BTI 2014 LLC v PRICEWATERHOUSECOOPERS LLP & Anor

The court considered an application by the claimant to re-amend its Amended Particulars of Claim after expiry of the limitation period. The judgment applies s35 of the Limitation Act 1980 and CPR 17.1(2), 17.3 and 17.4 to decide whether proposed amendments plead a new cause of action and, if so, whether that new cause of action arises out of the same or substantially the same facts.

Two categories of proposed amendment were considered. The Divisibility Amendments (relating to whether a CERCLA "divisibility" defence could succeed in light of Burlington Northern and whether factual remediation advice should have been sought) were held not to plead a new cause of action because, in substance, they build on already-pleaded allegations that PwC failed to obtain necessary expert advice on divisibility and therefore relate back to the existing pleaded facts. The court therefore granted permission to make those amendments as an exercise of its discretion under CPR 17.1(2)(b).

The Total Remediation Costs Amendments (asserting that PwC underestimated the Total Remediation Costs and should have obtained independent remediation expert advice as to those total costs) were held to plead a new cause of action that does not arise out of the same or substantially the same facts as the existing claim. Because the limitation period had expired, the court had no power under s35 and CPR 17.4 to permit those amendments and they were refused.

The court also took into account subsidiary matters including Miles J's earlier case management decision limiting the claimant's pleaded need for expert evidence (permitting only legal advice on divisibility as pleaded), the relative lateness of the amendments and the prejudice to PwC if certain amendments were permitted late.

Background and nature of the application: BTI, as assignee of Windward's rights, sought permission to re-amend its Amended Particulars of Claim to add further particulars of alleged auditor negligence by PwC in auditing Windward's 2007 and 2008 accounts. The proposed amendments fell into two categories: (a) matters relating to the factual underpinning of a CERCLA "divisibility" defence relied on in the 2008 Accounts (the "Divisibility Amendments"); and (b) matters alleging PwC had underestimated Total Remediation Costs and should have obtained independent remediation expert advice for both the 2007 and 2008 Accounts (the "Total Costs Amendments").

Procedural posture: The application was made after the applicable limitation period had expired. The court was required to apply s35 of the Limitation Act 1980 and CPR 17.1(2), 17.3 and 17.4. Miles J had earlier, at a case management conference, ruled that the claimant's pleading on divisibility in the Amended Particulars of Claim extended only to a failure to obtain US legal advice and refused permission for remediation expert evidence on that pleaded case.

Issues framed by the court:

• Issue 1: Whether it is reasonably arguable that the proposed amendments are made outside the applicable limitation period (agreed by the parties).
• Issue 2: Whether the amendments seek to add or substitute a new cause of action.
• Issue 3: If a new cause of action is pleaded, whether it arises out of the same or substantially the same facts as are already in issue.
• Issue 4: If no new cause of action is pleaded, or if it does arise out of substantially the same facts, whether the court should in its discretion allow the amendments.

Reasoning and conclusions: The court applied the guidance in Mulalley and Co-op and focused on the bare minimum of essential factual claims in the existing and proposed pleadings. It concluded:

• The Divisibility Amendments do not amount to a new cause of action because they are, in substance, further particulars of the already-pleaded allegation that PwC failed to obtain necessary expert advice on the availability of a divisibility defence; legal and factual remediation advice are, in the context of CERCLA divisibility, two aspects of the same enquiry. Because they do not raise a new cause of action, the court exercised its discretion under CPR 17.1(2)(b) and allowed those amendments, after weighing lateness and prejudice considerations and finding prejudice to PwC to be relatively low.
• The Total Costs Amendments do plead a new cause of action. An allegation that Total Remediation Costs were underestimated is, in its essentials, materially different from an allegation that the NCR/API share was underestimated: estimating the total liability requires independent remediation expert evidence and creates a distinct counterfactual (what an independent remediation expert would have said) that was not in the ambit of the original pleadings. Because the limitation period had expired and the new cause of action does not arise out of the same or substantially the same facts, the court had no power under s35 and CPR 17.4 to permit those amendments and they were refused. Even if the court had power, it would have exercised discretion against permitting them given the lateness and prejudice to PwC.

Subsidiary findings and context: The judgment records detailed consideration of the litigation history, the Sequana proceedings which informed the pleadings, Miles J's prior ruling limiting expert evidence on factual remediation matters as originally pleaded, and the practical prejudice arising from delay (particularly the fading memories of auditors relevant to the Total Costs Amendments).

This is a first-instance disposal of an application to amend pleadings. The court granted permission to make the Divisibility Amendments under its discretion in CPR 17.1(2)(b) because those amendments do not, in substance, plead a new cause of action and relate to alleged consequences of the already-pleaded failure to obtain necessary expert advice on a divisibility defence. The court refused permission to make the Total Remediation Costs Amendments because those amendments do plead a new cause of action and do not arise out of the same or substantially the same facts as the existing claim; accordingly s35 of the Limitation Act 1980 and CPR 17.4 preclude permitting them after expiry of the limitation period. The court also, on discretionary grounds, would have refused permission for the Total Costs Amendments because of the lateness of the application and prejudice to the defendant.