England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		16 May 2012

Mr Justice Eady:

1. A PTR hearing took place before me on 30 April and 1 May 2012 in these three related actions. The PTR had been fixed by MacDuff J on 29 March. I heard four applications advanced on behalf of the Secretary of State for permission:

i) to amend the particulars of claim in the Topland action (HQ10X01672);

ii) to re-amend the particulars of claim and the reply in the action against Mr Smith and LSM (HQ08X03617);

iii) to withdraw the admission in respect of a policy entitled "Other Side Pays Costs" in the Reply in the action against Mr Smith and LSM;

iv) to introduce further evidence (both factual and expert).

2. The trials are listed to come on in a window beginning on 13 June of this year, directions having been given in April last year by King J. In view of the detailed judgment handed down by the learned Judge on 18 April 2011, I need not repeat the background to the dispute: see [2011] EWHC 983 (QB).
3. At the conclusion of the hearing on 1 May, I informed the parties that I would reject the Secretary of State's three applications (save in so far as they had been consented to) but, as it was by then 4.45 pm, I decided that it would be more convenient for all concerned if I gave my reasons later in writing.
4. After I had announced my decision, however, I received further detailed written submissions on behalf of the Secretary of State dated Friday, 4 May. I had not invited any further submissions and I now gather that no warning had been given to the other parties that there was any intention to provide these. Nonetheless, I read the document over the weekend. Having done so, I naturally gave the opportunity to the other parties to respond. Counsel for the Topland Defendants and counsel for Mr Smith chose to do so and made full submissions to address the new points raised by the Secretary of State. They only did so, however, under protest since they thought the procedure adopted unorthodox and inappropriate. It amounted to a new round of submissions, all of which could have been made at the hearing of the applications, and which were delivered not only after the hearing had concluded but after the court's decision had been announced. I agree, therefore, that the procedure was inappropriate. It no doubt took up considerable time and costs on the part of the Defendants' legal representatives in having to deal with it. I shall return to the subject shortly.
5. Meanwhile, I propose to give my short reasons for rejecting the applications to amend. They represent a wholly new factual case as to what the Secretary of State would or could have done if the alleged wrongdoing had not taken place ten years ago and, what is more, it is one that could have been pleaded at any stage. It seems that the idea was inspired not by the discovery of new facts but by the content of his own expert report served earlier this year.
6. My first reason is that such amendments, coming at this stage, would almost inevitably jeopardise the trial date and increase the costs significantly. That is in my judgment unfair so far as all the Defendants are concerned, but it is particularly hard on Mr Smith, who is having to fund this litigation out of his own resources.
7. The allegations made against the various Defendants, including conspiracy, fraud and bribery, are obviously very serious. Save in exceptional circumstances, it would not be fair to give any further directions at such a late stage which would have the effect of placing that trial window in jeopardy. That is a consideration which looms especially large where, as here, the allegations of wrongdoing go back for so many years. The proceedings must now be brought to a conclusion at the earliest opportunity consistent with fairness to all concerned.
8. As a general principle, no doubt, it is right to permit amendments that will enable the court to identify and resolve the real issues between the parties. Sometimes, even late amendments can be permitted when, for example, the party concerned has only recently come into possession of the facts on which he seeks to rely. They may, perhaps, have been obtained on disclosure of documents, or they may have been kept from the party who seeks to amend by persons over whom he has no control. In such a case, it would be necessary to consider whether the other side would be prejudiced by the late amendments and, if so, whether or not that could be adequately compensated for by way of an order for costs.
9. Here, there would be undoubted prejudice to the Defendants and, as I have already indicated, the allegations are so serious that any delay could not possibly be compensated for in purely financial terms.
10. Furthermore, the court will, generally speaking, be less sympathetic to late amendments where they involve material which could have been raised at an earlier stage, as for example where an amending party has simply thought of a new way of putting arguments on the same factual matrix. In this case, the most contentious of the proposed amendments would involve the Claimant putting forward a different factual case, as to what his predecessor would have done in 2003, from that which has been pleaded now for several years. The case would involve not only amendment of the statements of case but also further evidence to be prepared by the other parties, both factual and expert.
11. Matters have been exacerbated to some extent by the conduct of the litigation on the part of those acting for the Secretary of State – not least because the three applications were launched only the week before the hearing and the witness statement in support only became available one working day before. The amendments now proposed, in so far as they relate to causation and loss, were apparently in contemplation some six months ago. Yet the draft pleading in the Topland action was only served on 14 March of this year, with a revised version following on 13 April. Indeed, in the action involving Mr Smith, the amendments were only provided to him on or about 10 April. This follows a history of delays catalogued by Ms Garbett (solicitor for the Topland Defendants) in her evidence.
