A new cause of action can only be introduced by amendment if it arises out of substantially the same facts that remain in issue at the time of the amendment

Pleadings that have previously been struck out cannot be used to introduce a new, limitation-barred claim that arises out of substantially the same set of facts as the struck out claim according to the Court of Appeal in Libyan Investment Authority v King [2020] EWCA Civ 1690.

Background

The claim arises out of a failed joint venture between the parties to build a shopping centre in Hertfordshire, England. The claimants' amended particulars of claim was struck out by the judge at first instance on the basis that there was no reasonable prospect of any of the claims succeeding. However, the claim form was not struck out in order to give the claimants the opportunity to reformulate their claims in a viable manner.

These amended claims were "new claims" and therefore arguably statute-barred, but the claimants applied to amend their particulars of claim on the basis that a new claim can be pleaded after the limitation period has expired providing that it arises out of the same facts, or substantially the same facts, as an ongoing claim (CPR 17.4). The first instance judge allowed the amendment on the basis that the "new claims" arose out of the same facts those pleaded in the previously struck out claims.

The defendants appealed the first instance decision and were granted permission to appeal the decision on a single ground: that the Court had no power to grant permission to the claimants to amend their claim because there were no claims "in issue" in the case (providing facts from which a new claim could arise), as all of the claims had been struck out.

The Court of Appeal decision

The Court of Appeal allowed the appeal, unanimously finding that:

1. Whilst the words "in issue" do not appear in CPR rule 17.4, section 35 of the Limitation Act 1980, which does contain those words, should be read into CPR rule 17.4;
2. Once pleaded facts have been struck out from a pleading, they cease to be "in issue" or "already in issue"; and
3. Consequently, the claimants' amendment sought to introduce a new claim arising out of facts which had been struck out by the time the amendment was being considered.

However, by way of a majority decision, the Court of Appeal allowed the claimants to amend their claim under the "slip rule" in CPR 40.12 that allows for a mistake in an order or judgment to be corrected. The first instance judge had clearly intended to give the claimants the opportunity to reformulate a claim against the defendants based on facts in the re-amended particulars of claim; the order had failed to give effect to his intention because of the way in which the striking out and amendment appeared in the order. Therefore, the facts in the amended particulars of claim were not considered struck out, and the "new claim" could be introduced by the claimants as it would arise out of existing facts in issue in the dispute.

Comments

The Court of Appeal decision makes clear two key issues:

1. Parties cannot seek to introduce new claims after the expiry of the relevant limitation period if those claims arise out of facts which are not in issue in the dispute, irrespective of whether they had been in issue previously
2. The "in issue" wording of section 35 of the Limitation Act 1980 should be read into CPR rule 17.4.

Consequently, parties looking to discontinue a claim or defend a strike-out application should consider carefully the implications a strike-out could have on any future claims they may want to introduce by amendment.