England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
(The Hon Mr Justice Phillips)

		Royal Courts of Justice Strand, London, WC2A 2LL
		28 March 2018

Lord Justice Simon:

1. This is an appeal from the order of Phillips J, sitting in the Mercantile Court, made on 9 September 2016, in which he dismissed the appellant's application to amend the Claim Form so as to substitute the appellant ('Mr Bennett'), as the named claimant in place of 'Best Friends Group'.
2. The limitation period for bringing a claim against the respondent, Barclays Bank Plc ('the Bank'), had expired, so Mr Bennett had to apply under CPR Part 17.4: 'amendments to statements of case after the end of the relevant limitation period'. Part 17.4(3) provides:

The Court may allow an amendment to correct a mistake as to the name of a party, but only where the mistake was genuine and not one which would cause reasonable doubt as to the identity of the party in question.

3. This provision indicates three stages of an enquiry: (1) was the mistake genuine, (2) was it a mistake which would not have caused reasonable doubt as to the identity of the claimant, and (3) if those questions were answered in favour of the applicant, should the court exercise its discretion in favour of the applicant: the discretion being explicit from the use of the word 'may'? The Judge concluded that (1) the naming of 'Best Friends Group' as the claimant was not a genuine mistake, (2) the naming of 'Best Friends Group' would have caused reasonable doubt as to the identity of the claimant, and (3) in the circumstances, he should decline to exercise his discretion in the appellant's favour.
4. On this appeal each of those three conclusions is challenged.
5. Mr Bennett runs veterinary practices from properties in which he holds the freehold. He is also the owner and controller of 'Best Friends Veterinary Group' ('BFVG') which is an unlimited company running some of the veterinary practices from the freehold premises. In 2006, and again in 2008, Mr Bennett entered into interest rate swap transactions with the Bank in his own name. These related to his exposure under loans with the Bank and the Royal Bank of Scotland.
6. During a review process the Bank accepted that the swap transactions justified the payment of compensation to Mr Bennett; and payments were made amounting to the sums paid by him under the swap transactions. No agreement was reached about compensation for consequential loss.
7. Proceedings were begun against the Bank by a Claim Form in respect of this loss, issued on 20 November 2014. It is common ground that the primary limitation period for the 2006 swap expired on 15 September 2012 and for the two 2008 swaps on 2 December 2014. Accordingly, the claim was issued more than 2 years after the expiry of the primary limitation period for the 2006 swap, and approximately 2 weeks before the expiry of the primary limitation period for the 2008 swaps. The expiry of the limitation period for the 2008 swaps was specifically acknowledged in the Claim Form as being 1 December 2014. The claimant was named as 'Best Friends Group'; and the application before the Judge and on the appeal before us proceeded on the basis that there had been a mistake and that Mr Bennett should have been named as the claimant. At one point, Mr Penny QC submitted that the mistake in failing to name Mr Bennett was made by a junior employee of Mr Bennett's then solicitors: Messrs Duffy, Fowler, Gabbi Solicitors ('DFG'). Whether or not that is right, the statement of truth on the Claim Form was signed by Mr Jared Duffy, the partner in charge at DFG and not by a junior employee.
8. It was Mr Duffy's evidence that he noticed that a mistake had been made in the Claim Form shortly before service of the document. On 17 March 2015 the Claim Form was purportedly amended under CPR 17(1) so that it now read: 'Mr Andrew Bennett T/A Best Friends'. The same address was given as before. This document was sent, with the original (unamended) Claim Form and Particulars of Claim to the Bank's solicitors. They were received on 18 March 2015. The statement of truth in relation to the amended Claim Form was also signed by Mr Duffy.
9. Although the limitation period in respect of the 2008 swaps had now expired, no attempt was made to seek the court's permission to add or substitute another party pursuant to CPR Part 19.5. Before the Judge, it was rightly accepted that the amendment to the Claim Form was either ineffective or must be set aside.
10. The title of the Particulars of Claim was:

Best Friends Group

Mr Andrew Bennett T/A Best Friends Claimant

The statement of truth appears to have been signed by Mr Duffy.

