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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Mercer Limited & Anor v Ballinger & Anor [2014] EWCA Civ 996 (17 July 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/996.html Cite as: [2014] Pens LR 669, [2014] EWCA Civ 996, [2014] WLR(D) 335, [2014] 1 WLR 3597, [2014] WLR 3597

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION,
MANCHESTER DISTRICT REGISTRY
His Honour Judge Pelling (sitting as a High Court Judge)
2MA30311

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th July 2014

Lord Justice Tomlinson :

1. CPR 17.4 permits, in certain cases, an amendment to a statement of case to introduce a new cause of action after the expiry of the limitation period applicable thereto. It gives effect to s.35 of the Limitation Act 1980. The circumstances in which such a claim may be introduced are that it arises out of the same facts, or substantially the same facts, as those already in issue in the claims as currently pleaded in the proceedings. Two questions arise on this appeal from His Honour Judge Pelling QC, sitting as a judge of the Chancery Division in Manchester. First, on the interlocutory application to amend, what is the proper approach to the determination of the threshold question whether the proposed new claim is time-barred, and in particular upon whom lies the burden of persuasion? Second, did the judge here reach a permissible conclusion on the question whether the proposed new claims arise out of the same facts, or substantially the same facts, as those already in issue in the claims as then currently pleaded in the proceedings?
2. In the description of the proceedings and of the judge's decision which follows I have borrowed extensively, with gratitude and without attribution, from the exceptionally clear and helpful skeleton arguments submitted by counsel on both sides.
3. The underlying claim is a professional negligence claim brought by the Claimants/Respondents who are the present trustees of an occupational pension scheme. The scheme provides contracted-out final salary type benefits to former employees of FirstCity Insurance Brokers Ltd later renamed FirstCity Partnership Ltd ("FirstCity"). The scheme closed to further accrual of benefits in 2001. FirstCity entered into liquidation following the sale of its business in May 2010. The scheme is in substantial deficit.
4. The claim is against the Appellants/Defendants who between 1993 and 1 January 2004 provided administrative and actuarial services to the scheme's then trustees. The claim concerns the preparation of actuarial valuation reports ("AVRs") by which the Appellants valued the assets and liabilities of the scheme and gave advice to the trustees regarding the level at which contributions to the scheme should be sought by the trustees from the employer, FirstCity. It is alleged that the Appellants were negligent in their valuations with the consequence that the liabilities of the scheme were understated. It is further alleged that in consequence of the Appellants' negligence the contributions sought by the trustees from FirstCity were lower than they should have been. The trustees are of course no longer able to seek further contributions from the employer. Their claim is therefore for the present value of such contributions as it is alleged would have been made had the trustees been properly advised as to the liabilities of the scheme and the level at which contributions should be sought from FirstCity. The loss claimed by the trustees is of the order of £14-15 million.
5. By way of brief explanation:

i) Where a member of a pension scheme leaves pensionable service before he is entitled to an immediate pension, then his accrued pension rights are 'deferred' until future payment. For example, if he left employment aged 40 and is not due a pension until age 65 it is 'deferred' in the interim.

ii) Because of the effects of inflation in the intervening period, pensions are now generally 're-valued' in the interim period.

iii) Some pension schemes are 'contracted-out' of the state pension scheme. This means that the members pay reduced national insurance scheme contributions, and lose their rights to a state earnings related pension scheme ('SERPS') pension, and instead their private pension scheme must provide certain minimum benefits. In relation to benefits accrued between 1 January 1985 and 6 April 1997 those minimum benefits are the "Guaranteed Minimum Pension" or "GMP".

iv) There are specific rules on the revaluation of the GMP element of contracted-out pensions.

v) There are various different, statutory, requirements for revaluation of the element of pensions in excess of GMP, but pension schemes can also make different provision for revaluation depending on their own terms, albeit within various tax related limits.

vi) Trustees of occupational pension schemes are required to obtain an AVR at regular intervals. Each AVR contains valuations of the scheme's assets and liabilities on a number of different bases of valuation. Thus, the AVR will usually contain an "ongoing" valuation (which assumes that the scheme will continue receiving contributions and paying benefits out of scheme assets) and a "discontinuance" or "solvency" valuation (which assumes that the scheme will terminate and pay such benefits as have accrued to date, generally by the purchase of immediate and deferred annuities). Further, between April 1997 (when the relevant provisions of the Pensions Act 1995 came into force) and December 2004 (when those provisions were repealed and replaced by the current statutory funding regime contained in the Pensions Act 2004), trustees were obliged to obtain a valuation of assets and liabilities on the prescribed statutory basis known as the Minimum Funding Requirement or "MFR". The MFR valuation was often contained within the AVR, although it required separate certification.

