England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Rimer)

		Royal Courts of Justice Strand London WC2 Tuesday 8th May, 2001

1. LADY JUSTICE ARDEN: This is an application by Abbey National Plc ("Abbey") to discharge the permission given to the respondents by Robert Walker LJ on 23rd March 2001 on appeal from the order of Rimer J dated 14th February 2001. By virtue of the judge's order, Abbey was given permission to amend its statement of case and to serve replies in four test cases. It is necessary to say a little about the background to the application before Robert Walker LJ, and I can do so by reference to the judgment of Rimer J.
2. These proceedings were commenced in 1997 and, at least in the case of the first of the test cases before the judge, that is Abbey National v Perry, they arose out of transactions in 1990. The cases were based on alleged professional negligence by a firm of solicitors in the purchase of a property on which they acted both for Abbey and the borrower and purchaser in a conveyancing transaction.
3. The Defence contains a limitation plea. The complaint in the statement of case is that although Abbey was told that the purchase price was to be £93,000, the price in fact paid for the property either did not or probably did not exceed £77,000, all of which was derived from its advance. Those are the facts in the Perry case. There are variations between the test cases, but for today's purposes I am not concerned with those variations.
4. The statement of case pleaded that on 1st May 1990 Abbey offered the borrower an advance of £78,850, subject to Abbey's various conditions which the borrower accepted, and thereupon Abbey retained the defendant to act for it. The statement of case alleges that the solicitors accordingly owed a duty of care to it and, because they were acting for the borrower, a fiduciary duty. There were certain allegations which were in the statement of case in which Abbey claimed that there were breaches of both those duties.
5. The case on breach of fiduciary duty has, I understand, now been abandoned. There was also an allegation in the original statement of case of constructive trust. Paragraph 13 of the statement of case alleged that the defendant became a constructive trustee of the mortgage advance after its receipt and that such trust required it to hold the advance money for Abbey:

"... until such time as this sum was to be applied in accordance with [Abbey's] wishes and instructions failing which the Defendant came under an immediate obligation to return the same."

6. Abbey then alleged that in breach of trust the defendant misapplied the advance by releasing it for the borrower's benefit, without having first told Abbey of the matters pleaded in paragraph 10 and by which the defendant knew or ought to have known that the true nature of the transaction was being concealed from Abbey, and that if the said facts had been disclosed by the defendant to Abbey prior to completion it would not have authorised the making of the advance.
7. In paragraph 10 Abbey alleged that the defendant negligently failed to advise it in the certificate of title of various matters which would have affected its decision to make the advance, being facts to which, Abbey says, the defendant was privy. They, as I understand it, include the fact of the difference in price to which I have referred.
8. Abbey sought to recast the constructive trust claim in paragraph 13. I should say that although paragraph 13 referred to the wishes and instructions of Abbey, the statement of case did not actually define those wishes and instructions. The proposed amendment jettisoned the word "constructive" as a description of the relevant trust, and asserted that the advance money was to be paid to the defendant:

"... with authority only to apply it for the purpose of enabling the borrower to complete the purchase of the property at a price of £93,000 and otherwise to repay the said mortgage advance to [Abbey]."

9. Then at paragraph 14 alleged:

"On or about 9^th June 1990 in breach of trust and without authority the Defendant misapplied the mortgage advance by applying it for the purpose of enabling the borrower to complete the purchase of the property not at £93,000 but at a price of £77,190 or less without first having notified [Abbey] of those matters set out at paragraph 10 above and by which the Defendant knew and must or ought to have known that the true nature of the transaction was being concealed from [Abbey] and that if the said facts had been made known by the Defendant to [Abbey] prior to completion it would not have authorised the making of the advance."

10. Paragraph 15 then alleges that the application of the advance by the defendant was in breach of trust, and Abbey claims the return of the whole amount plus interest.
11. The defendant objected to the application for leave to amend before Rimer J on several grounds, including that the new plea amounted to a new cause of action.
12. I am told that the application before the judge took three days. Mr Driscoll, for Abbey before the judge, contended that the claim did not seek to raise a new cause of action; alternatively, that the plea arose out of the same or substantially the same facts as had already been pleaded in paragraph 13.
13. The learned judge considered the authorities and he held that there was indeed an allegation of a new cause of action, and in that circumstance he had to consider whether or not the facts arose out of the same or substantially the same facts. He considered that this was a matter to be determined as a matter of impression. In so doing he referred specifically to Welsh Development Agency v Redpath Dorman Long [1994] 1 WLR 1409 at 1418D, and in addition to certain other authorities. The judge held that the fact that the trust had originally been described as a "constructive trust" was a misdescription which was of no import, and that the real question was to consider whether there was a substantial difference between the facts as pleaded.
14. The judge agreed with Mr Pooles, for the defendant solicitors, that the new claim involved the pleading of a crucial new fact; that is, that the purchase was to proceed at £77,000 rather than £93,000. Mr Driscoll accepted that that particular fact was an essential part of the new trust case. However, the judge went on to say that the fact that the new case involved pleading this new fact that it did not follow that permission to amend must be refused. He applied the matter of impression approach and, at the foot of page 14 of his judgment, he accepted that while there was a change of case, he had come to the conclusion that it did arise out of substantially the same facts as the current claim and he therefore determined to allow the amendments to the statement of case.
15. He then turned to the reply. This does not involve a limitation point, but rather an exercise of discretion. The judge referred to the recent decision in Brocklesby v Armitage & Guest [2001] 1 All ER 172, in which the court held that for the purposes of section 32(1)(b) of the Limitation Act 1980 it is necessary to demonstrate, as the Act requires, that the fact relevant to the claimant's right of action has been deliberately concealed, but that for this purpose it does not mean deliberate in any sense greater than that the commission of the act was deliberate in the sense of being intentional, and that the act or omission, as the case may be, involved a breach of duty, whether or not the defendant appreciated that legal consequence.
16. The learned judge referred to the fact that what was proposed was to serve a reply in which there was an allegation that the defendant's solicitor decided not to notify Abbey of the paragraph 10 matters, that is the matters set out in paragraph 10 of the statement of case. The judge observed that:

"The difference between this allegation and the others is that whereas the latter involve allegations of intentional acts said to constitute a breach of duty, but not involving any allegation that the defendant knew they amounted to a breach of duty, this allegation does involve the contention that the defendant made a deliberate decision to conceal relevant facts."

17. The judge concluded that, contrary to Mr Pooles' submission, the case Abbey wished to plead in support of the its section 32 argument did not involve any departure from or inconsistency with the factual basis of its substantive claim against the defendant, the latter being based on negligence and breach of trust, and that the nature of those cases was not changed by the facts pleaded in support of its section 32 plea. Accordingly, he gave leave to Abbey to serve a reply containing the proposed allegations.
18. When the matter came before Robert Walker LJ, Robert Walker LJ granted permission and gave as his reasons as follows:

"I am inclined to think that Rimer J did not err in the `matter of impression' or in the exercise of his discretion, and that his decision was not inconsistent with the important judgments in Mothew [1998] Ch 1 and Thakerar [1999] 1 AER 400. But the point is difficult and may significantly affect the outcome of the managed litigation. It is an appeal which merits consideration by the full court."

19. On the application today Mr Driscoll appears for Abbey and he accepts that he has to show a compelling reason why the permission should now be discharged. He has made a number of submissions. His first submission is based on the fact that, through oversight, the applicants for permission to appeal, that is the defendant's solicitors, did not put before Robert Walker LJ the decision in Nationwide Building Society v Thimbleby & Co. This was a case to which Rimer J had regard when he refused permission to appeal. But over and beyond that point, at the end of his judgment in that case Mummery LJ stresses that the court is slow to interfere with a case management decision of a judge, particularly a judge entrusted with the management of a list of managed cases such as these cases before us today, and that this was especially so where a judge was making a decision as a matter of impression, as he is required to do under the Limitation Act.
20. In the Thimbleby case the position was that as a result of a previous case management order the claimants in that case had been directed to serve points of claim, and they later sought to raise an issue which was in their original statement of claim. The question was whether or not the new allegation arose out of substantially the same facts. The judge in charge of the managed list had regard to what had originally been pleaded. The Court of Appeal upheld his approach.
21. Mr Driscoll points out that because Rimer J had been referred to this case, and indeed had himself referred to it, not in his judgment but when refusing permission to appeal, the appellants should themselves have referred to it when they made their application for permission to appeal. That was an application which of course is made without notice to the other side, and accordingly Mr Driscoll takes us to the authorities on the obligation of full and frank disclosure on obtaining without notice applications by way of freezing applications. He refers specifically to Memory Corporation Plc v Sidhu [2000] 1 WLR 1443, and to the well-known principles there that a party who makes a without notice application is under an obligation to the court to make the fullest possible disclosure of all material facts within his knowledge, and if he does not make that fullest possible disclosure then he cannot obtain any advantage from the proceedings and may indeed be deprived of any advantage which he has already obtained.
22. There is a further point that Mr Driscoll makes in this regard, that there was a misleading impression given. Before I say that I should say that the reason why the Thimbleby case was not referred to in the papers has been the subject of a witness statement by Mr Tyler, the solicitor for the defendant solicitors. He says that a note of the judge's reasons for refusing permission to appeal made by the solicitors was included in the bundle, but subsequently the solicitors received the form completed by the judge himself setting out his reasons for refusing permission to appeal. This did not include a reference to Thimbleby, and accordingly when the note was replaced by the form completed by the judge, inadvertently the reference to Thimbleby disappeared. It was also not referred to in the skeleton argument.
23. Mr Driscoll makes the further point that in the skeleton argument which accompanied the application for permission to appeal, the defendants also overstated the position about the cases affected by the proposed amendments. The position, however, is that there are some 35 cases in this managed list which contain a constructive trust allegation, and it is sought to substitute the new allegation in the majority of those cases. So it is undoubtedly correct that while not all the cases are affected by this point, many are.
24. Mr Driscoll also submits that in their skeleton argument the defendant solicitors wrongly referred only to Mothew, which was not an amendment case, and not to any of the other cases which had been before the judge. But of course the references to the relevant cases are in the judge's judgment itself and, in addition, Robert Walker LJ himself refers to the Thakerar case which was an amendment case.