11. On 19 March 2015, the Bank's solicitors wrote to complain about the inadequacies of the Particulars of Claim. In particular, there was a complaint that it was impossible to determine the basis on which the claims for wasted expenditure and lost profit claim were calculated. Following a further letter of complaint, on 28 April DFG wrote agreeing to serve an amended Particulars of Claim.
12. The Amended Particulars of Claim was served on 5 June 2015. This document set out revised and reduced figures for wasted expenditure and loss of profits. It will be necessary to consider this and the unamended version of the Particulars of Claim in slightly more detail later in this judgment.
13. On 10 June, the Bank served a Part 18 request seeking further particulars of the consequential loss claim which had been pleaded compendiously in a single long paragraph.
14. On 2 July, DFG served a spread sheet in relation to one of the items of lost profit (£212,000). The spread sheet comprised recorded sales for each of years 2012-14. These figures, which were said to support the figure of £212,000, were described as 'combined'. It is common ground that they included sums in respect of the veterinary businesses of BFVG and the property businesses of Mr Bennett.
15. On 15 July 2015, the Bank served its Defence. This document was headed:

(1) Best Friends Veterinary Group

(2) Andrew Bennett (trading as Best Friends) Claimants

16. At paragraph 7, the Bank pleaded:

Further, the Swaps were entered into by Barclays and Mr Andrew Bennett … personally, not BFG. By way of a purported amendment to the Claim Form on 18 March, Mr Bennett was purported either to be substituted as the Claimant or added as the Second Claimant (it is unclear which).

17. The Bank further pleaded that the causes of action in relation to the 2006 swaps were time barred and that the causes of action arising out of the 2008 swaps had become time-barred by the date of the purported amendment to the Claim Form: 17 March 2015.
18. The Defence expressly pleaded that since there had been a failure to seek, let alone obtain, permission to substitute or add Mr Bennett after the expiry of the limitation period, his purported joinder was ineffective.
19. Since the issue of the ineffectiveness of the joinder of Mr Bennett had been clearly pleaded, one might have expected the matter to have been addressed promptly and effectually by those acting for Mr Bennett. The response was neither.
20. It came in the form of a Reply served on 30 September 2016. The statement of truth appears to have been signed by a partner of DFG, and the document adopted the same heading as the Defence. Importantly for present purposes, at paragraph 2, it was pleaded that the relevant limitation periods had not expired owing to the Bank's deliberate concealment of material information from the 'Claimant'. It was asserted that he had not become aware of this information until December 2011; and that accordingly the limitation period in respect of all the swaps (2006 and 2008) did not start to run until 2011. In addition, there was a plea that, since the limitation period had not expired, it was sufficient simply to add the name of Mr Bennett as had been done in the amended Claim Form. There was also reliance on a conversation between DFG and 'the Court registry' in support of the contention that it was sufficient to amend the Claim Form, as had been done in March 2015.
21. The Reply is troubling in a number of respects. Although, we were told that this pleading, like the Particulars of Claim, was settled by counsel (not Mr Penny), it was not signed. If counsel thought that, what was essentially a plea of fraud was justified, we would have expected the pleading to have been signed by her or him. A further troubling feature is that it soon became clear that there was no proper basis for the plea of deliberate concealment.
22. Instead of taking steps to apply to amend the title of the Claim Form the matter was allowed to drift, on the basis of an improper plea of fraud in the Reply, from September 2015 until June 2016.
23. On 20 May 2016, prior to an adjourned Case Management Conference, the Bank's solicitors applied to strike out the allegation of deliberate concealment. This was not opposed; and on 3 June 2016 paragraphs 2 and 3 of the Reply were struck out by consent in an order made by HHJ Waksman QC. Since the attempts to extend the limitation period had been struck out, the claim in respect of the 2006 swap was discontinued.
24. On 1 July, following the service of a proposed re-amendment to the Particulars, the Bank applied to strike out the claim on the basis that there was a purported substitution of Mr Bennett as a claimant after the expiry of the time limit, without an order under CPR Part 19.5.
25. On 14 July 2016 DFG issued an application under CPR 19.5 for permission to add Mr Bennett as a claimant. The application was supported by the 2nd witness statement of Mr Duffy ('Duffy 2'). At paragraph 6, Mr Duffy said:

The addition of Mr Andrew Bennett will assist the court as the issues between the proposed Claimant and the Claimant are inextricably linked, CPR Pt 19.2(b). This is particularly pertinent as the Claimants' and the proposed Claimant's business were one and the same, being the purchase of property and the development of veterinary practices.

