England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TECHNOLOGY and CONSTRUCTION COURT
HIS HONOUR JUDGE TOULMIN CMG QC
HT-06-165

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/06/2007

Lord Justice Chadwick :

1. This is an appeal from an order made on 30 March 2007 by His Honour Judge Toulmin CMG QC in proceedings brought in the Technology and Construction Court by insurers against the appellant, BSF Consulting Engineers Ltd. The issues raised by the appeal require consideration of the principles to be applied by the court on an application for permission to withdraw an admission. In the events which happened the relevant admission was made in the context of compliance with a relevant pre-action protocol – and so before proceedings have been commenced - and was repeated in the pleaded defence.

The underlying facts

2. The claimants are the household insurers of a property known as No 1 Dering St Mary, Station Road, Pluckley in Kent. The property was purchased in December 1999 by their insured, Mr and Mrs Mickleburgh. A dwellinghouse was then in the course of construction: the property being plot 1 in a small development of two dwellinghouses. The first named defendant to these proceeding, Greensand Homes Limited, were the developers and contractors. The house on plot 2 was for occupation by Mr Tony Hutchins and his wife. Mr Hutchins was a director of Greensand Homes. We were told that Greensand Homes has taken no part in the proceedings; that judgment has been entered against it; but that it is not thought that there is any prospect of recovery under that judgment.
3. It is said by the claimants that construction of the house on plot 1 was not completed until 7 July 2000 (at the earliest). On 16 August 2003 Mrs Mickleburgh returned from a holiday and noticed (for the first time) structural damage in the form of substantial and extensive cracks, both externally and internally. The cracks worsened over the next couple of months. Site investigations revealed that there were tree roots beneath the foundations of the right flank wall and the front wall. The claimants were advised that the structural damage was caused by lateral heave pressures on the inside face of the right flank wall foundation caused by shrinkage of the subsoil. Remedial works were carried out between March and August 2005 at the cost of the insurers.
4. On 29 July 2005 the claimants' solicitors wrote to the second named defendant, BSF Consulting Engineers Limited. The letter put BSF on notice that the property described as "Dering St Mary, Station Road, Pluckley" had suffered subsidence damage and that the solicitors were acting for the household insurers. The letter contained a paragraph in these terms :

"We are informed that you were appointed by the developers/contractors, Greensand Homes Limited to design the foundations which were constructed in accordance with your design. Please may we, therefore, have copies of all the drawings you prepared for the design and construction of the foundations."

BSF replied to that letter on 26 September 2005. It wrote:

"We are endeavouring to contact Greensand Homes Limited to obtain consent to release the documents you require."

The letter of 26 September 2005 does not take issue with the assumption that BSF were, indeed, responsible for the design of the foundations of the property.

5. BSF gave consent to the inspection of documents relating to the property held by the Building Control Department of Ashford Borough Council. The claimants appointed a geotechnical engineer who carried out an inspection of the Building Control project file on 14 October 2005. Following that inspection the claimants' solicitors wrote again on 16 November 2005. That letter referred to drawings which had been obtained from the project file: in particular to "Drawing no 6513/A1/1 which you prepared relating to the foundations of Mr Mickleburgh's property at Dering St Mary . . .". The letter set out, in some detail, the basis upon which it was said that BSF were liable "in negligence and breach of contract" for the loss suffered by reason of the failure of the foundations. The letter concluded with the statement that it was intended as a Letter of Claim for the purposes the Pre-Action Protocol for Construction and Engineering Disputes; and it drew attention to the need for a response which complied with the requirements of that protocol.
6. BSF instructed solicitors. A considered Letter of Response to the Letter of Claim was sent on 9 January 2006. The Letter of Response contained the following admission:

"Our client was appointed by Greensand Homes Limited ('Greensand') to design the foundations for your client's Property, which we understand has been damaged as a result of heave of the clay subsoil. . . . "

The letter went on to set out the reasons why, notwithstanding that admission, liability for the structural damage suffered by the property was denied. Further correspondence between solicitors took place in March, April and May 2006. There is nothing in that correspondence which suggested that BSF sought to withdraw the admission contained in the letter of 9 January 2006.

