Paragon Finance Plc v DB Thakerar & Company
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PILL,LORD JUSTICE MAY,LORD JUSTICE MILLETT |
| Judgment Date | 21 July 1998 |
| Docket Number | CHANI 97/1275/3 |
| Date | 21 July 1998 |
| Court | Court of Appeal (Civil Division) |
[1998] EWCA Civ J0721-14
Lord Justice Millett
Lord Justice Pill
Lord Justice May
CHANI 97/1275/3
CHANI 97/1560/3
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand
London W2A 2LL
ON APPEAL FROM THE CHANCERY DIVISION
(MR JUSTICE LLOYD)
ON APPEAL FROM THE CHANCERY DIVISION
(MR JUSTICE CHADWICK)
MR CHRISTOPHER PARKER (instructed by Messrs Hamlin Slowe, London W1A 4SQ) appeared on behalf of the Paragon Finance Plc.
MR EDWARD BANNISTER QC and MR THOMAS DUMONT (instructed by Messrs Browne Jacobson, Nottingham) appeared on behalf of the two firms.
These two conjoined appeals arise out of what is alleged to have been a series of mortgage frauds in relation to the purchase of flats at Vogans Mill in Docklands in the latter part of 1990. The Plaintiffs are the mortgage lenders. The Defendants are the solicitors who acted for the Plaintiffs as well as for the borrowers. In one action the Defendants are Thimbleby & Co.; in the other Thakerar & Co. Thimbleby & Co. acted in the purchase and mortgage of 7 flats; Thakerar & Co. in the purchase and mortgage of 5 flats. None of the borrowers went into occupation of the property or made any payments under their mortgages. Each of the borrowers made immediate default, following which the Plaintiffs recovered possession and eventually realised their security by resale at a substantial loss.
It was an express term of the Defendants' retainer in every case that they should advise the Plaintiffs:
(i) of any matters likely to affect the value of the property being purchased of which the Plaintiffs should be aware;
(ii) of any reduction in the purchase price for whatever reason or of a sub-sale of which the Defendants became aware; and
(iii) of any information suggesting that the property was not being purchased as the borrower's principal residence for the sole continuing occupation of the borrower and the borrower's family.
The vendor of each of the flats was Rosehaugh Co-Partnership Developments Ltd. ("Rosehaugh"). The Defendants' client, however, (if he or she existed at all) was not purchasing the property directly from Rosehaugh but from an intermediate third party ("the sub-vendor") by way of sub-purchase at a price far in excess of the amount payable to Rosehaugh. Moreover the amount of the mortgage advance which the Defendants' client was obtaining from the Plaintiffs was also substantially in excess of the price payable by the sub-vendor to Rosehaugh.
In each of the transactions in which Thimbleby & Co. acted, the sub-vendor was a Mr. Shefket or a company alleged to belong to or to be controlled by him; in each of the transactions in which Thakerar & Co. acted, the sub-vendor was Belgravia Estates Ltd. The Defendants were aware that their ostensible clients were sub-purchasers who had applied for mortgage advances in amounts and were purporting to buy at prices which were both significantly higher than the corresponding prices payable by the sub-vendor to Rosehaugh; yet in every case they failed to inform the Plaintiffs of these facts. Instead, they reported that there were no matters which they were required to bring to the Plaintiffs' attention.
In 1994 the Plaintiffs brought two actions, one against Thimbleby & Co. and the other against Thakerar & Co., alleging breach of contract, breach of a duty of care and breach of fiduciary duty. They alleged negligence but not dishonesty or intentional wrongdoing. Part at least of the loss which the Plaintiffs had sustained, however, was the result of the collapse of the residential property market at the end of 1990. Following the decisions of the House of Lords in South Australia Asset Management Corporation v York Montague Ltd. [1997] AC 191 and Smith New Court Securities Ltd. v Scrimgeour Vickers (Asset Management Ltd. [1997] AC 254 it became apparent that the Plaintiffs could not recover this part of their loss unless they established fraud. Accordingly they applied for leave to amend their pleadings in order to allege fraud, conspiracy to defraud, fraudulent breach of trust and intentional breach of fiduciary duty and sought orders for further discovery.
