England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		13 October 2008

INTRODUCTION

1. This is my determination of a number of preliminary issues which were tried on 27 and 28 August 2008. They all relate to questions of limitation. It will be helpful to set out the background before referring to the issues in detail.

THE SHARE SALE AGREEMENT

2. In 2001 the Claimant ("Mr Pickthall") agreed to sell his shareholding in a company called The Phone People Plc ("TPP") which operated a large number of retail mobile phone outlets. At the time of the sale he was a director of TPP although by then he had little involvement in its day to day management. The purchaser of his shares was a company set up for the purpose of the acquisition by another TPP shareholder, Mr Baig. The acquiring company was called Ever 1440 Limited ("Ever 1440"). The total consideration to be paid was around £2.7m.
3. The solicitors acting for Mr Pickthall on the sale of his shares were the First Defendant ("Hill Dickinson") and the particular solicitor with conduct of the matter on his behalf was the Second Defendant, Mr Martindale.
4. On 6 February 2001, Mr Pickthall entered into a written share sale agreement with Ever 1440 ("the SSA"). Of the consideration payable,

(1) £650,000 was payable in monthly instalments of £100,000 starting on 6 March 2001;

(2) £700,000 was payable on completion but Mr Pickthall undertook to pay that amount over to TPP pursuant to a separate written agreement made on the same day, whereby he would acquire in return the benefit of numerous warranty contracts made between TPP and its customers. Under such contracts customers paid regular amounts in return for warranty cover over their mobile phones. The benefit of those contracts was thus an income stream for Mr Pickthall;

(3) £540,000 was provided to Mr Pickthall by the discharge of what was said to have been a loan previously made by Mr Baig to Mr Pickthall; and

(4) £610,000 was provided to Mr Pickthall by the discharge of what was said to be the monies he owed TPP under his loan account with the company;

(5) The remaining consideration consisted of £100,000 in cash paid to Mr Pickthall on the day and the assumption by Ever 1440 of a debt owed by Mr Pickthall to a Mr Phillip Collins.

5. Mr Pickthall alleges that in fact he owed Mr Baig less than £540,000 and owed TPP less than £610,000 but was told by Mr Martindale that this did not matter since the loans recited were being discharged in any event. It did mean however that the true consideration payable to Mr Pickthall was something less than £2.7m.

THE CLAIM AGAINST MR PICKTHALL

6. Shortly after completion of the SSA, on 6 March 2001, TPP, acting at the direction of Mr Baig and another director Mr Nicholson petitioned the High Court for an administration order on the grounds that it could not pay its debts. Such an order was made on 15 or 19 March 2001. On 28 March 2001 the Administrators of TPP issued proceedings against Mr Pickthall and an injunction was granted preventing him from dealing with the completion monies paid under the SSA.
7. By Particulars of Claim served on 9 May 2001 various claims were made against Mr Pickthall. These included claims for damages for breach of fiduciary duty in relation to TPP, an account of profits made from the transfer to him of TPP assets or damages and a declaration that the transfer of the benefit of the warranty contracts should be avoided.
8. On 27 September 2001 and following a trial earlier that month, HHJ George upheld the claims against Mr Pickthall. The assignments by TPP to Mr Pickthall of the warranty contracts were struck down as was the release of his director's loan. Various other asset transfers that followed from the SSA were also declared invalid. In addition, Mr Pickthall was ordered to pay the Administrators the sum of £642,082 plus interest. He was found to have been in breach of fiduciary duty, guilty of unlawful financial assistance to TPP and having participated in transactions at an undervalue, all as a result of the SSA and its associated transactions.

MR PICKTHALL'S BANKRUPTCY

9. On 6 October 2001 a bankruptcy order was made against Mr Pickthall on his own petition. The trustee in bankruptcy, Mr Baird, was released from his office on 6 April 2006 whereupon the assets of Mr Pickthall's bankruptcy estate vested in the Official Receiver ("OR"). On 22 August 2006 Mr Pickthall was discharged from his bankruptcy.

MR PICKTHALL'S COMPLAINT AGAINST HILL DICKINSON

10. By mid-2006 Mr Pickthall was taking legal advice as to whether he had a claim against Hill Dickinson in negligence in connection with the advice given to him, or which should have been given to him in relation to the terms of the SSA, and in respect of the drafting thereof. Hill Dickinson was asked for the file in connection with this matter which was eventually provided. The thrust of the complaint was that Hill Dickinson had failed to advise Mr Pickthall that the terms as to consideration in the SSA in particular relating to the transfer of assets from TPP to him, directly or otherwise, rendered him vulnerable to the sort of claims which were later made against him arising out of TPP's insolvency. He also said that different terms as to the provision of the consideration could and should have been drafted which would not have exposed him in this way.

THE PROCEEDINGS

11. In January 2007, Leading Counsel advised Mr Pickthall that any cause of action along these lines was presently vested in the OR and it would thus be necessary to obtain an assignment of the claim to Mr Pickthall. Steps were taken to procure this but no such assignment was obtained by 5 February on which day a Claim Form was issued in the name of Mr Pickthall.

The Claim Form read thus:

"1. The Claimant claims damages for breach of contract made between the Claimant and the First Defendant and/or the Second Defendant in or about January 2001 and/or for negligence arising out of or in connection with the First Defendant and/or Second Defendant acting as solicitor for the Claimant in connection with a Contract which was made on 6^th February 2001 by the Claimant under which he agreed the sale of his 50% shareholding in The Phone People ("TPP") and agreements linked to that sale agreement and made at the same time and interest..

2. Alternatively a declaration that the First Defendant and/or the Second Defendant owed the Third

Defendant as the Claimant's trustee in bankruptcy such damages and interest. The Claimant was made bankrupt on 6^th October 2001. On 6^th April 2006 his trustee in bankruptcy obtained his release and assets vested in him as such trustee including the claim against the First and/or Second Defendant will have reverted to the Third Defendant.."

14. It is common ground that the reason why the Claim Form was issued then was because of a perceived expiry of the limitation period the next day, being six years since the date when Mr Pickthall entered into the SSA.
15. Mr Pickthall's solicitors had instructed the Court not to serve the Claim Form, no doubt in order to gain the benefit of a four month period in which it was hoped that the assignment would come through. In error the Court served the Claim Form and as a result the Court then ordered a stay of proceedings until 8 July 2007. On 20 June the expected assignment was made thereby vesting the claim against these Defendants, in Mr Pickthall.
16. On 20 July 2007 Particulars of Claim were served. They alleged in particular, as follows:

"47... (1) Hill Dickinson ... should have advised the Claimant that TPP and/or insolvency practitioners

that might be appointed..might successfully assert that provisions of the agreement..were void or might be avoided or rescinded..

(2) Further ..Hill Dickinson..should have but failed to advise the Claimant to ensure that the sale agreement should only be completed on Ever 1440 paying the £700,000 to TPP...

(3) ...Hill Dickinson..should have advised the Claimant to negotiate further..so as to avoid assets of the TPP being used as consideration towards the purchase of his shares..

48. Had the Claimant been advised as he should have been..the Claimant would not have agreed..the provisions of clause 3.1.3 (and clause 3.2) and the attendant warranty benefit assignment and clause 3.1.6..and would have negotiated further for alternative provisions...