7. The further correspondence did not lead to resolution of the dispute as to liability. On 8 June 2006 the claimants' solicitors – mindful, no doubt of the periods of limitation prescribed under section 1(5) of the Defective Premises Act 1972 and under section 14A of the Limitation Act 1980 – commenced proceedings by the issue of a claim in the Technology and Construction Court. Service of the claim form – and of particulars of claim – was deferred, by agreement, until 2 October 2006.
8. The claim in the proceedings is for damages in respect of the cost of remedial works in respect of structural damage caused by defective foundations. It is pleaded, at paragraphs 1 and 7 of the Particulars of Claim, that BSF, as consulting engineers, designed the foundations. It is alleged that, in carrying out the design work, BSF was in breach of its duties under the 1972 Act, and were negligent at common law. BSF served a defence on 26 October 2006. At paragraph 2 of that defence it is admitted, in terms, that BSF designed the foundations of the insured property. The claim is defended on other grounds.

The application to amend the defence

9. The application before His Honour Judge Toulmin – made by notice dated 6 February 2007 – was for permission to file and serve an amended defence, withdrawing the admission made in paragraph 2 of the defence served on 26 October 2006. It is said, in the draft amended defence served with the application notice, that - having reviewed the matter more closely - it had become clear to BSF that it had had no involvement with, and did not undertake, any work in relation to the foundations of the insured property. It is said that the design work was carried out by a third party, KWE Designs Limited.
10. The evidence before the judge showed that KWE Designs Limited had carried on business as architectural and interior design consultants. It appeared from the director's report for the year ended 31 March 2002, filed in January 2003, that the sole director of that company was Mr K W Elliott. The balance sheet as at 31 March 2002 showed the company to be insolvent – in that there was a small deficiency in shareholders' funds. KWE Designs Limited was dissolved on 16 September 2003.
11. It is clear that KWE Designs Limited, or (perhaps) Mr Elliott personally, had some part in the design of the houses erected on plots 1 and 2 Station Road, Pluckley. I put it in that way because, although an important drawing (10130/03A, dated February 1999) is said to be the copyright of the company, an earlier drawing (10130/02, dated July 1998) is said to be the copyright of "KWE Designs". It may be that Mr Elliott was (or had been) carrying on business as an individual under the trade name "KWE Designs". Drawing 10130/03A provides support for the view that KWE Designs Limited had (at least) some responsibility for the design of the foundations in relation to both plot 1 and plot 2. The drawing includes the note:

"Trench fill foundations to be to designated mix GEN 3 concrete to BS5328, 1991, width 600mm under 265mm walls and 430mm overlap. Final foundation depths and widths to the approval of the Building Control Officer on site."

12. The judge was content to accept that, on the basis of the material before him, BSF had an arguable case that it did not design the foundations. There is no challenge by the respondents to the judge's approach in relation to that question. In the absence of challenge it is, I think, sufficient to observe, first, that the BSF drawing (drawing No 6513/A1/01, dated February 1999), to which reference had been made in the Letter of Claim dated 16 November 2005 and on which reliance was placed in the particulars of claim, shows the two plots at Station Road. The job title on the drawing is "Proposed Dwelling – Plot 2 Pluckley". As I have said, that is not the insured property: the insured property is Plot 1. There is clearly a basis for contending that that drawing does not purport to contain design work in relation to plot 1: although the details shown on the drawing provide support for an argument to the contrary. And, as I have said, drawing 10130/03A (also dated February 1999) suggests that KWE Designs Limited may have provided the specifications for the foundations.
13. Further, the judge was content to accept that the admission that BSF had done design work in relation to the insured property (plot 1) was the result of a genuine mistake A full explanation as to the circumstances in which BSF came to make what is now said to be a mistaken admission – in the Letter of Response dated 9 January 2006 and in the defence served on 26 October 2006 – was provided by a director, Mr Keeler, in a witness statement dated 12 February 2007. There was no reason why the judge should not have accepted that Mr Keeler simply overlooked the point which BSF now wishes to take: namely, that its responsibilities (if any) were limited to plot 2.

