England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE KINGSTON UPON HULL COUNTY COURT
(MR RECORDER LODGE QC)

		Royal Courts of Justice The Strand London
		Wednesday 23 February 2000

Wednesday 23 February 2000

1. THE LORD CHIEF JUSTICE: The question at the heart of this appeal brought with the permission of Mr Recorder Lodge QC is whether the Recorder was right in a judgment handed down on 18 May 1999 to refuse permission to the first defendant to withdraw pleaded admissions of fact and an admission of liability. On that decision, on the unusual facts of this case, depended the injured claimant's chance of recovering any of the damages to which he was in principle entitled. On 1 June 1994 Mr Sollitt was employed by a company named Tolent Construction Limited. He was working on a site at Hull when he was hit and injured by the bucket of an excavator operated by an employee of another company. On 3 June 1994, just two days after the accident, Mr Sollitt's employers, Tolent, wrote to DJ Broady Limited at 122, Stoneferry Road, Hull, complaining that this accident had been caused by the negligence of a Mr Neylon, an employee of D J Broady Limited, who had been driving the excavator at the time, and Tolent gave notice of a claim.
2. On 6 June 1994 liability was promptly rejected on behalf of DJ Broady Limited.
3. On 17 May 1996 Mr Sollitt issued proceedings in the Kingston upon Hull County Court against DJ Broady Limited of 122, Stoneferry Road, Hull. He claimed damages for personal injuries sustained on 1 June 1994 when he had been working on the construction site and had been injured by the excavator bucket. It was alleged that the driver of the excavator had been the defendant's servant or agent and that he had been negligent.
4. A defence was served on 3 June 1996. It was signed by Bridge McFarland, solicitors on behalf of the defendants. It was expressly admitted in that defence that Mr Sollitt had been struck by the bucket of an excavator on 1 June 1994 and that the driver of the excavator had been the servant or agent of the defendant. Negligence, causation and loss and damage were either denied or not admitted, and contributory negligence was alleged. A reply was duly served.
5. When Mr Sollitt's summons was issued it was sent by his solicitors to DJ Broady Limited at the address already mentioned. In a covering letter it was pointed out that the matter had been dealt with by "your insurers, the Builders Accident Insurance Ltd", under a reference which was quoted.
6. This summons was received by Mr Wakefield, the general manager of DJ Broady Limited. He sent it to the Builders Accident Insurance. VV e learn from an affidavit of Mr Bridge that he had had previous experience of acting for DJ Broady Limited and was instructed by Mr Wakefield on this occasion. In an affidavit sworn in February 1999 he said in paragraphs 3 and 4:

"3. I should say that over a period of perhaps ten years I had from time to time acted for DJ Broady Limited on the instructions of their insurance company, both in relation to employer liability and public liability claims. From recollection, I would say that I had acted for them in relation to six or seven previous cases.

4. When these proceedings were commenced, I contacted the company. My contact was Mr Michael Wakefield who had been my point of contact in relation to every previous case that I had handled."

7. The defendants' solicitors served a list of documents on 1 July 1996, which bore the name of Bridge McFarland, the solicitors acting for the defendants. On 27 August 1996 Mr Bridge of Bridge McFarland wrote an important letter to the solicitors acting for Mr Sollitt under the caption "DJ Broady Ltd -ats- Sollitt". In that letter Bridge McFarland said:
8. "The Defendants hereby admit primary liability to the Plaintiff in negligence."
9. They made a specific admission of one of the paragraphs of the claim. However, they

maintained other allegations, particularly their allegations of contributory negligence.

10. In due course statements were prepared by various of the participants and exchanged. The

driver of the excavator, Mr Neylon, in a statement dated 27 September 1996 said in paragraph 2:

11. "I make this statement on behalf of the Defendant Company, DJ Broady Limited for whom I

have been employed as an excavator driver for 2 years."

12. There was also an affidavit sworn by Mr Wakefield on 16 October 1996 verifying the defendants' list of documents. He described himself as "of DJ Broady Ltd" of the address already mentioned and said in paragraph 1:
13. "I am employed by DJ Broady Limited as a general manager. I make this Affidavit to verify a List of Documents prepared by Broady's solicitors. I am authorised to make this Affidavit on their behalf. "
14. This affidavit bore the name of Bridge McFarland.
15. A witness statement was made by Mr Wakefield of DJ Broady Limited, of the address

already mentioned, on 3 October 1996 in which he said:

"2. I am employed by DJ Broady as a General Manager.

3. I have known Mr Neylon for the length of time he has worked for DJ Broady which is since 23rd May 1994 which is just over 2 years."

16. The contents of this statement he duly confirmed to be true.
17. On 2 June 1998 a supplementary list of documents was served on behalf of the defendants

by Bridge McFarland.

