England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
DEPUTY JUDGE DAVID DONALDSON QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		2 April 2004

Sir Martin Nourse :

1. This is an appeal against an order allowing a claimant to amend her statement of claim. The defendant's objection before the master and initially before the judge was founded on an argument as to the true construction of an order in another action made in the Tomlin form. That objection, though it was upheld by the master and remains live in this court, was correctly rejected by the judge. But after he had given his decision on that question the defendant raised a fresh objection based on section 35 of the Limitation Act 1980 (new claims in pending actions). This second objection was also rejected by the judge. It is, however, far more formidable than the first, and it is to that question that the argument in this court has principally been directed. I will refer to the two questions as the construction and limitation questions respectively.
2. Although by the close of the argument in this court each of the two questions was seen to be a short one, neither can be understood without a recital of the background facts and an account of the proceedings. The facts can be taken from the first judgment of Mr David Donaldson QC, sitting as a deputy judge of the Chancery Division, delivered on 13 December 2002, and they can be stated mainly in his own words.
3. The claimant, Natasha Julie Furini, is the daughter of the late Ghulham Mustafa Khan and the first defendant, Abdul Waheed Bajwa, is his nephew. Dr Khan emigrated from India to the United Kingdom in 1969. Miss Furini was born here and Mr Bajwa emigrated here in 1981. In 1989 Dr Khan went to Pakistan and did not return. On 5 June 1991 he was murdered at his home in Pakistan. At the time of his death he was the registered proprietor of eight freehold properties situated in the United Kingdom. On various dates subsequent to his death Dr Khan's title to each of those properties was purportedly transferred to one or more of the first six defendants to this action (including Mr Bajwa) and some were charged in favour of the banks or other lenders which are the seventh to tenth defendants. Some of the properties were transferred by transfers purporting to be executed by Dr Khan; others by transfers purporting to be executed under powers of attorney. In this action, known as the rectification action, Miss Furini, as the administratrix of Dr Khan's estate (see below), claims that all the transfers and the powers of attorney were forgeries. She seeks to have the register rectified accordingly.
4. Miss Furini was unable to verify rumours of Dr Khan's death until December 1996, when she visited Pakistan. On 24 January 1997, having returned from that visit, she obtained a grant of letters of administration to Dr Khan's estate on the basis that he was dead and had died intestate. Four months later Mr Bajwa produced a purported will of Dr Khan dated 28 December 1989, by which he left all eight properties to Mr Bajwa. On 15 May 1998 Miss Furini, issued the writ in the rectification action. On 22 May 1998, seven days later, Mr Bajwa issued a writ in an action known as the revocation action, in which he claimed revocation of the grant of letters of administration to Miss Furini and sought a grant to himself with the will dated 28 December 1989 annexed. He also claimed an account of Miss Furini's dealings with the estate of Dr Khan.
5. Initially, Miss Furini put in a defence to the revocation action which simply denied the authenticity of the will dated 28 December 1989. However, in the autumn of 2001, her defence was amended so as to allege that the will had been forged by Mr Bajwa. Among the matters from which the court was asked to infer that Mr Bajwa had been the forger were allegations that he had forged the transfers and powers of attorney as claimed in the rectification action. The revocation action having put in issue Miss Furini's entitlement to sue on behalf of Dr Khan's estate, it was agreed that the rectification action should be stayed pending the outcome of the revocation action.
6. By an order in the Tomlin form made in the revocation action on 12 March 2002 it was ordered by consent, first, that Mr Bajwa discontinued his claims for revocation of the grant to Miss Furini and for a grant to himself; second, that Mr Bajwa's claim for an account of Miss Furini's dealings with the estate of Dr Khan should proceed upon the terms set forth in the schedule to the order; third, that for the purpose of carrying the terms in the schedule into effect the revocation action should be consolidated with the rectification action.
7. The outcome of the construction question depends on the opening words of paragraph 1 of the schedule to the Tomlin order:

