Case Comment: CNM Estates (Tolworth Tower) Ltd V Carvill-Biggs & Anor [2023] EWCA Civ 480

• Published date: 26 June 2023
• Subject Matter: International Law, Litigation, Mediation & Arbitration, Export Controls & Trade & Investment Sanctions, Arbitration & Dispute Resolution, Professional Negligence
• Law Firm: Gatehouse Chambers
• Author: Mr Thomas Mitty

When is it permissible to take into account the merits of a proposed amendment in an application to amend? Does it make a difference if it is a very late amendment as opposed to a late amendment?

Background

In October 2015, the Claimant company ('CNM') acquired a property with the intention of developing it. The purchase price was approximately '60.5 million, of which '54 million was funded by loans. In April 2017, CNM fell into default on the loans; and by August 2017, had instructed real estate agents to market the property for sale.

The Defendants were the receivers appointed pursuant to the lender's rights under the mortgage and debenture which formed security for the loans ('the Receivers'). They were appointed before CNM's marketing campaign commenced, and subsequently engaged their own agents to market the development site for sale. In December 2017, the Receivers entered into a contract of sale of the property to a third party for the total outstanding balance on the loans, a sum in excess of '80 million.

CNM contended that this was well below the market value of the development site and issued the present proceedings. Its original claim against the Receivers, CNM's pleaded case was that the Receivers had breached their equitable duties to exercise proper skill and care to obtain the best price reasonably obtainable on the sale of the development site.

Following the trial of a preliminary issue in June 2020, Foxton J held that: (i) the Receivers would only be liable for breach of an equitable duty of care owed to CNM where the liability in question was directly caused by the Receivers' gross negligence or wilful misconduct; and (ii) CNM had not advanced any such case of gross negligence nor of wilful misconduct in its original pleadings. Permission to appeal Foxton J's decision was subsequently refused by Flaux LJ. Accordingly, unless amended, CNM's claim against the Receivers was bound to fail.

CNM, however, took no steps to amend until prompted by the Receivers in January 2021 with an invitation either to discontinue the claim, or to provide draft amendments for consideration. On 8 April 2021, CNM indicated its intention to continue the claim and to seek permission to amend. This, however, was followed by another sustained period of delay on CNM's part, which resulted in an application by the Receivers to the court for directions. Eventually, on 3 November 2021, CNM agreed the terms of an 'unless' order which was duly made by Bryan J by consent in the following terms ('the Unless Order'):

"The Claimant shall, by 4pm on Friday, 14 January 2022 serve on the parties and CE File draft Re-Re-Amended Particulars of Claim ('the Proposed RRAPOC'), failing which its claim shall be struck out."

CNM then served a draft pleading on 14th January 2022. This pleaded a case of wilful misconduct. However, it made no allegations of gross negligence. There was no formal application to amend.

On 6 May 2022 sought to amend again. It made a formal application to amend again, with a further Re-Re-Amended Particulars of Claim annexed. Again, this was only upon prompting by the Receivers. This time, CNM included pleas of both gross negligence as well as wilful misconduct.

The Court Below

The application came before Julia Dias QC sitting as a Deputy Judge of the High Court ('the Deputy Judge'), who dealt with the pleas separately.

i) Gross Negligence

The Deputy Judge considered that CNM was in breach of the Unless Order and would therefore require relief from sanctions to advance the case in gross negligence. Having then heard an oral application for such relief, the Deputy Judge refused both relief from...