18. On 10 February 1999 Mr Bridge swore an affidavit, the purpose of which was to seek an order that the name of another defendant be substituted for the defendant DJ Broady Limited, whom Mr Sollitt had sued.
19. It is necessary to diverge from the chronology to explain the confusion in company names which lies at the heart of this case. On 28 January 1963 a company was incorporated by the name DJ Broady Limited. It was a substantial company. This is the company for which the driver of the excavator worked on 1 June 1994. On 15 September 1995 this company did two things. First, it sold its assets for a very substantial consideration to another company, Deamcrest Limited, to whom it did not transfer its liabilities. Secondly, it changed its name to TD Broady Investments Limited ("Investments"), although before 15 September 1995 it was not known by that name.
20. Deamcrest Limited was incorporated on 18 August 1995. On 15 September 1995 it changed its name to DJ Broady Limited ("DJB"). On that date it acquired the assets of Investments. The employees of Investments were transferred to it and Mr Wakefield, who had formerly been a director of Investments, became the general manager of DJB. Thus by the time the proceedings were issued on 17 May 1996 the name of the company for which the negligent excavator driver had worked at the time of the accident was borne by a different corporate entity. In law of course the liability to Mr Sollitt (if there was such a liability) lay with Investments. DJB was not at that date in existence. But DJB had admitted that the excavator driver had worked for it at the material time and that he had been negligent. Thus it was that Mr Bridge made this application. In paragraph 2 of his affidavit sworn to support it he said:
21. "I received instructions to defend these proceedings once the Summons had been served on the 11th May 1996. My instructions came from BAI (Run-off) Limited, an insurance company that was continuing the voluntary run off of the insurance business formerly undertaken by the Builders' Accident Insurance Limited. DJ Broady Limited had, inter alia, employer liability and public liability insurance with the Builders' Accident Insurance Limited as of the 1st June 1994 when the Plaintiff's accident allegedly occurred."
22. Mr Sollitt resisted the application for substitution and drew attention to a number of documents which had been exchanged between the parties. The application was referred to Mr Recorder Lodge who refused an order of substitution of Investments for DJB, but ordered that Investments be added as a second defendant. On 11 March 1999 the issue of liability was determined. The Recorder ruled, having decided the issue of contributory negligence, that Mr Sollitt was entitled to recover damages of £10,567.75, inclusive of interest. He however reserved judgment on the question against whom that order for damages should be made. That issue he resolved in the judgment handed down on 18 May 1999 when he held that DJB and Investments were jointly and severally liable for the damages awarded. It is against that conclusion that DJB now appeal. The significance of the appeal is that, while DJB can meet the judgment of the court if required to do so, Investments has no assets, is effectively uninsured and cannot meet the judgment.
23. The first question is whether Bridge McFarland had actual authority to make the admissions that they did. In my judgment they plainly had. The proceedings were issued against DJB and served on that company, as it happens twice. The proceedings were referred by the general manager of DJB to insurers. The insurers acting on behalf of the company sued, of which they thought they were the insurers, instructed Bridge McFarland. Bridge McFarland communicated with the general manager of DJB and thereafter acted for and on behalf of DJB, the only company sued. If, however, contrary to that view Bridge McFarland did not have actual authority, then in my judgment they had ostensible authority since they were plainly held out by DJB as having authority to act on that company's behalf. I have already referred to several documents authenticated by the general manager of DJB which were issued or served by Bridge McFarland. It is as I think quite impossible to suggest that DJB did not hold out Bridge McFarland as having authority to act on its behalf if, in truth, the firm did not. The real crux of this appeal is whether the Recorder erred in exercise of his discretion in refusing to allow DJB to resile from factual admissions that it was the employer of Mr Neylon at the time of the accident and its admission of liability.
24. For purposes of this argument it may in my judgment be assumed that Mr Sollitt sued DJB when his cause of action properly lay against Investments; that the claim was defended and admissions made on behalf of DJB without any point being taken on the liability in principle of DJB; that knowledge of Mr Sollitt's error was or should have been apparent to DJB particularly by Mr Wakefield; that responsibility for failure to correct the error lay at any rate primarily with DJB; and that nothing was done to alert Mr Sollitt or his solicitors to the true position until January 1999.
25. On the basis of those assumptions, not all of which he would accept but which are in my view inescapable, Mr Edwards for DJB makes two submissions: first, that a party should ordinarily be permitted to withdraw an admission made by mistake unless this cannot be done without serious prejudice to the other party; and second, that here Mr Sollitt is no worse off as a result of the admissions made on behalf of the wrong defendant than if the true legal position had been drawn to his attention at the proper time.
26. In support of the first of those submissions Mr Edwards relies on Gale v Superdrug Stores Plc [1996] 1 WLR 1089, and in particular on a passage in the judgment of Waite U at page 1097H, where he said:
