and is not bound by them.

He claims to rely on the approach of the Court of Appeal in Goode v Martin and Hemmingway v. Smith-Rodham, which although not decisive, Mr. Reed says supports his case. Mr. Reed says that although the commentary in the White Book is not decisive, there are no policy considerations why a claimant should be entitled to rely on the facts in issue against other defendants.

Mr. Reed rightly contends that whatever the answer to his first submission, the court in its consideration of whether the new cause of action is similar or substantially similar to the existing pleading, must be careful to exclude pleaded facts which are not relevant to support the claim.

Mr. Reed says that there is no allegation with paragraph 9 to procure a collateral warranty. He says that the differences between the two concepts is fundamental; one requires consideration of the exercise of due care and skill by Birse procuring a collateral warranty -- that exercise is different from the evidence that is required in relation to the existing paragraph 9. The duty to procure a collateral warranty requires investigation of the scope of duty, which is different in relation to the failure to procure a collateral warranty as opposed to a breach of a collateral warranty. The damage that flows, so it is said, is wholly different.

Mr. Reed notes that the breaches at paragraph 15 relate to design and workmanship allegations. No facts and matters, he says, could be pleaded in relation to the failure to procure a collateral warranty.

In reply, Mr. Stuart says that CPR 17.4 must be construed according to its precise wording, the result of which is that the court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same or substantially the same facts as the claim in respect of which the party applying for permission has already claimed a remedy in the proceedings. The words "in the proceedings" are important. The rule could have said "against that party in the proceedings." It did not do so.

Having been greatly assisted by the submissions of Mr. Stuart and Mr. Reed, I conclude with considerable diffidence that CPR 17.4 should be construed in the wider sense contended for by the claimants. It seems to me that the amendment arises out of substantially the same facts as claims which the claimant has made in the proceedings, and I propose therefore to allow the amendment subject to the issue of discretion which I shall deal with later in the judgment.

I should emphasise that the issue of discretion is of the greatest importance particulary in relation to allowing draft amendments made on the basis that they arise out of claims made against other parties to the proceedings.

Broadway Malyan takes a similar position to Birse in relation to draft paragraphs 31(v) and (vi). It also takes objection to draft paragraph 34(vi)(iii). Paragraph 34(v) provides the general allegation (to which objection is not taken):

Then appears the passage to which objection is taken:

This has been referred to as the workmanship allegation. In the light of the exchange of skeleton arguments, Broadway Malyan maintains its opposition to the proposed amendments in so far as they relate to workmanship.

Broadway Malyan (BM) says that the pleaded case against BM is that BM was aware that the building was owned by Sheerness, and Sheerness intended to let the building to tenants, and that BM should have been aware that Sheerness would rely in BM to exercise skill and care in the performance of its appointment by Birse, specifically in the design of the building and the advice given to Birse in connection with that design.

It is suggested that the former pleading, paragraph 12, was that the defendant would exercise reasonable care and skill in the design and construction of the building. BM says that in relation to the generalised pleading at paragraph 12, that the defendant would exercise reasonable care and skill in the construction of the premises, the only fair way to read it is that the design allegation relates to the designers, and the construction allegation to the constructors, and therefore construction allegations in the original pleading could not be directed against BM. BM further contends that even if that submission is rejected, the allegations now being made are not construction allegations, but a failure to visit, a failure to spot defects and alert Birse to defects.

The third contention is that the amendment must be considered in relation to an existing claim and not an abandoned claim.

In response, Mr. Stuart makes three points. First, there is no new cause of action in relation to workmanship or design. Secondly, you have to look at the original Particulars of Claim in order to reach a conclusion. Thirdly, he makes a point on discretion. His main point is that his clients are in the same position as the injured claimant in Goode v. Martin, who because of his injuries was unable to recall what had happened in the accident.

Mr. Stuart said that his clients are in a similar position in relation to the fire, and that CPR 17.4(2) should be interpreted to permit the court to allow an amendment whose effect will be to add a new claim, but only if the new claim arises out of the same facts or substantially the same facts are already in issue on a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.

Mr. Stuart also contends that his clients do not know who designed the rivets -- either BM did the design wrongly, or failed to point out that the aluminium rivets had been wrongly designed.

Mr. Stuart also contends that the original pleading alleges a warranty that BM would exercise reasonable care and skill in what they had to do in relation to the contract.