49 (1) The Claimant lost a substantial opportunity of negotiating and obtaining the agreement of Mr Baig..of the payment of additional consideration ..in the place of the provisions of clause 3.1.4 (and the attendant assignment of the warranty contracts) and 3.1.6..

(2) Further, .the Claimant lost a substantial opportunity of limiting his loan account with the company..."

THE ISSUES

17. Prior to serving any Defence, the Defendants applied for the trial of preliminary issues. Ultimately on 20 May 2008 the parties agreed that the Court should determine the following preliminary issues (as subsequently refined before me):

(1) As at 20 June 2007 (the date of the assignment), was the claim statute-barred?

(2) If it was, should the claim be struck out as being an abuse of process?

(3) If it should not be so struck out, is it necessary for the Claim Form to be amended to plead the fact of the assignment?

(4) If it is necessary, should the Court in its discretion allow that amendment?

18. It is common ground that:

(1) If the claim was not statute-barred by 20 June 2007, none of the further preliminary issues arise and the claim can proceed;

(2) If (a) the claim is not struck out as an abuse of the process and (b) there is no need to amend the claim form to plead the assignment, equally the claim can proceed;

(3) Any amendment of the claim form to plead the assignment (if necessary) will engage the provisions of s35 of the Limitation Act 1980 and CPR 17.4 (2). For these purposes:

(a) The plea of the assignment would give rise to a "new claim" but

(b) It is one which arises out of the same or similar facts as those already pleaded so that

(c) The only issue arising on the amendment is whether, notwithstanding (b) above the Court should refuse the amendment in its discretion.

THE EVIDENCE

19. No oral evidence was called at this trial. I have been assisted by a Statement of Agreed Facts, a witness statement from Mr Pickthall dated 5 August 2008 which has not been challenged, a statement from Mr Smith of Beale & Co. which of itself takes matters no further and some extracts from the file of the trustee in bankruptcy for 26 September 2003.

ISSUE 1: AS AT 20 JUNE 2007, WAS THE CLAIM STATUTE-BARRED? Introduction

20. It is conceded that any claim in contract as against Hill Dickinson was time-barred as at 20 June 2007 because it must have arisen by no later than the date of the making of the SSA on 6 February 2001. The question is therefore when the cause of action in negligence arose which in turn depends on when Mr Pickthall suffered loss and damage. If this was before 20 June 2001 it follows that the claim was time-barred as at 20 June 2007 the date of the assignment.
21. Mr Flenley accepted on behalf of Mr Pickthall that he bears the burden of proof of showing that the claim was not so time-barred. In essence, he contends as follows:

(1) Hill Dickinson's negligence in its advice and drafting of the SSA rendered Mr Pickthall liable to having the transaction impugned in one way or another by a liquidator or administrator of TPP;

(2) As there was a substantive transaction involved here from which Mr Pickthall stood to benefit (had it proceeded as intended and not been later impugned) this was not a "pure contingency" case like Law Society v Sephton [2006] 2 AC 543 where the

House of Lords held that no loss is suffered until the contingency has arisen; for ease of reference I shall refer to such a case as a "Class 1" case;

(3) No loss was suffered at the outset here because it was not then clear whether the transaction would ultimately prove to be a burden so that a loss was sustained not a benefit. So it was a case of the same type as Nykredit v Edward Erdman [1997] 1 WLR 1627, where the House of Lords held that no loss was incurred until it became clear that the Claimant lender would need to rely on its security which would not be sufficient to cover the outstanding debt; I refer to this type of case as a "Class 2" case;

(4) Applying that analysis to this case, no loss was suffered until the contingency (the impugning of the SSA such that Mr Pickthall was deprived of the benefits conferred under it and so made a loss) had arisen and it did not so arise until the judgment of HHJ George on 27 September 2001, over 3 months after the key date of 20 June.

22. In response Mr Ticciati for Hill Dickinson contended as follows:

(1) He agreed that this was not a "pure contingency" case, but he disagreed that this was a Nykredit - type case. Principally this was because, on the basis of the claim made, if liability was established the Court was not being asked to compare the position of Mr Pickthall had the SSA not been entered into at all with the position he actually found himself in (ie a "no transaction" analysis). Rather it was being asked to proceed on the footing of a "loss of chance". The comparison here was between (a) the position of Mr Pickthall had the correct advice been given - which he said was that different terms could and would have been sought for the SSA avoiding the risk of it being impugned and (b) his actual position;

(2) Accordingly the instant case was analogous not to Nykredit but to such cases as Forster v Outred [1982] 1 WLR 86, Moore v Ferrier [1988] 1 WLR 267, Bell v Browne [1990] 2 QB 495 and Watkins v Jones Maidment Wilson [2008] PNLR 23 where although a contingent liability was certainly involved it could be said that the property of the Claimant had suffered an immediate loss in value even if not quantifiable at the outset and/or that the Claimant had not received what he should have got from the transaction. I refer to this type of case as a "Class 3" case. On that basis, the loss was suffered on 6 February 2001;

(3) Mr Ticciati's fallback position was that even if this is a Class 2 case, any analysis of when loss was actually suffered would entail the conclusion that it was suffered either on 28 March when the administrator issued proceedings against Mr Pickthall, or on 9 May at the latest when the Particulars of Claim in that action were served. The contingency had arisen by then even if its outcome was not yet known. Accordingly, the claim would still have been time-barred by 20 June 2007.

The Law

23. In a case such as this, an examination of a number of the authorities is inevitable.

Nykredit v Edward Erdman [1997] 1 WLR 1627

24. Here, the Defendant valuer overvalued the property to be taken as security for a loan by the Claimant lender. The Defendant valued the property at £3.5m when its true value was no more than £2.1m. The Claimant had advanced £2.45m to the borrower which it would not have done, had it known of the true value of the security. The question of when the cause of action accrued arose in the context of the claim for interest on the damages awarded against the Defendant. According to Lord Hoffman, loss was suffered

"when the lender can show that he is worse off than he would have been if the security had been worth the sum advised by the valuer. The comparison is between the lender's actual position and what it would have been if the valuation had been correct.

There may be cases in which it is possible to demonstrate that such loss is suffered immediately upon the loan being made. The lender may be able to show that the rights which he has acquired as lender are worth less in the open market than they would have been if the security had not been overvalued. But I think that this would be difficult to prove in a case in which the lender's personal covenant still appears good and interest payments are being duly made. On the other hand, loss will easily be demonstrable if the borrower has defaulted, so that the lender's recovery has become dependent upon the realisation of his security and that security is inadequate. ... Relevant loss is suffered when the lender is financially worse off by reason of a breach of the duty of care than he would otherwise have been." (pl639).

25. In that case it so happened that the borrower defaulted almost at once rendering his personal covenant to repay (secured by the property) worthless. The transaction was entered into in March 1990 and by December 1990 (the dated from which the Claimant sought interest) the full loss attributable to the overvaluation had been suffered.

