Jersey Unreported Judgments

Construction - application by the Plaintiff to amend its particulars of claim

[2024]JRC159

Royal Court

(Samedi)

24 July 2024

Before     :

Advocate David Michael Cadin, Master of the Royal Court.

 

Advocate J-M. G. Renouf for the first Plaintiff.

Advocate F. J. Littler for the Defendant.

judgment

the MASTER:

1.        This is my judgment in relation to an application by the Plaintiff to amend its Particulars of Claim.

Background

2.        Mr and Mrs Mitchell are the majority shareholders of the Plaintiff building company.  In 2021, the Defendant got engaged to their eldest daughter and discussions came about in relation to procuring assistance with the renovation of a property.

3.        There does not appear to have been any written contract between the parties and the Plaintiff's Particulars of Claim plead that:

"6.  The parties to the contract were the Plaintiff and the Defendant. The Plaintiff contracted through Mr Mitchell, its Managing Director. The Defendant had capacity to, and did, contract for himself.

7.  The Defendant had no drawings, specifications, or other scoping information. Work would be undertaken in accordance with his instructions and invoiced accordingly."

4.        Work started at the property in October 2021 and the Plaintiff issued invoices in respect of the works done.  By July 2022, the Defendant had apparently run out of money.

5.        In January 2023, the relationship between the Defendant and Mr and Mrs Mitchell's daughter broke down.  The property was sold in February 2023 but according to the Plaintiff, the outstanding invoices amounting to £102,503, were not paid.

6.        The Defendant denies that he engaged the Plaintiff to carry out the works and avers that there was an informal, family arrangement between him and his then fiancée and future father-in-law. He pleads that:

(i)        he purchased the property using £285,000 loaned by his father and the balance using a loan from a third-party company and he planned to repay these loans out of the sale proceeds of the property.

(ii)       Mr and Mrs Mitchell's daughter told her parents that the Defendant had £100,000 available for the renovation.  She insisted that Mr Mitchell help the Defendant with the development and Mr Mitchell agreed to do so.  Mr Mitchell said that the works might cost "a bit more" but that the final amount would not "be too far off". In fact, the invoices raised by the Plaintiff total more than £366,000, which the Defendant says, is an actionable breach of the representations previously made.

(iii)      there were delays in the completion of the works caused by the Plaintiff which required him to incur additional borrowing fees.

7.        Directions were given and the proceedings were stayed for the purposes of ADR, albeit that no settlement was reached.  In January 2024, the case came back for further directions and since then, discovery has occurred.

8.        As part of that discovery, the Defendant produced the loan agreement with his father which evidences that he and his wife ("Mr and Mrs Long") loaned the Defendant £275,000 for the purchase of the property and further provides that:

"4.1 The loan will not bear any interest but will demand payment of 50% of any profits after [the property] has been sold and the initial loan amount repaid."

9.        The Plaintiff relies upon this document to assert that the Defendant was in partnership with Mr and Mrs Long, that the Defendant was acting on behalf of the partnership rather than on his own account.  The Plaintiff therefore brings an application to amend the Particulars of Claim accordingly, and to add Mr and Mrs Long as Second and Third Defendants respectively.

Relevant Law

10.     A partnership does not have its own, separate legal identity and the Royal Court held in Golder v Le Quesne and Thacker (practising as Viberts) [1993] JLR 344:

"Each partner is responsible jointly and severally for the actions of the partnership and each must be sued in any particular action that is brought against the partnership".

11.     Accordingly, if the partnership is to be sued, Mr and Mrs Long will have to be joined.

12.     In Cannon v Nicol [2006] JLR 299, Birt, DB, held that:

"The law of partnership

93 We must first decide what in fact the plaintiff and defendant agreed to do. Having done so, we must then determine whether that agreement amounts to one of partnership or something else (e.g. loan). In this respect, it does not matter whether the parties used a particular label to describe their relationship. As Lord Templeman put it in Street v. Mountford (6) ([1985] 2 All E.R. at 294):

"Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they have only created a licence. The manufacture of a five- pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade."

