WHEN THE LIMITATION ACT IS NOT YOUR BEST FRIEND: “SHEER INCOMPETENCE” DOES NOT PERSUADE A COURT TO EXERCISE ITS DISCRETION

CPR 17.(4) is always one of the most “challenging” sections of the Limitation Act in practice. Amending the name of a party after the expiry of the limitation period is not always easy.  The judgment in Best Friends Group & Anor (t/a Best Friends) v Barclays Bank Plc [2018] EWCA Civ 601 highlights the issues.   This highlights the strict requirements of CPR 17.(4). Also the need for speedy action if an application is needed, coupled with the need for comprehensive, and first-hand, evidence in support.

“…counsel’s characterisation of what occurred as ‘sheer incompetence’ was neither a sufficient explanation nor such as to come near to a justifiable excuse to what were repeated failures in the conduct of the litigation in what is a specialist court, where high standards of efficiency and expertise are expected of practitioners.”

KEY POINTS

  • Check, clearly, before issue that you have the correct name of the claimant (and the defendant for that matter).
  • A simple, unauthorised, amendment of the pleadings prior to service will not suffice.
  • If an application is to be made, make it promptly.
  • It is prudent to have first-hand evidence in support.
  • This case also shows the danger of the inappropriate pleading of fraud.  The claimant’s allegations of deliberate concealment were struck out by consent.

THE CASE

The claimant brought an action against the bank for alleged negligence in the handling of swap transactions.  The claimant was “Best Friends Group”, an unlimited company. It was common ground that the claimant should have been an individual, Mr Bennett. It was also common ground that the limitation period had expired.

The defendant made an application to strike out the claim. In response the claimant made an application under CPR 17.(4) (3) to amend the name of the claimant.

“The Court may allow an amendment to correct a mistake as to the name of a party, but only where the mistake was genuine and not one which would cause reasonable doubt as to the identity of the party in question.”

THE CLAIMANT’S “AMENDMENT”

The claim form had “purportedly”  been amended, prior to service, to read “Mr Andrew Bennett T/A Best Friends”. This amended claim form, together with the original was served on the defendant.

The judge held that the amendment was ineffective because permission of the court was needed.  The defence expressively pleaded that Mr Bennett had not been joined into the action because of the failure to seek and obtain the court’s permission.

INAPPROPRIATE PLEADING

The claimant served a reply alleging “deliberate concealment”, and thus the limitation period had not expired.  The defendant applied to strike this out, the claimant agreed to this and the relevant paragraphs of the Reply were struck out by consent.

THE DEFENDANT’S APPLICATION

The defendant then made an application to strike out the action on the basis that Mr Bennett was the appropriate claimant and he had never been joined into the action.

THE CLAIMANT’S APPLICATION

The claimant then made the appropriate application.  We pick up the history in the Court of Appeal judgment.

