A recent decision in a pensions dispute provides a reminder of circumstances in which the English courts will allow a statement of case to be amended to bring a new claim which would otherwise be time barred
Generally under English law once a limitation period has expired it is not possible to bring a new claim that is “out of time”. However, under civil procedure rule 17.4 (giving effect to section 35 of the Limitation Act 1980), the English court may in certain circumstances grant permission for a statement of case to be amended to introduce a new cause of action which would otherwise be time barred. The Court of Appeal’s decision in Mercer Ltd and another v Ballinger and another1 provides a useful reminder of the threshold that needs to be met in order to gain such permission.
The underlying dispute
In Mercer, the trustees (Ballinger and another: the Trustees) of an occupational pension scheme in substantial deficit, had brought a professional negligence claim against the provider of administrative and actuarial services to the scheme’s then trustees (Mercer Ltd and another: the Valuers). The claim concerned reports by the Valuers valuing the assets of the scheme. Allegedly the Valuers were negligent in their valuations, which, it was argued, resulted in the scheme’s liabilities being understated which in turn resulted in lower contributions to the scheme being sought from the employer than should have been sought. As the employer had subsequently entered liquidation it was not possible to seek further contributions from it. The loss claimed by the Trustees was in the order of £14-15m.
The claim form was issued on 3 July 2012, and after agreement to extend the time for service, the particulars of claim were served on 14 December 2012.
On 22 November 2013, the Trustees served an application to amend the particulars of claim. The Valuers opposed three categories of proposed amendments, which it was accepted by all sides each raised a new cause of action and thus a new claim.
The rules and law relevant to the application
Section 35 of the Limitation Act 1980 (the Act) provides that a new claim made during the course of any action after expiry of the limitation period (and not made in third party proceedings) may be allowed if:
“in the case involving a new cause of action, if the cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action”
This is reflected in civil procedure rule 17.4, which provides that in such circumstances the court may allow an amendment:
“whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”
The relevant test and the decision at first instance
It was accepted by all parties that the judge at first instance correctly set out the three stage test to be satisfied if the application to amend the statement of case to raise a new claim is to succeed:
- Is it reasonably arguable that the opposed amendments are outside the applicable limitation period?
- If so, do they seek to add or substitute a new cause of action?
- If so, does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim?
Taking each limb in turn, the two sides disagreed about whether or not the three categories of amendments were all outside the limitation period. The parties accepted that each of the three categories of amendments added a new claim. The parties disagreed about whether the new claims arose out of the same or substantially the same facts as were already in issue in the claim.
The judge at first instance found that the Valuers had a reasonably arguable case that the new claims were time barred under statute. He nevertheless gave permission for two of the new claims to be brought on the basis that they arose out of the same or substantially the same facts as were already in issue in the proceedings. The judge refused permission in relation to the third new claim, on the basis it did not arise out of the same or substantially the same facts as were already in issue.
Both sides appealed:
- The Valuers appealed, arguing that the two new claims which the judge had allowed to be brought did not in fact arise from the same or substantially the same facts as were already in issue.
- The Trustees cross-appealed, arguing that the judge had been wrong to rule that the two allowed new claims were time barred under statute, and that this was an additional reason to allow them to be brought. Further, the Trustees argued in relation to the disallowed third new claim that it did arise out of the same or substantially the same facts as were already in issue in the proceedings, and permission for it to be brought should be granted
The Court of Appeal’s decision
The Court of Appeal allowed the appeal against the decision to give permission for the first two new claims to be brought, and dismissed the cross-appeal, including in relation to the decision not to grant permission for the third new claim to be brought.
In relation to the first limb of the test, the Court of Appeal held that provided the defendant could show a prima facie defence of limitation, the burden must be on the applicant to show that the defence was not in fact reasonably arguable. In this instance the Court of Appeal held that the original judge’s approach to the limitation question had been “impeccable” and that the Trustees had failed to show that the Valuers’ limitation defence was not reasonably arguable.
The second limb of the test was not in issue.
In relation to the third limb of the test, the Court of Appeal held that the judge had been right to have considered whether or not the proposed amendments arose out of the same or substantially the same facts as are already in issue in the existing claim. However, the Court of Appeal held that the judge had not carried out a sufficient analysis of the extent to which the Valuers would be required by the new claims to embark on an investigation of facts which they would not otherwise have needed to investigate. The Court of Appeal found that, contrary to the first instance judge’s findings, the introduction of the first new claim (relating to 2002 valuations) did not arise out of the same or substantially the same facts as were already in issue and would require the Valuers to carry out various additional investigations; permission to amend was refused. In relation to the second new claim, the Court of Appeal noted that insofar as it related to actuarial valuation reports produced in 1999 and 2001 it did arise substantially out of the same facts as already in issue, but insofar as it related to 2002 valuations it did not do so, and these amendments were not allowed (contrary to the decision of the judge at first instance). In relation to the third new claim, the Court of Appeal held that the judge had been right to refuse permission for it to be brought on the basis it gave rise to a completely new enquiry which raised new and difficult questions.
Although the Court of Appeal’s decision does not break new ground it does reaffirm the relevant test which will be applied when the English court is asked for permission to allow a statement of case to be amended to add a new claim which would otherwise be time-barred. The case also provides an insight into how the courts should apply the test, in what is a surprisingly complicated area of law. It is clear that the test is applied strictly only after careful analysis of the facts. Claimants should be wary of limitation periods even after the issue of proceedings if they have in mind an amendment to the claim.