MICHAEL LLOYD & Anor v MICHELMORES LLP

Permission to amend a statement of case should be refused where the proposed case has no real prospect of success. The court applies a merits test requiring more than an arguable case. The pleading must carry some degree of conviction, be coherent and adequately particularised, and be supported by evidence establishing a sufficient factual basis.

The court must also apply the overriding objective and consider whether the pleaded elements of the cause of action are adequately particularised. Where particulars are just sufficient, permission may be granted subject to further information. Costs thrown away by abandoned claims are ordinarily assessed at the conclusion of the proceedings. A payment on account may nevertheless be ordered where appropriate, but uncertainty may justify a substantial discount.

The claimants sought permission to amend their particulars of claim in professional negligence proceedings against their former solicitors. The proposed amendments concerned alleged duties owed personally to the first claimant, advice concerning termination and liquidation, advice about an appeal from earlier Technology and Construction Court proceedings, and several miscellaneous matters.

The claimants accepted that they should pay costs thrown away by claims abandoned through the amendments. The dispute concerned the merits and particularity of the proposed amendments, and whether costs should be assessed immediately or on an indemnity basis and whether a payment on account should be made.

The central issues were whether the proposed amendments had a real prospect of success and were adequately pleaded, and what costs orders should follow.

The application was allowed in part. The court directed that further submissions be heard on certain revised paragraphs and consequential matters.

1. Merits test. On an application to amend, the court should refuse a case which has no real prospect of success. It must carry some degree of conviction, be coherent and properly particularised, and be supported by evidence establishing an arguable factual basis. The overriding objective remains central to the exercise of discretion.
2. Alleged duties of care. Whether solicitors voluntarily assumed responsibility is highly fact-specific. Foreseeability and reasonableness of reliance are assessed objectively by reference to the particular circumstances. The pleaded communications and surrounding facts were sufficient to support a reasonable prospect of establishing such a duty, although further particulars could properly be requested.
3. Termination and liquidation allegations. The proposed case that the defendants had acted without adequate consultation and advice raised a reasonable prospect of success. Alleged inconsistencies in the first claimant’s earlier evidence were matters for cross-examination and trial.
4. Advice about an appeal. The proposed amendments had a reasonable prospect of success. The court shared the Court of Appeal’s difficulty in identifying an obligation on the first claimant to continue funding the company. A claim for loss of the chance of succeeding on an appeal did not require proof that the appeal would certainly have succeeded.
5. Several miscellaneous amendments were refused, restricted or required to be reformulated where they were unsupported, inaccurate, or legally misconceived. Others were permitted.
6. Costs. Costs relating to amendments and abandoned claims were to be dealt with through the normal single detailed assessment at the conclusion of the proceedings. Indemnity costs were unwarranted. A payment on account of £25,000 was ordered because some payment was appropriate, but uncertainty over apportionment required a significant discount.