Chandra & Anor v Brooke North (a firm) & Anor

Factual and Procedural Background

This judgment arises from two related solicitors' negligence actions brought by a company, Company A, and its controllers, the Appellants, against a solicitor firm, Company B, and its successor firm. Company A and the Appellants engaged Company B to advise on a hotel development project financed by a bank. The project encountered difficulties, leading to claims that Company B negligently advised on financing arrangements and personal guarantees, which caused financial losses.

The Appellants issued claims in the Queen's Bench Division in 2009, alleging breaches of contract and/or negligence. The claims were broad in Company A's case but narrower in the Appellants' personal claims. Amendments to the particulars of claim were sought in 2011 to introduce new claims relating to alleged negligent advice concerning a deed of warranty and emergency funding arrangements.

The amendments raised the issue of whether new causes of action were introduced after the expiry of limitation periods under the Limitation Act 1980. The initial permission to amend was granted ex parte by a Master but later challenged by the defendants. The matter was heard by a deputy High Court judge in 2012-2013, who refused to set aside the amendments and granted declarations that the claims were brought within time under section 14A of the Limitation Act 1980. The defendants appealed this decision to the Court of Appeal.

Legal Issues Presented

1. Whether the judge was correct to refuse to set aside the claimants' amendments relying on section 14A of the Limitation Act 1980, given that the amendments raised new causes of action after the expiry of the limitation period.
2. Whether the amendments could be justified on the basis that they fell within the scope of the original claim forms.
3. Whether the judge erred in his procedural approach by treating the hearing as a trial of a preliminary limitation issue rather than an application to amend pleadings.
4. Whether the judge had a residual discretion to allow amendments raising new causes of action outside the limitation period and not arising out of similar facts.

Arguments of the Parties

Appellants' Arguments

• The initial order allowing amendments was revoked, so the issue before the judge was a fresh application to amend, not an application to set aside.
• The judge incorrectly treated the hearing as a trial of a preliminary limitation issue rather than a procedural application concerning amendments.
• The amendments raised new causes of action outside the limitation period and therefore should not have been allowed.
• The narrower claim form in the Appellants' personal action did not encompass the new claims, and Company A's claim form was narrowed by its particulars of claim, preventing reliance on the original broad claim forms.
• The re-amendments introducing the successor firm as a defendant were inappropriate as they raised no new cause of action and were statute barred.
• The judge had no residual discretion to allow the amendments given the limitation issues.

Defendants' Arguments

• The amendments were brought within time under section 14A of the Limitation Act 1980, as the claimants only acquired sufficient knowledge to start time running after the judgment in the related Chancery action.
• The original claim forms were broad enough to encompass the new claims, justifying the amendments.
• The initial permission to amend granted by the Master had not been revoked and should stand.
• The defendants denied any fraudulent concealment that would extend limitation periods.
• The judge's approach to the limitation issue was appropriate and the amendments should be allowed.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court of Appeal examined whether the amendments to the particulars of claim introduced new causes of action outside the limitation period and whether they could be justified under section 14A of the Limitation Act 1980 or by falling within the scope of the original claim forms.

The court reviewed the relevant statutory provisions, including sections 14A and 35 of the Limitation Act 1980, and the procedural rules under the former Rules of the Supreme Court and the Civil Procedure Rules. It noted that amendments adding new claims outside limitation periods are generally disallowed unless the new claims arise out of the same or substantially the same facts as the original claims.

Applying the precedent from Welsh Development Agency v Redpath Dorman Long Ltd, the court held that if the defendant has a reasonably arguable limitation defence, amendments should be refused. In this case, the defendants had such a defence because the Appellants arguably had knowledge of the relevant facts before the limitation period expired.

The court found that the judge below erred by effectively conducting a trial on limitation issues rather than treating the matter as a procedural amendment application. The judge made definitive findings on limitation without the appropriate procedural safeguards, which was improper.

Regarding whether the amendments fell within the scope of the original claim forms, the court relied on Steamship Mutual and related authorities, concluding that the claim form alone does not justify amendments if the particulars of claim had narrowed the scope. The Appellants' personal claim form was too narrow to encompass the new claims, and Company A’s particulars of claim limited the scope despite the broad claim form.

The court rejected the judge’s view that a residual discretion existed to allow amendments raising new claims outside limitation periods, citing In re L (children) and emphasizing that such discretion does not extend to circumventing statutory limitation provisions.

Accordingly, the court concluded that the amendments and re-amendments should not have been allowed and any orders permitting them must be set aside.

Holding and Implications

The Court of Appeal ALLOWED the appeal.

The court held that the amendments to the particulars of claim introduced new causes of action outside the limitation period and that the defendants had a properly arguable limitation defence. The amendments could not be justified as falling within the scope of the original claim forms once the particulars of claim were considered. The judge below erred in his procedural approach and in exercising a residual discretion to allow the amendments.

As a result, the orders permitting the amendments and re-amendments, as well as the declarations made by the judge below, were set aside. However, the court upheld the case management decision to transfer the action to the Technology and Construction Court, which was unchallenged and considered sensible.

No broader legal precedent was established beyond the application of existing principles concerning limitation and amendments to pleadings. The decision directly affects the parties by restricting the claimants from pursuing the new claims via amendment in the existing actions.