The judge's decision to refuse the application

14. The judge refused BSF's application for permission to file and serve the proposed amended defence. He reminded himself of the guidance given by Mr Justice Sumner in Braybrook v Basildon & Thurrock University NHS Trust [2004] EWHC 3436 (QB) and endorsed by this court in Sowerby v Charlton [2005] EWCA Civ 1610 [35]; [2006] 1 WLR 568, 576H-577C. The passage is set out at Note 14.1.8 in the current edition of Civil Procedure. The guidance has been adopted (in substance), since the application was before Judge Toulmin, as paragraph 7.2 of the Practice Direction supplemental to CPR Pt 14 (Civil Procedure 14PD7). It is sufficient to note, for the purposes of this judgment, that the court must consider all the circumstances of the case and seek to give effect to the overriding objective; and that amongst matters to be considered are (a) the justification for the application (b) the balance of prejudice to the parties.
15. The judge explained the basis on which he concluded that the application should be dismissed ([2007] EWHC 1053 (TCC), [39], [40]) :

"[39] Having considered, as I do, the factors in the judgment of Sumner J, and taking all the facts and circumstances into account, and balancing all the points made, and bearing fully in mind the overriding objective, I do not think that it will be just to permit the second defendant to withdraw their admission. Had they investigated the claim properly, they would, in January 2006, either have made the admission, or set out in the pre-action letter the position as they properly understood it. In the latter event, there would have been a proper opportunity for the claimant to make the appropriate investigations and decide how to proceed.

40 In all the circumstances, I conclude that the claimants would suffer substantial prejudice if the defendant was permitted to withdraw its admission and the application is dismissed."

16. The "substantial prejudice" which the judge had in mind – and to which he referred in paragraph [40] of his judgment – is, I think, that which he had mentioned earlier, at paragraphs [27] and [32] and [33]:

"[27] Mr White says that, in the light of BSF's new case, attempts have been made to contact KWE Designs, now alleged by BSF to have designed the foundations for plot 1. He has been unsuccessful in his attempts in the last six weeks to contact KWE Designs. He is concerned that, if he is able to do so, KWE Designs will now argue that any claim against them in respect of the design of the foundations is statute barred: the property was completed in July 2000. He contends that the syndicate has been at pains to investigate the claim, comply with the pre-action protocol, and set out a fully pleaded case."

. . .

"[32] There can be no doubt that BSF is the author of its own position. Ever since its response to the claimant's solicitors' letter before action, dated the 16 November, 2005, which it gave on the 9 January, 2006, BSF has asserted that it was appointed to design the foundations of the property which are the subject matter of the action. This continued after BSF had filed its formal pleadings in the action. It is clear that, at the time of the original response, the limitation period had not expired, and the claimant would have been able to investigate any claim by BSF that it had not designed the foundations, and that KWE Designs had done so.

[33] BSF contends that the relevant date is the date on which the particulars of claim were filed, namely the 2 October, 2006, by which time the claim may well have been statute barred. But in terms of prejudice this cannot be correct; detailed correspondence between solicitors took place between the 16 November, 2005, and the 7 July, 2006. On the basis of that there was no threat of the claim between these parties being statute barred, or that BSF was the wrong defendant. There can be no doubt that, if BSF had denied that they had designed the foundations, the claimant's solicitors would have carried out investigations and been enabled to make a decision as to whether or not to proceed, before the expiry of the limitation period in July 2006."

17. The judge recognised that he must weigh the prejudice that would be suffered by the claimants, if BSF were allowed to withdraw the admission, against that which would be suffered by BSF if permission to amend were refused. He said this:

"[36] On the other hand, I must also take into account that, if I refuse the amendment, BSF will be unable to put forward an arguable and important defence. I also take into account that this is a claim for professional negligence against the defendants, as consulting engineers, but I cannot but be surprised that, if BSF is now correct, the claim was treated so lightly in the course of extensive correspondence, and even after litigation had started. BSF, on their own admission, did not make any sufficient effort to check the facts before settling their detailed defence."

It is, I think, clear that – in weighing the prejudice that would be suffered by the claimants (if BSF were allowed to withdraw the admission) against that which would be suffered by BSF (if permission to amend were refused) – the judge took the view that the fact that BSF was the author of whatever misfortune either party would suffer was the determinative factor.

