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In Ballinger and another v Mercer Ltd and another  EWCA Civ 996 the Court of Appeal recently overturned a judge’s decision to allow amendments to particulars that introduced new causes of action after the expiry of the relevant limitation period. In an important decision, the court addressed what is the proper approach, on an interlocutory application to amend a statement of case, to the determination of whether a proposed new claim is time-barred and, crucially, who bears the burden of persuasion in that regard.
The procedure for making amendments to a statement of case is contained out in CPR Part 17 and CPR PD 17. CPR 17.4 permits, in certain cases, amendments to statements of case to introduce a new cause of action after the expiry of the applicable limitation period. The rule gives effect to section 35 of the Limitation Act 1980 (LA 1980). Such a claim may be introduced where it arises out of the same facts, or substantially the same facts, as those already in issue in the claims as currently pleaded in the proceedings (Goode v Martin  1 All ER 620).
As many of you will know, this procedure can be incredibly useful for claimants due to the operation of the 'doctrine of relation' in LA 1980, s 35(1), ie if a new claim is permitted by way of amendment it is treated as having been made by way of a separate action commenced on the same date as the original action. Accordingly, where an amendment is permitted to introduce a new claim that was in time at the date of commencement of the action but arguably out of time on the date on which permission to amend is granted, the defendant is thereafter precluded from reliance at trial on the arguable limitation defence.
In this decision the Court of Appeal confirmed the three stage test to be satisfied by a claimant before permission to introduce a new claim by way of amendment is granted:
It is in relation to the first stage of this test that the court provided crucial guidance. The Court of Appeal stated that provided a defendant can show a 'prima facie' defence of limitation, the burden is on the claimant to show that the defence is not in fact reasonably arguable (Welsh Development Agency  4 All ER 10 and Paragon Finance  1 All ER 400). The burden is allocated in this way because the claimant is, in effect, inviting the court to make a summary determination that the defence of limitation is not available. If the availability of the defence of limitation depends on the resolution of factual issues that are seriously in dispute, the matter cannot be determined summarily, but must go to trial. Therefore, it can only be appropriate at the interlocutory stage to deprive a defendant of a prima facie defence of limitation if the claimant can show that the defence is not reasonably arguable. Of course, if the answer to the first question is 'no' and limitation is not an issue, then any proposed amendments should be made in accordance with CPR 17.1-3 and CPR PD 17.
If a claimant is not able to show that the defendant's limitation defence is not reasonably arguable (and the court makes a finding to that effect), the claimant is not precluded from issuing separate proceedings in relation to the new cause of action in which it can seek to prove that its claims are not in fact time barred. On a practical note, practitioners should be aware of the potential expiry of any applicable limitation period during the interval in which it is seeking an amendment pursuant to CPR 17.4. Accordingly, if there is a risk that the amendment will not be granted (ie because all three limbs of the test above are not satisfied) and that limitation may expire, then it may be advisable to commence a new set of proceedings for that cause of action at the same time as seeking the amendment.
Both CPR 17.4 and LA 1980, s 35 provide that the new claim may be added on condition that it arises out of the ‘the same or substantially the same facts’.
In this case, the Court of Appeal provided a helpful summary as to the relevant law regarding the meaning of the phrase 'same or substantially the same facts':
To which the Court of Appeal added that the phrase 'same or substantially the same' is not synonymous with 'similar' and although it has used as a convenient shorthand it should not divert attention from the appropriate enquiry.
The judge at first instance got the three stage test right and the judge correctly held that the claimant did not show that the defendant did not have a reasonably argument limitation defence. Accordingly, he went on to consider whether the proposed amendments arose out of the same or substantially the same facts. The Court of Appeal found that whilst the judge did not misdirect himself as to the relevant law as set out above, he did not carry out a sufficient analysis of the extent to which the defendant would be required by the new claims to embark on an investigation of facts which they would not previously have been concerned to investigate. The Court of Appeal decided that the amendments should not have been allowed. The appeal was allowed and the cross appeal was dismissed.
This was an appeal from a decision of His Honour Judge Pelling (sitting as a High Court Judge) in the Chancery Division, Manchester District Registry.
The appeal was heard by the Court of Appeal on 24 June 2014 and the judgment was handed down on 17 July 2014. Judgment was given by Lord Justice Tomlinson with the Master of the Rolls, Lord Dyson, and Lord Justice Briggs in agreement.
First published on Lexis®PSL Dispute Resolution. Click here for a free one week trial of Lexis®PSL
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Barry specialises in international arbitration and commercial litigation. He trained and practised at Jones Day before joining Pinsent Masons. At LexisNexis, Barry is Head of Arbitration and Head of the Lexis®PSL Dispute Resolution Group.
In practice, Barry’s work included commercial, aviation and technology arbitrations pursuant to international arbitral rules, involving UK and international clients. He also has a background in general commercial, civil fraud and IT litigation, including experience before the High Court. While in private practice, Barry worked with a broad range of clients from the private and public sectors.
At LexisNexis, when not focused on the strategic development and operational requirements of the Dispute Resolution Group, Barry’s content work focuses on the law and practice of international commercial arbitration and investment treaty arbitration. In addition to his work for Lexis®PSL, Barry contributes to the LexisNexis Dispute Resolution Blog and New Law Journal on litigation and arbitration matters
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