Mandrake Holdings Ltd & Anor v Countrywide Assured Group Ltd

On a renewed application for permission to appeal against refusal of an amendment, sufficient prospect of success may exist where an arguable legal issue has been approached on an arguably mistaken procedural basis. The distinction between striking out an action and permitting an amendment may be material. A proposed preliminary determination of a legal issue, with factual issues stood over, need not necessarily cause loss of an existing trial date. Loss of that date is an important case-management consideration, but it is not automatically decisive. The court must assess the proposed course accurately and weigh delay, prejudice and the litigation as a whole. The court did not determine whether damages for failure to pay an indemnity were legally recoverable.

The claim concerned an indemnity for liabilities arising from the pensions review, including payments in the second phase of that review. The claimants sought declarations, rectification, an account, payment and damages. After approximately 18 months of proceedings, they proposed an amendment claiming loss of an opportunity to expand and increase the value of the relevant business because the indemnity had not been honoured.

Lightman J refused permission to amend on the grounds that the proposed claim was legally unsustainable under existing authority and that the unexplained delay and likely loss of the July 2005 trial date caused serious prejudice. The claimants renewed their application before the Court of Appeal. The immediate issue was whether the matter had sufficient prospects to justify an expedited inter partes hearing, with any substantive appeal to follow.

Mance LJ, with whom Jacob LJ agreed, ordered that the renewed application be adjourned for an expedited inter partes hearing, with the substantive appeal to follow if permission was granted.

1. The court considered that there was a sufficient prospect of success to justify an inter partes hearing. The lower court had arguably treated the amendment application as governed by the same considerations as an application to strike out the whole action. The Court of Appeal regarded that distinction as potentially material. [2001] EWCA Civ 274 concerned a final decision on whether a claim could stand, rather than an application for permission to amend.
2. The lower court had proceeded on the basis that the claimants proposed limiting the trial to foreseeability while excluding causation. The court was told that the proposal was instead to have the legal issue—whether loss caused by failure to pay an indemnity could ever be claimed—determined as a preliminary issue, leaving factual questions including foreseeability, causation and loss to be dealt with later. That course would not necessarily require the July trial to be adjourned.
3. The court recognised the force of the view that, under [1999] 1 Lloyd's Rep IR 111, failure to meet an indemnity was treated as failure to pay damages. It described that decision as controversial and as raising an issue which might warrant reconsideration by the House of Lords. The court did not decide the substantive correctness of that authority.
4. Loss of the trial date could amount to serious prejudice, and the unexplained lateness of the amendment materially weakened the application. However, the court was not persuaded that loss of the date alone necessarily justified refusing an otherwise good claim. The circumstances had to be assessed overall.

The matter was expedited so that the court could consider whether the July trial date could still be maintained if the amendment were permitted.

• Court of Appeal (Civil Division): On 12 May 2005, the renewed application for permission to appeal was adjourned for an expedited inter partes hearing, with the substantive appeal to follow if permission was granted: [2005] EWCA Civ 638.
• High Court (Chancery Division): Lightman J refused permission to amend on 8 March 2005, relying on the alleged legal unrecoverability of the proposed claim and case-management prejudice.