Law Society v Sephton [2006] 2 AC 543

26. In this case, the Defendant accountant negligently certified between 1989 and 1995 that a solicitor had complied with the Solicitors' Accounts Rules. The accountant had failed to make a proper investigation and over that period the solicitor had misappropriated over £750,000 from his client account. The Law Society discovered the fraud only later in 1996 when it intervened in his practice and he was struck off. Subsequently various claimants made compensation claims in respect of the misappropriation against the Law Society and it paid them out. On 16 May 2002 the Law Society issued proceedings against the Defendant. He argued that in respect of each negligent report the cause of action accrued as soon he had misappropriated monies following receipt of the report by the Law Society. If so, the action was time-barred. The House of Lords rejected this argument.
27. A number of aspects of the judgment of Lord Hoffman are relevant for present purposes. It is convenient to recite them all in one place and I do so here:

"16 The broader interpretation of Forster v Outred & Co was unanimously rejected by the High Court of Australia in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514. The principal judgment (of Mason C J and Dawson, Gaudron and McHugh JJ) is a masterly exposition of the law which deserves careful study...

17 The High Court said, at pp 529, 531, 532, that Forster v Outred & Co was explicable:

"by reference to the immediate effect of the execution of the mortgage on the value of the plaintiffs equity of redemption ... It has been contended that the principle underlying the English decisions extends to the point that a plaintiff sustains loss on entry into an agreement notwithstanding that the loss to which the plaintiff is subjected by the agreement is a loss upon a contingency. For our part, we doubt that the decisions travel so far. Rather, it seems to us, the decisions in cases which involve contingent loss were decisions which turned on the plaintiff sustaining measurable loss at an earlier time, quite apart from the contingent loss which threatened at a later date ... If ... the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred."

18 I say at once that I am in complete agreement with this analysis, which provides the answer to this appeal. By virtue of the terms of the Solicitors' Compensation Fund Rules 1995, Mr Payne's misappropriations gave rise to the possibility of a liability to pay a grant out of the fund, contingent upon the misappropriation not being otherwise made good and a claim in proper form being made. Such a liability would be enforceable only in public law, by judicial review, but would still in my opinion count as damage. But until a claim was actually made, no loss or damage was sustained by the fund. I must however consider certain other authorities and contrary arguments.

19 My second quotation from the judgment of Stephenson LJ in Forster v Outred & Co [1982] 1 WLR 86, 94 was approved by this House in Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627, 1630, but the House did nothing to resolve the ambiguity which I have identified. There was no need to do so because the context was altogether different. In the Nykredit (No 2) case the surveyor's negligent valuation had led to the plaintiff obtaining what turned out to be inadequate security for his loan. There was no question of a contingent liability; the issue was whether a cause of action arose immediately or when the amount he was owed exceeded the value of his rights under the transaction (borrower's covenant plus security). The House decided that it was the latter. This was entirely in accordance with the principles discussed in the Wardley case, where, in a passage to which Lord Nicholls of Birkenhead referred, at p 1634, Brennan J said 175 CLR514, 536:

"A plaintiff may suffer economic loss or damage in a number of ways: by payment of money, by transfer of properly, by diminution in the value of an asset or by the incurring of a liability. Whether loss or damage is actually suffered when any of these events occurs depends on the value of the benefit, if any, acquired by the plaintiff by paying the money, transferring the properly, having the value of the asset diminished or incurring the liability. If the plaintiff acquires no benefit, the loss or damage is suffered when the event occurs. At that time, the plaintiffs net worth is reduced. And that is so even if the quantification of that loss or damage is not then ascertainable. But if a benefit is acquired by the plaintiff, it may not be possible to ascertain whether loss or damage has been suffered at the time when the burden is borne-that is, at the time of the payment, the transfer, the diminution in value of the asset or the incurring of the liability. A transaction in which there are benefits and burdens results in loss or damage only if an adverse balance is struck."

20 The Nykredit (No 2) case [1997] 1 WLR 1627 therefore decides that in a transaction in which there are benefits (covenant for repayment and security) as well as burdens (payment of the loan) and the measure of damages is the extent to which the lender is worse off than he would have been if he had not entered into the transaction, the lender suffers loss and damage only when it is possible to say that he is on balance worse off. It does not discuss the question of a purely contingent liability.

21 Next, there are a number of cases in the Court of Appeal which involve transactions, with both benefits and burdens, into which the plaintiff entered as a result of the negligence or breach of contract of the defendant. None of these cases concerned purely contingent obligations. It is only necessary to observe that in such bilateral transactions the answer to the question of whether damage has been suffered may be different according to whether the liability is for the consequences of the defendant not performing his duty or (as is usual in claims for misrepresentation) the consequences, or some of the consequences, of the plaintiff entering into the transaction. If the liability is for the difference between what the plaintiff got and what he would have got if the defendant had done what he was supposed to have done, it may be relatively easy, as Bingham LJ pointed out in DWMoore & Co Ltd v Ferrier [1988] 1 WLR 267, to infer that the plaintiff has suffered some immediate damage, simply because he did not get what he should have got. Thus in Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172, where the plaintiff paid a premium for a voidable fire insurance policy because his insurance broker had failed to disclose material facts, the Court of Appeal held that he had suffered immediate damage because he "did not get what he should have got", namely a policy binding on the insurers. On the other hand, if the damage is (as it was in the Nykredit (No 2) case [1997] 1 WLR 1627 and First National Commercial Bank Plc v Humberts [1995] 2 All ER 673) the difference between the defendant's position after entering into the transaction and what it would have been if he had not entered into the transaction, the answer may be more difficult. Despite the breach of duty, the transaction may on balance have originally been advantageous to the plaintiff and some evidence may be necessary to show when he was actually in a worse position. The judgment of Mason CJ and his colleagues in the Wardley case drew attention to this distinction 175 CLR 514, 530-531:

"Another element in some of the English decisions ... is the conclusion that, because the subject matter of the agreement lacked the qualities which it had been represented as having, that subject matter was therefore less valuable than it would have been if the representations had been true. That conclusion is acceptable in cases in which the contract measure of damages is appropriate but it is not acceptable here where the contract measure of damages does not apply. The application of that measure of damages [sc the difference between the value of what the plaintiff got and what he would have got if the defendant had performed his duty] may, in some situations, enable a court to conclude more readily that the plaintiff first suffers loss or damage on entry into an agreement."

30 In my opinion, therefore, the question must be decided on principle. A contingent liability is not as such damage until the contingency occurs. The existence of a contingent liability may depress the value of other property, as in Forster v Outred & Co [1982] 1 WLR 86, or it may mean that a party to a bilateral transaction has received less than he should have done, or is worse off than if he had not entered into the transaction (according to which is the appropriate measure of damages in the circumstances). But, standing alone as in this case, the contingency is not damage...

31 The majority of the Court of Appeal appear to have decided the case on the basis that the Law Society did not enter into any transaction giving rise to the contingent liability. It did nothing and the contingent liability was created by the misappropriations and the previous existence of the compensation fund and the rules which governed its administration. No doubt in most cases in which a party incurs a contingent liability as a result of entering into a transaction, that liability will result in damage for the reasons already discussed in relation to bilateral transactions. But I would prefer to put my decision on the simple basis that the possibility of an obligation to pay money in the future is not in itself damage."