"Without prejudice to any relief which is or may be sought by [Miss Furini] against [Mr Bajwa] and others in the Rectification Action:

(a) an account shall be taken … "

The account to be taken is of "all monies paid, properties transferred and/or all benefits" (i) given by Mr Bajwa to or for the benefit of Dr Khan during his life, and to or for the benefit of his estate following his death, and (ii) received by and/or for the benefit of Mr Bajwa from Dr Khan and/or his estate whether before or after Dr Khan's death. Under sub paragraph (b) the balance due to or from Mr Bajwa upon the taking of the account is to stand as a debt payable to Mr Bajwa by Miss Furini out of Dr Khan's estate or by him to her, as the case may be. In sub-paragraph (c) there is a proviso that in respect of the account up to and including 30 April 1989 the net amount (if any) due to Mr Bajwa shall not in any event exceed £150,000.

8. On 12 June 2002, three months after the Tomlin order, Miss Furini applied for leave to amend her statement of claim in the rectification action. The main purpose of the proposed amendments was to enable her to allege that the transfers and the powers of attorney had been forged by Mr Bajwa himself. In his first judment the judge recorded that he had been told that one reason for that was that such an amendment would give Miss Furini an additional ground, that of fraud, to advance under section 82(1) of the Land Registration Act 1925 in support of her claims to rectify the register; an additional and, as the judge himself later recognised, the primary objective was to found a further monetary claim against Mr Bajwa, on the footing that he held or had held each of the properties on a constructive trust for Dr Khan's estate. The judge said (para 11):

"In so far as that would entitle the estate to recover properties in the hands of Mr Bajwa and/or proceeds of sale of properties which he has sold or any benefits which in fact arise from these properties, that would add nothing to what Miss Furini would obtain from the operation of the agreed procedure under the [Tomlin order]. But a claim based on constructive trusteeship arising from Mr Bajwa's alleged fraudulent conduct would in addition entitle Miss Furini to recover compensation in respect of benefits which could have been obtained but were not received by Mr Bajwa."

9. Miss Furini's application first came before Master Bowman, who, on 18 July 2002, dismissed it. He acceded to Mr Bajwa's objection that the amendments would be inconsistent with the account agreed to be taken by paragraph 1 of the schedule to the Tomlin order; the amendments sought an account on a different basis from, though covering in part the same ground as, the account previously ordered.
10. In his first judgment the judge concentrated his attention on the opening words of paragraph 1 of the schedule to the Tomlin order, sc. "without prejudice to any relief which is or may be sought" by Miss Furini against Mr Bajwa in the rectification action (his emphasis). He said (para 17) that, on the face of it, those words:

"suggest that the agreement to strike and pay the balance between the benefits on both sides in the manner provided for in paragraph 1 of the schedule is to impose no restriction on relief which not only is currently but may in the future be claimed in the rectification action."

Later (para 19) he said that he did not think that those words:

"can be overridden as regards the additional claim for benefits which could have been but were not achieved, because that does not seem to me, in my judgment, a necessary consequence of the wording which is employed subsequently in the schedule."

11. The judge did not, however, allow the amendments as then sought. He gave two reasons: first, that it could not be right to bring a new claim for a liability which was already the subject of the Tomlin order; second, the procedure agreed in paragraph 1 of the schedule must be allowed to run its course in accordance with its own terms, otherwise the amendment would be seeking effectively to breach the agreement. He added (para 21):

"On the other hand, for the reasons which I have explored above, there would be nothing wrong, in my judgment, in making quite outside that process a claim for unachieved benefits based on fraudulent conduct and constructive trusteeship."

The judge concluded (para 22):

"Accordingly, like the Master, I would not grant permission for the amended pleading in its present form but I do consider that the Master's indication of what pleading would be appropriate was too restrictive."