25. It is, in my judgment, unfortunate that the Thimbleby case was not expressly referred to in the skeleton argument which was before the learned Lord Justice when he considered the application for permission to appeal. But Mr Driscoll has gone on to argue that it is impossible to say what effect its omission had on Robert Walker LJ. For my own part, the principle with which it deals, namely that on the question whether or not the new facts are substantially the same as the facts originally pleaded, the authorities establishing that it is a matter of impression are well-known and are referred to by the judge, so that they would have been before Robert Walker LJ. So far as the principle of deference to the judge in matters of case management is concerned, that is a principle which is also well-known and is not simply to be found in the Thimbleby case. Therefore I venture to think that the omission to refer to the Thimbleby case would not have played a significant part in the learned Lord Justice's reasoning.
26. Moreover, in the Thakerar case, to which Robert Walker LJ did indeed refer, it is said that in some cases the very question at issue whether the facts are substantially the same as were originally pleaded is a matter of analysis. In my judgment that is so in this particular case where the court is faced with the question whether or not the facts which supported the original constructive trust claim are the same or substantially the same as those involved in the new purpose trust claim. Accordingly, in my judgment, the fact that Robert Walker was not referred to the Thimbleby case, is not one which could justify discharging the permission today.
27. Mr Driscoll's second main point is that there were other aspects of the skeleton argument which did not make it clear what was in issue below so far as the amendments are concerned. This point substantially involves the question of the reply. What Mr Driscoll says is that the case which is sought to be introduced for the first time in the reply is the addition of an allegation of deliberate conduct. He submits that this goes further than Abbey needs to go; that Abbey wishes to say that not only did the solicitor represent that the price was X, rather than X minus Y, but that the reason why the defendant solicitor decided not to do so was deliberate. He does not necessarily suggest that the solicitor was dishonest, but he wants to add that gloss by the reply. He submits that this is going further than section 32 requires, on the authority of Brocklesby, and, moreover, that the question of the application of section 32 had already been put in issue by the statement of case which makes a cursory reference to section 32.
28. So far as this point is concerned, it is clear from the annexure to the notice to appeal that the primary points to be raised about the defendant are the question of inconsistency, which was indeed a point directly considered by the judge in his judgment, and also the question of the effect of delay, because it is now many years since the facts in issue occurred, and that those are the principal points of reply and the order sought on appeal is that the respondents to the appeal (that is the claimants, Abbey National) should not have permission to serve a reply.
29. So far as Mr Driscoll's point is concerned, if it is being said that the appeal raises an issue which goes beyond the issue with which the judge was concerned, again, as it seems to me, that is a matter for the substantive hearing of the appeal itself. It is not a compelling reason for discharging the appeal and this court is not here to restrict questions on appeal. So far as this court is concerned, the question is whether or not there is a compelling reason for discharging the permission already given.
30. So far as I am concerned, having looked at this matter, it seems to me that the matters relied upon by the applicants/appellants, that is the defendant solicitors, as summarised above, do raise points which can properly be raised on appeal and which have a reasonable prospect of success; because if the judge were to have been wrong, say on the inconsistency point, it would be open to the Court of Appeal to set his exercise of discretion aside. There is a real prospect of success on the inconsistency point.
31. The third point raised by Mr Driscoll is that when one takes into account the reasons already given and the reasons given by Robert Walker LJ, there is no real prospect of success in this case. Of course Robert Walker LJ's reasons begin by saying that he was not personally convinced that the appeal would succeed. But that is a different question. For the purpose of giving permission to appeal, the test is whether there is a real prospect of success. As I see it, the discretion of the Lord Justice could not be faulted on that point, seeing the differences between the new plea on trust and the original plea. There is clearly a question of whether or not on analysis the facts are substantially the same, and the point, although lengthily argued before the judge, is dealt with quite briefly in the judge's judgment.
32. Robert Walker LJ was also influenced by the fact that this matter was of importance in this managed litigation. As I have said, the trust allegation is involved in the majority of the 35 cases. Mr Driscoll accepts that this allegation is an additional string to his bow, and he confirms that it is not Abbey's intention to abandon it.
33. In those circumstances, it seems to me that there are no grounds for setting aside the permission which has already been granted.
34. Accordingly I would dismiss the application.
35. MR JUSTICE SUMNER: I agree.
ORDER: Application to set aside the grant of permission to appeal refused with costs assessed in the sum of £4,417, to be paid within 14 days; direction given that if the case has not previously been heard by 31st August, the case is to be given the first available date between 1st September and 31st October. (Order not part of approved judgment)