AMENDING PLEADINGS: HAS THE LIMITATION PERIOD EXPIRED? WHERE DOES THE BURDEN OF PROOF LIE?

The Court of Appeal decision today in Mercer -v- Ballinger [2014] EWCA Civ 996 may appear to be an issue of esoteric civil procedure.  However the decision is an important one with far-ranging  practical consequences for a party seeking to amend its statements of case where there is an issue as to whether the limitation period has, in fact, expired.  It is important that anyone seeking to amend their pleadings in these statements of case is aware of the case, the rules, and the practical consequences.

THE ISSUE: AMENDING AFTER THE EXPIRY OF THE LIMITATION PERIOD

The court can grant permission to a party to amend its statement of case under CPR 17.3.   However, after the expiry of a limitation period, the power to permit amendment is limited by CPR 17.4.

Amendments to statements of case after the end of a relevant limitation period

17.4

(1) This rule applies where –

(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and

(b) a period of limitation has expired under –

(i) the Limitation Act 19801;

(ii) the Foreign Limitation Periods Act 19842; or

(iii) any other enactment which allows such an amendment, or under which such an amendment is allowed.

(2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.

(3) 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.

(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings started or has since acquired.

THE EFFECT OF AMENDMENT

If the court gives permission then the pleading is deemed to be effective from the date of issue.

WHO BEARS THE BURDEN OF PROOF OF SHOWING THAT THE LIMITATION PERIOD HAS EXPIRED

There was an issue in the case as to whether the limitation period had expired and, consequently, whether CPR 17.4 applied.   The question was who bore the burden of proof at the application stage.

“24. It was common ground that the question for the judge was whether the Appellants had
a reasonably arguable case on limitation. The debate resolved to the question on
whom rests the burden of persuasion.
25. It must be borne in mind that the context of the debate is the doctrine of relation back
introduced by s.35(1) of the Limitation Act 1980. If a new claim is permitted by way
of amendment it is treated as having been made by way of a separate action
commenced on the same date as the original action. So where an amendment is
permitted to introduce a new claim which was in time at the date of commencement
of the action but arguably out of time on the date on which permission to amend is
granted, the defendant is thereafter precluded from reliance at trial on the arguable
limitation defence.
26. The situation in which the court finds itself on an application to introduce a new claim
which does not arise out of the same or substantially the same facts as are already in
issue in the original action is summarised by Jackson LJ in Chandra v Brooke North
[2014] TCLR 1 at paragraphs 65-67 of his judgment:-
“65. If a claimant seeks to raise a new claim by amendment and
the defendant objects that it is barred by limitation, the court
must decide how to proceed. There are two options. First the
court could deal with the matter as a conventional amendment
application. Alternatively, the court could direct that the
question of limitation be determined as a preliminary issue.
66. If, as is usually the case, the court adopts the first option, it
will not descend into factual issues which are seriously in
dispute. The court will limit itself to considering whether the
defendant has a “reasonably arguable case on limitation”: see
WDA at 1425 H. If so, the court will refuse the claimant’s
application. If not, the court will have a discretion to allow the
amendment if it sees fit in all the circumstances.
67. If the court refuses permission to amend, the claimant’s
remedy will be to issue separate proceedings in respect of the
new claim. The defendant can plead its limitation defence.
The limitation issue will then be determined at trial and the
defendant will not be prejudiced by the operation of relation
back under section 35 (1) of the 1980 Act.”
27. What that passage does not spell out is upon whom lies the burden of persuasion.
Working from first principles however it is plain that, provided the defendant can
show a prima facie defence of limitation, the burden must be on the claimant to show
that the defence is not in fact reasonably arguable. The claimant is after all in effect
inviting the court to make a summary determination that the defence of limitation is
unavailable. If the availability of the defence of limitation depends upon the
resolution of factual issues which are seriously in dispute, it cannot be determined
summarily but must go to trial. Hence it can only be appropriate at the interlocutory 
stage to deprive a defendant of a prima facie defence of limitation if the claimant can
demonstrate that the defence is not reasonably arguable.

THE PRACTICAL RESULT OF THIS

  • If the defendant can raise a prima facie defence of limitation then the judge should only conclude that the proposed amendments are not outside the limitation if the claimant can show that the defence is not reasonably arguable.
  • The claimant is not precluded from issuing a further claim. “That does not preclude the Respondents from issuing separate proceedings in which they will seek to prove that the claims are not in fact time-barred, as they have indeed done.”