Unfortunately for the Plaintiffs, by this time more than six years had elapsed since the last of the relevant transactions, and prima facie any applicable limitation period had expired. The Plaintiffs' applications in the Thimbleby case came before Timothy Lloyd J on 25th. March 1997 when they were granted. Similar applications in the Thakerar case came before Chadwick J. on 4th. June 1997 when they were refused. Thimbleby & Co. appeal from the order of Timothy Lloyd J. and the Plaintiffs appeal from the order of Chadwick J.
Pleading a new cause of action after expiry of the limitation period
For the purposes of the Limitation Act 1980 ("the 1980 Act") any new claim made in the course of existing proceedings which involves the addition or substitution of a new cause of action is treated as a separate action commenced on the same date as the original proceedings: Section 35(1)and (2) of the 1980 Act. Where the pleadings are amended to add such a claim after an applicable limitation period has expired, the effect is to deprive the defendant of an accrued limitation defence. By the combined effect of Section 35(3)-(5) of the 1980 Act and RSC Order 20 Rule 5(2) and (5), however, the Court may not allow such an amendment after the expiration of any relevant limitation period unless the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action.
The proper approach to an application for leave to amend in such circumstances was considered by this Court in Welsh Development Agency v Redpath Dorman Long Ltd. [1994] 1 WLR 1409. The Court observed that a new claim is not made by amendment until the pleading is amended. It follows that the relevant date for the purpose of calculating the limitation period is the date at which the amendment is actually made, which by definition must be no earlier than the date at which leave to make the amendment is granted. The Court also held that leave to amend by adding a new cause of action should not be given unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation which will be prejudiced by the new claim or that the new cause of action arises out of the same or substantially the same facts as a cause of action in respect of which he has already claimed relief. By this means the injustice to the defendant of depriving him of an arguable limitation defence is avoided without denying the plaintiff the right to bring a fresh action to which, if he is correct, there is no limitation defence.
The issues
In each case the Judge had to decide (i) whether any proposed amendment introduced a new cause of action (ii) if so whether any applicable limitation period had expired by the date of the hearing before him and (iii) if so whether the new cause of action arose out of the same or substantially the same facts as a cause of action already pleaded. The pleadings and proposed amendments in the two cases are not identical, but they follow the same general lines and neither party has suggested that there is any material difference between them. For convenience we have been taken through the pleadings in the Thimbleby case only, and it has been tacitly assumed that our decision in respect of the particular amendments for which leave was sought in that case will apply with any necessary changes to the other. Furthermore, in each action the pleadings are repeated in more or less identical terms for each transaction.
Accordingly, I shall consider only the proposed amendments in relation to the first of the transactions pleaded in the Thimbleby case. I shall deal with them under five headings:
(1) Non-contentious amendments which do not introduce a new cause of action.
(2) Amendments which the Plaintiffs contend do not introduce a new cause of action and are not objectionable on other grounds.
(3) Amendments which introduce a new cause of action but in respect of which the Plaintiffs contend there is no applicable limitation period.
(4) Amendments which introduce a new cause of action in respect of which the primary limitation period has expired but the Plaintiffs contend that an extended limitation period is available.
(5) Amendments which introduce a new cause of action after the expiry of the limitation period but which the Plaintiffs contend arises out of the same or substantially the same facts as a cause of action already pleaded.
(1) Non-contentious amendments
Leave is sought for a large number of minor amendments which clearly do not introduce a new cause of action. The Defendants do not object to them. Leave to make them should be granted. They were identified in the course of argument. It is not necessary to refer to them further in this judgment.
(2) Amendments which the Plaintiffs contend do not introduce a new cause of action and are not objectionable on other grounds
The classic definition of a cause of action was given by Brett J in Cooke v Gill (1873) LR 8 CP 107 at p. 116:-
"Cause of action" has been held from the earliest times to mean every fact which is material to be proved to entitle the plaintiff to succeed—every fact which the defendant would have a right to traverse" (my emphasis).
In the Thakerar case Chadwick J cited the more recent...
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