Limitation

18. In addressing the challenge to the judge's refusal to permit an amendment to the defence filed on 26 October 2006 it is necessary to have in mind the applicable periods of limitation. There are, as it seems to me, two relevant periods prescribed by statute. The first is that applicable to a claim under section 1(1) of the Defective Premises Act 1972. Such a claim must be brought within six years from the date on which the cause of action accrued: section 9 of the Limitation Act 1980. A cause of action in respect of the duty imposed by section 1 of the 1972 Act is deemed to have accrued at the time when the dwelling was completed: section 1(5) of the 1972 Act. Paragraph 10 of the particulars of claim contains the allegation that the construction of the property was not completed until 7 July 2000 (at the earliest). On that basis, a claim under section 1(1) of the 1972 Act – whether against BSF, KWE Designs Limited or Mr Elliott personally – would have become statute barred on 7 July 2006.
19. The second relevant period of limitation is that applicable to a claim in tort: that is to say, in the present context, a claim in negligence at common law. Again, prima facie, such a claim must be brought within six years from the date on which the cause of action accrued – section 2 of the Limitation Act 1980 – but that section is displaced in a case to which section 14A of the Act applies. In such a case the claimant may bring an action within the period of three years from the starting date as defined by section 14A(5): section 14A(4)(b) of the 1980 Act. The starting date, in that context, is the earliest date on which the claimant (or any person in whom the cause of action was vested before him) "first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action": section 14A(5) of the 1980 Act. The "knowledge required for bringing an action for damages in respect of the relevant damage" means "knowledge both - (a) of the material facts about the damage in respect of which damages are claimed; and (b) of the other facts relevant to the current action mentioned in subsection (8) below": section 14A(6) of the Act. The "other facts relevant to the current action" include the facts "(a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and (b) the identity of the defendant": section 14A(8) of the Act. For the purpose of those provisions a person's knowledge includes "knowledge which he might reasonably have been expected to acquire – (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek": section 14A(10) of the Act.
20. Paragraph 11 of the Particulars of Claim contains the allegation that the damage to the property – in the form of substantial and extensive cracking – was not discovered until 16 August 2003. Prima facie, at least, that would be the earliest starting date for the purpose of section 14A(5) of the 1980 Act. But, having regard to the need for knowledge that the damage was attributable in whole or in part to the design of the foundations, it could well be said that the starting date for that purpose was postponed until investigations had been carried out – as they were – which identified the cause of the damage as the shrinking of sub-soil beneath the foundations. On that basis the starting date would be postponed to (at least) 10 October 2003; the date when those investigations were completed.
21. It is important to keep in mind, however, that the staring date, in relation to a claim against any given defendant, may be further postponed to the date upon which the claimant first knew (or is to be taken, by virtue of the provisions of section 14A(10), to have known) of the identity of that defendant. In the present case it seems to me (at the least) arguable that the claimants did not know that KWE Designs Limited (or Mr Elliott personally) was a potential defendant to a claim in negligence until (at the earliest) 14 October 2005 when the geotechnical engineer whom they had appointed carried out an inspection of the Building Control project file held by Ashford Borough Council. It was following that inspection that the claimants' solicitors wrote to BSF on 16 November 2005, referring to drawings which had been obtained from the project file. Those drawings included BSF's drawing No 6513/A1/01, on which the claimant relied as the basis for their claim against BSF: but the drawings on the project file included, also, the KWE Designs Limited drawing 10130/03A to which I have referred earlier in this judgment. In those circumstances it seems to me impossible to assume that a common law claim in negligence against KWE Designs Limited (or Mr Elliott personally) has become time-barred.

