Rose & Ors v Creativityetc Ltd & Ors

Applications to amend pleadings engage a continuing discretionary assessment under the overriding objective. The court should balance the injustice to the applicant if amendment is refused against prejudice to the opposing party, other litigants and the court if it is allowed. Lateness is relative and depends on the nature of the amendment, the explanation for delay, the strength of the proposed case, and the wasted and additional work involved. A party seeking a late amendment bears a heavy burden, particularly where the amendment risks loss of a trial date. The court may assess the strength of the proposed case without conducting a mini-trial. Absence of particular prejudice to the opponent is relevant but is not decisive. A properly pleaded claim with a real prospect of success may nevertheless be refused where the amendment substantially recasts the case, was deliberately withheld for commercial reasons, and is weak at trial.

The claimants sought permission to re-amend their particulars of claim in proceedings concerning mortgages over property. The existing proceedings sought redemption and alleged bad faith in the exercise of a power of sale. The proposed re-amendment would introduce a substantially different claim alleging fraud, conspiracy, misrepresentation, undue influence, breach of fiduciary duty and forgery, with rescission of the mortgages as the principal relief.

The claimants had previously indicated that they would not challenge the validity of the mortgages. They said that their change of position followed the defendants’ disclosure of the amount said to be secured. The defendants opposed the application on grounds including lateness, inadequate pleading, lack of real prospects, election, estoppel, abuse of process and the burden imposed on the proceedings. The central issue was whether justice required permission for the proposed re-amendment.

1. Relief from procedural default. Relief was granted in respect of late witness statements. Applying Denton v T H White Ltd [2014] EWCA Civ 906, the delay was short, understandable and had not materially affected preparation or determination.
2. Applicable approach to amendment. The court rejected rigid categories dividing amendments into ordinary, late and very late cases. The application lies on a continuum. The court must apply the overriding objective and balance injustice to the applicant against injustice to the opponent, other litigants and the court. As proceedings progress, prejudice, wasted court time and disruption normally increase. The applicant must justify lateness, demonstrate the strength of the new case, and explain why justice requires permission.
3. The proposed pleading had a real prospect of success and was sufficiently comprehensible. The fraud and forgery allegations were weak and faced substantial obstacles, but were not fanciful. The court could examine their apparent strength without conducting a mini-trial.
4. The defendants’ arguments concerning status, a suite of documents, res judicata, cause of action estoppel and abuse of process did not make the proposed claim incapable of success. Whether the mortgage documents formed an interconnected package was a matter of construction. The default judgment did not necessarily determine the validity of the mortgages. The alleged fraud was not itself an abuse of process, although the earlier conduct was relevant to discretion.
5. Redemption and rescission for fraud were incompatible rights. Election required knowledge of both rights and an informed choice, but knowledge could be inferred where a legally represented party acted after legal advice. The claimants’ lack-of-knowledge argument was not fanciful, although it escaped that threshold only narrowly and had poor prospects.
6. The decisive discretionary factors were the radical recasting of the case, the substantial further pleadings, disclosure, evidence and court time required, the risk to the trial window, the claimants’ deliberate commercial decision not to plead rescission earlier, their repeated statements that they would not do so, and the weak prospects at trial. Permission was refused for the key elements of the proposed re-amendment. Permission was granted only for paragraphs 20A, 23, 23B, 23C and 25, subject to reformulation.

Not an appeal. The judgment determined the claimants’ application for permission to re-amend the particulars of claim.