Neutral Citation Number: [2012] EWHC B12 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Rolls Building,
Fetters Lane,
London EC4A 1NL

10th May 2012

Before:

THE HONOURABLE MR JUSTICE EDWARDS-STUART

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B E T W E E N

ARCHLANE LIMITED			Claimant

And

JOHNSON CONTROLS LIMITED		First Defendant

COFELY LIMITED 				Second Defendant

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(Transcribed from CD by Cater Walsh Transcription Ltd.,
1st Floor, Paddington House, New Road, Kidderminster DY10 1AL
Official Court Reporters and Tape/CD Transcribers)

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MR M. DE GREGORIO  appeared for the Claimant

MR G. WOODS appeared for the First Defendant.
MR M. WHEATER  appeared for the Second Defendant.

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JUDGMENT
Thursday 10th May 2012 

MR JUSTICE EDWARDS-STUART:

1.	This is an application to amend the defence of the First Defendant.  It is opposed by both the Claimant and the Second Defendant.  This claim arises out of a flood that occurred in October 2008 at Sea Containers House, which is the well known building on the South Bank of the Thames. The flood was caused by the overflowing of water header tanks on the top floor of the building. The level of water in those tanks was controlled by various float switches and these included a fail safe high level protection float switch, which was designed to detect abnormally high levels of water in the tanks.  When that was activated it would shut down the pumps that fed the tanks and the system would then have to be reset manually.

