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

An unless order must be given the effect which its terms specify. Where a party serves the required draft pleading by the deadline, it has complied with the order. The order cannot instead be treated as imposing a narrower sanction which bars a later amendment to add a particular allegation.

Permission to make a late, but not very late, amendment must be refused if the proposed claim has no real prospect of success. Otherwise, the court should not assess its perceived weakness when exercising the amendment discretion. It must avoid a mini-trial and balance the injustice of refusal against prejudice, delay, costs and the overriding objective under the Civil Procedure Rules 1998.

CNM alleged that receivers appointed over its development site had failed to obtain the best reasonably obtainable price on its sale. A preliminary issue had established that the receivers could be liable only for loss directly caused by gross negligence or wilful misconduct.

CNM later sought permission to amend its particulars to plead gross negligence and wilful misconduct. The Commercial Court refused the gross-negligence amendment on the basis that CNM required, and would be refused, relief from the sanction in an unless order. It also refused the wilful-misconduct amendment as a discretionary matter: [2022] EWHC 1583 (Comm).

CNM appealed. The central issues were whether service of a draft pleading within the unless-order deadline required relief from sanctions before a further amendment could be sought, and how the court should approach a late amendment alleged to be weak but not fanciful.

1. Appeal allowed by the majority. Sir Geoffrey Vos MR and Newey LJ agreed with Males LJ that CNM had complied with the unless order. It required service of a draft re-re-amended pleading by a stated date, which CNM had done. Under Civil Procedure Rules 1998, CPR 3.8(1), relief from sanctions arises only where a sanction exists and the party has failed to comply. The judge could not construe an order imposing strike-out of the whole claim as a sanction which instead prohibited only a subsequently proposed allegation of gross negligence.

2. The proposed amendments therefore fell to be determined under the ordinary amendment jurisdiction. A proposed claim must have a real, rather than fanciful, prospect of success. The court may test whether the pleading is coherent and adequately particularised, but should not conduct a mini-trial or weigh disputed evidence. The majority held that, save for very late amendments, apparent weakness short of the no-real-prospect threshold is not ordinarily a factor in the discretionary balance.

3. The amendments were late but not very late. No trial date would be lost, disclosure had not occurred, and the basic factual disputes remained substantially the same. The allegations concerning the Hartland Agreement required evidence as to what the receivers knew, what should have been disclosed, and causation. They could not be characterised as fanciful at the interlocutory stage. The remaining marketing and valuation allegations also had a real prospect of success.

4. Re-exercising the discretion, the majority held that the balance of prejudice favoured allowing both amendments. CNM had complied with the agreed pleading deadline; the gross-negligence plea added little to the alleged facts; and refusal would be unjust despite the seriousness of the allegations and the further costs involved.

5. Males LJ would have dismissed the appeal. He considered the Hartland Agreement allegations internally contradictory and incapable of establishing wilful misconduct or gross negligence. Before hand-down, however, the parties compromised the whole claim. The court made the agreed consent order notwithstanding its merits decision.

• Court of Appeal (Civil Division): By a majority of Sir Geoffrey Vos MR and Newey LJ, the court would have allowed CNM's appeal and granted permission to amend. Males LJ would have dismissed the appeal. Following the parties' settlement, the court made their agreed consent order: [2023] EWCA Civ 480.
• High Court, Commercial Court: Julia Dias QC, sitting as a deputy High Court judge, held that relief from sanctions was required for the gross-negligence amendment and refused it; she also refused permission to plead wilful misconduct: [2022] EWHC 1583 (Comm).
• High Court, Commercial Court: On a preliminary issue, Foxton J held that the receivers would be liable only where loss was directly caused by their gross negligence or wilful misconduct: [2020] EWHC 1605 (Comm).