6. The Claim Form was issued on 3 July 2012. It alleged negligence and/or breach of contract in the period 1 January 1993 – 1 January 2004.
7. The Claim Form and Particulars of Claim were served on 14 December 2012 pursuant to an agreement to extend time for service of both. The Particulars of Claim alleged negligence by the Appellants in relation to three AVRs, namely those for 1996, 1999 and 2001.
8. The alleged defects in the 1996, 1999 and 2001 AVRs as pleaded in the Particulars of Claim are as follows:

i) Revaluation of deferred pensions in excess of GMP. The Respondents allege that the Appellants valued deferred pensions incorrectly. The incorrect rate of increase during the period of deferment (known as revaluation) was applied. The correct rate was 5% but the Appellants valued the benefit on the basis of a rate of the lower of 5% and RPI. This error is alleged in relation to each of the 1996, 1999 and 2001 AVRs.

ii) Increases to GMPs in payment. The Respondents allege that the Appellants valued GMPs incorrectly. The incorrect rate of increase once the GMP was in payment was applied. The correct rate was 3%, applicable to the entire GMP, but the Appellants valued the benefit on the basis of a lower rate of increase and/or at the correct rate, but applicable only to part of the GMP rather than the whole of it. This error is alleged in relation to the 1999 and 2001 AVRs only (the 1996 AVR was correct in this respect).

iii) Uniform accrual rate. The Respondents allege that the Appellants adopted an inappropriate assumption regarding the rate at which certain members' benefits would accrue under the Scheme. The correct rate of accrual was as stated in the rules of the Scheme for each category of member. The amount of a pension is subject to the Inland Revenue maximum limits, but a reduction is only to be applied to a member's pension if that limit is reached: in those circumstances, one way of reducing the pension so as to stay within the overall limit is to apply a reduced rate of accrual over the entire period during which the pension accrued. However, the Appellants assumed that a reduced rate of accrual applied to all members, irrespective of whether their benefits in fact infringed Revenue limits, calculated so as to ensure that all members' benefits would necessarily remain within the overriding limitations on the maximum value of their benefits at retirement age (a "uniform accrual rate" assumption). That resulted in liabilities being understated because reductions were assumed across the board, whereas only some benefits would in fact have had to be reduced. This error is alleged in relation to each of the 1996, 1999 and 2001 AVRs.

iv) Allowance for promotional increases. The Respondents allege that when valuing the Scheme's liabilities the Appellants should have included an allowance for increases in the value of members' benefits consequent on promotion to a higher salary band. Some such promotions would result in significant increases in pension benefits, because they would result in members moving to a higher accrual rate for all of their pensionable service. The Appellants made no allowance for this possible increase in liabilities. This error is alleged in relation to each of the 1996, 1999 and 2001 AVRs.

9. On 19 August 2013 the Appellants served their Defence. They contended that any alleged cause of action for negligence and/or breach of tortious duty is time-barred notwithstanding s.14A of the Limitation Act 1980. It is accepted that any contractual cause of action is time-barred. It is also accepted that s.14A applies only to tortious claims. In the alternative the Appellants reserved their position on the question whether the claims in negligence and/or breach of tortious duty are time-barred pending the provision of further information by the Respondents as to the earliest date on which the trustees first had both the knowledge required for bringing an action for damages in respect of the relevant damage and the right to bring such an action.
10. In their response to the Appellants' Part 18 Request served on 1 October 2013 the Claimants said that the earliest date on which they had relevant knowledge within the meaning of and for the purposes of s.14A of the Limitation Act was shortly after 31 August 2007. Specifically, request and response 7 provided as follows:-

"[Request 7]: With reference to paragraph 5 of the Defence, please specify and explain the earlier [sic] date on which the Claimants or any person in whom the cause of action was vested before them first had both the knowledge required for bringing an action of damages in respect of the relevant damage and a right to bring such an action (the 'Starting Date') within the meaning of section 14A of the Limitation Act 1980.

