HM Revenue & Customs v Begum & Ors

After a limitation period has expired, an amendment adding or substituting a cause of action may be allowed only if the new cause arises from the same or substantially the same facts as an existing claim. A cause of action is defined by its essential material facts, selected at a high level of abstraction, rather than by its legal label or remedy.

Further information may clarify facts already pleaded, but cannot supply an essential element omitted from the statement of case. Even where the limitation condition is satisfied, permission remains discretionary. The court must consider prospects of success, delay, prejudice, the loss of a limitation defence and the efficient administration of justice.

HMRC brought two actions arising from alleged missing trader intra-community VAT fraud. It claimed damages for conspiracy and relief under Insolvency Act 1986, section 423, concerning payments totalling £10 million by Cellcom Limited to a company associated with the Bibi Settlement.

The actions began in 2002 and 2007. They had been affected by related criminal proceedings, stays, the death of an alleged conspirator and successive attempts to reformulate the pleadings. HMRC applied to amend both particulars of claim after the relevant six-year limitation periods had expired. The principal questions were whether the amendments introduced new causes of action, whether any new causes arose from the same or substantially the same facts, and whether permission should be granted as a matter of discretion.

1. Applications granted, subject to a limitation on the 2002 conspiracy claim. HMRC was permitted to amend the particulars of claim in both actions. In the 2002 action, however, the permissible conspiracy case was confined to the extent identified in the judgment. HMRC was required to make that limitation clear in its pleading.

2. For section 35 of the Limitation Act 1980 and CPR 17.4, a claim is new only if it adds or substitutes a new cause of action. The remedy claimed and the cause of action are distinct. The cause of action consists of the essential material facts which must be proved to obtain the remedy. The court must compare the essential factual elements of the existing and proposed pleadings at the highest appropriate level of abstraction.

3. Further information may be examined to understand and particularise an existing pleaded case. It cannot supply an essential element of a cause of action omitted from the particulars of claim. It may nevertheless be considered when deciding whether a proposed new cause arises from facts already in issue, provided that the information was properly within the scope of further information.

4. The 2002 amendments added conspiracy claims against Cellcom and others. Claims based on companies being controlled by the alleged individual conspirators arose from substantially the same facts because the controllers’ knowledge could be attributed to those companies. A case based on independent corporate knowledge, intention and dishonesty introduced substantially different facts. The claim involving the brokers arose from substantially the same facts because their knowledge and intentions would already require investigation. The 2007 conspiracy amendments introduced no new claim; alternatively, they arose from substantially the same facts.

5. A conspiracy whose predominant purpose is to injure may employ lawful or unlawful means. For unlawful-means conspiracy, criminal offences may constitute unlawful means without being independently actionable by the claimant. A genuine belief in lawfulness may operate as a defence in some circumstances, but whether the claimant or defendant bears the legal burden remained open. It was at least arguable that the alleged VAT offences and cheating caused HMRC’s pleaded loss.

6. The section 423 amendments generally refined existing claims and introduced no new cause of action. The new claim against Ward Enterprises Limited in the 2007 action arose entirely from facts already pleaded. There was a real prospect that Ward’s alleged connection with the English fraud, Cellcom and the settlement would make it just and proper to grant relief despite its foreign incorporation and banking arrangements.

7. Permission remained discretionary. The court considered the defendants’ lost limitation defence, HMRC’s delay, the death of a principal alleged conspirator, evidential prejudice, prospects of success and pleading clarity. The central case had remained substantially unchanged, instructions and extensive documents had been obtained during the deceased’s lifetime, and the trial judge could allow for evidential prejudice. The balance favoured amendment.

This was a first-instance determination of applications to amend two civil actions commenced in 2002 and 2007. The 2002 action had been stayed during related criminal proceedings and again following the death of Mr Uddin. Both actions were transferred to the Chancery Division in 2007. This court granted HMRC permission to amend both particulars of claim, subject to a restriction on the conspiracy allegations permitted in the 2002 action.