94 We must therefore consider the constituent elements of a partnership. These were helpfully reviewed by Bailhache, Bailiff in the recent case of Bennett v. Lincoln (1). The court approved Pothier's definition of a contrat de société (Traité du Contrat de Société, para. 1, at 443 (1827 ed.)):

"Le Contrat de Société est un contrat, par lequel deux ou plusieurs personnes mettent ou s'obligent de mettre en commun quelque chose, pour faire en commun un profit honnête, dont ils s'obligent réciproquement de se rendre compte."

95 The court went on to approve the four characteristics which Pothier states are essential to a partnership as follows (in translation) (2005 JLR 125, at para. 21):

"(i) That each of the parties brings or obliges itself to bring something to the arrangement;

(ii) that the arrangement is established for the common benefit of each of the parties;

(iii) that the parties propose, by the arrangement, to make a gain or profit in which each of the contracting parties can hope to have a share of what it has brought to the arrangement; and

(iv) that the business which is the object of the arrangement and for which the contracting parties entered into the arrangement should be something lawful and that the profit which they propose to withdraw should be an honest profit.""

13.     However, as Bailhache B noted in Bennett v Lincoln [2005] JLR 125:

"22 It must be remembered, however, that a partnership is a contract and like all contracts there must be a meeting of minds between the parties. The first prerequisite of a valid contract is consent; have the parties agreed to create this contractual relationship? That is an issue of fact for the Jurats."

14.     As to amendment, I noted at paragraph 23 of Carmichael v Alderton [2024] JRC 036:

"23. The principles in relation to amendments are well known and were set out by Birt Deputy Bailiff, in Cunningham v Cunningham [2009] JLR 227 and succinctly summarised by Clyde-Smith Commissioner in Financial Technology Ventures II (Q) LP and Ors v ETFS Capital Limited and Tuckwell [2020] JRC 152 (at paragraph 11) as follows:

(i) The general position is that all matters in dispute between parties should be resolved so far as possible before the Court at trial. Leave to amend should, therefore, be given if there is no prejudice to the other side which cannot be compensated for by costs (at paragraph 15).

(ii) Amendments will not be permitted which infringe the rules of pleading or introduce a claim which is so hopeless that it would be liable to be struck out (at paragraph 19).

(iii) More stringent considerations apply where an application to amend is late (at paragraph 17) and if (and only if) the Court considers that an amendment is 'late' it may then consider (at paragraph 21);

(a) why the amendment material could not have been pleaded earlier;

(b) the strength of the new case;

(c) whether and why an adjournment ought to be granted;

(d) how to remedy any adverse effects attendant upon the amendment being granted; and

(e) why the balance of justice favours the party seeking to amend at a late stage."

The Parties' Respective Submissions

15.     The parties are agreed that these amendments are not late; discovery has only just occurred, no trial date has been fixed and the more stringent considerations, set out above, do not apply.  I agree.

16.     The Plaintiff submits that, as set out in the first paragraph of Cunningham v Cunningham [2009] JLR 227 (summarised above), all matters in dispute between parties should be resolved so far as possible before the Court at trial and leave to amend should, therefore, be given to make the claim against the partnership.

17.     In contrast, the Defendant submits that:

(i)        the claim against the partnership would be liable to be struck out under RCR 6/13 as disclosing no reasonable cause of action (Rule 6/13(a)); and/or as it may prejudice, embarrass or delay the fair trial of the action (Rule 6/13(c));

(ii)       given the amount of the claim, the fact that the Defendant is impecunious and the likely cost of joining the Defendant's father and step-mother, making amendments to pleadings in this case would be contrary to the Overriding Objective and in particular RCR 1/6(2)(b), (c) and (d):

"(b) saving expense;

(c) dealing with the case in ways which are proportionate (i) to the amount of money involved... (iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly."