I do not accept BM's argument that paragraph 12 must be construed restrictively, so that design allegations are confined to designers and construction allegations to the contractors.

Nor am I able to accept the argument that the allegations relating to a failure to visit, failure to spot defects and to alert Birse to defects, could not be inherent in allegations relating to the exercise of reasonable care and skill in design and construction of the building.

Even if I am wrong about this, I reach the further conclusion that if this is a new cause of action, it is one that arises out of the same facts or substantially the same facts as those that are already at issue in the claim, in respect of which the party applying for permission has already claimed a remedy in the proceedings.

Fordham Johns does not advance any submissions in relation to the Limitation Act, but contends that the court should exercise its discretion to disallow any amendments against it. It also contends that if the claimants fail against Frank Graham, they must also fail against Fordham Johns. They support Birse's proposals in relation to further information and review of the case.

In so far as there are claims arising out of the contract under seal between Holdings and Frank Graham, the Limitation Act points do not arise. Otherwise, Frank Graham claims that the proposed amendments at paragraph 31(iv) and (vi) and paragraph 34(x) are new causes of action which do not arise out of the same or substantially the same facts as those already pleaded. 34(x):

The claimant says that Frank Graham makes two points, neither of which is well founded. The first point is that in the Particulars of Claim there is an allegation of a contractual duty between Sheerness, one of the claimants, and Frank Graham, and also between Wakeley Brothers and Frank Graham. On receipt of the documents, it appears that there was a single contract under seal between Sheerness and Frank Graham, and therefore the claimants narrowed their case in the proposed amendment.

In addition, in the Particulars of Claim, the claimants allege tortious duties imposed on Frank Graham in respect of each of the defendants, to exercise reasonable skill and care in the design and construction of the building. The defects alleged related to the fire wall at grid line C. In the draft amendment, it is said that all that has happened is that particulars have been given of the duty to warn, that duty having been pleaded in the original Particulars of Claim.

Mr. Stuart QC for the claimants asks rhetorically,

He suggests the answer would have been that the issue was res judicata and the proposed amendment would have been struck out. The two passages which cause difficulty relate to the failure to report to Harris, as Sheerness employer's agent, defects in breach of its obligations in contract and at common law, and failure to observe poor workmanship. Mr. Stuart asks rhetorically,

The allegation of poor workmanship is one which alleges that Frank Graham ought to have observed poor workmanship on site visits. This may well amount to a new cause of action, on the basis that I have already discussed in the case of Broadway Malyan, although I have already indicated that I doubt whether it is a new cause of action. Even if it is, in my view it arises out of the same or substantially the same facts as the claim in respect of which the claimant has already claimed a remedy in the proceedings.

I note that in its skeleton, Frank Graham's counsel says that discretion is likely to be the most important issue in relation to his case. The note raises serious questions to be addressed as to the future conduct of the litigation by the claimant against this defendant, and I well understand the points which are made in that regard.

In the course of argument, I raised the question of the extent to which the issue of discretion could be introduced into this hearing. I said that the purpose of the hearing was to enable the defendants to raise all objections in relation to allegations which they said raised new causes of action, including the argument that I should not exercise my general discretion in favour of the claimants to allow the amendments.

The claimants originally interpreted a previous order as debarring the defendant from raising questions of discretion. This was not the intended consequence of the order.

In the course of the hearing, the defendants said that they would not press for determination of the issues which they claim were matters of discretion, provided they had an opportunity to put together a request for information in relation to the proposed amended Particulars of Claim. The claimant would respond to that request within a comprehensive pleading, which should be substituted for the existing Particulars of Claim. The defendants would then have an opportunity to deal with that, after which the claimants would have an opportunity to serve a reply to the defendants.

I had hoped to complete my judgment by or soon after 25th August 2004. Unhappily, this was rendered impossible by my domestic circumstances, and this has no doubt caused some delay. I am satisfied that this approach is the right way forward, and I will hear the parties on the aspects of the case as to the precise orders that I should make.

A large part of the problem in this case has been caused by the fact that all the documents were lost in the fire. This has clearly hampered the claimants in their preparation of the case. Nevertheless, the clamiants have now had a considerable time to assemble their case. It is important that the case should be accurately pleaded, both in relation to facts and causation. Two broad issues need to be addressed as a matter of urgency: (1) which are the parties that ought to be concerned with the action, and (2) what precisely are the issues that can properly be pleaded against them. I propose that a time be set aside in the near future so that these matters can be considered in detail.