26. In fact, it is now clear from the evidence that Mr Bennett's business was property development and the veterinary business was carried out through the unlimited company, BFVG, sometimes using the name 'Best Friends Group' or 'Best Friends'.
27. Paragraph 14 of Duffy 2 concluded:

[The Bank] has now made an application to strike out the Claimants case on the ground of ineffective joinder. It was envisaged that if [the Bank] were to take the point then a simple discussion would have proved helpful at which point the application would have been made.

28. Since the Bank had raised the point a year earlier and the response was not an application to amend but an unfounded allegation of deliberate concealment, it is difficult to understand what Mr Duffy was complaining about.
29. On 26 August, the Bank served the witness statement of Harriet Baker of Dentons UKMEA LLP, its solicitors. Among the many telling points about the conduct of the claim and the description of the businesses of Mr Bennett and BFVG, was her evidence that all versions of the Particulars of Claim contained claims for damages that could only be made by BFVG. At paragraph 29 she said this:

It is therefore clear that the Claimant's claim for lost profits has been calculated on the basis of both of Mr Bennett and BFVG's businesses (not Mr Bennett's alone).

30. Although the court was taken to a number of documents in relation to the extent of what must be BFVG's claim for damages, Ms Baker's evidence was not challenged. The only issue was the precise amount of the damages claimed that was properly the claim of BFVG.
31. It is now common ground that (a) the loss of profits claim of £212,000 included a loss that was properly that of BFVG, and (b) losses in relation to premises at Peterborough in the sum of £43,000 odd also related to BFVG. In the course of argument Mr Ulyatt argued that other parts of the claim for losses were also those of BFVG. These were not matters that were investigated by the Judge in any detail. In my view it was not necessary either for him or this court to do so.
32. Following the service of Ms Baker's witness statement, Mr Duffy made a further witness statement ('Duffy 3') in support of an application (dated 8 September 2016) that:

… permission be given to correct a mistake as to the name of the party such that the name 'Andrew Bennett' appears within the proceedings herein in the place of the names presently appearing.

33. The application notice was also issued on 8 September 2016, the day before the hearing of the Bank's strike out application. It seems that those advising Mr Bennett belatedly realised that they would need to make an application under CPR Part 17.4 to correct the name of the claimant outside the limitation period.
34. The stated intent of Duffy 3 was 'to clarify a number of issues concerning … the correct designation of the claimant.' Mr Duffy stated that 'it had always been intended that the claim should be made by Mr Bennett as an individual for his losses.' He went on to say, at paragraph 4, that Mr Bennett as an individual 'had traded under a number of styles including 'Best Friends Group' and 'BFG' and 'Best Friends' as well as his own name.' Having blamed a junior colleague for a mistake in the title of the original Claim Form, he took credit for noting the mistake before its service. At paragraph 6 he said that, although it was recognised that the time limit had expired, 'the position of the claimant (Mr Bennett) was that the time bar had not expired by reason of there having been deliberated concealment on the part of the [Bank]'. At paragraph 7 he described the delay in making the claimant's application to substitute the name of Mr Bennett in the Claim Form until after the Bank's strike out application as 'due to an unfortunate series of absences from the office.' At paragraph 9, he said that, although the Part 19.5 application sought permission to add the name of Mr Bennett, 'on reflection, since 'Best Friends Group' is simply a trading name for Mr Bennett … it would be more appropriate to seek permission to substitute the name of Mr Bennett for 'Best Friends Group''. At paragraph 15, he stated that it had never been intended that BFVG be a party to the proceedings; but, at paragraph 18, he accepted that the claim for loss of profits in the re-amended claim included claims based on the sales figures of both the Claimant and BFVG. At paragraph 16, he acknowledged:

When I attended to the service of the Claim Form (as amended under CPR Part 17) and the original Particulars of Claim I was unaware of the distinction between the various entities and names used by the Claimant and as a result I did not appreciate that BFVG was in fact a separate legal person … This lack of knowledge on my part may have contributed to some extent to the apparent confusion that has arisen.

