Sowerby v Charlton: Admit in Haste, Repent at Leisure
Sowerby v Charlton: Admit in Haste, Repent at Leisure
A common situation: C writes a letter of claim; D admits liability; negotiations on quantum do not result in settlement; proceedings are issued; D then decides that liability should not have been admitted after all. Can D resile from the admission? If so, must the court give permission and using what test?
The background to the appeal
In Sowerby v Charlton [2005] EWCA 1610, C was rendered paraplegic when she fell about 8 feet from an unfenced platform outside a front door above ground level. More than 6 months after the letter of claim, D's solicitors stated without prejudice that they were prepared to admit breach of duty, and proposed a deduction for contributory negligence. C rejected the contributory negligence offer and asked for the admission of liability to be made in open correspondence, which it duly was. As the issue of contributory negligence could not be agreed, proceedings were issued. However, in the Defence D denied primary liability. This was only 4 months after the first letter admitting breach of duty. The change of view came after taking advice from counsel.
C, not surprisingly, was unhappy with this and successfully applied to Master Tennant to strike out the paragraphs relating to denials of primary liability and for judgment on primary liability. His decision was upheld by the Judge on appeal. Permission for a second appeal was given in Sowerby because it was recognised that there was no CPR authority on the scope of Part 14 (admissions) and accordingly there was uncertainty.
The appeal decision
In the course of the judgment, the Court of Appeal ruled as follows:
• The old RSC provisions had been held to be capable of embracing admissions made before, as well as after, the action commenced. Accordingly, the court had power under the old rules to give leave to a defendant to withdraw an admission made in pre-action correspondence.
• However, the CPR is a new procedural code and old authorities are not necessarily on point. The CPR is principally concerned with regulation of cases after an action has started. Gale v Superdrug (the leading pre-CPR case) should now be approached with caution given the change in procedural regime since it was decided.
• On analysing the structure of CPR Part 14, it was said that pre-action admissions of liability were not embraced by the words “A party may admit the truth of the whole or any part of another party’s case” in CPR 14.1.
• Accordingly, since a pre-action admission is not within the scope of CPR 14.1, then it is not governed by CPR 14.1(5) where it says that "The court may allow a party to amend or withdraw an admission.”
• This would fit with the Pre-Action Protocol, which recognises that:
(a) there is no presumption in multi-track cases that admissions are binding (unlike fast track claims);
(b) matters may come to light as a result of investigation after D has responded; and
(c) letters of claim and responses are not intended to have the same status as statements of case in proceedings.
Ordinarily, that would have been the end of the appeal - i.e. as CPR 14 did not apply to the pre-action admission, D could resile from it without difficulty and D could have contested primary liability at trial as of right. However, D conceded that if summary judgment could be entered on the facts (i.e. if D had no real prospect of successfully defending primary liability) then the judgment entered by Master Tennant could be upheld on an alternative basis. The Court of Appeal then considered the facts, ruled that summary judgment on primary liability was appropriate and dismissed D’s appeal.
Discussion
Sowerby represents a considerable change from the position as previously understood. Importantly, the Court of Appeal made no attempt to suggest that there was some alternative test to be applied where there was a change of view from a pre-action admission of liability. The way is now open for defendants to resile with ease from admissions made pre-action without needing permission from the court or the claimant’s agreement – whether this is because of a new evidence, a change in value of the claim leading to fresh thoughts or even simply a different view being taken by another case-handler or by a new legal advisor.
The decision does have the effect of seriously weakening the need for defendants in larger cases to take proper and final decisions on liability at an early stage. The incentive for proper investigation and consideration at the outset is reduced if defendants know that anything said about liability, unless it results in overall settlement, can be revisited later. Claimants also have the dilemma of whether to carry on investigating liability, in case the admission is withdrawn and evidence by that stage is unobtainable, at the risk of such costs not being recoverable if the admission is not withdrawn.
What issues should parties be alert for now? The possible routes for a claimant who wants to hold D to an admission of liability would appear to be these:
• Issue proceedings straight away after liability has been admitted to get a judgment by consent on liability before D changes its mind, as a judgment would be much harder to get set aside later. The downsides are the increase in costs this entails, plus the loss of control to the court in timetabling and obtaining evidence
• Issue proceedings later on and if D resiles, make an application for summary judgment on the grounds that D in fact has no real prospect of successfully defending the claim, given the evidence. Again, this is expensive.
• Attempt to create a contract. It is far easier to withdraw an admission of 100% liability than it is to get out of an agreed split of primary liability and contributory negligence. Where a deal on apportionment of liability is agreed, the courts take the view that a contract of compromise has been reached which cannot be impeached save for the usual vitiating factors for contract (mistake, misrepresentation, one party being under 18 or a patient, etc) - Burden v Harrods [2005] EWHC 410. Some claimant firms are already writing letters in response to admissions of full liability along the lines of "We accept your offer to admit liability and in consideration thereof we will now refrain from carrying out further investigations on the question of liability", the idea being no doubt to try and run contractual arguments at a later stage if D tries to withdraw the admission. Will such arguments succeed?
• Get admissions in open correspondence. If admissions are expressed as offers to admit liability (whether in full or in part) which are made "without prejudice" and for the purpose of negotiation only, then D has a better chance of persuading a court that there could have been no contract, let alone any admission upon which C could rely. Bolt v Basildon [2004] EWHC 783 is an example of this.
What about admissions made after proceedings have started?
These are clearly within CPR 14. Given the disruption to court procedure that a change of stance during proceedings can cause, not to mention the extra importance to be attached to admissions in proceedings as opposed to admissions pre-action, the hurdle for defendants is higher.
The Court of Appeal indicated, obiter, that the approach of Sumner J in Braybrook v Basildon & Thurrock University NHS Trust (7th October 2004) offers "valuable guidance" on the way in which a court should exercise its discretion when determining whether or not to permit the withdrawal of an admission that was made after an action was commenced. Sumner J in fact says little that is new as he distils various points made in cases pre- and post-CPR:
“1. In exercising its discretion the court will consider all the circumstances of the case and seek to give effect to the overriding objective. 2. Amongst the matters to be considered will be: (a) the reasons and justification for the application which must be made in good faith; (b) the balance of prejudice to the parties; (c) whether any party has been the author of any prejudice they may suffer; (d) the prospects of success of any issue arising from the withdrawal of an admission; (e) the public interest, in avoiding where possible satellite litigation, disproportionate use of court resources and the impact of any strategic manoeuvring. 3. The nearer any application is to a final hearing the less chance of success it will have even if the party making the application can establish clear prejudice. This may be decisive if the application is shortly before the hearing.”
What about fast track claims?
In fast track claims, unlike with multi-track claims, there is a presumption under the Pre-Action Protocol that an admission of liability is binding. The Court of Appeal did not discuss under what procedural method a defendant can resile in a fast track case if CPR 14 does not apply, or what the test would be. Until we are told otherwise, perhaps Sumner J’s distillation of the points to consider is the best guide.