Response: The earliest date on which the Claimants had relevant knowledge within the meaning and for the purposes of section 14A of the Limitation Act 1980 was shortly after 31 August 2007, as explained in numbered paragraph 2 of Squire Sanders (UK) LLP's [Claimants' solicitors] letter to Maurice Turnor Gardner LLP [Defendants' solicitors] dated 9 July 2013. The Claimants are unable to be more precise than this, but they did not have relevant knowledge before 31 August 2007."

11. On 22 November 2013 the Respondents served an application seeking to amend the Particulars of Claim. Some of the amendments for which the Respondents sought permission were not opposed and neither the appeal nor the proposed cross-appeal concerns those aspects of the application.
12. The Appellants opposed 3 categories of proposed amendment, namely those referred to as the Category 4 Amendments, the Category 5(i) Amendments and the Category 5(ii) Amendments – by reference to the correspondingly numbered paragraphs of the application notice dated 22.11.13. As to these:

i) The Category 4 Amendments sought to introduce a claim in respect of further valuations prepared by the Appellants in 2002. The Respondents allege that the valuations in 2002 contained the same errors as those that are the subject of the existing claim as described above, namely as regards the revaluation of deferred pensions, GMP increases, uniform accrual and promotional increases. In short, the Category 4 Amendments seek to plead the same errors in relation to the valuations in 2002 as are already in issue in the existing claim. The Judge gave permission for these amendments. The Appellants appeal that decision and the Respondents seek to uphold it on an additional ground, as explained below.

ii) The Category 5(i) Amendments sought to allege a further breach of duty in relation to the error regarding the uniform accrual rate assumption that is already in issue in the claim. The original claim alleges that this error was negligent because the assumption adopted by the Appellants is contrary to the rules of the scheme. The amendment sought to allege that the same error was negligent for the additional reason that, as regards each of the MFR valuations^[1], the assumption was contrary to the prescribed MFR valuation methodology. In short, the Category 5(i) Amendments sought to allege that the same error as is already in issue was negligent for a further reason. The Judge gave permission for these amendments. The Appellants appeal that decision, but only insofar as it relates to the valuations in 2002, and the Respondents again seek to uphold it on the same additional ground, as explained below.

iii) The Category 5(ii) Amendments sought to allege a new error (pension increases). This concerns the basis on which pensions (in excess of GMP) in payment were valued. The Respondents contend that pensions in excess of GMP should have been valued on the basis that they increase in payment at 5% per annum but the Appellants valued them at a lower rate of increase, namely the lower of 5% and RPI, subject to a minimum rate of 3%. The Respondents allege that this was negligent both as being contrary to the rules of the Scheme and as being contrary to the prescribed MFR methodology. The former (rules-based) breach arises in relation to each of the 1996, 1999 and 2001 AVRs and the 2002 Valuation Letter; the latter (MFR) breach arises only in relation to the 1999, 2001 and 2002 MFR valuations – there being no MFR valuation in 1996. In short, the Category 5(ii) Amendments sought to introduce a new allegation of breach of duty, in relation to both the AVRs that are already in issue (1996, 1999 and 2001) and the valuations in 2002 that it is sought to include by these amendments. The Judge refused permission for these amendments and the Respondents seek permission to appeal that decision.

13. CPR 17.4 provides:

"(1) This rule applies where –

(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and

(b) a period of limitation has expired under –

(i) the Limitation Act 1980;

(ii) the Foreign Limitation Periods Act 1984; or

(iii) any other enactment which allows such an amendment, or under which such an amendment is allowed.

(2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.

(3) The court may allow an amendment to correct a mistake as to the name of a party, but only where the mistake was genuine and not one which would cause reasonable doubt as to the identity of the party in question.

(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings started or has since acquired."

14. Section 35 of the Limitation Act 1980 provides, so far as relevant:-

"35 New claims in pending actions: rules of court.E+W

(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced—

(a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and

(b) in the case of any other new claim, on the same date as the original action.