This appeal

22. The judge refused permission to appeal from his order of 30 March 2007, expressing the view that the decision whether or not to permit the withdrawal of an admission and the amendment of the defence was within his discretion and that an appeal would have no real prospect of success. Permission to appeal was granted by Lord Justice Richards, after consideration on the papers. In giving his reasons he noted that it had been common ground before the judge that KWE Designs Limited had been dissolved in September 2003 and that it was arguable that the judge had failed to take that fact into account as a material fact when determining the balance of prejudice. He observed that, "notwithstanding the general difficulty faced by an appellant in challenging a discretionary decision of this kind" an appeal had a real prospect of success.
23. The difficulties which face an applicant who seeks to challenge decision made by a judge in the exercise of his discretion are not in doubt. An appellate court should not substitute its own view for that of the judge – a fortiori, where the decision was made in the context of the judge's management of the case which it was his task to try – unless it is satisfied that judge erred in law. If the exercise by the judge of his discretion is legally flawed, the appellate court must intervene. In those circumstances the appellate court may substitute its own discretion for that of the judge. But it may not do so merely because it takes the view that, had it been charged with the task of making the decision which the judge had to make, it would have reached a different conclusion. The first question on this appeal, therefore, is whether the judge erred in law: in particular (in the context of this case) whether he took into account facts which he should not have taken into account or left out of account facts to which he should have had regard.
24. In my view that question has to be answered in the affirmative. It seems to me that the judge ought to have had regard to the fact that KWE Designs Limited had been dissolved in September 2003 and that (at the time when dissolved) it had no assets to meet the substantial claim made in respect of cost of the remedial works carried out at the property. In deciding whether, by reason of the admission made in the letter of 9 January 2006, the claimants had lost a claim of value against KWE Designs Limited, the judge needed to ask himself whether (notwithstanding the dissolution) that company could have been restored to the register and, if so, how long that would have taken. It is pertinent to have in mind that all that BSF was required to do, in its letter of response on 9 January 2006, was to state whether or not it had designed the foundations. If BSF had denied responsibility for the foundations on 9 January 2006, it would not have been required to go on to state whom, in its opinion, had done that work. So, had the admission not been made, the claimants might well not have had BSF's assistance in identifying KWE Designs Limited as a potential defendant. In those circumstances it is not self-evident that they would have done so in time to restore KWE Designs Limited to the register before 9 July 2006. It is of some significance, in that context, that the claimants had known of drawing 10130/03A since 14 October 2005; and had not (it seems) taken the view that that drawing pointed to KWE Designs Limited as a potential defendant.
25. The question whether the company could have been restored to the register might well – and, in any event the question whether there was any purpose in doing so would - turn on whether there was any relevant policy of insurance in relation to third party claims. On the material before the judge, that was a matter of speculation. The judge could not assume that it was self evident that the claimants had ever had a claim of value against KWE Designs Limited. In balancing the prejudice caused to the claimants by the expiry of the limitation period applicable in relation to the claim under the 1972 Act the judge needed to have in mind that the value of that claim was (at best) speculative. There is nothing in his judgment to suggest that he did so. For that reason alone, as it seems to me, it is necessary for this Court to set aside the judge's decision and examine for itself the question whether BSF should be permitted to withdraw the admission that it had designed the foundations of the property and to amend its defence.

What order should be made?

26. If it were not for the fact that the admission was first made in the letter of 9 January 2006, I should have no doubt that BSF should be permitted to amend paragraph 2 of its defence. The reason may be stated shortly. By the time that the defence was served (26 October 2006) the period of limitation applicable to the claim under the 1972 Act – whether against KWE Designs Limited or against Mr Elliott personally – had already expired. On the claimants' own case that period expired on 7 July 2006: six years from the time when the construction of the house was completed. So that claim was not lost as a result of the admission in the defence. And, for the reasons that I have set out earlier in this judgment, it seems to me impossible to assume that a common law claim in negligence against KWE Designs Limited (or Mr Elliott personally) has, even now, become time-barred. But, if it has, there is no material to support the view that that claim became time-barred in the period between 26 October 2006 and 6 February 2007 (when the application to amend was made). To reach that conclusion it would be necessary to hold that the claimants might reasonably have been expected to acquire knowledge that KWE Designs Limited or Mr Elliott personally had been responsible for the design or specification of the foundations on some date between 26 October 2003 (shortly after the date when the site investigations were completed on 10 October 2003) and 6 February 2007. The claimants have not advanced that case. So it cannot be said that that claim was lost as a result of the admission in the defence. In those circumstances it would be impossible to say that the withdrawal of an admission first made in the defence had given rise to any prejudice in respect of which the claimants could not be adequately compensated by an appropriate order for costs.
27. The position, however, is that the admission was not first made in the defence: it was first made in the letter of 9 January 2006. The period of limitation applicable to the claim under the 1972 Act did expire after that date. It is arguable that the claimants were led, by the admission made on 9 January 2006, to refrain from taking the steps which they would otherwise have taken to identify LWE Designs Limited and Mr Elliott personally as potential defendants (or co-defendants) to the proceedings which they commenced in June 2006; and that, as a result, they have suffered prejudice because the claim under the 1972 Act became time-barred before the admission was withdrawn.
28. It is said on behalf of BSF that the admission in the letter of 9 January 2006 is to be given little weight in the light of the decision in this Court in Sowerby v Charlton [2005] EWCA Civ 1610; [2006] 1 WLR 568. The issue in that case was whether the defendant required permission, under CPR 14.1(5), to withdraw an admission of liability made in pre-action correspondence. That issue arose in the context of an application by the claimant to strike out those paragraphs of the defence which sought to put liability in issue. The Court held (ibid, [14]; 573F-G ) that:

