Sodi-Tech EDM Limited & Anor v DJM Law Limited

Permission to amend a statement of case should be determined by balancing the injustice to the applicant against prejudice to the opponent and the wider administration of justice. Procedural non-compliance, delay, prejudice and the coherence and merits of the proposed amendment are relevant factors.

An amendment which changes the factual justification for an existing pleaded head of loss is not necessarily a new cause of action. Expert evidence must be confined to matters reasonably required to resolve the pleaded issues, assessed by reference to the proceedings as a whole. In mitigation cases involving expenditure to acquire an asset, evidence may be required to assess both the value acquired and the claimant’s overall position before and after the expenditure.

The claimants brought professional negligence proceedings against their former solicitors. The defendant admitted breach of duty concerning advice on sections 190 and 195 of the Companies Act 2006, but disputed causation, loss, contributory negligence and mitigation.

The claimants sought permission to amend a Part 18 response concerning the justification for paying £1.887 million for a former shareholder’s shares. They also sought expert evidence addressing the open-market value of the shares and the effect of the acquisition on the claimants’ overall position. The defendant proposed narrower expert questions focused on net asset value and discounts.

1. Amendment. Permission was granted to include the proposed new paragraph 4d in the Response. The governing exercise required the court to balance prejudice to the claimants if the amendment were refused against prejudice to the defendant and other litigants if it were allowed. Strict compliance with procedural obligations, the timing and explanation for the amendment, and the resulting prejudice were relevant. The principles in Pearce v East and North Hertfordshire NHS Trust [2020] EWHC 1504 (QB) were applied.
2. The proposed amendment did not introduce a new cause of action. It supplied a different factual justification for expenditure already pleaded as mitigation loss. The merits threshold for amendments therefore did not apply in the same way as it would to a new claim or defence. The amended case, read with the Amended Reply, was coherent. If verified by statement of truth, the second claimant could be cross-examined on it at trial.
3. The requirements identified in CNM Estates (Tolworth Tower) Ltd v Carvill-Biggs [2023] 1 WLR 4335, including coherence, proper particularisation and the avoidance of futile amendments, were considered. The court also accepted the explanation of the real-prospect requirement given in Scott v Singh [2020] EWHC 1714 (Comm).
4. Expert evidence. Under CPR r.35.1, expert evidence had to be restricted to evidence reasonably required to resolve the proceedings. The guidance in British Airways Plc v Spencer [2015] Pens LR 519 was applied. The scope of evidence was to be determined by reference to the totality of the pleadings on mitigation and failure to mitigate.
5. The effect of the payment for the former shareholder’s shares could not be determined solely by applying a discount to a net asset valuation. Expert evidence was reasonably required to assess the value of the acquired shareholding, whether a premium had been paid, and the value of the second claimant’s shareholding before and after the acquisition. The experts were directed to answer the claimants’ proposed questions.