CNM Estates (Tolworth Tower) Limited v Simon Peter Carvill-Biggs & Anor

A party which serves the draft pleading required by an unless order within the specified deadline complies with that order. A subsequent application to introduce an additional amendment requires consideration on its merits, rather than relief from sanctions. Permission to amend requires a real prospect of success, assessed on the same basis as summary judgment and without conducting a mini-trial. Except for very late amendments, perceived weakness beyond that threshold is normally irrelevant to the discretionary balance. A very late amendment is one which would cause the trial date to be lost. The court must balance the injustice of refusing permission against finality and the injustice to other parties and litigants.

CNM owned a development site which the defendant receivers sold following its default on secured loans. CNM alleged that inadequate marketing and failures to provide information about leases and possible vacant possession caused a sale at an undervalue. A preliminary judgment, [2020] EWHC 1605 (Comm), established that the receivers could be liable under the relevant security documents only for loss directly caused by gross negligence or wilful misconduct.

CNM subsequently complied with a consent unless order by serving a draft pleading alleging wilful misconduct within the specified deadline. It later applied for permission to amend and added an allegation of gross negligence. The deputy judge refused relief from sanctions for the gross negligence amendment and refused permission for the wilful misconduct amendments: [2022] EWHC 1583 (Comm).

The appeal concerned compliance with the unless order, the proper assessment of the merits of proposed amendments and the discretionary treatment of claims considered weak. The parties compromised the entire claim before the judgments were circulated in draft.

1. The majority, Sir Geoffrey Vos MR and Newey LJ, would have allowed the appeal and granted permission for both amendments. Males LJ would have dismissed the appeal on different grounds from the deputy judge. Because the parties had compromised the entire claim, the court made their agreed consent order rather than orders implementing the substantive conclusions (paras [62], [90]).

2. All three judges agreed that relief from sanctions was unnecessary. Under rule 3.8(1) of the Civil Procedure Rules, the preliminary questions were whether a sanction had been imposed and whether the relevant requirement had been breached. The unless order required service of a draft pleading by a specified deadline, which CNM had done. Its sanction concerned striking out the whole claim. It did not prevent a later application for an additional amendment while preserving allegations included in the timely draft. That application required consideration on its merits (paras [40]–[46], [64]).

3. A proposed amended claim must have a real prospect of success. The assessment follows summary judgment principles. The court may examine whether the pleading is coherent and properly particularised, and reject factual assertions which are demonstrably unsupportable. It must avoid resolving disputed evidence through a mini-trial. The majority applied the approach in Okpabi v Royal Dutch Shell Plc and explained that Elite Property Holdings Ltd v Barclays Bank Plc supplied no different merits standard for late amendments (paras [69]–[75], [77]).

4. Once that threshold is met, permission remains discretionary. Except for very late amendments, perceived weakness is normally irrelevant to the balance between injustice to the applicant, finality and injustice to other parties and litigants. Very late amendments are those which would cause the trial date to be lost. Cases near the boundary may require attention to the amendment, the explanation for its timing and consequential work. Even then, a mini-trial remains inappropriate. The deputy judge had therefore erred by treating the perceived weakness of CNM’s case as a discretionary reason for refusal (paras [67]–[80]).

5. The majority considered the allegations to have a real prospect of success. The receivers’ knowledge, the availability of vacant possession and its possible effect on bidders required evidence at trial. The other marketing allegations likewise could not be dismissed from the pleading alone. Males LJ considered the allegations concerning the agreement for vacant possession incoherent and deficient on causation (paras [50]–[61], [81]–[88]).

6. The discretionary balance favoured permission. No trial date would be lost, disclosure had not occurred and substantial duplication of cost and effort would not result. Most amendments drew inferences from existing allegations. The later gross negligence allegation largely characterised conduct already pleaded. The seriousness of allegations against professionals did not justify refusal in those circumstances (para [89]).

• Court of Appeal (Civil Division): [2023] EWCA Civ 480 . The majority would have allowed the appeal and permitted both amendments. Following settlement, the court made the agreed consent order.
• High Court, Commercial Court: [2022] EWHC 1583 (Comm). Julia Dias QC, sitting as a deputy High Court judge, refused relief from sanctions for the gross negligence amendment and permission for the wilful misconduct amendments.
• High Court, Commercial Court: [2020] EWHC 1605 (Comm) . Foxton J determined that the receivers could be liable for breach of their equitable duty of care only where liability was directly caused by gross negligence or wilful misconduct. Flaux LJ subsequently refused permission to appeal.