"[14] "This new regulatory scheme [under the Civil Procedure Rules] has been so carefully crafted that in our judgment the rule-makers cannot have intended a pre-action admission of liability to be embraced by the words 'A party may admit the truth of the whole or any part of another party's case' in CPR r 14.1"

On the basis that pre-action admissions were not within the scope of CPR 14.1, the provision in sub-rule (5) – which enabled the court to allow a party to amend or withdraw an admission" - did not apply to them. Permission was not needed.

29. Following the decision of this Court in Sowerby, a new rule – CPR 14.1A – was introduced by the Civil Procedure (Amendment No 3) Rules 2006 (SI 2006/3435. The effect of the new rule – which was not in force at the time when the application in these proceedings was before Judge Toulmin and which, in any event, applies only to admissions made after 6 April 2007 – is to extend the provisions of CPR 14.1 to pre-action admissions made in the context of a response to a letter of claim under a pre-action protocol in certain limited classes of case (personal injury, clinical disputes and disease and illness claims). It would have no application in proceedings such as the present. The importance of the new rule, in the present context, is that it provides confirmation that, in cases which do not fall within the specified classes, permission to withdraw an admission made in pre-action correspondence – even when made in response to a letter of claim under a pre-action protocol - is not required. As the editors of the current edition of Civil Procedure observe (at Note 14.1.9) any application to challenge the withdrawal of pre-action admissions – say, by a pleading which contradicts those admissions – "would have to be made in accordance with guidance given by Smith LJ in Stoke on Trent City Council v John Whalley (sic) [2006] EWCA Civ 1137". It is to that case that I now turn.
30. The issue in Stoke-on-Trent City Council v Walley [2006] EWCA Civ 1137; [2007] 1 WLR 352 was whether, in circumstances where there had been an admission of liability in pre-action correspondence, a defence denying liability should be struck out. The circuit judge had proceeded on the basis that permission to withdraw the admission was required under CPR 14.1; that permission should not be given, on the facts in that case; and that the Council should be held to its admission and judgment entered for the claimant. It was accepted in this Court (ibid, [26]; 358G) that the decision below could not be upheld (on that basis) in the light of the (subsequent) decision of this Court in Sowerby. The matter had to be approached by reference to CPR 3.4(2).
31. Sub-paragraph (b) of that rule provides that the court may strike out a pleading if "it is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings." Lady Justice Smith, with whom the other members of the Court agreed, observed (ibid, [34]; 360D) that, for a claimant to show that the withdrawal of an admission would amount to an abuse of process of the court, it would usually be necessary to show that the defendant had acted in bad faith. That could not be said in that case. She went on (ibid, [35], 360 F-G) to say this:

"[35] I also accept that, in order to show that the withdrawal of a pre-action admission is likely to obstruct the just disposal of the case, it will usually be necessary for the claimant to show that he will suffer some prejudice which will affect the fairness of the trial. Examples of this kind of prejudice were discussed during the hearing. In the light of an admission, the claimant might agree to the destruction of an item of real evidence; he might agree that an expert's inspection is not necessary and it might no longer be possible for one to take place. Witnesses might have died or lost contact. The possibilities are legion. Funding difficulties might also give rise to real prejudice, if the evidence were to show that the claimant had changed his position in reliance on the pre-action admission. . . ."

She observed that, in that case, there was no evidence that the claimant had changed his position in reliance on the pre-action admission. And she went on to say, in a sentence which is of importance in circumstances such as the present:.

