Samba Financial Group v Byers

The Court of Appeal allowed Samba's appeal against Birss J's order permitting the respondents to re-amend their Particulars of Claim to plead a constructive trust claim after the expiry of the primary limitation period. The court held that CPR r.17.4(2) and s.35 Limitation Act 1980 permit relation-back only where the new claim arises out of the same or substantially the same facts as are already in issue in the existing proceedings. The judge below had not carried out the necessary evaluative analysis and erred in treating narrow assertions of Samba's good faith as sufficient to show that the wide-ranging factual allegations in the new pleading were already in issue.

The appeal was allowed because the re-amended constructive trust claim relied upon extensive new factual allegations that would have obliged Samba to investigate matters beyond the ambit of facts it could reasonably be assumed to have investigated in defending the original s.127 claim; accordingly the re-amendment should not have benefitted from relation back.

This was an appeal from Birss J's order of 6 December 2017 granting the respondents (the liquidators of Saad Investments Company Limited and SICL) permission to re-amend their Particulars of Claim in proceedings originally issued in 2013. The original claim sought a remedy under section 127 of the Insolvency Act 1986 in respect of a September 2009 transfer of Saudi bank shares by Mr Al-Sanea to Samba. The Supreme Court held that the transfer was not a "disposition" for the purposes of s.127 and remitted the case to the High Court to allow the respondents an opportunity to re-plead.

The respondents applied to re-amend to plead a constructive trust/knowing receipt claim against Samba alleging extensive factual matters said to show that Samba knew or ought to have known that the shares were held by Mr Al-Sanea on trust for SICL. Samba opposed the re-amendment on forum non conveniens and abuse of process grounds and principally on limitation grounds, arguing that allowing the re-amendment would defeat its accrued limitation defence by relation back to the 2013 issue date.

The Court of Appeal confined the live issue to whether the newly pleaded constructive trust claim arose out of the "same or substantially the same facts" as were already in issue on the earlier s.127 claim so as to satisfy the conditions in s.35 Limitation Act 1980 and CPR r.17.4(2). The court reviewed authorities (including Goode v Martin; Ballinger v Mercer; Paragon Finance; Mastercard v Deutsche Bahn; and Papadimitriou v Crédit Agricole) and emphasised that the statutory rule requires a threshold evaluative inquiry into whether the defendant would, by the time the limitation period expired, have reasonably been put to investigate the facts now relied on.

Key issues the court framed and decided:

• (i) Whether the facts "already in issue" are to be determined solely by the pleadings. The court held that, while pleadings will usually determine what is in issue, in exceptional cases it may be permissible to look beyond them, but such cases are rare.
• (ii) Whether Birss J carried out the required evaluative assessment under the statutory test. The Court of Appeal held he did not adequately evaluate the relationship between the narrow earlier assertions of Samba's good faith and the extensive new factual case advanced by the respondents.
• (iii) Whether the new constructive trust claim arose out of the same or substantially the same facts as were already in issue. The court held it did not: the re-amendment introduced numerous new allegations of facts and inferences which would require investigation beyond what Samba could reasonably be assumed to have investigated.

Result: permission to re-amend was quashed and the 2013 action was to be dismissed, the court concluding it was not right to leave on foot an action bound to fail. The decision explains the proper application of s.35 Limitation Act 1980 and CPR r.17.4(2), and stresses that relation back is not to be given where the new cause of action depends on extensive new factual material not already in issue.

The appeal was allowed. The Court of Appeal quashed Birss J's order permitting re-amendment because the judge did not perform the required evaluative inquiry under s.35 Limitation Act 1980 and CPR r.17.4(2) and erred in treating limited earlier assertions of Samba's good faith as rendering the expansive factual allegations of the new constructive trust claim "already in issue". The new claim did not arise out of the same or substantially the same facts and relation back did not apply.

Proceedings in the High Court (Chancery) (Birss J) HC/2013/000606 and HC/2017/001598; Birss J gave permission to re-amend on 6 December 2017 (see [2017] EWHC 3106 (Ch) referred to in the judgment). The matter had previously been before the Court of Appeal and then the Supreme Court on related jurisdictional and substantive issues (the Supreme Court held the transfer was not a "disposition" under s.127 and remitted the matter). The present appeal to the Court of Appeal resulted in quashing the re-amendment and dismissal of the 2013 action.