35. In his judgment of 9 September 2016, the Judge first addressed the question as to whether there had been a genuine mistake in the light of the submission that the intention had been that Mr Bennett should be the claimant, and the use of 'Best Friends Group' was an honest and genuine mistake by Mr Duffy's junior colleague who was unaware of the existence of a company with the similar name, BFVG. In the Judge's view, it was difficult to understand why, if Mr Bennett was supposed to be the original claimant, he was not simply named on the Claim Form. The evidence that 'Best Friends Group' was a trading name used by Mr Bennett was very thin. In fact, there was documentary evidence that 'Best Friends Group' was a trading name used by the unlimited company, BFVG. The fact that the claim included combined losses alleged to have been suffered by both Mr Bennett and BFVG gave rise to serious doubts as to whether or not there was some desire to name a claimant who might be able to claim damages on behalf of the company and/or the group as a whole and not Mr Bennett alone. Overall, there was insufficient evidence to conclude that the use of 'Best Friends Group' was a genuine mistake. Without doubting the truth of what Mr Duffy said, the Judge was left with a residual concern that there may have been discussions and reasoning with Mr Bennett of which Mr Duffy was unaware.
36. Having reached this conclusion, the Judge then went on to consider the second question: if there were a genuine mistake, was it such as to cause reasonable doubt as to the identity of the party in question? On the one hand, it was clearly stated on the Claim Form that the claimant was the party that entered into the swaps, which was known by both parties to be Mr Bennett. However, the name 'Best Friends Group' was so close to BFVG that there could be reasonable doubt and a possibility of an alleged agency. The fact that the Particulars of Claim sought damages which were suffered by BFVG and not by Mr Bennett further demonstrated the reasonableness of the doubt as to the true identity of the claimant.
37. It is convenient to consider these two questions together.
38. Mr Penny submitted that in the light of the entirety of the evidence, it was clear that there had been a genuine mistake. The Bank knew that the counterparty to all the swaps transactions was Mr Bennett and him alone. The references in the pleadings to other entities, such as 'Best Friends' and 'Best Friends Group', was not such as to give rise to reasonable doubt as to the party who it was intended should make the claim. The Bank itself, at paragraph 7 of the Defence, had acknowledged that the swaps contracts were made with Mr Bennett. As was made clear in Adelson v. Associated Newspapers Ltd (CA) [2008] 1 WLR 585 at [51], the best source for what the claimant intended was to be found in the statements of case. Mr Penny referred to the judgment of the Court of Appeal as to the proper approach under the old rules at [43] and, in particular, to principle (iii):

These authorities have led us to the following conclusions about the principles applicable to Ord 20, r5. (i) The mistake must be as to the name of the party in question and not as to the identity of that party. Such a mistake can be demonstrated where the pleading gives a description of the party that identifies the party, but gives the party the wrong name. In such circumstances a 'mistake as to name' is given a generous interpretation. (ii) The mistake will be made by the person who issues the process bearing the wrong name. The person intending to sue will be the person who, or whose agent, has authorised the person issuing the process to start proceedings on his behalf. (iii) The true identity of the person intending to sue and the person intended to be sued must be apparent to the latter although the wrong name has been used. (iv) Most if not all the cases seem to have proceeded on the basis that the effect of the amendment was to substitute a new party for the party named.