(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either—

(a) the addition or substitution of a new cause of action; or

(b) the addition or substitution of a new party;

and "third party proceedings" means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings.

(3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor the county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.

For the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action.

(4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose."

(5) The conditions referred to in subsection (4) above are the following—

(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and

(b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.

. . ."

15. It is accepted on all sides that the judge correctly set out the three stage test that the Claimants needed to satisfy before being granted permission to raise a new claim in an existing action:-

i) Is it reasonably arguable that the opposed amendments are outside the applicable limitation period?

ii) If so, do they seek to add or substitute a new cause of action?

iii) If so, does the new cause of action arise out of the same or substantially the same facts as are already in issue in the existing claim?

16. It is likewise accepted on all sides that each of the opposed amendments raises a new cause of action and thus a new claim for the purposes of the rule.
17. The contested claims are plainly all sought to be made outside the primary limitation period of six years. The Appellants' position before the judge was, and remains, that given the Respondents' response to the request for further information as to the earliest date on which they had the relevant knowledge for the purposes of s.14A of the Limitation Act 1980, the contested claims must have become time-barred in August 2010, i.e. three years after August 2007.
18. The Respondents countered this argument by reliance upon a witness statement dated 19 December 2013 of their solicitor, Victoria Leigh, a partner in Squire Patton Boggs (UK) LLP (then Squire Sanders (UK) LLP). In that witness statement Miss Leigh said:-

"7.1 . . .the Disputed Amendments relate to 3 issues; the extension of the claims currently pleaded to include the 2002 AVR, a breach of duty in relation to the prescribed MFR valuation methodology and a breach of duty in relation to the calculation of pension increases in excess of GMP.

7.2 All these issues first came to the Claimants' attention as potential claims against the Defendants in July 2013 during the course of discussions with their expert actuary who was instructed to advise on the quantum of the claim."

19. The judge held:

1. that the Appellants had a reasonably arguable case that the new claims (i.e. those contained in the Category 4, Category 5(i) and Category 5(ii) Amendments) are all statute-barred and

2. that the Category 4 and Category 5(i) Amendments did, but the Category 5(ii) Amendments did not, arise out of the same or substantially the same facts as are already in issue in the proceedings.

20. On this appeal:-

1. the Respondents argue that the Judge's decision on the limitation issue was wrong and that his decision to permit the Category 4 and Category 5(i) amendments should be upheld for the additional or different reason that, the limitation period not having expired, permission should be granted under CPR 17.1(2)(b), which provides that where a statement of case has been served a party may amend it with the permission of the court;

2. the Appellants have permission to appeal the Judge's decision on the "substantially the same facts" issue as regards the Category 4 and Category 5(i) Amendments, insofar as they relate to the 2002 valuations;

3. the Respondents have permission to appeal the Judge's decision on the "substantially the same facts" issue as regards the Category 5(ii) Amendments.

Limitation

21. The judge held that whilst, in principle, the explanation given by Miss Leigh might on investigation be taken as justifying a date of knowledge for the Category 5(i) and 5(ii) Amendments different from 31 August 2007 as asserted for the original claims, the same could not be said for the Category 4 Amendments which alleged that the 2002 valuations were negligent for the same reasons as already advanced in respect of the 1996, 1999 and 2001 AVRs. As the judge succinctly put it at paragraph 16 of his judgment:-

"If the claimant had the knowledge relevant to the pleaded claims relating to the 1996, 1999 and 2001 AVR in or about August 2007, it is wholly unexplained why the claimant did not have or could not reasonably have acquired the same knowledge in relation to what is described by the claimants as the 2002 AVR."