18.     The test for striking out is well known and was set out by Beloff JA in Trant v AG [2007] JLR 231:

"22 The test on an application to strike out is well established. It is only where it is plain and obvious that the claim cannot succeed that recourse should be had to the court's summary jurisdiction to strike out. Particular caution is required in a developing field of law. Provided that a pleading discloses some cause of action or raises some question fit to be decided by a judge, jurats or jury, the mere fact that a case is weak is not a ground for striking it out. These propositions are vouched for by a wealth of Jersey authority embracing principles deployed by the courts of the United Kingdom, see e.g. In re Esteem Settlement (6) (2000 JLR at 127) (we note en passant that a new regime, arguably more favourable to an application to strike out, has been introduced in England and Wales by the Civil Procedure Rules).

23 On an application to strike out under sub-para. (a) of r.6/13(1) (that there is no reasonable cause of action) evidence is not admissible. The facts alleged in the Order of Justice must be taken as correct. However, where an application is made under sub-para. (b) (scandalous, frivolous or vexatious), or sub-para. (d) (abuse of process), or where the application to strike out is made out under the inherent jurisdiction of the court, evidence is admissible and may be considered by the court. It follows that, on this application, evidence was and is admissible."

19.     In this application, no evidence has been adduced.  Instead, the Defendant submits that on the face of the amended pleading, the claim is bound to fail given that:

(i)        the Plaintiff's amended claim is on the basis that it contracted with the partnership, and the partnership alone (paragraphs 7 and 8 of the draft Amended Particulars of Claim) as opposed to the current claim which is that it contracted with the Defendant and the Defendant alone;

(ii)       the Plaintiff was unaware of the existence of the "partnership" until after discovery in these proceedings (paragraph 4 of the draft Amended Particulars of Claim);

(iii)      whilst the loan document might involve profit sharing, beyond pointing to the terms of the loan document, the Plaintiff can give no evidence about the actual agreement between the Defendant and his father and step-mother, nor has it pleaded any details of when, where or how that agreement was reached;

(iv)     as Bailhache B noted in Bennett v Lincoln, the substance of that agreement is the critical element in any analysis and in the absence of such additional evidence, the Plaintiff's claim is bound to fail;

(v)      particularly as the Defendant will say that there was no partnership; and

(vi)     there cannot have been a "meeting of minds" (a relevant factor in Bennett v Lincoln): the Plaintiff cannot have had the requisite intent to form a contractual relationship with the "partnership" and the Defendant will say he would not have "represented, and acted on behalf of, the Partnership" (paragraph 6 of the draft Amended Particulars of Claim).

20.     Whilst there may be some force to these submissions, as Beloff JA noted, "the mere fact that a case is weak is not a ground for striking it out."  The claim itself must be deficient and no evidence is admissible in relation to that assessment.  In my judgment, the Defendant's submissions are based on evidential matters, and I cannot take them into account when determining whether the claim against the partnership is one that cannot succeed.  Further, this is not a late amendment, and the strength or weakness of the new case is not, therefore, a relevant issue provided that the claim is not obviously incapable of succeeding.

21.     In my judgment, the pleaded claim against the partnership is a tenable claim and it will be a matter for the Jurats to determine whether the contract between the Defendant and Mr and Mrs Long was one of simple loan or partnership.

22.     As to the Overriding Objective, most amendments will involve some additional work and/or cost and/or court time, particularly where additional parties are joined.  The Defendant points to the fact that there will be additional pleadings, additional discovery, additional witness statements, a longer time estimate for trial and a prolonging of the inevitable human toll of litigation.  Whilst all these matters may be true, the amendment, made shortly after discovery has occurred, is intended to add the alleged partnership as a potential defendant and to raise a claim, in the alternative, against the Defendant.  In my judgment, that is not such a significant amendment that it offends the Overriding Objective.  In my judgment, this is a claim that can be managed under the Royal Court Rules and in accordance with the Overriding Objective, notwithstanding the modest sum in issue.  In my judgment, this objection does not provide a proper basis for rejecting the proposed amendments.