12. After judgment there was a discussion between the judge and counsel, in which it was agreed that revised amendments conformable to the judge's judgment should be brought back to be approved by him. The possibility of agreeing the revisions there and then having been floated by counsel, the judge said that he was against drafting on the wing or on the hoof. In the result the matter was adjourned and no order was drawn up.
13. It is convenient to deal with the construction question at this stage. It can be dealt with very briefly. On behalf of Mr Bajwa Mr Scrivener QC, who did not appear below, has submitted that the judge, having correctly identified the appropriate principle, failed to apply it correctly to the facts. That submission must be rejected. Its practical result, if correct, would be to give no effect at all to the unrestricted words "without prejudice to any relief which is or may be sought" by Miss Furini against Mr Bajwa in the rectification action. The judge's view of this question, as expressed in paragraphs 17, 19 and 21 of his judgment, was correct and should be affirmed accordingly.
14. I turn to the limitation question. Towards the end of January 2003 Mr Althaus, for Miss Furini, provided Mr Gasztowicz, for Mr Bajwa, with a revised draft of amendments intended to conform with the judge's judgment. By letter dated 14 February 2003 Mr Bajwa's solicitors responded with an intimation that the draft was accepted as consistent with the judgment, subject to two exceptions, on which agreement was subsequently reached. However, the letter also, for the first time, advanced a claim based on limitation. It was said that the bulk of the amendments should be excluded from the amended pleading, and instead incorporated in a fresh claim form, on the ground that they raised new causes of action which were arguably statute-barred. Within a few weeks of the receipt of the letter dated 14 February Miss Furini issued a new protective claim form.
15. The matter came back before the Judge on 3 April 2003, when Mr Bajwa sought to argue the limitation question and Miss Furini objected to its being raised at that stage. The judge's second judgment was delivered on 9 May 2003. He refused Mr Bajwa's application that he should consider his objections to the amendments based on limitation.
16. By his order made on 9 May 2003 the judge allowed Miss Furini's appeal in part and granted her permission to amend her statement of claim in the form previously agreed and without regard to Mr Bajwa's limitation objection. Mr Bajwa applied to this court for permission to appeal on both questions. On 27 October 2003 Lady Justice Arden, in a reasoned judgment delivered at an oral hearing, granted permission. She pointed out that an appeal on the construction question would be a second appeal, for which permission would not be given unless she considered that the appeal would raise an important point of principle or practice or there was some other compelling reason for this court to hear it; see CPR, Pt.52.13(2). She said that the construction question raised no important point of principle or practice. However, having decided that Mr Bajwa had a real prospect of success in an appeal on the limitation question, she thought that it might be that in the course of the hearing of that appeal it would be in the best interests of justice that the construction question should also be considered by this court. In other words, she considered that there was a compelling reason for this court to hear an appeal on the construction question.
17. Section 35 of the Limitation Act 1980 provides, so far as material, as follows:

"(1) For the purposes of this Act any new claim made in the course of any action shall be deemed to be a separate application and to have been commenced –

(a) [Claims in or by way of third party proceedings]; and

(b) in the case of any other new claim, on the same date as the original action.

(2) In this section a new claim means … any claim involving either –

(a) the addition or substitution of a new cause of action …

(3) Except as provided by … rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim …

(4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied …

(5) The conditions referred to in subsection (4) above are the following –

(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action … "

18. Before the judge, by reason of the decision of this court in Paragon Finance PLC v D.B. Thakerar & Co. [1999] 1All ER 400, the following matters were common ground:

(1) The claim that Mr Bajwa was himself the forger of the transfers and the powers of attorney, and was thus liable as a constructive trustee, was "a new cause of action" within s.35(2) (a) and thus "a new claim" for the purposes of s.35(3).

(2) The new claim did not arise out of the same facts or substantially the same facts as were already in issue on any claim previously made in the action for the purposes of s.35(5)(a).