12. In so far as the proposed pleading is now intended to suggest that the Secretary of State would have negotiated in 2003 for a 35 year lease on different terms, that is a fundamentally different case from that hitherto pleaded. His claim so far has been based on the proposition that, had the alleged wrongdoing not taken place, he would have remained in First Avenue House on the terms of the original lease, beginning in 1998, and would have reconsidered his position later, in anticipation of its expiry in 2012. It was contended that he would probably then have sought an extension of 10 years.
13. The factual and expert witnesses could have addressed this hypothetical case, had it been advanced earlier, in their original statements and reports, at the appropriate times, rather than having now to grapple with them afresh.
14. It is a question not only of what individuals within the Ministry of Justice might have done, at the material time, but also a matter of determining what it would have then been possible for them to achieve in the prevailing market conditions. It thus would involve the court in hearing evidence, and to a degree speculating, as to how specific entities (Standard Life, the original landlord, and the Topland Defendants) might have behaved if the alleged misconduct had not taken place.
15. There can be no doubt that this new set of factual scenarios, prompted by the expert report but nevertheless hypothetical in nature, would need to take up precious time and money over the next few weeks when the parties would reasonably expect to be preparing for trial on the basis of the allegations and the evidence originally relied upon.
16. The lateness of the applications to amend would in my judgment be conclusive in itself. There is an additional reason, however, in that it appears from the evidence so far that Standard Life would say that it would not have been prepared to enter into the alternative hypothetical lease now put forward on behalf of the Secretary of State. It is a proposition that would be difficult to challenge as a matter of evidence. It is hard to understand, therefore, how the Secretary of State would be prejudiced at all if permission for the amendments is refused, since they have no visible means of support.
17. The final point to note on the subject of amendment is that the Secretary of State also sought to reformulate the claim for an account of profits (this being the third attempt). Mr Onions invited me to set out the reasons for not permitting the latest draft to go forward. As Mr Brook Smith recognised at the hearing, any such claim would need to be formulated by reference to net profit and also confined to any such loss attributable to the wrongdoing alleged. That would require a further re-draft. I turn now to the application to admit new evidence.
18. To an extent, that application is also disposed of by its lateness and by my refusal to grant permission for the amendments. Nevertheless, the most recent exercise, conducted in the round of written submissions between 4 and 10 May, has taken the form of a detailed analysis (which I need not replicate) of Parts 7 to 9 of the report served on the Secretary of State's behalf from Mr Hull, his expert. The report's only legitimate function, in accordance with the order of King J, was to provide evidence as to rental valuation. That went to pleaded issues. There is no objection to its contents in so far as it covered that topic.
19. What was challenged, however, was its coverage of impermissible material, specifically the content of Parts 7 to 9 which contained unpleaded criticisms of Mr Smith and dealt with the alternative unpleaded case which the Secretary of State now wishes to advance. They are headed, respectively, "The Renegotiation", "Calculation of Interest" and "Alternative Scenario". There is also introduced a new expert called Dr Neill Morrison with a different expertise, and one for which permission had never been given (i.e. that of quantity surveying). He put forward a case on the likely cost of future hypothetical refurbishments. This was introduced by way of a Trojan horse in one of Mr Hull's appendices. For obvious reasons, the other parties had not focussed on any of these points in their witness statements or expert reports.
20. After I had announced my decision on 1 May, the fall-back position adopted on behalf of the Secretary of State was to seek to retain elements of Parts 7 to 9 of Mr Hull's report on the basis that actually they were relevant to issues pleaded already, and in respect of which King J's order permitted the Secretary of State to introduce expert evidence. To a limited extent, this is accepted; that is to say, in respect of paragraphs 7.24 and 7.24.1-4, it is acknowledged that there is material going to the issue of rental valuation by reference to market rent in 2002-2003. These passages are introduced under the heading "Subsidiary Issues". Otherwise, it seems to me that the objections to Parts 7 to 9 raised by Mr Onions and Mr Blackwood are well founded, partly because they deal with issues which are unpleaded and partly because, in any event, no permission was given by the order of King J to range so widely in subject-matter.
21. What is now required is for the Secretary of State to serve an amended report from Mr Hull in the light of the exclusion of Parts 7 to 9 and, consequentially, of any cross-references which the report contains to those passages.
22. I hope that the parties are now, at least, free to concentrate their energies upon preparing for trial.