Hyde & Anor v Nygate & Anor

After the limitation period has expired, an amendment adding a new cause of action may be permitted only where the new claim arises out of the same or substantially the same facts already in issue. The court must compare the existing and proposed pleadings at Stage 2, then assess the wider factual investigation required at Stage 3. This approach applies equally to insolvency applications where pleadings have been served. A claim that administrators negligently failed to pursue rescue of a one-asset company is materially different from a claim that they incompetently conducted an asset sale. Shared facts concerning the administration, asset, period and valuation are insufficient where the new claim requires a different breach and counterfactual involving refinancing, development, planning and tax. If the statutory conditions fail, no discretion to permit the amendment remains.

The joint liquidators of One Blackfriars Ltd applied to amend their claim against the former administrators. The existing claim concerned the alleged incompetent pursuit of Objectives 2 and 3 under Schedule B1 to the Insolvency Act 1986, including a sale of the development site at an undervalue. The proposed amendments added a claim that the administrators negligently failed to pursue Objective 1, rescuing the company as a going concern, together with a new refinancing, development and loss case. The respondents objected under section 35 of the Limitation Act 1980 and CPR 17.4, and on general discretionary grounds. An earlier amendment application had been refused in [2018] EWHC 3267 (Ch). The central issues were whether the amendments added a new cause of action and whether it arose from the same or substantially the same facts.

Application refused in relation to the Objective 1 amendments. The statutory conditions for allowing the amendments after expiry of the limitation period were not satisfied. The court therefore had no discretion to permit them and did not consider the general discretionary factors.

1. Statutory objectives. Paragraph 3 of Schedule B1 to the Insolvency Act 1986 establishes a hierarchy. Objective 1 is the paramount objective. Objectives 2 and 3 may be pursued only when the statutory conditions are met. For a one-asset development company, rescuing the company as a going concern requires retaining all or a material part of its business and restoring solvency. It is conceptually distinct from selling the asset to distribute proceeds to creditors.
2. Applicable framework. The court applied the four-stage approach derived from Ballinger v Mercer [2014] 1 WLR 3597 and Diamandis v Willis [2015] EWHC 312 (Ch). The relevant questions were whether the amendment added a new cause of action and, if so, whether it arose from the same or substantially the same facts. The ordinary pleading rule in Chandra v Brooke North [2013] EWCA Civ 1559 applied; the originating application and evidence could not enlarge the pleaded claim.
3. Stage 2. Comparing the existing and proposed pleadings, the Objective 1 claim introduced new breaches, including failure to determine the proper administration strategy and failure to assess or pursue rescue. It also introduced a wholly new counterfactual involving refinancing, joint venture finance and development of the site, producing a different loss case. The claim was therefore a new cause of action. The proposed composite-claim analogy based on Stock v London Underground [1999] (CA) 30 July 1999 WL 478034 was distinguished as fact-specific and arising in a different context.
4. Stage 3. The new claim required extensive investigation into finance, joint venture arrangements, construction, planning, marketing, valuation and taxation. These matters were outside the factual issues raised by the existing sale-at-an-undervalue claim. Overlap in the administration, time period, valuation evidence, bidders and disclosure was insufficient. Material allegations introduced in the Reply and Part 18 responses could not be used to establish that the new claim was already in issue.
5. The Objective 1 amendments did not arise from the same or substantially the same facts under section 35 of the Limitation Act 1980 and CPR 17.4(2). Permission for the unopposed amendments was granted under CPR 17.1(2)(b).

This was a first-instance application. An earlier application to amend in the same proceedings was refused for the reasons given in [2018] EWHC 3267 (Ch). The present application was then determined on 18 June 2019.