39. As to the Judge's conclusion assuming that, if a genuine mistake were made, it was such as to cause reasonable doubt as to the identity of the claimant, Mr Penny was critical of the Judge postulating an alleged agency on behalf of Mr Bennett. He submitted that there was no proper basis for such a view. He accepted that the Particulars of Claim included a claim for the combined losses of Mr Bennett and BFVG and that it also included losses based on the Peterborough practice which could not form part of Mr Bennett's losses; but he submitted that the Judge gave too much weight to these matters. They were simply claims that could be struck out.
40. Having considered these points, I have concluded that the Judge was entitled to the view he took on the first two questions. The difficulty with Mr Penny's argument is that there is no evidence from the person who might be expected to have given it: Mr Bennett. The evidence shows that 'Best Friends' and 'BFG' were manifestations of BFVG and it is common ground that BFVG was the company through which Mr Bennett carried out his veterinary business. Mr Bennett is the person who best knows how his overall business is conducted. It was he who must have given instructions for the bringing of the claim; and he must have been consulted before the allegation of deliberate concealment was made in the Reply. It is a matter of professional obligation that a statement of case containing an allegation of fraud must be based on clear instructions to make such an allegation. Mr Duffy has given explanations of a series of mistakes and misunderstandings on his side; but the fact remains that claims were made for losses that were not the losses of Mr Bennett (at least in relation to the £212,000 claim and the Peterborough practice). In these circumstances, it seems to me, that it was open to the Judge to find that there was a degree of calculation in keeping all possible options open; and that there was sufficient justification for his view that the conduct of the litigation was such as to cause reasonable doubt as to the identity of the claimant.
41. Having reached his conclusions on the first and second questions, the Judge turned to the third question: the exercise of the court's discretion under CPR 17.4; and, decided that, if it had come to it, he would have exercised his discretion against Mr Bennett at [23]:

The mistake, if it was such, was one which was apparently appreciated as long ago as March 2015. But rather than making a proper and prompt application to correct the mistake, if indeed there was one, the claimant has undertaken a series of convoluted processes to maintain and justify its actions, including making a serious allegation of deliberate concealment which was not in the end pursued.

The result has been months of delay, incurring a huge amount of unnecessary costs, all caused by what [counsel then instructed for Mr Bennett] himself described to me as 'sheer incompetence.' I do not consider, in those circumstances, that it would have been appropriate to exercise my discretion to permit an amendment had I otherwise been satisfied that the requirements of CPR 17.4 were met.

42. Mr Penny submitted that the Judge's conclusion involved a penal approach to the exercise of discretion which led to a disproportionate result. He referred in this context to the decisions in Insight Group Ltd v. Kingston Smith (A Firm) [2014] 1 WLR 585; and American Leisure Group Ltd v. Olswang LLP [2105] EWHC 629 (Ch). I would accept at once that it is not for the court to exercise its discretion so as to punish a party for a harmless error by its legal representative. However, I do not consider that this is what occurred. The Judge was rightly concerned by the delay in making the application. The Claim Form has been issued at the end of (and in relation to the 2006 swap, after the expiry of) the limitation period. The claim was conducted without any of the urgency that it should have had. Even when the issue of the proper identification of the claimant was specifically raised in the Defence on 15 July 2015, nothing was done to put the matter right. Instead of a prompt application to amend the Claim Form an unwarranted allegation of deliberate concealment was made. Although there has been no waiver of privilege which might have enabled the Judge to assess it, previous counsel's characterisation of what occurred as 'sheer incompetence' was neither a sufficient explanation nor such as to come near to a justifiable excuse to what were repeated failures in the conduct of the litigation in what is a specialist court, where high standards of efficiency and expertise are expected of practitioners.
43. The Judge made a discretionary decision at a Case Management Hearing based on an evaluative judgment of the relevant facts. In the ordinary course appellate courts do not disturb such decisions unless the Judge is shown to have erred in principle or reached a conclusion that was plainly wrong. For what is only the most recent authoritative restatement of this well-established approach, see Barton v. Wright Hassall LLP [2018] 1 WLR 1119, Lord Sumption JSC at [15].
44. In his clear and comprehensive judgment, the Judge refused the application to amend and struck out the claim. In my view the challenge to his decision and order fails. I would accordingly dismiss the appeal.

Lady Justice Arden

45. I agree.