" . . . Such evidence should have been put in at the outset, as it would have been relevant whether the judges below were exercising a general discretion under Part 14 or were applying the more restricted test under CPR rule 3.4." [emphasis added]

32. CPR 17.1(2)(b) requires that, where a party has served a statement of case (which includes a defence – see CPR 2.3(1)), he may amend it only with the permission of the court. In deciding whether or not to grant permission the court must, in a case where the effect of the amendment sought is to withdraw an admission made in an earlier statement of case, have regard to CPR 14.1 and to the Practice Direction which supplements that rule. In particular, the court must, now, have regard to the matters listed in paragraph 7.2 of that Practice Direction. Those matters include the relative prejudice which will be suffered by each party if the admission is (or is not) withdrawn. By contrast, if the admission was made in pre-action correspondence and has not been repeated following the commencement of proceedings – in particular, where it has not been made in an earlier pleading – the question for the court (in a case not falling within CPR 14.1A) is whether to allow it to be withdrawn in the party's pleaded case would be to allow an abuse of process or a course likely to obstruct the just disposal of the proceedings. But, in that context also, the relative prejudice which will be suffered by each party if the admission is (or is not) withdrawn will be a factor which the court must take into account. It must do so in order to give effect to the overriding objective – to deal with a case justly. Fairness may require that a party who, by a pre-action admission, has led the other party to act to his detriment should not be permitted to withdraw that admission. On the other hand, if the detriment is insubstantial, fairness will normally require that the case be determined on the basis of the real issues in dispute – albeit that an ill-advised admission may have been made at an earlier stage.
33. For those reasons it seems to me that the judge was plainly correct to have regard to the prejudice (if any) caused to the claimant by the admission in the letter of 9 January 2006. Strictly, he was required to approach the matter on the basis that, in exercising his discretion to give (or to refuse) permission to amend under CPR 17.1(2)(b), he should have regard to CPR 14.1 and the practice under that rule. But, adopting that approach, in the particular circumstances of the present case BSF should be left in no worse position than it would have been if the proposed amended defence had been served on 26 October 2006; but should be put in no better position than it would have been if, having served a defence in that form on 26 October 2006, the claimant had applied to strike out that defence under CPR 3.4(2)(b). The judge did not err in having regard to the prejudice caused to the claimant by the admission in the letter of 9 January 2006. As I have held, he erred in failing to examine critically the prejudice which was alleged.
34. For my part, I would hold that, in weighing the prejudice which will be suffered by each party if the admission is (or is not) withdrawn, the balance falls firmly in favour of BSF. To refuse to allow the admission to be withdrawn exposes BSF to a trial on liability which may proceed on a wholly false basis – that is to say, that BSF was responsible for the design of the foundations of the property. To deny BSF the opportunity to dispute that issue – in circumstances where there are plainly grounds on which the case which BSF wishes to advance could be supported – would pose a serious risk of unfairness. On the other hand, to allow the admission to be withdrawn exposes the claimants to the possibility that, if they fail to establish liability against BSF, they will not be able to pursue a claim under the 1972 Act against KWE Designs Limited or against Mr Elliott personally. But, as I have explained, there is no reason to think that the claimants would not be able to pursue claims in negligence (subject to restoring KWE Designs Limited to the register); and there is no reason to think that those claims (and, in particular, the claim against KWE Designs Limited) have any value. There is no evidence that either KWE Designs Limited or Mr Elliott was, or was likely to be, insured under a relevant policy. Further, although I accept that proceedings under the 1972 Act may be more attractive to a claimant than proceedings at common law, I am not persuaded that, in the circumstances of this case, the outcome would be likely to differ whichever claim were pursued.
35. For those reasons I take the view that this Court, exercising its own discretion under CPR 17.1(2), should allow BSF to amend its defence so as to withdraw the admission that has been made.

Conclusion

36. I would allow this appeal. Save that I would not allow the inclusion in the amended defence of paragraph 2.5 (which asserts that the claim against BSF should be struck out as disclosing no reasonable cause of action), I would give BSF the permission to amend its defence which it seeks.

Lord Justice Thomas: I agree.

Lord Justice Latham: I also agree.