The Specific Amendments

23.     The proposed amendments plead the existence of the partnership, the contract with the partnership, matters consequential upon the pleading of the existence of the partnership, and certain unrelated amendments apparently added for clarity and accuracy.

24.     In my judgment, none of these proposed amendments infringe the rules of pleading or introduce a claim which is so hopeless that it would be liable to be struck out.  Nor are they inconsistent with matters pleaded by the Plaintiff in its Reply or Answer to Counterclaim.

25.     Accordingly, I give permission for the Plaintiff to amend the Particulars of Claim in accordance with the draft provided, subject to minor further amendments necessary to plead a claim against the Defendant in the alternative (which was omitted from the draft).

Costs

26.     The Defendant seeks an order in what is described as the usual terms, as set out in Monteagle International Limited v Grocery Market Research [2022] JRC 261:

"12...I accept, of course, that the usual or conventional order in such cases is that the amending party should pay the costs of and occasioned by the amendment. The reasons for this conventional award are conveniently summarised in the judgment of Mann J in Various Claimants (supra) at [33]-[35] in the following terms:

"33. The normal or usual rule as to costs of amendment appears in Taylor v Burton [2014] EWCA Civ 21, as applied by Mr Roger Ter Haar QC in Benyatov v Credit Suisse Securities (Europe) [2020] EWHC 3328 (QB). In the former case, Rimer LJ said:

'30. Mr Butler reminded us that the general rule is that those who obtain permission to amend are ordered to pay the other parties' costs of and occasioned by the amendment. He referred us to paragraph 17.3.10 in the notes to Volume 1 of Civil Procedure, which records that such orders are 'often' made; and to paragraph 8.5 of The Costs Practice Direction, which records that such orders are 'commonly' made. Both references reflect judicial practice with which anyone with experience of contentious litigation will be familiar."

34. Mr Ter Haar's judgment repeats the extent to which that is a common order.

35. It is not, however, an inevitable order. Practically all costs are ultimately within the discretion of the judge - CPR44.2. If it is the case (and it is) that the normal order is that the amended against party should have the costs of and occasioned by the amendment then there must be some reason for it. I have been unable to find that reason articulated in authority, but in my view it must be that in the normal case a party's change of tack in the course of litigation is of that party's own volition and it is right that the other party should have the costs of that voluntary change, particularly where the amending party might have included the amendments in the initial pleading. Where the amended claim might have been made at the outset then the amended against party would have had to plead only once. That seems to have been the case on the facts of both Taylor v Burton and Benyatov. As a result of the amendment extra costs are incurred in having to revisit the pleading which would have been avoided had the pleading been in the amended form in the first place, and it is right that the amending party should bear those costs."

13. This explanation of the underlying reasoning for the conventional order helps to explain what is meant by the costs of and occasioned by the amendment. The order is intended to ensure that work done by the amended against party which only has to be done because the amending party's pleading is being amended should be paid for by the amending party. So, in the ordinary case, the amended against party is entitled to recover the costs of reviewing a proposed amendment and deciding whether it should be agreed or opposed. Such work would not be necessary if the amending party were not seeking to amend its pleading. Similarly, the amended against party is entitled to recover the costs incurred in amending its own pleading so as to respond to the other party's amended pleading if it is allowed.""

27.     In my judgment that is the appropriate order in this case.

28.     As to the costs of the application itself, in my judgment, the hearing was necessary, if only to address the absence of a claim in the alternative in the draft.  In my judgment, the appropriate order is for the costs of the hearing to be costs in the cause.

Authorities

Golder v Le Quesne and Thacker (practising as Viberts) [1993] JLR 344. 

Cannon v Nicol [2006] JLR 299. 

Bennett v Lincoln [2005] JLR 125. 

Carmichael v Alderton [2024] JRC 036. 

Cunningham v Cunningham [2009] JLR 227

Trant v AG [2007] JLR 231. 

Monteagle International Limited v Grocery Market Research [2022] JRC 261.