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11 June 2013
In D&G Cars Limited v Essex Police Authority ( EWCA Civ 514) the Court of Appeal, in a majority decision, upheld the High Court's decision to refuse permission to amend an existing claim to include allegations of intentional wrongdoing.
D&G Cars, a vehicle recovery business, had a longstanding commercial relationship dating back to 1998 with the Essex Police Authority to collect and dispose of motor vehicles that had been damaged in road traffic accidents or used unlawfully.
In March 2006 D&G entered into a new five-year contract to undertake vehicle recovery in particular areas of Essex. In 2008 another contractor withdrew from its contract and the police authority put this contract out to tender. D&G was invited to participate in the tender, which was governed by the Public Contracts Regulations 2006. Just before the contract was awarded, the police authority received an anonymous letter alleging that D&G had acted contrary to its obligations under its existing 2006 contract.
The police authority carried out a preliminary investigation and suspended the 2006 contract pending the outcome of a full investigation. The results of the full investigation appeared to support the allegations and, while D&G's directors denied any knowledge or involvement, the police authority terminated the 2006 contract in August 2008 and notified D&G that it had been excluded from the tender competition for the new 2008 contract. D&G argued that this exclusion was in breach of the regulations and invited the police authority to delay the award of contracts pending the determination of the lawfulness of that exclusion. The police authority refused to do so and awarded the contracts to two other tenderers.
D&G commenced the following proceedings:
D&G sought specific disclosure of documents relating to the 2008 tender process. Having obtained these, D&G sought to make comprehensive amendments to the particulars of claim, suggesting that the 2008 tender process had been conducted in bad faith. It also alleged that the police authority acted with a conscious bias in favour of other tenderers and against D&G, to the effect that the tender was rigged to ensure that D&G lost. However, D&G conceded that this was in fact an allegation of misconduct in public office and conspiracy to injure.
The issue of limitation was critical to the application to amend the proceedings for breach of the regulations, which required that proceedings be brought within three months of any alleged breach.
The application was made to a deputy master, who concluded that the application came after the expiry of a period of limitation within the meaning of Civil Procedure Rule 17.4, and that it amounted to a 'new claim' within the meaning of Section 35 of the Limitation Act 1980 on the basis that such claim did not arise out of the same facts or substantially the same facts as a claim in respect of which D&G had already claimed a remedy (Civil Procedure Rule 17.4(2)). The deputy High Court judge agreed and an appeal was dismissed.
After the court's draft judgment was circulated, the parties asked whether the allegations of bad faith (ie, dishonest rigging of the tender process) could be pleaded by way of an amendment to the reply. The court refused on the basis that there was no application to amend the reply and, furthermore, the result would not necessarily turn solely on whether D&G was seeking to introduce a new claim, which was the basis of the argument. If such permission was to be sought, it should have been by way of a fresh application.
D&G argued that both the deputy master and judge failed to appreciate that the "fundamental issue" was whether the matters on which D&G sought to rely were sufficiently relevant to the defence and any answer to the defence. The defence had contended that D&G committed an act of grave misconduct, or alternatively, that it was reasonably believed that it had, and that it was not economically advantageous for the police authority to contract with D&G, whose integrity was doubtful. In so doing, the police authority had positively asserted its own good faith.
D&G took issue with this approach and sought to argue that these assertions and the facts upon which it sought to rely tended to disprove the defence and were relevant and admissible regardless of whether they might also constitute a new claim; there would have been no risk of the latter if they were contained within a reply. In any event, D&G argued that the amendments did not introduce a new claim.
The police authority argued that where a claimant seeks by amendment to allege the breach of a new duty, there is no question that a new cause of action arises. It relied on Steamship Mutual(1) in arguing that it makes no difference whether the allegations appear in the particulars of claim, the reply or in further information.
The Court of Appeal, by a majority, dismissed the appeal and refused the application to amend. The majority considered that the amendment constituted a new claim.
The particulars of claim alleged that the exclusion of D&G from the tender process was in breach of the regulations and the material relied upon was the circumstances surrounding the approach of the authority to the anonymous information. In short, it was contended that D&G's conduct did not justify the decision of the police authority.
Lord Justice Leveson considered that the focus of the particulars of claim was on the way in which D&G's breaches should be characterised, and that the amendment sought to divert the forensic spotlight away from D&G and onto the police authority and its handling, over many years, of these contracts.
The issues were clearly defined and fell within a comparatively small scope: what conclusions could the police authority legitimately have reached about what it had learned? If it were open to the authority to conclude that D&G was guilty of grave misconduct, the decision to exclude it from the tender process could not be impeached and the claim would fail; if not, the claim would succeed.
The way in which the amended particulars of claim were cast generated a far more wide-ranging case. The fact that these allegations were said to go to the rebuttal of the allegation that the police authority relied on D&G's general breaches to justify refusing to permit D&G to participate in the tender was not the point. Therefore, to permit the amendments sought would constitute pleading a new cause of action under the regulations, which was, at least prima facie, barred by statute.
