Clyde & Co Llp & Anor v New Look Interiors of Marlow Ltd & Anor

Permission to amend pleadings should be refused where the proposed case is speculative, insufficiently particularised and dependent on disclosure to identify the essential facts. A claimant cannot reverse the ordinary burden of proof by pleading a broad theory based on a small sample of transactions and hoping that disclosure will establish the case. On an appeal from a case-management decision, the appellate court ordinarily intervenes only where the first-instance judge exceeded the generous ambit of reasonable disagreement. That protection does not preserve an order permitting an intolerable and unfocused burden to be imposed on the opposing party. A restitutionary claim for money paid under mistake will generally not lie where payment discharged a debt, subject to a qualification where the mistake was induced by the payee; that qualification does not ordinarily extend to a mistake merely about the reasonableness of the price.

The claimants, a firm of solicitors and its associated firm, sued their former contractors and the second defendant for approximately £1.7 million, alleging systematic overcharging over several years. They sought permission to amend their particulars to rely principally on implied contractual terms, negligent misstatement, mistake and a reduced fraud claim. The proposed case was based on a small sample of invoices and anticipated disclosure of the defendants’ records to establish the wider case.

Master Foster permitted the amendments on 25 July 2008. The defendants appealed, contending that the proposed claims were speculative, inadequately particularised and lacking a realistic prospect of success, and that the Master had failed to apply relevant principles governing contractual implication and mistake.

1. Appeal allowed. The Master had erred in exercising his discretion to permit the proposed amendments.
2. On an appeal from a case-management decision, the court should intervene only where the first-instance decision exceeded the generous ambit within which reasonable disagreement is possible, as explained in Tanfern Ltd v Cameron MacDonald [2000] 1 WLR 1311. That threshold did not prevent intervention here because the proposed pleading was fundamentally speculative.
3. A pleading verified by a statement of truth must have an evidential foundation. The claimants could not know that systematic overcharging, dishonest or negligent misrepresentation, or the proposed implied terms existed, since they intended to discover the case only through disclosure. The approach effectively reversed the burden of proof and imposed an intolerable burden of expense, uncertainty and inconvenience on the defendants. The principles discussed in Clarke v Marlborough Fine Art (London) Ltd [2002] EWHC 11 (Ch) supported that conclusion.
4. The proposed implied terms were not sufficiently supported by pleaded facts and, in the case of contracts formed by accepting quotations, were difficult to reconcile with fixed prices and the requirements of necessity, obviousness and consistency with express terms. The pleadings were also insufficiently particularised under CPR 16.4(1).
5. The mistake claim could not be maintained in relation to payments which discharged debts owed to the payee. Although Barclays Bank Ltd v W J Simms Son & Cooke [1980] QB 677 recognised a qualification where the payee induced the payer’s mistake, that qualification did not extend to an alleged mistake merely as to the reasonableness of the price.
6. The court declined to exercise the discretion afresh in the claimants’ favour, but observed that they could have a further opportunity to plead a more focused and particularised case.

• Master Foster: permission to amend the particulars of claim was granted on 25 July 2008.
• High Court (Queen's Bench Division): permission to appeal was granted by Sweeney J on 6 November 2008. The appeal was allowed and the proposed amendments were not permitted to stand.