22. In relation to the Category 5(i) and 5(ii) Amendments the judge went on to say this:-

"17. I now turn to the category 5 proposed amendments. Miss Lee's (sic) evidence relevant to the issue I am now considering is little more than bare assertion. It is asserted that in fact knowledge that the loss allegedly attributable to the breaches the claimant now wishes to advance were attributable to the negligence of the defendant was only acquired as a result of advice from an expert. What is not explained at all is why it was reasonable for such expert advice in relation to what, on any view, is a technically complex case, to be taken or given in July 2013, rather than prior to the commencement of the proceedings or why, if expert advice was taken prior to the commencement of the claim, that advice did not include that which it is asserted was first given in July 2013. This sort of piecemeal approach to litigation adds greatly to the length, complexity and thus the cost of litigation, involves a disproportionate use of court time as the hearing of this application demonstrates and is at least arguably contrary to the Overriding Objective as it is now formulated. In any event, the date when the claimant might reasonably have been expected to acquire the relevant knowledge will depend on a factual investigation at trial following disclosure and cross-examination. That is not possible on an application of this sort. As I have noted already, both parties asked me to determine this application as a conventional application for permission to amend.

18. In my judgment, the defendant has passed the relatively low threshold test applicable to the question I am now considering in the context of an application for permission to amend because (i) the claims are and have for some time been barred applying the six-year limitation period, (ii) an earlier date of knowledge has been asserted in relation to the claims currently pleaded without explaining, in detail and otherwise than by bare assertion, why the same date could not reasonably apply to the proposed new claim; (iii) no explanation is offered as to why the relevant knowledge could only be acquired with the help of an expert when such was apparently not the case in respect of the claims as they are currently pleaded, or (iv) if an expert was consulted prior to the commencement of proceedings why the relevant advice could not reasonably have been given at that stage."

23. The Respondents assert that the judge was wrong to reject Miss Leigh's evidence. They suggest that the most that a claimant can do is to assert clearly its date of knowledge and that it cannot be expected to prove a negative. They suggest that in order for the Appellants to demonstrate an arguable limitation defence, the onus is on them to adduce evidence, or to advance some argument, which casts real doubt on the Respondents' evidence that they only acquired relevant knowledge within the last three years. The Appellants, they suggest, did not do that. They simply indicated that they did not accept Miss Leigh's evidence and would seek to undermine it at trial. That provided no basis for rejecting the assertion, bare or otherwise, as to the Respondents' date of knowledge.
24. It was common ground that the question for the judge was whether the Appellants had a reasonably arguable case on limitation. The debate resolved to the question on whom rests the burden of persuasion.
25. It must be borne in mind that the context of the debate is the doctrine of relation back introduced by s.35(1) of the Limitation Act 1980. If a new claim is permitted by way of amendment it is treated as having been made by way of a separate action commenced on the same date as the original action. So where an amendment is permitted to introduce a new claim which was in time at the date of commencement of the action but arguably out of time on the date on which permission to amend is granted, the defendant is thereafter precluded from reliance at trial on the arguable limitation defence.
26. The situation in which the court finds itself on an application to introduce a new claim which does not arise out of the same or substantially the same facts as are already in issue in the original action is summarised by Jackson LJ in Chandra v Brooke North [2014] TCLR 1 at paragraphs 65-67 of his judgment:-

"65. If a claimant seeks to raise a new claim by amendment and the defendant objects that it is barred by limitation, the court must decide how to proceed. There are two options. First the court could deal with the matter as a conventional amendment application. Alternatively, the court could direct that the question of limitation be determined as a preliminary issue.

66. If, as is usually the case, the court adopts the first option, it will not descend into factual issues which are seriously in dispute. The court will limit itself to considering whether the defendant has a "reasonably arguable case on limitation": see WDA at 1425 H. If so, the court will refuse the claimant's application. If not, the court will have a discretion to allow the amendment if it sees fit in all the circumstances.

67. If the court refuses permission to amend, the claimant's remedy will be to issue separate proceedings in respect of the new claim. The defendant can plead its limitation defence. The limitation issue will then be determined at trial and the defendant will not be prejudiced by the operation of relation back under section 35 (1) of the 1980 Act."