28. Lord Hoffman therefore distinguished Nykredit from the case before him in which, at best, the Defendant had exposed the Law Society to a possible liability to compensate in the future. Nykredit, however, was not a contingent liability case at all. Instead, Lord Hoffman placed Nykredit into a different category where, as a result of the Defendant's negligence, the Claimant has entered into a transactions with benefits and burdens. He then drew the familiar distinction between claims involving such transactions where (a) liability is based on the Defendant not performing his duty to the Claimant such that the Claimant did not get what he should have got and (b) liability is for the consequences of the Claimant entering into the transaction (limited, in overvaluation cases, to the loss due to that overvaluation - as in Nykredit). Cases such as Moore v Ferrier [1988] 1 WLR 267 fall into the former category. If the complaint is that the Claimant did not get what he was entitled to receive then, logically, the loss is sustained as soon as the product of the Defendant's work - usually a transaction - is provided - because at that point the Claimant had not received what he expected.
29. The distinction between the two types of case referred to in paragraph 27 above approximates to that between Classes 2 and 3 described in paragraph 20 above. The Class 3 cases all involve an element of contingency but it is not determinative:

(1) In Moore the Claimant received restrictive covenants which may well have been unenforceable even though the contingency which would put them to the test had not

arisen initially and might not have arisen. But because the covenants were "defective" the contract was less valuable to the Claimant at the outset and hence time started to run then;

(2) The same is true of the case of Bell v Browne [1990] 2 QB 495;

(3) Equally, in Watkins v Wilson 4 March 2008, the same analysis applied where the Claimant would have entered into a building contract on better terms had proper advice been given by the Defendant.

30. One can see that when the nature of the complaint is that the professional's negligence leads to a transaction involving the Claimant which was less advantageous than it should have been (either because the Defendant should have drafted it better or should have given proper advice which would have led to it being drafted better), it is hard to conclude other than the Claimant received less than he bargained for so that the loss is suffered there and then.
31. By way of contrast, in Nykredit the surveyor was not warranting that the property was in fact worth £3.5m as opposed to £2.1m. So the Claimant could not allege that he should have received a property worth £3.5m. Had it been able to do so it would surely have followed that the loss was suffered at once. Since, however, liability sprung from a negligent misstatement as to its true worth absent which the Claimant would not have lent the money, it might not be clear at the outset that the Claimant was in a worse position than it would have been in had not lent that money. Had the principal debtor paid according to his covenant the fact that the security was overvalued would have made no difference.
32. Forster v Outred is perhaps more difficult to categorise. But according to Lord Hoffman and the Australian High Court in Wardley v Western Australia [1992] HCA 55, Forster was not a Class 1 case because there was an immediate impact on the value of the Claimant's property as a result of entering into the ill-advised mortgage. The property was now encumbered.
33. In his judgment in Sephton Lord Walker similarly distinguished Nykredit. See paragraph 43. He also saw cases such as Moore as forming a separate category See paragraphs 44 - 46. He went on to say in paragraph 48:

"48 In all these cases the claimant has as a result of professional negligence suffered a diminution (sometimes immediately quantifiable, often not yet quantifiable) in the value of an existing asset of his, or has been disappointed (as against what he was entitled to expect) in an asset which he acquires, whether it is a house, a business arrangement, an insurance policy, or a claim for damages. Your Lordships have not, I think, been shown any case in which the imposition on a claimant of a purely personal and wholly contingent liability, unsecured by a charge on any of the claimant's assets, has been treated as actual loss. That would have been the position if the claimant in the Forster case [1982] 1 WLR 86 had given a personal covenant guaranteeing her son's debts (which she seems not to have done-she paid them simply to prevent enforcement of the security on her farm) and if she had not given any security over any of her own assets."

34. In paragraph 51 he went on to say that the "defective product" type cases must be kept within their bounds:

"The claimant's risk of being subjected to an order under regulatory legislation cannot to my mind be termed a contingent liability or a fetter on the claimant's assets. The other way of expressing the ground of decision is more sustainable, on the basis that the claimant had got from his solicitor a defective scheme rather than one which was proof against regulatory attack. Even so, it seems to me close to the borderline. I see no good reason to stretch the "defective product" analogy to cover every situation in which a professional or commercial adviser carelessly gives inadequate advice and so produces a state of affairs which carries the risk of future loss; and to do so would be contrary to the unanimous decision of this House in the Nykredit (No 2) case [1997] 1 WLR 1627.

52 I would therefore reject Sephtoris submission that it was enough that the Law Society was, every time that misappropriations were made after the issue of defective accountant's certificates, at risk of having to meet claims from clients from whom Mr Payne misappropriated funds-even if that risk (of a future eventuality) is beguilingly expressed as "exposure to claims" (suggesting a present or current condition). It was in a sense a detriment, but it was not a detriment of the sort described in Forster v Outred & Co [1982] 1 WLR 86, 94 as understood and developed in the later authorities."

Application of the law to the facts of this case

35. As Lord Hoffman's analysis in Sephton makes clear, it is vital to begin with a careful consideration of the claim itself. As drafted it is plain that what is alleged is that in the SSA, Mr Pickthall received less than expected. Had his solicitor acted properly and drafted the contract correctly and/or given the correct advice which would have led to more advantageous drafting of the SSA, there was at least a substantial chance that Mr Baig would have agreed to those different terms and a safer contract for Mr Pickthall would have emerged.
36. On that basis the claim falls within Class 3 and not Class 2. Damages are to be assessed on the basis of a comparison between the actual position of Mr Pickthall under the SSA as made, and the position he would have been in had the SSA contained the proper terms (subject to loss of chance principles). Indeed Mr Flenley accepted that if Hill Dickinson had been expressly instructed to make the SSA watertight against any future claim by a liquidator or administrator, and it had negligently failed to do so, the cause of action would have accrued as soon as Mr Pickthall entered into the SSA. But if so, it is difficult to see why the position should be any different when negligence is said to have resulted from breach of the usual implied duty of reasonable care and skill. If negligence is proved in this case, it can only be because Hill Dickinson should have foreseen and considered the risk of later action against Mr Pickthall from liquidator or administrator. That is indeed how the claim, in part, is put at paragraph 47 (1) of the Particulars of Claim.
37. Thus Mr Pickthall did not get the agreement he expected and in fact, since consideration was payable over time, there was a risk that it would not all be paid (because in the intervening period there would be a challenge to the SSA) - which is of course what happened. And as damages are claimed on the basis of the loss suffered as a result of Mr Pickthall not getting a better agreement, it is hard to see how the chance to obtain a better agreement can have been lost at any time later than when that chance disappeared ie upon the making of the actual SSA.
38. It is not enough, therefore, for Mr Pickthall to contend simply that this is a "benefits and burdens" case. The question is what sort of transaction case it is. In my judgment it is clearly akin to Moore for example, as opposed to Nykredit.
39. If I were wrong about that, then I would agree with Hill Dickinson's fallback position. If a Nykredit - type analysis is undertaken, the loss was surely suffered by 9 May at the latest when the Particulars of Claim against Mr Pickthall were served and indeed probably by 28 March when the proceedings were issued. At that point the contingency had occurred because a claim was made against him. True it was not determined until judgment was given on 27 September. But that can make no difference:

(1) In Sephton, the Court held that the contingency (claims for compensation) arose as and when the claims were made not when they were paid out - see the judgments of Lord Hoffman at paragraph 18 and Lord Mance at paragraph 83, Lord Walker agreeing with both of them;

(2) Although as at March or May 2001 it could not be said for sure that the claims would lead to payments or what the total loss suffered by Mr Pickthall would be, that could not have been an obstacle to the commencement then of a claim over by Mr Pickthall against Hill Dickinson. Had he intimated proceedings against it then it is difficult to imagine that Hill Dickinson could have applied successfully to strike out such a claim as being premature;

(3) As Lord Walker pointed out in paragraph 48 of his judgment in Sephton, the cause of action can accrue before it is capable of quantification.

