The High Court has rejected an appeal of a County Court decision to a) refuse to consider an additional argument first raised by a Defendant at trial, and b) to refuse an application at trial to amend pleadings to include that additional argument.
This decision affects any parties to litigation before the courts and is an important indication of the courts' approach to late amendments to pleadings or attempts to raise unpleaded arguments at trial.
The litigation related to Mr and Mrs Zaman who were occupiers 119 Healds Road and had been for a number of years. They had originally agreed to purchase the property from the previous owners, Mr and Mrs Fadipe. However, Mr and Mrs Zaman, rather than having the property registered in their names, agreed to allow Mr Mallon to be registered as the owner at the land registry as security for a trade debt between Mr Mallon and Mr Zaman. The intention was that once the trade debt had been repaid, the property would be transferred into the names of Mr and Mrs Zaman.
However, after the trade debt was repaid, Mr Mallon failed to transfer the property to the Zamans. Instead he raised mortgages against the property. He did not maintain mortgage payments, resulting in possession action by his mortgage lenders, including Kensington
The Zamans defended Kensington's possession claim, and in their defence they raised a number of legal arguments, including proprietary estoppel, mistake (in registering the property in Mr Mallon's name), and claimed, amongst other things rectification of the Land Register. Mr Mallon did not defend the claim.
On the morning of the first day of the trial in February 2018, Mr and Mrs Zaman's Barrister tried to raise an additional argument that a constructive or resulting trust had arisen. He argued that either the existing pleading was sufficient to raise that arguments because it already pleaded the necessary facts, or alternatively a short amendment to the existing pleading be permitted that would include the wording “the above gives rise to a constructive and/or resulting trust.”
The trial judge refused both arguments, and refused to consider whether there was any trust in place. Kensington won at trial and obtained a possession order. Mr and Mrs Zaman appealed.
The High Court's decision
Sir Gerald Barling, sitting as a Judge of the High Court in the Business and Property Court in Leeds, upheld the trial judge’s decision for the following reasons:
- The whole point of pleadings is “to ensure that the essential elements of each party’s case [are] known to the other side” and prevent situations “where on the day before the trial a new point [is] raised in a skeleton argument”;
- Mr and Mrs Zaman had prepared a skeleton argument in relation a previous application hearing that mentioned the possibility of a reliance on a constructive trust, but no formal application to formally plead this point (either before or after that hearing) had been made.
- The relevant principle from Credit Suisse AG v Arabian Aircraft and Equipment Leading Co  EWCA Civ 1169 is that “particulars of claim…can be expected to identify with care and precision the case the claimant is putting forward” and “set out the essential allegations of fact”. In this regard, the appellate judge considered that Mr and Mrs Zaman’s pleading “did not set out the nature of a constructive or resulting trust case at all, let alone with care and precision”.
- To rely on a trust argument, Mr and Mrs Zaman had to plead the specific type of trust and factual basis for it, which they had not.
- The judge took the view that if facts are pleaded expressly in favour of a proprietary estoppel argument cannot automatically be used to support the allegation of a trust argument. The two allegations are different, and likely to provoke a different response from Kensington in its Reply.
- The court referred to CPR 16.2(1), which requires ‘a concise statement of the nature of the claim’ and the practice direction required specific details of any breach of trust to be set out in the particulars of claim. On the content of the proposed amendment to the pleading, the judge found that it would not have provided the other side with the requisite information about the nature of Mr and Mrs Zaman’s case. A precise pleading was required specifying the trust property, trustee, beneficiary, type of trust, its terms and how it was formed.
This is a welcome decision in that the courts have reaffirmed their commitment to the idea that parties need certainty as to the arguments they will face at trial. It also reinforces the 'cards on table' approach that the Civil Procedure Rules were originally designed to engender
- Statements of case must be comprehensive, accurate and specific. It is not sufficient to simply rely on a recital of all background facts to make a legal argument or allegation – the argument or allegation must be specified. If a new point or argument needs to be raised by a party, parties should make an application to the court at the earliest possibility to avoid prejudicing their position by being unable to make an argument at trial.
- The court will exercise its wide discretion over case management to protect parties from being prejudiced by last minute arguments being raised as part of proceedings. The judgment makes clear that the court’s discretion to reject an application to amend pleadings is a wide one and falls squarely into the remit of case management, and therefore one that parties can expect to receive if they make last-minute applications of the nature;
- Even if the court allows applications to amend pleadings, the court appears minded to ensure that parties have sufficient time to consider and respond to the case against them. The court explained (at paragraph 82) that even if the application was allowed, Kensington would have been entitled to apply to adjourn the hearing to allow for a re-draft of the pleadings to protect against the risk of prejudice to Kensington’s position. This is likely to have significant costs implications for parties who do not make these applications in a timely manner and place trials at risk.
This decision will be of great help to those parties that are faced with opponents who, through lack of preparation or simple litigation tactics, attempt to raise new arguments at trial. It also provides clear direction to parties that want to raise additional arguments – these requests need to be done in good time ahead of trial and in the correct way, i.e. a formal application.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.