(3) Subject to s.32(1) of the 1980 Act (postponement of limitation period in case of fraud, etc.), the applicable limitation period was six years from the act or acts complained of.

19. In his second judgment the judge started by considering s.32(1), in reference to which he referred to various items of evidence to which Mr Gasztowicz had drawn his attention. Having recorded counsel's argument based on that evidence, including a fall-back submission that the frauds had all been discovered by Miss Furini at the latest in early 1997 (which would have made the new claim statute-barred at the date of the hearing on 3 April 2003), the judge expressed no view on the evidence, but went on to consider the prior question whether it was or should be open to Mr Bajwa to raise a limitation argument at that stage. He concluded that it was not.
20. In Welsh Development Agency v Redpath Dorman Long Limited [1994] 1WLR 1409 it was held by this court (Glidewell, Simon Brown and Peter Gibson LJJ) that the effect of s.35(3) was that leave to amend in order to raise a new claim could not be given where the limitation period had expired at the time that the court was considering the matter, even if it had not expired at the date when the application for leave was made. In delivering the judgment of the court Glidewell LJ said, at p.1421C:

"The wording of s.35(3) of the Act of 1980 … is so clear as to admit of only one interpretation. That is that the relevant date is the date at which the amendment is actually made, which by definition must be no earlier than the date at which leave is granted to make the amendment."

It was further held that, unless the claimant can establish that the defendant does not have a reasonably arguable case that the proposed new claim is statute-barred, the court must refuse permission to amend and leave the claimant to commence a new action in which the limitation defence can be fully argued and determined.

21. It having been accepted by Miss Furini, for the purposes of s.32(1), that she had discovered Mr Bajwa's forgeries or could with reasonable diligence have discovered them, by early 1997, the argument on the limitation question in this court has been reduced to one short point. Can it be said that the amendments were "actually made" on 13 December 2002? If they were not, then s.35(3) prohibited the court from allowing them to be made on 9 May 2003 (or on 3 April 2003), by either of which dates the six year limitation period had expired. The prohibition is absolute and the court has no discretion in the matter.
22. Mr Scrivener has argued that the amendments were not actually made on 13 December 2002. As to that argument, the judge said (para 28):

"This argument appears to ignore the relationship between judgment and formal order. The judgment takes effect when delivered, albeit subject to revocation or alteration by the judge at any time before being formally drawn up. The amendment is thus allowed by the court on the date of judgment, not at the date when the order is entered. In the present case, I adjudged on 13 December 2002 that the Claimant should have permission to make the proposed amendments adjusted in the respects which I identified. Events after that date, though before the entry of a formal order reflecting that judgment, are therefore irrelevant."

23. With respect to the judge's view, the principle correctly stated by him in general terms cannot apply where the judgment delivered does not approve specific amendments but leaves them to be agreed or determined at some later date. There can be no doubt that if revised amendments had been agreed or approved by the judge on 13 December 2002, it would not have mattered that they were embodied in an order drawn up later. But that is not what happened. The matter was adjourned without agreement or approval of the relevant amendments. On that footing it cannot possibly be said that the amendments were actually made on 13 December 2002. They were not made until the judge's second judgment was delivered on 9 May 2003. The judge had no power to allow them to be made at that date. The limitation question cannot be raised in the rectification action. It can only be argued and determined in the new action commenced by Miss Furini after the receipt of the letter dated 14 February 2003.
24. For these reasons, I would decide the limitation question in favour of Mr Bajwa and allow his appeal accordingly.

Lord Justice Maurice Kay:

25. I agree.

Lord Justice Mummery:

26. I also agree.
Order: Appeal allowed; question of amendments to be remitted to master; no order as to costs in the court below before 14/02/03; Respondent do pay Appellant's costs in the court below after 14/02/03; Respondent do pay 80% of Appellant's costs in the appeal; further orders to be agreed by counsel. (Order does not form part of the approved judgment)