Hendry v Chartsearch Ltd

A court has a general discretion to allow amendment of pleadings, including to plead matters arising after the writ. That discretion should be exercised according to the justice of the case and is not confined by rigid rules requiring an existing cause of action at the date of issue.

A contractual clause requiring prior consent to assignment, with consent not to be unreasonably withheld, may continue after the trading relationship has ended. Loss of a debtor’s statutory security-for-costs protection may constitute a reasonable ground for refusing consent. The majority held that consent must nevertheless be sought before assignment, or the court must declare that refusal was unreasonable.

The plaintiff, chairman and shareholder of Interface Data Centres Ltd, sued Chartsearch Ltd as assignee of Interface’s contractual and tort claims. The Bristol Mercantile Court struck out claims under the Samms and Namebank Agreements, refused leave to plead a post-writ assignment under an exploitation agreement, and allowed the claim for inducing breaches of employment contracts to continue.

The plaintiff appealed. Chartsearch cross-appealed against the surviving tort claim. The issues concerned amendment after issue of the writ, the effect of contractual restrictions on assignment, the relevance of consent sought after assignment, joinder of the assignor, and whether the tort claim was liable to strike out.

Disposition. The appeal was allowed in respect of the exploitation agreement and leave was granted to re-amend the statement of claim. The appeal otherwise failed. The cross-appeal was dismissed.

1. Under Order 19 rule 9 and Order 20 rule 5(1), the court has a general discretion to allow a pleading to include matters arising after the writ. The discretion is not restricted by a hard-and-fast rule that the claimant must have had a cause of action at the date of issue. Vax Appliances Ltd v Hoover Plc [1990] RPC 656 was applied, while the approach derived from Eshelby v Federated European Bank [1922] 1 KB 254 was not followed and Roban Jig and Tool Co Ltd v Elkadart Ltd [1979] FSR 130 was distinguished.
2. The exploitation-agreement claims had already been pleaded. The proposed amendment merely explained why the plaintiff claimed entitlement to sue. It introduced no new cause of action and caused no prejudice or embarrassment. Leave was therefore granted, subject to the agreed limitation defence.
3. An equitable assignee need not join the assignor as a party in order to sue. Joinder is established practice to bind the assignor and prevent double recovery, but the assignee has sufficient interest to seek a declaration concerning the assignment. A later refusal of consent did not cure an earlier assignment made without the stipulated prior consent; at most, it was evidence of the debtor’s attitude.
4. The qualified restriction on assignment continued after the commercial relationship ended, subject to the true construction of the contract. The changed relationship could alter the circumstances relevant to reasonableness, including the debtor’s legitimate interest in the identity of the opposing litigant.
5. Following Norglen Ltd v Reeds Rains Prudential Ltd [1997] 3 WLR 1177, assignment to an individual was not unlawful merely because the individual might obtain legal aid or avoid security for costs. Legal aid alone would ordinarily be an insufficient reason to refuse consent. The position was different where refusal protected the debtor’s statutory right under section 726 of the Companies Act 1985 to seek security for costs. That was a reasonable ground for refusal on these facts.
6. Henry LJ and Millett LJ formed the majority on the further point that prior consent must be sought before assignment. An assignment could take effect only after written consent or a court declaration that consent had been unreasonably refused. Evans LJ left that question open because the refusal was, in any event, reasonable.

There was no order as to the costs of the appeal or cross-appeal. Costs below were referred to the judge, with legal-aid taxation of the plaintiff’s costs.

• Bristol Mercantile Court: On 30 January 1995, His Honour Judge Raymond Jack QC struck out the claims under the Samms and Namebank Agreements, refused leave to plead the post-writ assignment under the exploitation agreement, and allowed the inducing-breach claim to continue.
• Court of Appeal (Civil Division): The appeal was allowed concerning the exploitation agreement, otherwise dismissed, and the cross-appeal was dismissed.