Fay of London Limited v Axis Speciality Europe

On an application to amend after a limitation period may have expired, permission will generally be refused where the defendant has a reasonably arguable limitation defence, unless the new cause of action arises from the same or substantially the same facts as the existing claim. The court must conduct a careful, comparative and granular analysis of the pleaded facts. Similarity is insufficient. A proposed amendment must also have a real prospect of success, but the court should avoid conducting a mini-trial. A Mastercard-type order altering the deemed commencement date is exceptional and must be used cautiously. It is generally inappropriate where the existing claim is substantially abandoned and replaced by claims based on different facts.

The claimant sought permission to replace or substantially recast its existing claims against an insurer under the Third Parties (Rights Against Insurers) Act 2010. The proposed amendments included fraudulent and non-fraudulent breach of trust, negligence, breach of contract, breach of fiduciary duty and deceit claims concerning earlier borrowing and alleged diversion of loan proceeds.

The defendant argued that the claims were statute-barred, that the proposed claims did not arise from the same or substantially the same facts as the existing claim, and that a later-date amendment order should not be made. The central issues were whether the amendments satisfied CPR Part 17 and the limitation provisions, and whether the court should permit them on a Mastercard basis.

1. Application dismissed. Permission to amend was refused. The claimant was required to issue a new claim if it wished to pursue the proposed claims.
2. For amendments potentially depriving a defendant of an accrued limitation defence, the usual course is to require a fresh claim unless the defendant lacks a reasonably arguable limitation case or the new cause of action arises from the same or substantially the same facts as the existing claim. This reflects Paragon Finance plc v DB Thakerar & Co, Welsh Development Agency v Redpath Dorman Long Ltd and Ballinger v Mercer.
3. The fraudulent breach of trust claim was adequately pleaded and had more than a fanciful prospect of success. Fraud may be pleaded by inference where the primary facts make dishonesty more likely than innocence or negligence. The court should not conduct a mini-trial on an amendment application.
4. Nevertheless, the defendant had a reasonably arguable limitation defence. The court declined to decide finally whether the proposed trust claim fell within the statutory exception for fraudulent breach of trust, or whether time was postponed under section 32 of the Limitation Act 1980.
5. The other proposed claims concerned a different loss, an earlier loan and materially different pleaded facts. The existing claim focused on later borrowing, an undertaking and an investment. The statutory requirement of the same or substantially the same facts was therefore not met.
6. A Mastercard-type order is discretionary and exceptional. It must be exercised with caution, having regard to prejudice, the purpose of the limitation legislation, the procedural stage and the prospects of early determination of limitation. It was inappropriate here because the proceedings were at an early stage and the existing claim was being substantially abandoned.