2.	The problem that arose in practice was that this lock out feature could be activated by interruptions of the power supply. So in 2006 the management contractor for the building, not the Claimant, instructed the First Defendant to carry out a small modification that would permit the auto restart of the system in the event of a power failure. The cost of this modification was trivial, some £173.
3.	It is accepted that the instruction to carry out this modification was given to the First Defendant, that the First Defendant invoiced for it subsequently and was eventually paid.  It is accepted by all parties that the work was in fact carried out by someone.  Unfortunately, far from solving the problem the work created a new one because the auto restart system as installed in fact disabled the high level float protector, which therefore did not operate to prevent overflowing of the tanks as it should have done.
4.	In pre-trial discussions, which went on for some three years or so, it appears to have been assumed by all the parties that the work was carried out either by the First Defendant itself  or by a subcontractor, but neither the Claimant nor the Second Defendant can point to any admission to that effect by the First Defendant.
5.	It is important to bear in mind that because there were no contractual relations between the Claimant and the First Defendant, the First Defendant is sued in tort alone. The First Defendant’s original defence, served in December 2011, contained the following averments.  Paragraph 7 of the particulars of claim was simply agreed.  It read as follows: “At all material times Johnson owed the Claimant a duty to take reasonable care in carrying out the works agreed in VO13 so as to avoid causing any damage to the property.”  The following paragraph, paragraph 8, read as follows: “The Claimant understands that the VO13 works were carried out by Johnson in approximately March or April 2008.  Johnson installed a Tempatron 341-070 relay and altered the wiring of the booster pump control system in the property.”  To that the First Defendant pleaded as follows: “Paragraph 8 is agreed. Johnson instructed either an employee or a subcontractor to carry out these works. The employee or subcontractor in turn carried out the works.”
6.	Then paragraph 15 of the particulars of claim set out particulars of negligence of the First Defendant, Johnson.  In response to that paragraph 15.4 of the defence read as follows: “Johnson has been unable to conclude its investigations into the identity and correct status of the person who carried out the material works.  In the event that the person was an employee of Johnson then Johnson will accept liability for any of the failures set out at paragraphs 13-15 to the extent that the court finds that such are failures.  Johnson reserves the right to amend their statement of case to argue that the works were carried out by a subcontractor, in which case Johnson owes no duty of care other than a duty to take reasonable care to appoint an appropriate subcontractor.”
7.	About a week after that defence was served the case came before the court on what I assume was the first case management conference, and Mr. Justice Ramsey gave directions.  Paragraph 4 of his order was in the following terms: “If the First Defendant wishes to amend its defence along the lines indicated in paragraph 15.4 of its defence to allege that the VO13 works, or any part hereof, were carried out by an independent contractor, it must make its application no later than 4.00 p.m. on Friday 27th April 2012.”  I need not read the rest.
8.	What then happened was that on 2nd May, just a few days after that deadline, the First Defendant made an application to amend its defence and the proposed amendments are as follows.  First, there is no amendment at all to paragraph 7, which continues to admit paragraph 7 of the particulars of claim that I have just read.  Paragraph 8 is now to read as follows: “Paragraph 8 is denied. Johnson denies that it carried out the VO13 works.  Johnson further denies that any employee, contractor, or other party for which it was or might have been responsible, carried out the VO13 works.  Johnson agrees that the party that carried out the VO13 works installed the relay as per paragraph 8.”
9.	Then there are consequential amendments to paragraphs 13 - 15; for example, at paragraph 14 there is now a denial that Johnson was responsible for the person or party who carried out the relevant works.
10.	What this really boils down to is an assertion by the First Defendant that the works were carried out by, in effect, a complete stranger.  Mr. Woods, who appears today on behalf of the First Defendant, accepts that that is in effect the case.
11.	The trial of the action is set to take place on 16th July and it is accepted by Mr. Woods that if this application is allowed the trial would have to be adjourned because the Claimant in particular have said they would require time to carry out various investigations.  Mr. Michele de Gregorio, who appears on behalf of the Claimant, and Mr. Michael Wheater, who appears on behalf of the Second Defendant, have both referred me to the relevant considerations that should be applied when the court is considering whether or not to give permission for an admission to be withdrawn. They are to be found at paragraph 7.2 of Practice Direction 14 against the side number 14PD.7.  That reads as follows: 
“In deciding whether to give permission for an admission to be withdrawn the court will have regard to all the circumstances of the case, including: 
(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made; 
(b) the conduct of the parties, including any conduct which led to the party making the admission to do so; 
(c) the prejudice that may be caused to any person if the admission is withdrawn; 
(d) the prejudice that may be caused to any person if the application is refused; 
(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial; 
(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the offer was made.”  
I am not entirely clear whether that means precisely what it appears to mean, but I take it that the criterion to which it is directed is whether or not, if the admission is permitted to be withdrawn, the case that is then going to be made in its place is one that has a reasonable prospect of success, and I will proceed on that basis.
12.	I will first deal briefly with each of those considerations.  The evidence that has been put forward on behalf of the First Defendant in the form of a statement by Mr. Fitzpatrick, a solicitor at Berrymans Lace Mawer, indicates that, there was a meeting on 23rd January this year at the offices of the First Defendant, attended by the loss adjuster who had been acting on behalf of the First Defendant’s insurers, and an expert.  What eventually emerged from this, according to Mr Fitzpatrick, was that an electrical subcontractor who had worked for the First Defendant at the relevant time, called Mr. Ian Gunn, who was an employee of a company called EWA Controls, said that he would have expected that he would have been the person to have done this work but that he was adamant that he did not do it.  That is not in fact quite what the attendance note appears to record, which is that there were other sub-contractors who might have done the work. By contrast, in his witness statement Mr. Fitzpatrick says at paragraph 8: “Very significantly, however, he...” that is Mr. Gunn “...was able to tell Miss Burne-Jones...” (she is the loss adjuster) “...that not only is he adamant that he did not do the VO13 works, he is certain that he was at all the relevant times the only Johnson appointed electrical engineer working at Sea Containers House, and if anyone had done the VO13 works for Johnson it would have been him.  This was not something we had been told before.”  I will not read the rest of the paragraph.
13.	On the basis of that evidence it seems to me that new evidence has come to light which was not known to the First Defendant at the time when the admission was made. It is more difficult to say whether or not it was not in fact available; one is inclined to think that if similar enquiries had been carried out with Mr. Gunn shortly after the First Defendant was notified of the claim some years beforehand this information would have emerged then, and I do not think Mr. Woods tried to persuade me otherwise.
14.	The next is the conduct of the parties. This is relied on by both Mr. De Gregorio and Mr. Wheater in the sense that at no stage during the discussions between the parties was it ever asserted on behalf of the First Defendant that neither it nor any subcontractor carried out the work. Everyone, it seems, including itself, proceeded on the basis that it did.
