Warning for parties seeking an order for a Preliminary Issue

13/09/2007

The Court of Appeal recently provided a warning about the dangers of ordering a preliminary issue in complicated proceedings where a determination of the issue does not lead to a resolution of the proceedings.

The claim involved an allegation by the Claimant that a partnership existed between the Claimant and the Defendant which the Defendant denied. A preliminary issue was ordered as to whether a partnership (as a result of an oral agreement) did exist and during that hearing it was very apparent that if the Claimant was unsuccessful, he would amend his pleading to seek alternative remedies on a different basis. Nevertheless the court proceeded in deciding the issue and found for the Defendant.

The Claimant appealed that decision and at the same time sought to argue in the alternative that a partnership existed on the basis that the Defendant was estopped from denying its existence.

Although ultimately the Court of Appeal dismissed the appeal and the alternative claim for relief by way of estoppel, all three judges commented on the need to exercise great caution in the ordering of preliminary issues. Although it was apparent that the preliminary issue would not dispose of the claim, the judge at first instance did not order that any alternative claims be included in the trial of the preliminary issue at which substantial evidence was heard on behalf of both parties. The judge did offer some indications as to ownership of various assets (horses) but he did not provide conclusive views on such issues (nor was he asked to by the Defendant).

Lord Justice Lloyd held:
"The Judge's hope that further expensive hearings would be avoided has not been realised. I fear that if we were to say the same our hopes would also be disappointed, given the strength of feeling that appears to exist between the parties. But in the light of the mounting costs of the litigation, and the limited value in financial terms of the issues at stake, it is incumbent on the court and the parties to attempt to resolve the issues without either undue further expense or unnecessary procedural complexity.

In my judgment, the appeal against the decision on the preliminary issue should be dismissed and the, as it were, deemed application for permission to amend should be treated as before us and rejected. But that does not dispose of the proceedings altogether. It remains open to the claimant to formulate an amendment to his particulars of claim, so as to put forward his alternativce case or cases as to the rights and obligations of the parties, whether it is on the basis of joint ownership or loan, or whatever else other than a partnership. He should do so. He should apply for permission to amend at first instance...

...Even with due proper and proportionate consideration of such applications and amendments, it is possible to foresee that a good deal of further expense can be incurred in this litigation before the issues between the parties can be brought to judicial resolution. In those circumstances, I do express the hope that sense and proportion may prevail and that the parties can address the real financial issues between them, whether by direct negotiations between solicitors or by mediation, but in any event without taking the matter to a further judicial resolution."

(see [i]Greville v. Venables [2007] EWCA Civ 878 (19 July 2007))

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