AMENDING PLEADINGS LATE 1: WANI LLP -v- RBS: A MATTER OF INTEREST?

There have been a few cases recently relating to fairly last minute attempts to amend pleadings. The principles governing applications were considered by Mr Justice Henderson in Wani LLP -v- The Royal Bank of Scotland [2015] EWHC 1181 (Ch). It provides an object lesson on the dangers of leaving applications until “late” in the day.  It also shows that “lateness” is a relative concept.  Much depends on the nature, and consequences, of the proposed amendment.  Further it is another case that raises the question of whether it is wise for solicitors to sign documents containing a statement of truth on behalf of their clients.

KEY POINT

Litigants who leave a substantial application to amend until a late stage cannot reasonably complain, in my judgment, if the undoubted prejudice to them caused by refusal of the application is found to be outweighed by the other factors which the court has to take into account.”

THE CASE

The claimant was suing several banks alleging it was mis-sold an interest rate swap. The matter was listed for a five day trial in June.

Earlier in the proceedings the defendants had put Part 18 questions asking whether it was the claimant’s case that it would have entered into the Swap or other interest rate hedging product but for the alleged breach of duty of the defendants.

THE EARLIER PART 18 REQUEST AND RESPONSE

  1. The claimant’s response to this request (“Response 14”) was as follows:

“14. The Claimant would not have entered into the Swap or any interest rate hedging product but for the breaches of duty by the Bank. The Claimant had not entered into any interest rate hedging product before the matters set out in the [particulars of claim] and furthermore, had never taken out a fixed rate product. The Claimant believed, or it was not made sufficiently clear, that the RBS Swap was a feature of the loan, and that the Swap offered by Mr Ramasawmy was required in order to get the funds. The Claimant was not told that it must have an interest rate hedging product suitable to the Bank, and thus believed it had to be the product that Mr Ramasawmy had recommended. For the avoidance of doubt, the Claimant would not have taken out any interest rate hedging product.”

  1. The claimant thus reiterated, in a response verified by a statement of truth signed by its solicitor, that its case was that it would not have entered into any other interest rate hedging product but for the alleged breaches of duty by the Bank. To the obvious objection that the Hedging Condition obliged the claimant to enter into some form of hedging product, the claimant’s answer (as confirmed by its responses to requests 1 and 2) would no doubt have been that the Bank was estopped from relying upon the Hedging Condition.

THE PROPOSED AMENDMENTS

The proposed amendments involved withdrawal of several aspects of the case but a new allegation of misrepresentation was pleaded.

  1. In place of the abandoned representations previously pleaded, it is now said that the Bank made express and/or implied representations regarding the Swap to the effect that: (i) it provided protection without additional risk; and (ii) if the claimant decided to terminate it ahead of maturity, at a time when base rate was below 6.21%, “potential breakage costs were modest and discretionary”. It is alleged that these representations were false, and that if the risk to the claimant had been properly explained, the claimant would not have entered into the Swap at all.
  2. Finally, it is important to note that paragraph 32 of the original particulars was left unamended. Thus it was still alleged, without qualification, that, properly advised, the claimant would not have entered into the Swap. Nor was any attempt made to amend, or withdraw, Response 14. These points were drawn to the claimant’s attention when the Bank’s solicitors wrote to CYK on 7 April 2015. They argued that the case put forward by the amendments was “incoherent”, because an alleged failure to provide information in relation to caps and their premiums was irrelevant to the claimant’s pleaded case that it would not have entered into any hedging product at all.
  3. In response to this objection, CYK said on 9 April 2015 that Response 14 had been overtaken by paragraph 55 of Mr Wadhwani’s witness statement and Mr Berkeley’s expert evidence that a suitable hedge would have been a cap. Amended Response 14 (see paragraph [30] above) was therefore enclosed. In addition, CYK said permission would be sought to amend paragraph 32 of the particulars of claim, so as to read (with the new text underlined):

“32. Properly advised, the Claimant would not have entered into the Swap but would instead have taken an interest rate cap for the shortest term and at the highest level (and consequently lowest premium) acceptable to the Bank in satisfaction of the [Hedging] Condition. The Claimant therefore claims as damages all payments made under the terms of the Swap together with consequential loss and interest less the cap premium.”

When the claimant’s application notice was issued on the same day, this further amendment to paragraph 32 was included in the draft for which permission was sought, but no application was made then or subsequently for permission to amend Response 14.

THE PRINCIPLES GOVERNING AMENDMENT

  1. As I have already said, there is no real difference between the parties about the legal principles by reference to which the application to amend must be determined. I can therefore deal with them briefly, while emphasising that I have well in mind all the passages in the authorities to which counsel have referred me in their skeleton arguments.
  2. The decision of the Court of Appeal in Swain-Mason is now so well known as not to require detailed citation. I will content myself with the following extract from the leading judgment of Lloyd LJ at [72] to [73]:

“72. As the court said [in the earlier Worldwide case in 1998, unreported], it is always a question of striking a balance … However, I do accept that the court is and should be less ready to allow a very late amendment than it used to be in former times, and that a heavy onus lies on a party seeking to make a very late amendment to justify it, as regards his own position, that of the other parties to the litigation, and that of other litigants in other cases before the court.

73. A point which also seems to me to be highly pertinent is that, if a very late amendment is to be made, it is a matter of obligation on the party amending to put forward an amended text which itself satisfies to the full the requirements of proper pleading. It should not be acceptable for the party to say that deficiencies in the pleading can be made good from the evidence to be adduced in due course, or by way of further information if requested, or as volunteered without any request. The opponent must know from the moment that the amendment is made what is the amended case that he has to meet, with as much clarity and detail as he is entitled to under the rules.”