15.	Sub-paragraph (c) concerns the prejudice that may be caused to any person if the admission is withdrawn.  Both the Claimant and the Second Defendant rely on prejudice under this head.   Mr. De Gregorio for the Claimant submits that it is going to be very difficult now for the Claimant to identify the relevant subcontractor, given that such documentation as there may be in relation to subcontractors is going to be with the First Defendant and, if they cannot say who it is, how on earth is the Claimant likely to find out?  Whereas if this had been something that had been revealed much earlier on in the process they might have been in a better position to do so.  Mr. De Gregorio said also that the amendments also seem to extend to deleting the date when the works were probably carried out, which makes the Claimant’s task even harder.
16.	So far as the Second Defendant is concerned, Mr. Wheater submits that there are further problems because if a culprit was identified and it turned out to be someone who had not already been questioned about this (and those appear to be fairly limited in the sense that Mr. Gunn is one of only a very few parties who has been mentioned by name), that that new subcontractor would know nothing about the case and would now be unable to investigate the in situ installation because most of the equipment in the basement, including the business management system and the relevant controls, have been removed.  So the prejudice to any prospective new Defendant would be irremediable and, in effect, that would mean that they would have a very good ground for not being joined in the action, and that would make it very difficult for either the Claimant or the Second Defendant to secure any recovery against them.
17.	I then go on to the prejudice caused to any person if the application is refused.  The prejudice there is obviously to the First Defendant and the possible prejudice is that it might then be fixed with liability in the sense that it would be found to have carried out the work, either by itself or by a subcontractor, in line with the defence as presently pleaded. But of course, as I have already mentioned, if it was in a position to show that it was a subcontractor, albeit one that was unidentified, that must have carried out the work, then it may be off the hook so far as a claim in tort is concerned. That would obviously depend on the precise findings of fact.
18.	So far as the stage of the proceedings at which the application to withdraw is made, it obviously does come at a late stage, that is to say some two months before the trial, but it is not one of those extreme cases where the party is seeking to withdraw the admission at the outset of the trial. There is clearly time in which investigations can be made and there can be no objection in principle to the trial being adjourned, no doubt at the First Defendant’s expense, in order that anything that can be done in the meantime can be done, but for the reasons I have already given there may be limits as to what in fact is practicable by way of further investigation on the part of either the Claimant or the Second Defendant.
19.	I then come to the prospects of success.  Both Mr. De Gregorio and Mr. Wheater have submitted in different ways that this is not a case which if allowed to be advanced in its amended form really has any real prospect of success, they rely obviously on the fact that the First Defendant has been paid for the work; the fact that the First Defendant is unable to identify anybody else who might have done the work if it was not either itself or a subcontractor; and that the idea, which is what it really comes down to, that this work was just carried out by some complete stranger without any involvement of the First Defendant at all is so fanciful as to be one that has no real prospect of success.  
20.	I have been referred to authority but I do not think it is necessary to say any more than the fact that the test set out at paragraph 7.2, which I have summarised, has now been approved by authority, for example in the case of White v Greensand Homes [2007] 1 BLR 313.
21.	So the question for the court is to balance these factors and consider whether or not in the interests of justice, having regard to all those particular factors, it would be right to allow the First Defendant to make these amendments.  I have come to the conclusion that the First Defendant should not be allowed to make the amendments, at least not in the form presently put.  I have the following reasons. First, I consider that the defence that would then emerge, namely that this work was carried out by a complete stranger (that is contractually) to the First Defendant is bordering on the fanciful.  The real position is that the First Defendant at present simply cannot say who did it. Whilst there is the reported evidence of Mr. Gunn, there does seem to be a mismatch with what he was actually reported as saying in the attendance note and how that is summarised in the witness statement of Mr. Fitzpatrick (as I have already highlighted).
22.	The second point is that, if it emerges that there was an unidentified third party who carried out this work who was not in contractual relations with the First Defendant, it is going to be next to impossible for either the Claimant or the Second Defendant to claim any form of contribution. The claim against the Second Defendant is that it should have seen that the work the subject of variation 13 had not been properly carried out, and so it would in principle have a potential claim for contribution against anyone who actually carried out the work.
23.	Third is the question of the reason for the state of affairs as it is today.  It is quite clear that what has prompted this amendment is the evidence, or what is said to be the evidence, of Mr. Gunn.  No reason has been put forward as to why he was not approached much sooner after the relevant events and when the parties were in correspondence back in 2009 and 2010.  If he had been spoken to sooner and had then said something similar, the action would have taken, I imagine, a different course.  But as I have said, there is no reason given as to why he was not seen sooner.
24.	Fourth, there is evidence in the attendance note to which I have referred that two or three other subcontractors have been identified who potentially could have been involved but it appears that their involvement has not been investigated and so at the moment, as Mr. De Gregorio submitted, the evidence comes nowhere near showing a real prospect that they can all be eliminated and therefore that no subcontractor of the First Defendant did the work.
25.	I was referred by Mr. Wheater to the case of Braybrook v Basildon, which introduced the criterion as to whether any party was the author of the prejudice that it may suffer.  It seems to me that that is a relevant factor here because to the extent that the First Defendant will suffer prejudice by the refusal of this amendment, which I accept is a clear possibility, it seems to me clear also that it is very substantially the author of that prejudice.  The reality is that nothing has changed since the original incident and there appears to be nothing that has been discovered now that could not have been discovered three years ago.
26.	For those reasons I refuse permission to amend in the terms that have been sought. Also I am troubled by the fact that the proposed amendments are in fact a departure from what is left and I have already referred to the admission made to paragraph 7 of the particulars of claim, which in my judgment is a plea that is inconsistent with the present amendments, but there has been no application to amend that paragraph.
27.	The question that really remains, it seems to me, is whether the First Defendant should be permitted to make any narrower form of amendment, namely to assert perhaps that the work was not carried out by any of its employees, which is part of what the present amendments say, but without going so far as to deny that it was carried out by any of its subcontractors.  The difficulty is that the present amendment extends to both and, in the sense that the greater includes the less, there is nevertheless a proposed amendment contained within the present draft amendments that the work was not carried out by any employee of the First Defendant.  The question remains whether that is an amendment that should be permitted.  It is a little more difficult to see how it might work in practice because if the First Defendant does not know who did the work at all, it might have some difficulty in saying that it was not one of its own employees, but the position at the moment is that I refuse the amendment as drafted but I am not going to prevent the First Defendant from advancing the narrower case that it was not one of its employees. I am not giving it permission to do so, I am merely saying that my refusal of the amendment in its present form does not extend to that.  It may well be that if an amendment is advanced along those lines that the Claimant and/or the Second Defendant would seek an adjournment of the trial, I cannot say.  All I am saying at the moment is that I am refusing the amendment in the terms proposed.  So, Mr. Woods, I am against you I am afraid.