As to the reply, the position was less straightforward. Leveson was willing to accept that it was open to D&G to argue that the conclusions reached in relation to this particular tender did not involve equal or non-discriminatory treatment, as evidenced by the more favourable treatment afforded to other tenderers. Although there was a risk that this could generate a new cause of action, even as a response to the denial of unequal or discriminatory treatment, D&G must be able to rely on facts that disclose how the police authority dealt with the other proposed tenderers and, in particular, issues concerning their suitability.
However, Leveson was far from satisfied that the allegations that had effectively been copied from the amended particulars of claim to the amended reply met that test. Further, he doubted that material from a tender in which D&G was one of only five that succeeded from about 20 applicants can be used to justify the inference that the police authority had demonstrated bad faith in their dealings with them. Much more relevant may be the specifics of the way in which this particular tender operation was conducted (whatever might have happened in the past).
In the event that Leveson did not consider it appropriate to consider this point any further, it was correct that the judge below had concluded that this point should be the subject of a separate application.
Lord Justice Briggs
Lord Justice Briggs considered that the claim both as originally pleaded and as amended alleged the same type of cause of action – breach by the police authority of the statutory duty to conduct the tender process in accordance with the principles of equal treatment and non-discrimination. To that extent, he agreed with Lord Justice Patten (below) that both the original and the new case plead the same duty and the same breach. Nonetheless, the characteristic feature of the proposed amendments, taken as a whole, was that they pleaded a new case as to the state of the corporate mind of the police authority, whereas the original case had alleged merely that the exclusion amounted to unequal and discriminatory treatment of D&G, regardless of the police authority's subjective intention.
Briggs considered the judgment in Paragon(2) a powerful, if not quite binding, authority to the effect that, regardless of whether an allegation of intent introduces some different type of cause of action (eg, fraud rather than negligence), the allegation of intentional misconduct of itself asserts a new cause of action because of the new factual assertion of intent. While an assertion of intent may be strictly irrelevant in the sense that the type of cause of action relied upon may be established without proof of it, as in negligence, nonetheless, the assertion of intent amounted to a new claim, because it was, by definition, a new cause of action.
Were it not for the fact that, as Leveson set out, the new case that D&G sought to advance plainly alleged deliberate wrongdoing and bad faith, Briggs would have agreed with Patten that the new allegations might have been categorised as further particulars of an existing cause of action.
Patten, dissenting, considered that while the allegations of conscious bias were factually very different from the claimant's existing case, the underlying duty and breach were consistent. The dispute concerned a single duty and single breach of the duty by the police authority; the duty was not to discriminate against any tenderers and the breach was the exclusion of D&G from the tender process. Therefore, even if proven, the new allegations would merely provide additional grounds on which it could be said that the core duty of equal treatment and non-discrimination had been breached. They could not give rise to separate and additional claims for damages, as in Steamship Mutual (which would have raised a new cause of action). If the court were to treat these allegations as new claims, it could be only on the basis that they established additional breaches of the same duty. However, Patten acknowledged that it is particularly difficult to determine whether pleading additional breaches of the same duty would constitute a new cause of action.
Patten, as with the majority, was not persuaded that the introduction of the proposed amendments into the reply, as opposed to the particulars of claim, could be treated as determinative in itself of whether they constituted a new cause of action. Once the allegations were in play in the action on liability, they were there for all purposes. Although the burden fell on the police authority to justify D&G's exclusion from the tender process, evidence that D&G's alleged breaches were little more than 'window dressing' to conceal a pre-determined bias in favour of another contractor must inevitably establish that there was, for that reason alone, also discrimination and unequal treatment.
The court therefore had to approach the matter in a wider manner to determine whether the new allegations could be introduced in the reply as relevant to the issue of liability. Patten considered that they could. Essentially, there was a single duty and a single breach. It therefore followed that even after the amendments, there was still only one cause of action. The principles of equal treatment and non-discrimination embodied in the regulations went to the legality of the act of exclusion. They did not provide separate causes of action for breach of the contracting authority's duty. D&G's case was and always had been that it was unlawfully excluded in breach of the regulations.
In delivering his judgment, Briggs commented: "The well-known phrase 'cause of action' has, notwithstanding its long life and well known attempts to do so, defied precise definition." This case provides some welcome guidance on this point, in particular on the contrasting comments between the majority and dissenting decisions, and is a good example of how the court will analyse a proposed amended case after a limitation period has expired.
Although the majority were swayed to find that there was an attempt to plead a new cause of action by the introduction of intentional wrongdoing, and the appeal failed, the court left open the possibility of some of the proposed amendments being incorporated into the reply as part of a rebuttal to the defence. However, this is likely to be narrow in application in light of Briggs's and Leveson's comments that, in doing so, it might still be difficult to avoid introducing a new claim.
(1) Steamship Mutual v Trollope & Colls  BLR 77.
(2) Paragon Finance plc v D B Thakerar & Co (A Firm)  EWCA Civ 1249.
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