27. What that passage does not spell out is upon whom lies the burden of persuasion. Working from first principles however it is plain that, provided the defendant can show a prima facie defence of limitation, the burden must be on the claimant to show that the defence is not in fact reasonably arguable. The claimant is after all in effect inviting the court to make a summary determination that the defence of limitation is unavailable. If the availability of the defence of limitation depends upon the resolution of factual issues which are seriously in dispute, it cannot be determined summarily but must go to trial. Hence it can only be appropriate at the interlocutory stage to deprive a defendant of a prima facie defence of limitation if the claimant can demonstrate that the defence is not reasonably arguable.
28. Authority for that approach can be found in two decisions of this court. In Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409 Glidewell LJ, giving the judgment of the court consisting also of Simon Brown and Peter Gibson LJJ, said, at page 1425, that in a case where s.35(1) does, or may well, give the plaintiff an advantage, permission to amend by adding a new claim should not be given "unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation which will be prejudiced by the new claim, or can bring himself within RSC Order 20 Rule 5". RSC Order 20 rule 5 is the precursor of CPR 17.4. That passage was applied by Millett LJ in Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400 who said, at page 404, that "by this means the injustice to the defendant of depriving him of an arguable limitation defence is avoided without denying the plaintiff the right to bring a fresh action to which, if he is correct, there is no limitation defence".
29. Accordingly, in approaching the first stage of the three-fold enquiry to which I referred at paragraph 15 above, if the defendant can raise a prima facie defence of limitation, the judge should only conclude that the proposed amendments are not outside the limitation period if the claimant can show that the defence is not reasonably arguable.
30. In a case where s.14A of the Limitation Act is in play, it must also be remembered that the court is concerned not just with the claimant's actual knowledge at a certain date but also with knowledge which he might reasonably have been expected to acquire, including knowledge ascertainable with the help of appropriate expert advice where it would have been reasonable for him to seek such advice. Thus a bald assertion such as that made by Miss Leigh at paragraph 7.2 of her witness statement, even when taken at face value, is not conclusive of the question whether the Respondents can successfully invoke s.14A. Miss Leigh simply does not address the question whether, for example, the Respondents might reasonably have been expected to realise in August 2007, when allegedly they became aware that the 1996, 1999 and 2001 AVRs had, with one exception identified above, been prepared upon the basis of four errors common to all valuations, that the 2002 valuations contained the same errors. Indeed it is difficult to understand why the Respondents would not have been looking at all four of the valuation processes, particularly having identified four errors common to the first three valuations. This says nothing as to what expert advice it would have been reasonable to seek at that stage.
31. Mr Jonathan Evans QC, for the Respondents, observed that had the Respondents had actual knowledge of the errors in the 2002 valuation at an earlier date, then of course they would have introduced a claim in respect thereof earlier. This is a non-sequitur, but it is with respect in any event beside the point, as was his submission that a party cannot be fixed with knowledge that an expert should have imparted if the expert got it wrong. There is in any event no evidence to support the notion that the Claimants were badly advised in 2007. Miss Leigh's bare assertion is consistent with expert actuarial advice in respect of the 2002 valuations only having been sought in 2013.
32. In my view the judge's approach to the limitation question was impeccable, both in relation to the Category 4 amendments and in relation to the Category 5(i) and 5(ii) Amendments. The Respondents did not show, and in my view did not come close to showing, that the Appellants have no reasonably arguable limitation defence to the new claims, and permission to amend should not therefore have been granted pursuant to CPR 17.1(2)(b). The judge answered question one of the threefold enquiry correctly and in the affirmative. It is important to appreciate that his determination was not a final determination that the relevant claims are time-barred. His finding was that the Appellants have a reasonably arguable case that they are time-barred. That does not preclude the Respondents from issuing separate proceedings in which they will seek to prove that the claims are not in fact time-barred, as they have indeed done. Thus the judge was in my view right to identify as decisive of the application before him the question whether the proposed amendments or any of them arise out of the same facts or substantially the same facts as those already in issue in the claims as then currently pleaded.

The same or substantially the same facts

33. Although he did not refer to authority, the judge correctly formulated the relevant question in this manner in the light of the decision of this court in Goode v Martin [2002] 1 All ER 620. That question derives from s.35(5) of the Limitation Act 1980, the language of which, as pointed out in that case, is not accurately or faithfully reproduced in CPR 17.4.
34. Helpful guidance as to the proper approach to the resolution of this question was given by Colman J in BP plc v Aon Ltd [2006] 1 Lloyd's Rep 549 where, at page 558, he said this:-

"52.At first instance in Goode v. Martin [2001] 3 All ER 562 I considered the purpose of Section 35(5) in the following passage:

"Whether one factual basis is 'substantially the same' as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after 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."

