Lombard North Central Plc v Automobile World (UK) Ltd

A party must ordinarily set out in its statements of case the factual case it intends to advance at trial. This requirement enables each side to know and prepare for the case it must meet. It applies equally to litigants in person.

A judge has no general duty to ask whether a litigant in person wishes to introduce an unpleaded case. A court may determine an unpleaded issue where fairness plainly requires it, including where both parties have attended ready to address the issue, but such cases are rare.

The party in breach bears the burden of proving a failure to mitigate. The innocent party need only act reasonably in the circumstances.

A finance company supplied a rare Mercedes-Benz Pullman limousine to a motor business under a hire-purchase agreement. After payment defaults, the finance company terminated the agreement, repossessed the vehicle and sold it. It obtained judgment for the contractual balance in the Leeds Mercantile Court.

The motor business appealed on two grounds. First, it contended that the trial judge had wrongly prevented it from advancing an unpleaded case that the vehicle had been misdescribed as manufactured in 2004. Secondly, it alleged that the finance company had failed to mitigate its loss because it sold the specialist vehicle inadequately and at an undervalue. Success on either ground could lead only to a retrial.

1. The appeal was dismissed on both grounds. Rix LJ gave the leading judgment. Rimer LJ delivered a concurring judgment, and Patten LJ agreed with both judgments.

2. The trial judge committed no substantial procedural error or injustice by refusing to entertain the misdescription case. The defendant knew that the point had not been pleaded and that permission to amend was required. It nevertheless neither amended its defence nor clearly raised the matter at the beginning of trial. By the time it advanced the point in closing submissions, the evidence had closed and it was too late to introduce the case.

3. Even an application made at the start of trial was unlikely to have succeeded without an adjournment at the defendant’s expense. The proposed case raised unresolved questions concerning reliance, the supplier’s role, contractual construction, sale by description, exclusion clauses, disclosure, evidence and the absence of a counterclaim.

4. Rimer LJ emphasised that statements of case ordinarily must disclose the factual case to be advanced. The rule serves substantive trial fairness by giving each party advance notice of the case it must meet. It applies to litigants in person as well as lawyers. A judge has no duty to ask whether a litigant in person wishes to amend the pleadings to introduce an additional case. The judge must not step into the arena and formulate that case.

5. The approach is not inflexible. A court may need to investigate an unpleaded issue where refusing to do so would plainly be unjust, including where both parties have attended ready to deal with it despite its omission from the pleadings. Such cases are likely to be rare, and the present case did not qualify.

6. The mitigation ground also failed. The party in breach bore the burden of proving failure to mitigate, while the innocent party needed only to act reasonably. The trial judge was entitled to accept the evidence of the person responsible for resale and to find that he had carefully obtained the best available price. The defendant supplied no independent expert valuation evidence, and evidence of asking prices did not establish achievable sale values. The appellate court therefore could not fault the judge’s assessment.

1. Court of Appeal (Civil Division): Permission to appeal was extended to include the misdescription ground. The appeal on that ground and the mitigation ground was dismissed.

2. Leeds Mercantile Court: HHJ Langan QC gave judgment for the claimant in the sum of £223,891.47. He refused to entertain the unpleaded misdescription case and rejected the allegation that the claimant had failed to mitigate its loss.

3. High Court appeal from summary judgment: HHJ Behrens allowed an earlier appeal and gave the defendant unconditional permission to defend, while leaving any amendment introducing a misdescription case to a later application.

4. Leeds County Court: Deputy District Judge Caswell granted summary judgment except on the issue of mitigation. That order was subsequently displaced by HHJ Behrens.