Conclusion

40. For all those reasons therefore, I find that this claim was time-barred prior to 20 June 2007. That being so, Hill Dickinson contend that the issue of the claim against them by Mr Pickthall was and remains, an abuse of process.

ISSUE 2: IF THE CLAIM WAS STATUTE-BARRED SHOULD IT BE STRUCK OUT AS

BEING AN ABUSE OF PROCESS?

41. Hill Dickinson contends that at the time when the claim form was issued on 5 February 2007 the cause of action against it was not vested in Mr Pickthall, and until and unless it was assigned to him the action could not proceed. Accordingly, it is said, the issue of the claim form was an abuse of the process of a kind described in cases such as Steamship Mutual v Trollope & Colls [1986] BLR 77, Barton Merrett and Ernst & Young [1993] 1 Lloyds 541 and Nomura v Granada [2008] Bus LR 1 - and should be struck out.
42. Before referring to the case-law it is necessary to rehearse some of the facts in this case. Paragraphs 10 - 12 of the Statement of Agreed Facts for the purpose of this trial read as follows:

"10 The Claimant cannot be blamed for the original bankruptcy.

11. When the claim form was issued, the Claimant intended (a) to proceed with the claim (subject to obtaining an assignment of the cause of action) and (b) knew the essence of the matters pleaded in the particulars of claim.

12. At the time when the claim form was issued, the Claimant was taking active steps to obtain an assignment of the Causes of Action from the Official Receiver."

43. In addition, Mr Pickthall made a witness statement for the purpose of this trial on 5 August 2008. It was admitted without objection from Mr Ticciati save that he reserved the right, if

necessary, to cross-examine him on it. In the event, he did not do so. Relevant parts of that statement read as follows:

"2. It is said that my trustee in bankruptcy had 4 ½ years in which to consider whether to bring proceedings against the defendants and elected not to do so. During the period of my bankruptcy, I believed that I had a claim which could not be pursued until my discharge from bankruptcy. I did not realise that the cause of action vested in my trustee in bankruptcy. I therefore did not explain the background to the claim to the Trustee.

3.1 was not discharged from my bankruptcy until 22 August 2006 and am advised that, until that date, I could not myself have obtained an assignment of the cause of action. In advance of that date, however, I knew the date on which the bankruptcy would end, and had instructed my solicitors to ask the first defendant for a copy of their file. I understand that my solicitors' letter of 25 July 2006 in the agreed trial bundle shows this.

4. I understand from my solicitors that the agreed trial bundle also shows that on 1 September 2006 my solicitors renewed their request to the first defendant and that the first defendant supplied a copy of most of its file under cover of a letter dated 7 September 2006.1 understand from my solicitors that this comprised 9 brown envelopes, each of which contained a bundle of papers in no particular order.

5. I Following this, my solicitors asked me to supply £5,000 on account so that they could instruct leading counsel to advise on the potential claim. Bearing in mind the recent conclusion of my bankruptcy, this was difficult for me to do. I was not able to supply the money until around mid- January 2007, but by December 2006 I was confident of being able to raise it and as a result my solicitors instructed leading counsel. I understand from them that on 18 December 2006 they arranged a consultation with leading counsel, which took place took place on 7 January 2007; I was unable to attend. I understand from my solicitors that at the consultation leading counsel advised that it would be necessary to obtain an assignment of the cause of action. Further I understand that leading counsel advised that he would need to see the first defendant's file relating to the completion of the share sale and Option agreement, and that my solicitors' letter of 17 January 2007 in the trial bundle requested a copy of that file. I understand from my solicitors that in response the first defendant under cover of a letter dated 1 February 2007 and received on 2 February 2007 which is in the trial bundle.

6. I After the consultation my solicitors advised me that it would be necessary to obtain an assignment of the cause of action. I immediately agreed to that course being followed and instructed my solicitors to try to achieve this.

7. I I understand from my solicitors that the claim form was issued on 5 February 2007. I also understand from them that obtaining the assignment of the cause of action proved time-consuming, and could not be achieved until 20 June 2007, because my trustee in bankruptcy required the provision of detailed information in relation to the potential claim, and the opportunity to take his own legal advice in relation to the potential assignment. In particular, the assignment could not be obtained prior to the issue of the claim form.

8. I I understand from my solicitors that they did not ask the Official Receiver to issue a protective claim form. I relied on my solicitors to deal with legal issues such as this. I understand from my solicitors that their impression from the Official Receiver was that he would grant no assignment until he had received legal advice on the matter."

44. A file note from the trustee in bankruptcy Baker Tilly dated 26 September 2003 records a remark made in interview by Mr Pickthall about Hill Dickinson and the SSA namely "How do I stand with them" and the interviewer says he cannot advise and Mr Pickthall should take legal advice. I do not think that this passing exchange really adds anything - there is no evidence of any active consideration of a claim at this time.

Steamship Mutual

45. In this case the Claimant issued proceedings against the First and Fifth Defendants in April 1982 in relation to various building defects. The Fifth Defendants were structural engineers. Statements of Claim were served on the other Defendants but not them. In 1984 the Claimant discovered facts which suggested possible liability on the part of the Fifth Defendant and in June 1985 sought permission to proceed against them. The Court refused and struck out that claim as being an abuse of process. When it first issued proceedings the Claimant had written to the Fifth Defendants saying that it did not intend at that stage to make allegations against them. The Fifth Defendants invited the Claimant to discontinue against them but it did not do so. May LJ stated as follows in the leading judgment at pages 87- 88 :

"..In my opinion to issue a writ against a party even in connection with a building dispute where cross-claims may subsequently be made, when it is not intended to serve a statement of claim and where one has no reasonable evidence or grounds on which to serve a statement of claim against a particular party, is an "abuse of the process of the court"..what is meant is "an improper use of the process of the court"... .had the structural engineers called for a statement of claim when the writ was first issued... [the Claimant] would have responded either by declining to serve a statement of claim and consequently..having the proceedings struck out or...to have served a statement of claim which they knew had no foundation. When that is the dilemma..in such circumstances it readily becomes apparent that an improper use of the process of the court has been made I think it should seldom be necessary to resort to this practice of issuing protective writes..Although there may be circumstances for example in the personal injury context where they may be unresolved serious injury in which it is arguably proper to resort to the issue of a protective writ towards the end of the three year period; but when that is done there is always the intention to prosecute the litigation if the claim is not settled once the nature of the serious injuries has ultimately been resolved."