53. In Lloyd's Bank plc v. Rogers [1997] TLR 154 Hobhouse LJ. said of Section 35:

"The policy of the section was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arises from those facts."

54. The substance of the purpose of the exception in subsection (5) is thus based on the assumption that the party against whom the proposed amendment is directed will not be prejudiced because that party will, for the purposes of the pre-existing matters [in] issue, already have had to investigate the same or substantially the same facts."

35. In the Welsh Development Agency case Glidewell LJ said, in an often quoted passage at page 1418, that whether or not a new cause of action arises out of substantially the same facts as those already pleaded is substantially a matter of impression.
36. Less well-known perhaps is the cautionary note added by Millett LJ in Paragon Finance, where at page 418 he said, after citing the passage from Glidewell LJ to which I have just referred:-

"In borderline cases this may be so. In others it must be a question of analysis."

37. I would also point out, as did Briggs LJ in the course of the argument, that "the same or substantially the same" is not synonymous with "similar". The word 'similar' is often used in this context, but it should not be regarded as anything more than a convenient shorthand. It may serve to divert attention from the appropriate enquiry.
38. I acknowledge straightaway, as did counsel before us, that on this part of the case we were given far more assistance than was the judge. Whilst I would accept that the judge did not misdirect himself, he did not in my view carry out a sufficient analysis of the extent to which the Appellants would be required by the new claims to embark upon an investigation of facts which they would not previously have been concerned to investigate.

The Category 4 Amendments

39. These relate to the 2002 valuations which are not mentioned in the original Particulars of Claim or in the Defence or in the Reply. As is apparent from paragraph 12A of the proposed amendment, the 2002 valuations were triggered by the inability of the scheme actuary to certify that the contributions being paid by FirstCity were sufficient to meet the statutory MFR. The reporting date was thus brought forward and the 2002 Valuation Letter, not a formal finalised AVR, was produced on 18 December 2002. A formal MFR Valuation was produced on 30 December 2002. As already noted, the scheme had been closed to future accrual of benefit during 2001 so that what was being valued as at 1 January 2002 was a scheme different in kind from that which had last been valued as at 1 January 2001. The particular and changed circumstances in which the 2002 valuations were conducted will have to be investigated. So too will the nature of the negotiations at this time between the scheme trustees and FirstCity, as it cannot be asserted that just because FirstCity as from 1 February 2003 met the requests for contributions to which the 2002 valuations gave rise, so too FirstCity would have been able and willing to pay the necessarily enhanced contributions indicated by a valuation carried out on a significantly different basis, as the trustees now allege it should have been. Furthermore, the 2002 Valuation Letter itself raised a question as to the appropriate basis of valuation. The Valuation Letter included valuations on the basis of four different assumptions, or bases, A, B, C and D. In that letter Mr Field said:-

"We would need to discuss whether or not [Basis D] would be appropriate as it uses a higher equity risk premium now than as at the valuation date."

Manifestly, the Appellants would be required now to investigate the shape of the discussions which took place in response thereto. The question also arises as to whether in different financial conditions from those which had obtained earlier the scheme trustees would have had to consider reducing benefits rather than simply increasing contributions.

40. In this regard I did not find persuasive Mr Evans' submission that the valuation process should be regarded as one of adjusting and updating the previous report, so that the actuaries did not on each occasion start with a blank sheet of paper. It seems to me that the actuaries would be subject to legitimate criticism if they approached their task in this manner. No doubt there is an element of building on past work, but surely a proper valuation necessarily involves an assessment whether assumptions and bases of valuation adopted in the past still hold good. Each valuation is, or should be, an independent and freestanding exercise.
41. Mr Evans submitted that the 2002 valuations are in any event in play because the quantum of contributions which would have been sought on the counterfactual hypothesis of properly conducted valuations will necessarily take into account to what level of contributions a properly conducted 2002 valuation exercise would have given rise. I do not follow this point. On the basis of the unamended pleading it would not have been open to the trustees to assert, in the context of the analysis of the loss to the scheme, that the 2002 valuations should have been conducted on a basis which would have given rise to a level of contribution other than that which was in fact sought by the trustees.
42. The judge regarded the introduction of the claims in respect of the 2002 valuations as analogous to the introduction permitted in the Welsh Development Agency case of the claim in respect of ten further buildings in addition to the two units in respect of which the action had been commenced. The analogy is however unsound. All twelve units had been constructed at essentially the same time, between October 1980 and November 1981, and in reliance on the same advice from the defendant structural engineers that the floor slabs of the buildings, as opposed to other parts of the structure, did not require piled foundations. The 2002 valuations were, obviously, produced at a different time than earlier valuations, in different conditions, in different form and on the basis of different data and different assumptions. In my judgment the judge was misled by this false analogy and in consequence reached the wrong conclusion. In my judgment it is clear that the Category 4 Amendments do not arise out of the same or substantially the same facts as are already in issue on the existing claims and should not be permitted.

