Mandrake Holdings Ltd. v Mandrake Associates Ltd.

Binding authority must be applied by a first-instance judge even where the law is controversial and may be reconsidered by a higher court. Where that authority prevents a proposed claim from succeeding, the Court of Appeal may preserve the proceedings so that the claim can later be pursued if the law changes. The court should balance the applicant’s hardship against specific prejudice to the respondent, including delay and possible loss of a trial date. In this case, the appeal was dismissed because the existing law remained binding, but the proceedings were kept open for a possible later phase.

The claimants sought declarations and rectification concerning a deed under which the defendant had covenanted to meet pension mis-selling liabilities. They sought to amend their particulars of claim to add a substantial consequential-loss claim based on the alleged destruction of an opportunity to sell the business. Lightman J refused permission to amend, holding that the claim was legally unavailable under binding authority and would in any event be refused in the exercise of his discretion because of delay and the likely loss of the trial date. The Court of Appeal considered whether the appeal should be dismissed while preserving the possibility of further proceedings if the House of Lords later changed the law.

Rix LJ gave the leading judgment. Nourse LJ and Clarke LJ agreed with it and with the proposed order.

1. Existing law. The court accepted that a claim for consequential damages arising from late or non-payment under a contract of indemnity was barred by the existing law, as expressed in Sprung v Royal Insurance [1999] 1 Lloyd's Rep IR 111. The available remedy was discretionary interest. The Court of Appeal was bound by that authority and could not itself alter the law. Lightman J had therefore been right to refuse the amendment. The merits of whether that law should be changed were not decided.
2. Binding precedent. Following Baird Textiles Holdings Limited v Marks & Spencer plc [2001] 1 All ER 737, a first-instance judge must apply binding authority which makes a pleaded claim legally hopeless, even where the issue is controversial and may be reconsidered by the House of Lords.
3. Case management. The same authority contemplated preserving proceedings while a possible appeal on the underlying law was pursued. The Court of Appeal therefore had a fresh discretion to keep the proceedings open. The existing trial could proceed on the pleaded issues. If the claimants failed, the proceedings would end. If they succeeded, and the House of Lords later granted permission and changed the law, the amended issues could be tried in a further phase.
4. Balancing prejudice. The unexplained delay and potential loss of the trial date were significant considerations. However, there was no specific prejudice to the defendant beyond the inherent inconvenience of continued litigation, and the suggested evidential overlap was not substantial. The hardship of losing a possible £15.5 million claim if the law changed outweighed that inconvenience. The different circumstances in Williams v Home Office (No 2) [1982] 2 All ER 564 did not alter that conclusion.

Permission to appeal was granted, but the appeal against refusal of permission to amend was dismissed. Permission to appeal to the House of Lords was refused. The claimants were ordered to pay the respondent’s costs in the Court of Appeal, summarily assessed at £16,948.

• Court of Appeal (Civil Division): Permission to appeal granted; appeal dismissed; permission to appeal to the House of Lords refused. The existing trial was to proceed, with a possible later phase if the law changed. [2005] EWCA Civ 840.
• High Court, Chancery Division: Lightman J refused permission to amend the particulars of claim on 8 March 2005.