CA-2025-000525 - [2025] EWCA Civ 1307

It is important to recognise that at the time the Judge heard and decided the amendment applications in January 2025 he had been managing the proceedings for several years and had done so with the conspicuous skill and fairness to be expected of a Commercial Court judge of his considerable experience and expertise. He had deep familiarity with the parties and the issues and fully understood the history of the proceedings and the context of the applications, with the result that his case management orders demand even more respect than that customarily accorded to such decisions. Nevertheless, I am satisfied that, in this one instance, the Judge erred in his approach, causing him to reach the wrong decision.

The Judge’s approach was that, once it was determined that the amendments were late and that there was no good reason for the delay, it was for ENRC to demonstrate that there was no possibility that any documents relevant to the issues raised by the amendment had ceased to be available. As ENRC failed in that task, the Judge regarded the risk of non-availability he had found to exist as necessarily seriously prejudicial to the SFO and the Dechert defendants. He further regarded such prejudice as outweighing the prejudice to ENRC in losing a very substantial part of its loss claim because ENRC was the author of its own misfortune.

The result of that approach is that ENRC’s amendments were refused even though it is perfectly possible, on the Judge’s analysis, that (i) he might have determined in due course (had the amendments been allowed) that no or only minimal categories of documents were disclosable, or (ii) any disclosable documents might have been found still to exist or to have been lost prior to the date a litigation hold should have been put in place or (iii) any disclosable documents that were lost due to the delay might not have resulted in prejudice to the defendants of a serious nature or at all. Further, the above aspects could have been assessed by the Judge, had he allowed the amendments, at latter stages of the proceedings, including at trial, and the amended claims struck out if a fair trial was not possible due to the non-retention of documents.

In my judgment the approach the Judge adopted was wrong in a number of respects, but the overarching point is that it regarded an entirely uncertain and unquantified risk of injustice to the defendants as outweighing the certain and substantial injustice to ENRC, notwithstanding that it was unnecessary to reach a final view on that balancing exercise given the very early stages of the Phase 2 process in which the issue arose. That was not, in my view, consistent with the overriding objective of determining the real dispute between the parties and was not necessitated by any countervailing considerations of proportionality, efficiency or expedition.

In my judgment the starting point should have been to consider the nature, extent and timing of the amendments proposed. A claimant which had proved very serious wrongdoing on the part of the defendants was now, at the pre-CMC stage of the quantum phase, seeking to re-formulate its claim for very substantial losses which had always been pleaded (amounting to some US$128 million including interest) due to a late realisation as to which companies in a group had incurred them. Given that the re-formulated loss claim passed the prospects and cogency tests, to refuse such an amendment would be hugely prejudicial to the claimant.

I do not consider that it was appropriate significantly to discount the weight to be given to the prejudice to ENRC in rejection of the amendments by reason of the timing of the applications. Whilst they were technically “late” in the sense discussed above (and ground 5 of ENRC’s appeal therefore fails) and no good reason could be advanced for the delay, they were made at the outset of the quantum phase, at a time when issues as to disclosure were yet to be determined. The Judge placed great store in the fact that ENRC resisted the defendants’ request for further information of the increased borrowing costs claim in the early stages of the proceedings, but no order was made requiring the provision of such information and all quantum issues were “put off” to Phase 2. The Judge also stressed that he had stated in 2020 that any amendments to the pleading should be made at that time, repeating that when giving preliminary directions on Phase 2 in March 2024, but again such indications were informal and in no way debarred ENRC from applying to amend at the start of Phase 2. In my judgment the Judge’s understandable view that problems would have been avoided had ENRC focussed on and corrected its loss pleading when pressed by the defendants and invited by the Judge himself, overly affected his view as to the timing of the amendments when made and the lack of sympathy he afforded ENRC in that regard.

The second stage was to consider whether the evidence demonstrated that permitting the amendments would cause injustice to the defendants that outweighed the substantial injustice to ENRC if the amendments were rejected. As it was suggested such prejudice arose from the fact that documents might not be available by reason of the delay in making the applications to amend, in my judgment the following questions needed to be addressed:

It is apparent that the Judge did not reach a concluded view on the first question, but based his decision on an assessment that he could not rule out the possibility that there were disclosable documents. In relation to the second question, the Judge did not consider at all the fact that some or all unavailable documents (if any) may have been lost or destroyed in the period between 2013 and the date when the applications should have been made. The Judge did not expressly address when that date would have been, although it is clear that he considered that ENRC should have revised its pleading soon after his instruction to consider amendments in 2020. That still means that documents might have been lost in the seven prior years, regardless of the criticism levelled at ENRC for lateness.

It is also apparent that the Judge did not expressly address the third or fourth questions, save to hold that the risk of prejudice to the defendants which he perceived outweighed the injustice to ENRC due to the fact that ENRC was the author of its own misfortune.

Had the Judge approached the question of the balance of injustice in stages as set out above (whether or not in that order), it would have been clear, in my judgment, that he did not have any or any sufficient evidence at that time of prejudice to the defendants capable of outweighing that to ENRC by disallowing the amendments. The proper approach would have been to allow the amendments, but to keep under review, if necessary, whether any subsequent failure to provide disclosure of the subsidiaries’ documents rendered a fair trial of the issues impossible, notwithstanding the possibility of making allowances or drawing adverse inferences at trial: see Republic of Mozambique v Credit Suisse International [2023] EWHC 1650 (Comm).

I would add that the Judge’s approach effectively regards a failure to place a litigation hold on documents as being seriously prejudicial in itself to the opposing party. Whereas I fully accept that a party must take steps to preserve documents when litigation is in prospect (and the same is an express requirement of the rules, see PD 31B paragraph 7 and PD 57AD paragraph 3) a failure to do so does not carry any automatic debarring sanction and does not in itself cause injustice unless and until it is established that disclosable documents have not been preserved with prejudicial effects. The Judge’s approach elevates a formal requirement over the substantive question of its effect on the parties and the justice of granting or refusing an application to amend.

It follows that I regard the criticisms of the Judge’s approach in grounds 1 and 2 of ENRC’s appeal as made out and as justifying allowing the appeal. In those circumstances I do not consider that it is necessary to address ground 3 or ground 4.

I concurred in the decision to allow the appeal for the reasons that have been given by Phillips LJ.