The Category 5(i) Amendments

43. It is now accepted that the judge was entitled to regard these amendments, insofar as they relate to the 1999 and 2001 AVRs, as arising out of substantially the same facts as are already in issue. However it necessarily follows from what I have already said about the Category 4 Amendments that I regard as insupportable his decision to permit these amendments so far as they relate to the 2002 valuations.

The Category 5(ii) Amendments

44. The judge regarded these amendments as raising for the first time an entirely separate allegation not previously raised in any form. They brought into play "a wholly new set of facts and calculations in relation to a different benefit," i.e. pensions in excess of GMP which were actually in payment at the time of the respective valuations.
45. As I understand it, these amendments relate to the manner in which there should have been valued benefits in payment which were themselves subject to a discretionary deduction, in the sense that the trustees had the power, never apparently exercised, to limit the otherwise prescribed annual rate of increase of the pension insofar as it exceeded GMP. This gives rise to a completely new enquiry which, albeit in a familiar context, raises new and different questions as to how this particular aspect was dealt with in the entire period between 1999 and 2002. Axiomatically, it opens up a new front in the enquiry as to the likely consequences of the valuations having been prepared in the manner in which it is alleged that they should have been.
46. It is true that the benefit to which these proposed amendments relates is not in one sense a different benefit from those already under consideration, for the element of a pension in payment which is in excess of GMP is part and parcel of a single pension which by definition must include also the element of GMP. But I do not think that this carries the matter any further. The Respondents accept that what is asserted is an entirely new breach of duty, albeit the duty is the same as that already relied upon. The enquiry is not however whether it is a breach of a similar nature to those already pleaded, but whether it will give rise to new and distinct enquiries. So the fact that it is an error which is said to have affected three sets of valuation reports which are already the subject of enquiry again takes one nowhere.
47. The judge noted at paragraph 31 of his judgment that Steamship Mutual v Trollope & Colls [1986] 33 BLR 77 was a case where an amendment was advanced by reference to the same duty as already pleaded. There, the breach initially alleged gave rise to alleged defects in the air-conditioning system. The proposed amendment, which was disallowed, alleged that the relevant duty had additionally been breached in a manner which gave rise to defects in the brickwork. It was suggested by Mr Evans that the judge drew false comfort from this case, as the reason why the amendment was disallowed was because its consideration involved a different discipline from that already engaged in consideration of the existing claim. Here there is a single discipline, actuarial valuation. It is true that in Steamship Mutual the first defect was said to engage questions of mechanical engineering whilst the second engaged questions of civil engineering, but that was simply one aspect of the different factual enquiry to which the two allegations gave rise. The judge was I think right to identify this case as indicating that the fact that the new claims are based on the same duty as that already invoked in relation to the original claims did not assist him in answering the question with which he was concerned.
48. In my view the judge reached the correct conclusion on this part of the case. I would dismiss the cross-appeal.
49. It follows that I would allow the appeal and dismiss the cross-appeal.

Lord Justice Briggs :

50. I agree.

The Master of the Rolls :

51. I also agree.

Note 1   i.e. the MFR valuation within each of the 1999 and 2001 AVRs and the separate 2002 MFR Valuation. The 1996 AVR does not contain an MFR valuation as it predates the MFR legislation. The Category 5(i) Amendments do not relate to the 1996 AVR.    [Back]