46. The abuse in that case was therefore concerned with the issue of a writ where there was no intention to prosecute it at all at least when issued and when the basis for any claim was not known. May LJ also made it clear that the issue of a protective writ where absent any settlement there would be an intention to pursue it once the nature of serious personal injury had been resolved might have been a different matter. In my judgment the case before me is clearly distinguishable from Steamship Mutual. Mr Pickthall had every intention of pursuing this claim. However he needed an assignment to do so. Although it took some time to obtain and the OR wanted to take legal advice first, there is no suggestion that there would ultimately be a real problem about this. And indeed there was not. It would be surprising if it were otherwise given the nature of the underlying claim and the nature of the assignor and assignee.

Barton

47. In this case, the Court found that there was no abuse of process. But Mr Ticciati relied on certain dicta of Saville J as follows:

"To my mind, at least in the absence of very special circumstances, it could hardly be suggested that it would be a proper use of the processes of the Court to issue a writ with no intention of following it up with a statement or points of claim, in circumstances where the plaintiffs were unaware of any basis on which they could bring proceedings against the defendants. The reason for this is simply that in contentious matters the Courts and Court procedures exist for the purpose of determining claims. If a plaintiff starts an action with no present intention of pursuing it, being unaware of any basis for a claim, then on the face of it that plaintiff is not using the processes of the Court for the purposes for which they were designed.

In the present case there is no doubt that the writs were issued when they were in order to avoid a possible defence of limitation. To my mind this alone would not prevent the writs from being struck out, given there was no present intention of pursuing the matter nor any known basis for the claim. Parliament has stipulated the periods within which proceedings must be begun so that unless the proceedings are begun within the relevant period (or the plaintiff can bring himself within one of the exceptions) then it is nothing to the point that he may have wished to protect the position in case something turned up at a later stage. To allow him to do so would in effect be to extend the period beyond that thought appropriate by Parliament."

48. As indicated above, I do not think that it can fairly be said that Mr Pickthall did not intend to use the Court process initiated by him to determine his claim. That is precisely what he wished to do and there were known grounds for the claim. It is true that there was obviously a "protective" basis for issuing this claim on 5 February 2007 which related to limitation. But in and of itself that does not amount to an abuse.

Nomura

49. The case on which most reliance is placed by Hill Dickinson is Nomura. Here the bank West LB had issued a claim form against Nomura. These parties then agreed a 12 month standstill agreement. Nomura considered that it might have a claim over against Granada but the latter did not agree a standstill. So Nomura issued a claim form. Granada then applied to strike it out. At the time of issuing its claim Nomura did not know what the nature of its claim would be since it did not know the details of any claim against it by West LB. Cooke J struck out the claim. The following parts of his detailed judgment are relevant:

"27 In Johnson v Gore Wood & Co [2002] 2 AC 1 , 22 Lord Bingham of Cornhill referred to the " inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people." He referred, at p 31, to the need to make a " broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court..."..

31 .... Mr Milligan maintains that there is a necessity for two elements before the issue of a writ could be said to be abusive. The first element is the lack of intention to serve a statement of claim whilst the second is the absence of any reasonable evidence or grounds on which it could be served. Mr Andreas Gledhill (for Granada) contends however that this is a dictum, not a statute, and that there is no necessity for both heads, the real point being whether or not, as appears from the passage at p 27, the claimant knew enough and had grounds which would enable him, given appropriate time, to marshall the facts of which he knew, in a statement of case which he could properly serve on the defendant in question...

37 In my judgment, when regard is had to these authorities the key question must always be whether or not, at the time of issuing a writ, the claimant was in a position properly to identify the essence of the tort or breach of contract complained of and if given appropriate time to marshall what it knew, to formulate particulars of claim. If the claimant was not in a position to do so, then the claimant could have no present intention of prosecuting proceedings, since it had no known basis for doing so. Whilst therefore the absence of present intention to prosecute proceedings is not enough to constitute an abuse of process, without the additional absence of known valid grounds for a claim, the latter carries with it, as a matter of necessity, the former. If a claimant cannot do that which is necessary to prosecute the claim by setting out the basis of it, even in a rudimentary way, a claimant has no business to issue a claim form at all " in the hope that something may turn up" . The effect of issuing a writ or claim form in such circumstances is, so the plaintiff/claimant hopes, to stop the limitation period running and thus deprive the defendant of a potential limitation defence. The plaintiff/claimant thus, unilaterally, by its own action, seeks to achieve for itself an extension of the time allowed by statute for the commencement of an action, even though it is in no position properly to formulate a claim against the relevant defendant. That must, in my judgment, be an abuse of process and one for which there can be no remedy save that of striking out the proceedings so as to deprive the claimant of its putative advantage. The illegitimate benefit hopefully achieved can only be nullified by this means. Whatever powers may be available to the court for other abuses, if this is an abuse, there is only one suitable sanction.

38 The concept, as exemplified by this line of authority, is further reinforced by the terms of CPR r 16.2(1) which provides that " the claim form must— (a) contain a concise statement of the nature of the claim" . CPR r 22.1( 4) provides that the claim form must be verified by a statement of truth being " a statement that— (a) the party putting forward the document ... believes the facts stated in the document are true...

40. Although defectively endorsed writs could be cured by subsequent statements of claim in the ordinary way, such cure depended upon the plaintiff having a known genuine cause of action at the time of the issue of the writ and the irregularity merely being the failure properly to set it out. As appears from the decisions discussed earlier, that principle is of no application where the plaintiff had no known basis for making the claim at the time when the writ was issued...

41. In my judgment, therefore, if Nomura, at the time of issuing its claim form, was not in a position to do the minimum necessary to set out the nature of the claim it was making, it would be seeking an illegitimate benefit, namely the prevention of further time running under the Limitation Acts for a claim which it could not properly identify or plead. That would be an abuse of the process of the court."

50. In Nomura as with Steamship Mutual the point was that the Claimant did not know what his claim against the Defendant (if any) was. That remained the position as at the date of the hearing of the application to strike out. There was no cross-application to amend to make clear what the basis was in sufficient detail to comply with the rules. As noted above the case before me is different on the facts. Nonetheless Mr Ticciati submits (following in particular the reasoning of Cooke J in paragraph 37 of his judgment) that while Mr Pickthall might say he had an intention to litigate the matter when the Claim Form was issued, in truth he could have had no such intention because there was no viable basis for his claim at that point since he had no title to sue. So the principle enunciated in the cases referred to above should apply not merely to where the Claimant cannot say what his claim is but where he must be taken to know as at the date of the issue of the claim form that he has a defect in title to sue. To issue in such circumstances must equally be an abuse.
51. I do not accept that argument for the following reasons:

(1) The underlying mischief is the bringing of proceedings without any intention to have them litigated; the fact that at some later stage a basis for the claim might turn up is not a justification. Nor is the fact that the Claimant seeks to protect his position with regard to limitation in case (a) a basis for the claim might turn up and (b) at that point the Claimant decides that there is good reason then to pursue a claim; that is not this case;

(2) Moreover, the "protective" element of the issue of the claim form on 5 February 2007 should not obscure the fact that there was substantial and proper argument before me as to whether time did start to run as early as 6 February 2001 and of course when the claim form was issued it was not clear precisely when the assignment would come through; he can properly be said to have intended to pursue the claim;

(3) While Mr Pickthall must be taken to have been aware of his defect in title which, had it remained, would be fatal, I cannot see that to issue in such circumstances where the expectation was that it would be resolved whereupon the claim would be decided by the Court is an abuse, even by analogy to the cases referred to above. After all he was simply hoping to have returned to him a cause of action that had been his in the first place;

(4) Moreover, it would in my judgment be wholly artificial to ignore the fact that the assignment did indeed come through and is referred to in the Particulars of Claim. All of this preceded the strike-out point taken by Hill Dickinson (together with other points) when it sought atrial of preliminary issues in October 2007.

