TCC strikes out claim pursued under assignment where permission to amend sought after limitation had expired

Kennedys has recently been successful in striking out a substantial claim for damages due to the claimant’s fundamental misunderstanding of the practical effect of an assignment of a cause of action.

The facts

Kennedys acted on behalf of the defendant, a company which offers dispute resolution services to the construction industry, in relation to allegations of professional negligence. The allegations arose out of advice it provided to a contractor relating to the status of a building contract upon the death of the employer.

The claimant, who was the personal representative of the original employer under the building contract, sought to pursue a claim against the defendant pursuant to an assignment of the contractor’s cause of action.

It was apparent from the particulars of claim that the claimant had fundamentally misunderstood the effect of the assignment, which is effectively to allow the assignee to ‘step into the shoes’ of the assignor.

Instead, the claimant’s particulars of claim pleaded that the effect of the assignment was to impose a direct contractual relationship between the employer and the defendant, along with a corresponding duty of care in tort. This was incorrect, because even with the assignment, the defendant’s only duty of care was to the contractor.

The misunderstanding was reinforced by the losses claimed, which were the direct losses of the employer, rather than the losses that would have been recoverable by the contractor.

The applications

An application to strike out the claimant’s claim was lodged, on the basis that the claim, as pleaded, had no reasonable prospects of success.

It was more or less common ground that the unamended claim was incorrect. Therefore, the claimants made a cross application to amend the particulars of claim. The claimants’ application suggested that the errors in the particulars of claim were a genuine mistake, which ought to be corrected for clarity.

The claimants’ application to amend was further complicated by the fact that the limitation period had expired very shortly after the proceedings were issued. Accordingly, if the court decided that the amendments constituted a “new claim”, the claimants would need to show that the new claim arose out of the same, or substantially the same, facts.

The decision

The Judge dealt first with the claimant’s application to amend, finding that the amendments were “plainly” a new cause of action, rather than a correction of a mistake. Therefore, in order to succeed, they needed to show that the new cause of action arose out of the same, or substantially the same, facts as those already in issue. 

Helpfully, the Judge clarified that “the essential purpose of this rule … is to avoid placing the defendant in the position where, if the amendment is allowed, he will be obliged, after the expiration of the limitation period, to investigate facts and obtain evidence of matters which are completely outside the ambit of and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim”.

Ultimately, the court accepted the defendant’s argument that because the unamended claim was liable to be struck out, any investigation at all required by the defendant as a result of the amendment would put it to significantly more effort and expense than the unamended claim. This was because the unamended claim was bound to fail and so would require no investigation at all.

Taking all of the above into account, the court was satisfied that it did not have jurisdiction to allow the claimant’s amendments and that the claim must be struck out.

Comment

This case provides a useful practical reminder when dealing both with claims pursued under an assignment and in relation to those where amendments are sought after the relevant limitation period has expired.

Although the background facts here were reasonably complex, the claimant fell into a common pitfall that is encountered all too frequently when dealing with claims pursued under an assignment.

This was compounded by the fact that proceedings were issued at the very end of the limitation period. Had proceedings been issued even a few weeks earlier, the claimant may have been able to amend their claim without having to meet the relatively high hurdles that are imposed once the limitation period expires.

Read other items in the Professions and Financial Lines Brief - June 2018