The Court of Appeal has handed down judgment in Adcamp LLP v Office Properties PL Ltd and BDB Pitmans LLP v Lee, two similar professional negligence cases in which the substitution of parties after expiry of limitation was considered.
Why identifying the correct defendant matters
In all claims, it is very important to ensure that the identity of the party being sued is correct. The issue frequently arises in professional negligence claims against solicitors, because it is common for these entities to change over the years. A claimant might instruct a partnership, which later converts to an LLP or a Limited Company, which subsequently merges with another entity, which might change its name or choose to trade under a different name.
What happens if the wrong entity is sued and limitation for a claim against the correct entity expires before the problem is identified?
The answer requires identification of the negligent entity and establishing whether liability rests with it or has been transferred to another. Frequently, when one law firm merges with another, the new entity will take on the liabilities of the previous entity. This should always be checked, however, as sometimes responsibility for liability does not transfer as expected.
Substituting the correct party after limitation
If a mistake has been made, and limitation for a claim against the correct party has expired, it is possible to ask the Court to allow the substitution of the correct party. The rules governing substitution are set out in section 35 of the Limitation Act 1980 and Rule 19 of the Civil Procedure Rules.
Substitution is only permissible if one of the following grounds applies:
Ground A – The original party was misnamed by mistake; or
Ground B – The claim cannot be maintained unless the substitution is permitted.
Ground A: misnaming the correct party
Ground A is reasonably simple: it applies to circumstances in which the correct party is identified, but for some reason the name of that party was included incorrectly. For example, a firm might be named Huge Law Firm LLP trading as Biglaw, but the Claim Form is completed with the name mistakenly written as Hugs Law Firm Ltd, or Biglaw LLP. In this situation, the correct party is identified, but there is a mistake as to its name.
Ground B: when substitution may be necessary
Ground B is less simple. In Adcamp LLP v Office Properties PL Ltd and BDB Pitmans LLP v Lee, the Claimants made errors in identifying the correct Defendant to their claims. Both sets of Claimants had instructed a firm named Pitmans LLP, which had allegedly provided negligent advice. Pitmans LLP had merged with Bircham Dyson Bell LLP to create a new firm named BDB Pitmans LLP. Pitmans LLP also continued to exist and later changed its name to Adcamp LLP. Importantly, at no point did BDP Pitmans LLP take on the liabilities of Pitmans LLP. Liability remained with the newly named Adcamp LLP.
The issue before the Court of Appeal
The Claimants issued claims against BDB Pitmans LLP in the mistaken belief that BDB Pitmans LLP had taken responsibility for the liabilities of Pitmans LLP. The issue was identified after limitation for a fresh claim against Adcamp LLP expired. The Court of Appeal had to decide whether Adcamp LLP could be substituted for BDB Pitmans LLP. Plainly, this wasn’t a situation in which the correct party had been identified but a mistake regarding its name had been made, so Ground A above did not apply. The case turned on whether Ground B applied.
Previous case law and the “same claim” test
In a previous case (Insight Group Ltd v Kingston Smith), it was suggested that Ground B could be used if the same claim would be advanced after substitution. However, the parties disagreed about whether the “same claim” would be advanced.
The Claimants argued that the claim would remain the same. The cause of action was the negligent advice given by Pitmans LLP, and this would not change. The Defendants argued that the claim would change. The original claim included pleadings that BDP Pitmans LLP had taken on the liabilities of Pitmans LLP.
The Court of Appeal’s decision
The Court of Appeal agreed that the substitution would significantly change the nature of the claims and that they would not be the same claims afterwards. For the two claims to be the same, the fundamental facts of the claim could not change. If substitution was permitted, different Defendants would be sued on two different bases.
The Court accepted that there would be limited circumstances in which Ground B could be relied on, but held that in some cases it would be available: for example, it might be necessary, for purely procedural reasons, to permit the interposition of a liquidator in place of a limited company to enable a claim to proceed. In these circumstances, the claim would remain the same.
However, watch this space: the Claimants have been given permission to appeal to the Supreme Court, so the issue may be considered again in the future.
Key takeaway for claimants
For now, the key lesson is that when issuing a claim, it is crucially important to ensure that the correct entity is identified. A Claimant cannot be sure that if a mistake is made, the Court will allow it to substitute the correct entity at a later point. A solicitor can assist you in ensuring that the correct party is identified before limitation expires.
How we can help
If you have a claim, our specialists can provide clear, practical, timely advice. Contact Alice Evelegh-Taylor if you need support.
