The England & Wales High Court recently handed down its decision in Rose and others v Creativityetc and others  EWHC 1043 (Ch), in which it refused an application by the first and second claimants (the "Claimants") to re-amend the Particulars of Claim. The proposed re-amendment sought a declaration that certain mortgages were rescinded as they were entered into as the result of fraud committed by those controlling the first defendant ("Creativityetc"). In exercising its discretion, the Court provided a helpful summary of several factors it must consider, including the timing of the application and the extent of the amendments, to decide whether it should allow the application.
The Claimants held registered titles to properties on trust for Dreadnought Ltd ("Dreadnought"), which had received loans from Creativityetc. The Claimants gave guarantees in respect of the properties and executed mortgages over part of the land in favour of Creativityetc. In July 2017, Creativityetc brought proceedings against Dreadnought for a debt claim and obtained a default judgment. The Claimants subsequently commenced proceedings seeking to redeem the mortgages.
On 30 April 2018, the Particulars of Claim were filed seeking redemption of the mortgages. They made no challenge to the mortgages' validity or enforceability. Those Particulars of Claim were then amended to allege bad faith on the part of Creativityetc in entering a sale contract in relation to the properties. Following a hearing on 3 August 2018, in which the defendants alleged that sums totalling at least £680,000 were secured by the mortgages, the Claimants realised that the "commercial rationale" for limiting the relief to redemption no longer made sense, as that amount was much higher than they had anticipated. As such the Claimants decided to expand the proceedings to seek to have the mortgages set aside on the basis of misrepresentation.
The proposed re-amendment was substantial: the amended Particulars of Claim were approximately 13 pages long, whereas the proposed re-amended Particulars of Claim extended to over 41 pages. The re-amendment also raised noticeably different matters than were contained in the original and amended Particulars of Claim. The effect of the re-amended Particulars of Claim would have been to downgrade the redemption claim to being an alternative to the Claimants' new principal claim that the mortgages should be held to have been rescinded due to allegations of an extensive fraud. As the Court described, there was "a radical change in the nature of the case being put on behalf of the Claimants".1
Principles considered by the Court
In considering the exercise of discretion, the courts must at all times have regard to the Overriding Objective, namely that cases are dealt with justly and at proportionate cost. That means that a proposed amendment will not be permitted if it does not disclose a cause of action or defence "with a real prospect of success", regardless of the stage proceedings have reached. 2
In addition, following recent cases, such as Nesbit Law Group LLP v Acasta European Insurance Co Ltd3, the courts are required to have a much greater appreciation of the effects of amendments on the court and other litigators than was previously the case. In particular, an amendment bringing delay and/or a change in approach may cause prejudice to another party that cannot be precisely quantified (and therefore payment of costs may not be adequate), but which is nonetheless real.
Timing – At the beginning of proceedings, there is an interest in allowing the real dispute between the parties to be determined, and in allowing the parties to put forward their best cases. In those early stages: (1) the waste of court time; (2) the prejudice to the other side; and (3) the adverse effect on other litigants, are likely to be less than they later become. The later an amendment is proposed, the more those factors will normally carry greater weight. It is also important to note the principle set out in Quah Su Ling v Goldman Sachs International4, which states that: "lateness… depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done". It is therefore more complicated than just assessing at what stage in the proceedings the amendment is proposed.
Strength of the case – As the Court observed, the weight placed on the merit of the proposed amended case changes as the parties get further into proceedings. The strength of the case in the proposed amendment is potentially a significant factor in assessing the degree of the potential injustice to the party seeking to amend if permission is not given and, consequently, whether that potential injustice outweighs the potential harm to the other party. It follows that the later an amendment is proposed, the more care the courts will take in assessing whether a "real prospect of success" has been shown.
Intelligibility of the proposed re-amendment – The Court held that an amendment will not be permitted if it contains a claim or defence which is not properly pleaded, regardless of the stage reached in the proceedings. It must be drafted in a way which enables the court and the other party to understand the case being put forward. The requirement increases in importance the later in the process that permission for amendment is sought, as there is less opportunity to clarify any points, for example, by way of a request for further clarification.
In this particular case, the Court refused permission on the following basis: (1) the Claimants were seeking an entirely different basis of claim consisting of serious allegations, which they deliberately chose not to assert when they commenced the proceedings; (2) the Claimants' re-amendment would have, at a late stage in the proceedings, taken the case "back to square one or almost square one"5; and (3) while the case the Claimants sought to advance met the threshold of being arguable, it was nonetheless weak.
While the case does not introduce any new law, it does provide a helpful summary of the factors the courts must consider when exercising its discretion in relation to late amendments. Parties should carefully consider those factors when deciding whether to propose amendments to their statement of case. In any event, it is always advisable for parties to put forward their best claim or defence at the outset as there is a risk that amendments will not be permitted, particularly where those amendments are requested a long way into proceedings and/or significantly change the party's case. As the Court described, a party who delays in putting his or her full claim or defence forward may become "the author of his or her own misfortune"6.
It should also be noted that there were some aspects of the proposed pleading that the Court considered as properly permissible. Parties should take some comfort that even an application to amend is refused, the courts may still allow parts of the proposed amendments.