27. "I prefer Mr Vineall's submission that the discretion is a general one in which all the circumstances have to be taken into account, and a balance struck between the prejudice suffered by each side if the admission is allowed to be withdrawn (or made to stand as the case may be). Although the judge reached his conclusions in the course of a full and careful judgment, Mr Vineall's criticisms of the judge's approach to the exercise of his discretion are also, in my judgment, well founded. The judge had no evidence before him of any specific matter which rendered it more difficult for the plaintiff to prosecute a claim in liability than it would have been if the admission had never been made. No one pointed, for example, to any eye witness whose evidence would have been obtained if liability had been in issue but who cannot now be traced. It is certainly true (as Sir George Waller pointed out) that this is a field in which there is scope for some degree of obvious inference, but the judge had nothing besides a general assumption that all delay is prejudicial to place against the very clear prejudice which the defendants would suffer if they were not allowed to urge the view of liability on which -- albeit at a late stage -- they had received fresh advice from their solicitors as soon as they were instructed. The judge was entitled to take account, as anyone naturally would, of the disappointment suffered by the plaintiff, but he was wrong in my view to elevate it to the status of a major head of prejudice, thereby giving it a wholly disproportionate emphasis."
28. This passage gives valuable guidance on the correct approach to the exercise of discretion and the striking of a balance in cases of this kind. But it is I think plain that Waite U was not purporting to lay down any rule of law, and that the exercise of any discretion depends on the facts of the case. I would observe that the dissenting judgment of Thorpe U has very considerable persuasive force, particularly in the new procedural environment inaugurated by the Civil Procedure Rules. I would, however, accept that it is generally necessary to look at the prejudice which the parties will respectively suffer if permission to withdraw an admission is given or not given.
29. I turn therefore to the second submission. If permission to withdraw these admissions is not given, the prejudice to DJB is obvious. That company is subject to an adverse judgment which could not have been made had the correct facts and the legal effect of them been appreciated and acted upon at the right time. It must, however, be observed that such prejudice is almost entirely of that company's own making. On behalf of DJB Mr Edwards submits that there is in the circumstances no prejudice to Mr Sollitt. His argument runs roughly like this: If the correct position had been pointed out to Mr Sollitt and his solicitors on or shortly after the issue of proceedings, he would have joined or substituted Investments as a defendant. That was a company with substantial assets in 1995 to 1996. It was moreover believed to be insured by BAI until June 1995, and thereafter BAI (Run-off) Limited was meeting its liabilities towards its insured, although not taking on new business. Therefore, it is said, Mr Sollitt and his advisers would not have worried about the ability of Investments to meet a claim, nor about the adequacy of insurance cover. The action would, it is said, have proceeded at the same leisurely pace until the end of 1998, by which time Investments would have parted (as it had) with its assets, and BAI (Run-Off) Limited would have gone into liquidation and become unable to meet any further claims. Thus, it is said, Mr Sollitt would have been no worse off. It is true that we cannot be sure what would have happened had the true facts been brought to the attention of Mr Sollitt and his solicitors at the right time. There are, however, a number of possibilities. One is that Mr Sollitt and his advisers would if necessary have made sure that Investments retained funds sufficient to meet a claim. Another is that, if there were doubts about the assets available to Investments, the insurance position would have been fully explored. Another possibility is that Mr Sollitt and his advisers would have entered into negotiations with the insurers with a view to making an early settlement. Another possibility is that application would have been made for an interim payment. Another is that Mr Neylon, the driver of the excavator, would have been joined in the action personally, the claim being one not beyond the means of a private individual. Mr Sollitt says that because of DJB' s admissions and the failure to alert him to the true position, he lost the opportunity to consider the courses of action open to him on the true facts and to take whatever steps were judged necessary to protect his interests. In short, he was lulled by a belief that he had in DJB, a defendant who was admitting liability and was able to meet any judgment whether supported by the company's insurers or not into considering and taking none of these steps.
30. This seems to me on the facts of this case to be a powerful and persuasive argument. DJB are however entitled, as Mr Edwards does, to point out that the Recorder in his judgment did not exercise his discretion along these lines and did not balance the prejudice to the respective parties in the way that on authority he should have done. The Recorder was much impressed, as indeed am I, by the obvious injustice of denying a judgment to Mr Sollitt against a company which up to the door of the court had been admitting liability in principle. The Recorder did not, however, consider whether Mr Sollitt would have been just as gravely prejudiced if the true facts had been pointed out in the summer of 1996. To that extent it seems to me that the criticism of his judgment is justified. If, however, the Recorder had reviewed the matter along the lines that he should have done, and along the lines that I have suggested, he would and should have come to the same conclusion, which was that to which in substance he did come. For my part I would not disturb his conclusion and would therefore dismiss the appeal of DJB.
31. LORD JUSTICE PILL: I agree.
ORDER: (Not part of judgment) Appeal dismissed; respondent to have costs of the appeal; the order on the stay to remain undisturbed.