Conclusion in relation to abuse of process

52. Applying the broad, "merits-based" judgment referred to by Lord Bingham in Johnson and cited by Cooke J with approval in paragraph 27 of his judgment in Nomura, and for the reasons given in paragraphs 45, 47 and 49-50 above, I am quite satisfied that the issue of the Claim Form in this case was not an abuse of process. This of course does not necessarily mean that the claim can proceed. That depends on the further issues dealt with below.
53. I should add that in this context I was referred to the cases of Pontin v Wood [1962] 1 QB 594 and Presentaciones v Secunda [1994] Ch 271. However I did not find them of any real assistance on the question of abuse of process.

ISSUE 3: IF IT SHOULD NOT BE SO STRUCK OUT, IS IT NECESSARY FOR THE

CLAIM FORM TO BE AMENDED TO PLEAD THE FACT OF THE ASSIGNMENT?

Introduction

54. Mr Pickthall contends that as a Particulars of Claim has been served making reference to the fact of the assignment - and hence showing his title to sue - no amendment of the claim form is necessary. If that is correct, no further issue arises on the trial before me and the claim may proceed. Hill Dickinson contends that however the amendment is actually expressed it is necessary for the Claim Form to be amended to plead the assignment.

Applicability of CPR 16.4

55. This rule provides that the claim form must "contain a concise statement of the nature of the claim." I have set out paragraph 2 of the Claim Form in paragraph 12 above. It is plain from this paragraph that Mr Pickthall did not have the cause of action vested in him. Given what is stated in paragraph 2, I cannot see how the claim form can be said to contain a concise statement of the nature of the claim unless it also makes clear that Mr Pickthall does (now) have title to sue. Normally, of course, this would not need to be pleaded since the Claimant has always been the person (and the only person) with title to sue but because of the intervention of his bankruptcy this is not a normal case.
56. Moreover, as paragraph 2 presently stands it is in conflict with the later Particulars of Claim. At first blush then, it would appear that an amendment is needed to the Claim Form.

Evans v Cig Mon Cymru 18 January 2008

57. However, Mr Flenley for Mr Pickthall relies on Evans. Here the claim form was issued before expiry of the limitation period but served after expiry. It mistakenly referred to "abuse at work" instead of "accident at work". The Particulars of Claim were served along with the claim form. They gave details of the accident. When the documents were read together it was clear that the word "abuse" in the claim form had been typed in error and it was obvious that this was an accident claim. The Court of Appeal declined to strike out the claim as an abuse of process. It also permitted the Claimant to amend the claim form so as to refer to the accident and not abuse.
58. Mr Flenley suggested that this decision entailed the conclusion in the instant case that (a) the claim form and Particulars of Claim should be read together and (b) in the light of that, no amendment is required at all. I do not agree. First the Court of Appeal in Evans held than an amendment to the claim form was required albeit a small one. Second, in relation to that amendment the Court of Appeal held that for the purpose of the application to amend the claim form should be read alongside the other documents with which it was served - including the Particulars of Claim. When this was done it followed that the amendment was of a most limited kind, needed simply to correct a clerical error. It did not amount to a "new claim" after expiry of limitation so as to engage s35. Since the Court's discretion was bound then to be exercised in favour of the Claimant the amendment was allowed. See paragraphs 23 - 26 of the judgment of Toulson LJ with whom Arden and Laws LJJ agreed.

Pontin

59. Mr Flenley also contends that the decision of the Court of Appeal in Pontin supports his contention that no amendment is necessary. In that case the writ, issued before expiry of the limitation period, claimed damages for personal injury without alleging the Defendant's negligence. After expiry of the limitation period the Statement of Claim was served which did so allege. In the Court of Appeal it was accepted that the writ was not a nullity for its failure to allege negligence. It was also conceded that had the Statement of Claim been served before expiry of the limitation period the defect in the writ would have been successfully cured. The Court of Appeal refused to restrict the curative effect of the Statement of Claim to the case where it was served before and not after expiry of the limitation period. The question of whether or not an amendment was required was not debated although the Defendant's position seems to have been that any application to amend would have fallen foul of limitation (see p604). In the light of the concession that in principle the writ could be cured by a subsequent Statement of Claim, the issue resolved itself into one of timing. The Court of Appeal applied the principle in Hill v Luton Corp. [1951] 2 KB 387, 391 to the effect that the defective indorsement on the writ could be cured by subsequent service of a statement of claim even after expiry of the limitation period. See p 613.
60. The instant case is different, however. There is no want of particularity in the claim form. Rather it needs to be amended to show that Mr Pickthall does have title to sue. It is required not to fill a gap but to change the case pleaded in paragraph 2. I do not think that in such circumstances the later Particulars of Claim can cure the defect without there being an amendment.

Conclusion on the need to amend

61. Accordingly, there is a need for Mr Pickthall to amend the claim form and in relation to that, the claim form can only be read on its own since the Particulars of Claim were not served with it.

ISSUE 4: IF AN AMENDMENT OF THE CLAIM FORM TO PLEAD THE ASSIGNMENT

IS NECESSARY SHOULD THE COURT IN ITS DISCRETION ALLOW IT?

Introduction

62. As noted above, Mr Pickthall concedes that to plead the assignment amounts to a "new claim" within s35. However, in the light of the decisions of the Court of Appeal in Smith v Henniker-Major [2003] Ch 182 and Blackburne J in Finlan v Winfield [2007] 4 All ER 143 it is also accepted by Hill Dickinson that such a new claim arises out of the same or substantially the same facts as the existing claim.

Smith and Finlan

63. In Smith the Claimant brought a claim in September 1999 against some of his fellow directors of a company. In 1998 he had purported to assign to himself claims which the company had against such directors. The limitation period expired in February 2000. In 2001 and in response to an application to strike out on the basis that the 1998 assignment was invalid the Claimant executed another document which purported to be a ratification of the 1998 assignment but which alternatively could be viewed as a fresh assignment. At first instance Rimer J held that the 1998 assignment was invalid and was not ratified by the 2001 document. The action could only succeed therefore by an amendment to plead the 2001 document as an assignment in its own right. Rimer J refused that amendment on the ground that it amounted to a new claim under s35 but (a) it did not arise out of the same facts and (b) even if it did, as a matter of discretion it should not be allowed. On that last point he stated as follows at pl4:

"The premise on which I would have to consider whether or not to refuse permission would therefore be one in which I had first concluded the proposed new claim would be one arising out of the same facts, or substantially the same facts, as those of the current claim. That situation does not arise, but I propose to indicate that, if it had, I would in the very unusual circumstances of this case have exercised my discretion against giving permission to amend. When Mr Smith started this action he had no title to sue at all. SPDL had a title to sue but had not done so. The 2001 assignment was effected at a time when any claim by SPDL was statute-barred. Mr Smith's position is, therefore, that he should be given permission to sue based on a title to do so given to him by a company whose own claim was statute-barred. I find it difficult to accept that a situation such as that can have been contemplated as being within the spirit of r. 17.4(2) and its predecessor provisions, not least because it is only very recently that the courts have recognised that as a matter of principle it is permissible to plead post-claim events as part of the claimant's cause of action."

