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31 Jan 2022

When can a claim be amended outside the limitation period? (Mulalley & Co v Martlet Homes)

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The Court of Appeal has clarified when a claim can be amended outside of the limitation period to address issues raised in a defence. The courts have a discretion to permit new claims (via amended particulars of claim) after the expiry of the limitation period if they arise out of the same, or substantially the same, facts already in issue in the existing claim. However, the scope of the 'substantially the same facts' test and its application to facts raised in the defence has not been clear. Adopting a broad interpretation of the relevant provisions, the Court of Appeal held that the test applies equally to facts raised in both the claim and the defence. It also confirmed that while there must be a sufficient overlap between facts raised in the defence and those relied upon in the new claim, the overlap does not have to be total for permission to be granted.

What are the practical implications of this case?

The key message from this case is to ensure that any possible alternative pleadings are made at the outset, particularly when the expiry of limitation is imminent. Where a late amendment outside the limitation period cannot be avoided, this judgment clarifies that facts and matters raised in a defence can provide the same springboard for amendment as facts and matters raised in the original Particulars of Claim. Further, the following points arise:

  • Consider whether the amendment is a new claim under CPR 17.4 (which incorporates S35(4) of the Limitation Act 1980) or not. CPR 17.4 provides that a new claim (via amendment to an existing claim) may be permitted if arising from the same or substantially the same facts of an existing claim.
  • Previous authorities on the question of what is 'substantially the same' are not a substitute for applying the statutory test to the facts.
  • 'Substantially the same' is not synonymous with 'similar'. While the rule provides a degree of flexibility, that flexibility is limited.
  • Goode v Martin [2001] EWCA Civ 1899 established that CPR 17.4 applies to facts set out in a defence as well as in the original Particulars of Claim. Goode v Martin is not, however, authority for the proposition that where a new claim derives from facts set out in the defence, it can only be based on facts set out in the defence. This 'ultra-restrictive' approach is incorrect. The claim may be permitted if arising from the same or substantially the same facts set out either in the claim or the defence.
  • Even if the new claim falls within CPR 17.4, permission is still discretionary. The nature and extent of any further investigation the defendant may be obliged to undertake as a result of permission being granted will be a relevant factor for the exercise of that discretion.

What was the background?

Mulalley contracted with Martlet Homes to design and undertake refurbishment work (including cladding) to a number of high-rise tower blocks. Practical completion of the work occurred in 2008. Following the fire at Grenfell Tower in June 2017, investigations were carried out on the cladding. In 2019, right at the end of the limitation period, Martlet issued and served proceedings against Mulalley seeking damages for alleged negligence and breach of contract. Specifically, the claim alleged failure to meet the required standard of design and workmanship in relation to the cladding of the external walls utilising EPS (expanded polystyrene) insulation.

In its defence, Mulalley denied that the alleged breaches had caused any loss. It asserted that Martlet would have been required, following the tragic fire in 2017, to have replaced the EPS insulation in any event. Further, it relied upon a certificate which it argued demonstrated that the building complied with the relevant building regulations in place at the time of the contract.

Martlet applied for permission to amend its claim after the expiry of the limitation period to plead that the selection of the EPS cladding was itself a breach of contract, alleging that it did not comply with the relevant building regulations in place at the time of the contract.

At first instance, the court ruled that Martlet's proposed amendment did constitute a new claim but that it arose out of substantially the same facts and permission was therefore granted. Mulalley appealed the finding that the new claim arose out of the same facts and Martlet cross-appealed the finding that the claim was in fact a new claim.

What did the court decide?

Was this a new claim?

The Court of Appeal concluded that the proposed amendment was a new claim pursuant to CPR 17.4. While there was a 'reasonably strong case' for asserting it was not a new cause of action, on a factual analysis 3 main factors pointed towards the contrary:

  1. The claim was pleaded as a contingent claim. Without the amendment, were Mulalley's defence on causation to succeed, the claim would be extinguished.
  2. On a practical analysis, the original claim alleged breaches of contract in the implementation of design choices. The new claim, by contrast, alleged failures in the design choices themselves.
  3. Overall, the nature, scope and extent of the amended claim was sufficiently different from the existing claim to render it a new claim.

Did the claim derive from the same or substantially the same facts already in issue?

The Court of Appeal unanimously agreed that the claim derived from substantially the same facts. Indeed, it held that the new claim arguably derived from substantially the same facts set out in the Particulars of Claim before even considering the defence. On an analysis of the defence, the court held the new claim 'flows naturally' from the way in which Mulalley pleaded its defence. Having put in issue compliance with the relevant building regulations in its defence, the Court of Appeal held it would be 'invidious' for the defendant to escape the consequences of an adverse finding by using limitation as a shield.

Further, while acknowledging that the amendment might necessitate a further element of investigation beyond that required by the original Particulars of Claim, the court held this would be supplemental to the existing investigation, and could not of itself be a bar to the proposed amendment.

This article was first published on Lexis®PSL on 27 January 2022.
 

Case details

  • Court:
  • Judge: Coulson, Baker and Andrews LJJ
  • Date of judgment: 24/1/2022
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