NOTE THE DIFFICULTY (AND THE PRACTICAL SOLUTION – ISSUE A SECOND SET OF PROCEEDINGS VERY PROMPTLY).

A litigator is here faced with a dilemma.  If an application to amend is made the court may not allow amendment if there is an arguable case that the action is outside the limitation period.  In these circumstances it would be imprudent to delay issuing a separate set of proceeding in relation to the new matters. The worse thing to do will be to make an application to amend; have that application refused and then find that the limitation period has expired whilst the application was pending.

ARISING OUT OF THE SAME OR SUBSTANTIALLY THE SAME FACTS

If the limitation period has expired then permission to amend can only be granted if the amendments arise out the “same or substantially the same” facts. This definition was also considered by the Court.

“33. Although he did not refer to authority, the judge correctly formulated the relevant
question in this manner in the light of the decision of this court in Goode v Martin
[2002] 1 All ER 620. That question derives from s.35(5) of the Limitation Act 1980,
the language of which, as pointed out in that case, is not accurately or faithfully
reproduced in CPR 17.4.
34. Helpful guidance as to the proper approach to the resolution of this question was
given by Colman J in BP plc v Aon Ltd [2006] 1 Lloyd’s Rep 549 where, at page 558,
he said this:-
“52.At first instance in Goode v. Martin [2001] 3 All ER 562 I
considered the purpose of Section 35(5) in the following
passage:
“Whether one factual basis is ‘substantially the same’ as
another factual basis obviously involves a value judgment,
but the relevant criteria must clearly have regard to the main
purpose for which the qualification to the power to give
permission to amend is introduced. That purpose is to avoid
placing a defendant in the position where if the amendment
is allowed he will be obliged after expiration of the
limitation period to investigate facts and obtain evidence of
matters which are completely outside the ambit of, and
unrelated to those facts which he could reasonably be
assumed to have investigated for the purpose of defending
the unamended claim.”
53. In Lloyd’s Bank plc v. Rogers [1997] TLR 154 Hobhouse
LJ. said of Section 35:
“The policy of the section was that, if factual issues were in
any event going to be litigated between the parties, the
parties should be able to rely upon any cause of action which
substantially arises from those facts.”

54. The substance of the purpose of the exception in subsection
(5) is thus based on the assumption that the party against whom
the proposed amendment is directed will not be prejudiced
because that party will, for the purposes of the pre-existing
matters [in] issue, already have had to investigate the same or
substantially the same facts.”
35. In the Welsh Development Agency case Glidewell LJ said, in an often quoted passage
at page 1418, that whether or not a new cause of action arises out of substantially the
same facts as those already pleaded is substantially a matter of impression.
36. Less well-known perhaps is the cautionary note added by Millett LJ in Paragon
Finance, where at page 418 he said, after citing the passage from Glidewell LJ to
which I have just referred:-
“In borderline cases this may be so. In others it must be a
question of analysis.”
37. I would also point out, as did Briggs LJ in the course of the argument, that “the same
or substantially the same” is not synonymous with “similar”. The word ‘similar’ is
often used in this context, but it should not be regarded as anything more than a
convenient shorthand. It may serve to divert attention from the appropriate enquiry.”

THE FINDING OF THE APPEAL COURT:THESE WERE NOT THE SAME FACTS OR SIMILAR

The Court of Appeal found that the judge reached the wrong conclusion on the issue of whether the amendments arose out of the same or substantially the same facts.  They did not and permission to amend should not be granted.

THE PRACTICAL CONSEQUENCES OF THIS

I have tried to avoid referring to the complex facts of the Mercer case. The significant element here is that:

1. Where a limitation issue is raised on an application for permission to amend the burden of proof in establishing that the case is not statute barred lies on the applicant.

2. If the matter has limitation issues it would be unwise to delay issuing separate proceedings pending an application.

3. The issue of whether the amendments arise out of “the same or substantially” the same facts is not the same as “similar”.

4. The purpose of the rule is clear  ( “That purpose is to avoid
placing a defendant in the position where if the amendment
is allowed he will be obliged after expiration of the
limitation period to investigate facts and obtain evidence of
matters which are completely outside the ambit of, and
unrelated to those facts which he could reasonably be
assumed to have investigated for the purpose of defending
the unamended claim.” )

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