  1. In Brown v Innovatorone Plc [2011] EWHC 3221 (Comm), unreported, Hamblen J reviewed the relevant principles at [5] to [14], in a passage which has since been widely followed by other judges at first instance, and which Nugee J has recently described as “an admirable, accurate and succinct statement of the principles”: see Bourke and Another v Favre and Another [2015] EWHC 277 (Ch), unreported, at [4]. After referring to relevant statements of principle in Worldwide and Swain-Mason, Hamblen J summarised the position as follows at [14]:

“14. As the authorities make clear, it is a question of striking a fair balance. The factors relevant to doing so cannot be exhaustively listed since much will depend on the facts of each case. However, they are likely to include:

(1) the history as regards the amendment and the explanation as to why it is being made late;

(2) the prejudice which will be caused to the applicant if the amendment is refused;

(3) the prejudice which will be caused to the resisting party if the amendment is allowed;

(4) whether the text of the amendment is satisfactory in terms of clarity and particularity.”

Both sides made detailed submissions to me by reference to these four factors.

  1. There is discussion in some of the cases about a possible distinction between amendments which are very late, and those which are merely late. In several of the leading cases, including Worldwide, Swain-Mason and Innovatorone, the application to amend was made either at the start of, or during, the trial. Does it therefore make any difference if the application is made, as in the present case, some two months before the start of the trial? This question has recently been considered by the Court of Appeal in Hague Plant Ltd v Hague and Others [2014] EWCA Civ 1609, unreported, where judgment was handed down on 11 December 2014. Delivering the leading judgment, Briggs LJ (with whom Christopher Clarke and Sharp LJJ agreed) said at [33] and [34], in a passage with which I respectfully agree:

“33. … Lateness is not an absolute but a relative concept. As Mr Randall put it, a tightly focused, properly explained and fully particularised short amendment in August may not be too late, whereas as lengthy, ill-defined, unfocused and unexplained amendment proffered in the previous March may be too late. It all depends on a careful review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of its consequences in terms of work wasted and consequential work to be done …

34. Lateness, used in this way, is a factor of almost infinitely variable weight, when striking the necessary balance in determining whether or not to permit amendments. The weight to give to this consideration in any particular instance is quintessentially a matter for the case management judge … “

  1. Finally, the Bank submitted, and Mr Hardwick did not dispute, that the instruction of new counsel is not in itself a good explanation for a late amendment. This was a feature of the Worldwide case, where the late amendments had been prompted by a reappraisal by newly-instructed counsel of the merits of the case, but permission to amend was nevertheless refused.
  2. In all applications for permission to amend, whether late or otherwise, it is also necessary to consider the merits of the proposed amendments. If they have no real prospect of success, applying the same test for this purpose as on an application for summary judgment under CPR Part 24, permission to make them must be refused.

AMENDMENT IN THE WANI CASE

The judge held that:

  • The amendments were made very late in the circumstances of this case. The “new” case law which the claimant attempted to rely upon were known since October 2014 and were known when the claimant served its witness evidence.
  • The proposed amendments were not formulated with sufficient particularity and clarity.
  • There would be prejudice to the defendants if the amendments were allowed.
  1. In view of the lateness of the amendments, and the significant failures to formulate them with appropriate clarity and particularity, the Bank would in my judgment be forced to investigate and respond to the claimant’s new case under great pressure, at a time when it should be able to concentrate its time, resources and energy on preparing for the forthcoming trial in June. This is not a burden which any litigant (however well-resourced) should normally be compelled to undertake, and which orderly pre-trial directions are carefully designed to avoid. In the present case, the main directions for disclosure, exchange of witness statements of fact, and expert evidence were given at case management conferences before Master Teverson on 9 April and 2 June 2014. In accordance with those directions, as subsequently varied by agreement in comparatively minor respects, the case in its existing form is now ready for trial at the allocated time.
  2. From the Bank’s perspective, this satisfactory state of affairs would be subject to severe disruption if the amendments were allowed. I accept the Bank’s submission that proper consideration of the new claim would require substantial further investigations to be undertaken, as well as further disclosure and further evidence….
  1. The Bank says, and I agree, that it would be unfair and unrealistic to expect the Bank to deal with all these matters in the few weeks remaining before trial. I am quite unable to accept the claimant’s submission that, if permission to amend were granted, the only consequential steps which would need to be taken would be amendments to the defence and the reply. The claimant’s new case is extensive and far-reaching, quite apart from the fact that it appears to rest on an evidential basis radically different from that which presumably underpinned the claim in its original form. The Bank cannot reasonably be criticised for wishing to subject it to a careful and probing scrutiny. Had the amendments been made six months ago, this might have been possible without undue prejudice to the Bank. At this late stage, however, I am satisfied that the prejudice alleged by the Bank is real and substantial, and should not be dismissed as mere bluff.

PREJUDICE TO THE CLAIMANT

  1. That there will be prejudice to the claimant if permission to amend is refused is obvious, in the sense that the claimant would be unable to pursue its new contentions and would be confined to arguing the case on those of the existing grounds which it has not abandoned. On the other hand, this is not a case where the claimant would be left without any realistic claim to pursue. The Bank would still have to answer the existing claims based on breach of contract and negligence at common law. Furthermore, the prejudice to the claimant is largely of its own making, because (viewed objectively) there is no good reason why the application to amend should not have been made in October or November 2014, when my provisional view is that it would have had reasonable prospects of success. Litigants who leave a substantial application to amend until a late stage cannot reasonably complain, in my judgment, if the undoubted prejudice to them caused by refusal of the application is found to be outweighed by the other factors which the court has to take into account. The present case, in my view, is one of that kind.

RELATED POSTS

There are some posts from the “Mitchell era” which may still be of relevance.

ON SOLICITORS SIGNING DOCUMENTS

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