64. In the Court of Appeal however, Walker LJ held (dissenting on this point) that the 1998 assignment was effective. For his part therefore there was no need to consider the further questions. However he went on to consider them anyway. He held that the 2001 document could not be relied upon the ratify the 1998 assignment. At paragraph 82 he stated that:

"Mr Smith has suffered grievously through the deplorable conduct of two associates whom he trusted, and he has shown determination in his attempts, in the face of many difficulties, to obtain recompense. But the serious imputations against Mr Henniker-Major are now not much short of ten years old, and his former employee, Mr Bright, is no longer alive to give oral evidence. In these circumstances even a relatively small amount of prejudice, coupled with the long delay, must in my judgment make it unfair for Mr Smith to rely on the 2001 deed as a retrospective ratification of the assignment executed three years earlier. I would reach that conclusion as a judgmental application of principle...., not as an exercise of judicial discretion, although for practical purposes the two are closely akin."

65. On the question of amendment, Walker LJ differed from Rimer J in that he thought there was "real doubt" that the new claim did not arise from the same facts albeit that he was not prepared to express a "definitive view that the judge was wrong." See paragraphs 100 and 101. However he agreed with the conclusion reached by Rimer J that as a matter of discretion the amendment should be refused anyway:

"83 The judge indicated that even if that condition had been satisfied, he would still, in what he

described as "the very unusual circumstances of this case", have exercised his discretion so as to refuse permission.

84 I will say at once that I regard the last-mentioned view of the judge, not as an off-the-cuff remark, but as a considered view from which this court should differ only on the limited grounds on which it is permissible for an appellate court to interfere with a judge's exercise of his discretion. I see no ground for interfering in this case. On the contrary, for the reasons set out in the last paragraph of the section of this judgment dealing with the ratification issue [ie paragraph 82 cited above], I would have reached the same conclusion myself."

66. The way in which Walker LJ expressed himself on this point gave rise to some debate before me. On the one hand he declined to interfere with the exercise of discretion by Rimer J who had come to a considered view. On the other hand the reasons which would have impelled him to the same view (delay and prejudice) are very different considerations. Both Counsel recognised before me that this gives rise to a degree of uncertainty. This position was not alleviated by Carnwath or Schiemann LJJ who simply agreed with what Walker LJ said on this point.
67. In my judgment

(1) To the extent that it is said that I must exercise my discretion in the same way as Rimer J and for the same reasons, I reject that suggestion. Each exercise of discretion must be undertaken in the context in which it arises;

(2) Moreover, once a decision in principle is reached that an amendment such as that in Smith is to be regarded as raising a new claim but one arising out of the same facts, there is a danger in then determining the exercise of discretion on the basis that the amendment is somehow not within the "spirit" of section 35 as implemented in the CPR by rule 17.4. Rather if it be found that the new claim does arise out of the same facts there should then be an unfettered exercise of discretion in the usual way;

(3) The factors which more naturally arise on a consideration of discretion are indeed the sort of matters referred to by Walker LJ in his paragraph 82. They are the sort of matters which were considered by Blackburne J in Finlan at paragraphs 46, 76 and 77, albeit that in that case the assignment which post-dated the issue of the claim form (just) was made before the expiry of the limitation period.

Discretion here

68. In this case I would, and do, exercise my discretion in favour of allowing the proposed amendment, for the following reasons:

(1) Hill Dickinson suffers no prejudice if the amendment is allowed and none is alleged over and above the fact that it will be deprived of a limitation defence. But that is not relevant for present purposes;

(2) It is true that the upshot will be that Mr Pickthall can pursue a claim which he did not have at the outset. But on the other hand there was no abuse of process here and in law the claim form as issued was not a nullity. The fact is that the claim form was issued by the (now) correct Claimant in whom in fact the cause of action had been vested originally, before his bankruptcy (for which, it is common ground, he was not to blame);

(3) In paragraph 30 (d) of his Skeleton Argument, Mr Ticciati contends that Mr Baird, the trustee in bankruptcy, "elected" not to bring proceedings in the 4Vi years during which he was trustee. However Mr Pickthall dealt with this in paragraph 2 of his witness statement referred to in paragraph 42 above. For the reasons there given, Mr Pickthall never explained the background to his claim to Mr Baird, so the latter was not in a position to "elect" not to pursue it. As for the period between his discharge and the commencement of proceedings nearly 6 months later, Mr Pickthall explained this in paragraphs 3 to 6 of his statement. Once the end of his bankruptcy was in sight he did consider a claim, against Hill Dickinson. He then had to get their file and put his solicitors in funds. It was only subsequent to this that Leading Counsel advised of the need for an assignment. In those circumstances I agree with Mr Pickthall when he stated in paragraph 9 of his statement that:

"I do not believe that there was undue delay on my part in trying to bring this claim, in the difficult circumstances of having only a short period after the conclusion of my bankruptcy in order to raise considerable funds so that leading counsel could advise me in relation to the numerous documents which the first defendant had supplied."

(4) Mr Pickthall has answered the point about the non-involvement earlier of the OR in paragraph 8 of his statement;

(5) It is true that unlike Smith it cannot be said that Mr Pickthall was mistakenly relying on some other pre-issue assignment which later was shown to be invalid. Mr Pickthall was aware that there was no assignment at the time of issue. But on the other hand this was not some wholly speculative manoeuvre on his part without a real intention to proceed - see my observations in connection with abuse of process;

(6) It is true that the assignment here came after expiry of the limitation period so that when it came, the claim held by the OR was time-barred, and yet the consequence of the amendment is to allow Mr Pickthall to pursue a claim he did not have at the outset. Perhaps, if Hill Dickinson had decided to mount an immediate challenge to the Claim Form before the assignment came it might have succeeded, although equally the assignment might have arrived before the hearing of any such application. But Hill Dickinson made no such application. Indeed it waited until after service of the Particulars of Claim and the making of the assignment before taking any steps to challenge the position. Furthermore, and unlike Smith, there is a very close identity between the assignor and assignee here - they can properly be described as two sides of the same coin for present purposes.

CONCLUSION

69. I therefore conclude as a matter of discretion that an amendment of the Claim Form to plead the assignment and delete the existing paragraph 2 should be permitted in a form on which I will hear from Counsel, along with other consequential matters, following the handing-down of this judgment.
70. I should add that I have been greatly assisted in this matter by Counsel, to whom I am indebted for the excellence of their oral and written submissions.