THE JUDGMENT IN THE COURT OF APPEAL
    1. Following the service of Ms Baker’s witness statement, Mr Duffy made a further witness statement (‘Duffy 3’) in support of an application (dated 8 September 2016) that:
… permission be given to correct a mistake as to the name of the party such that the name ‘Andrew Bennett’ appears within the proceedings herein in the place of the names presently appearing.
    1. The application notice was also issued on 8 September 2016, the day before the hearing of the Bank’s strike out application. It seems that those advising Mr Bennett belatedly realised that they would need to make an application under CPR Part 17.4 to correct the name of the claimant outside the limitation period.
    2. The stated intent of Duffy 3 was ‘to clarify a number of issues concerning … the correct designation of the claimant.’ Mr Duffy stated that ‘it had always been intended that the claim should be made by Mr Bennett as an individual for his losses.’ He went on to say, at paragraph 4, that Mr Bennett as an individual ‘had traded under a number of styles including ‘Best Friends Group’ and ‘BFG’ and ‘Best Friends’ as well as his own name.’ Having blamed a junior colleague for a mistake in the title of the original Claim Form, he took credit for noting the mistake before its service. At paragraph 6 he said that, although it was recognised that the time limit had expired, ‘the position of the claimant (Mr Bennett) was that the time bar had not expired by reason of there having been deliberated concealment on the part of the [Bank]’. At paragraph 7 he described the delay in making the claimant’s application to substitute the name of Mr Bennett in the Claim Form until after the Bank’s strike out application as ‘due to an unfortunate series of absences from the office.’ At paragraph 9, he said that, although the Part 19.5 application sought permission to add the name of Mr Bennett, ‘on reflection, since ‘Best Friends Group’ is simply a trading name for Mr Bennett … it would be more appropriate to seek permission to substitute the name of Mr Bennett for ‘Best Friends Group”. At paragraph 15, he stated that it had never been intended that BFVG be a party to the proceedings; but, at paragraph 18, he accepted that the claim for loss of profits in the re-amended claim included claims based on the sales figures of both the Claimant and BFVG. At paragraph 16, he acknowledged:
When I attended to the service of the Claim Form (as amended under CPR Part 17) and the original Particulars of Claim I was unaware of the distinction between the various entities and names used by the Claimant and as a result I did not appreciate that BFVG was in fact a separate legal person … This lack of knowledge on my part may have contributed to some extent to the apparent confusion that has arisen.
    1. In his judgment of 9 September 2016, the Judge first addressed the question as to whether there had been a genuine mistake in the light of the submission that the intention had been that Mr Bennett should be the claimant, and the use of ‘Best Friends Group’ was an honest and genuine mistake by Mr Duffy’s junior colleague who was unaware of the existence of a company with the similar name, BFVG. In the Judge’s view, it was difficult to understand why, if Mr Bennett was supposed to be the original claimant, he was not simply named on the Claim Form. The evidence that ‘Best Friends Group’ was a trading name used by Mr Bennett was very thin. In fact, there was documentary evidence that ‘Best Friends Group’ was a trading name used by the unlimited company, BFVG. The fact that the claim included combined losses alleged to have been suffered by both Mr Bennett and BFVG gave rise to serious doubts as to whether or not there was some desire to name a claimant who might be able to claim damages on behalf of the company and/or the group as a whole and not Mr Bennett alone. Overall, there was insufficient evidence to conclude that the use of ‘Best Friends Group’ was a genuine mistake. Without doubting the truth of what Mr Duffy said, the Judge was left with a residual concern that there may have been discussions and reasoning with Mr Bennett of which Mr Duffy was unaware.
    2. Having reached this conclusion, the Judge then went on to consider the second question: if there were a genuine mistake, was it such as to cause reasonable doubt as to the identity of the party in question? On the one hand, it was clearly stated on the Claim Form that the claimant was the party that entered into the swaps, which was known by both parties to be Mr Bennett. However, the name ‘Best Friends Group’ was so close to BFVG that there could be reasonable doubt and a possibility of an alleged agency. The fact that the Particulars of Claim sought damages which were suffered by BFVG and not by Mr Bennett further demonstrated the reasonableness of the doubt as to the true identity of the claimant.
    3. It is convenient to consider these two questions together.
    4. Mr Penny submitted that in the light of the entirety of the evidence, it was clear that there had been a genuine mistake. The Bank knew that the counterparty to all the swaps transactions was Mr Bennett and him alone. The references in the pleadings to other entities, such as ‘Best Friends’ and ‘Best Friends Group’, was not such as to give rise to reasonable doubt as to the party who it was intended should make the claim. The Bank itself, at paragraph 7 of the Defence, had acknowledged that the swaps contracts were made with Mr Bennett. As was made clear in Adelson v. Associated Newspapers Ltd (CA) [2008] 1 WLR 585 at [51], the best source for what the claimant intended was to be found in the statements of case. Mr Penny referred to the judgment of the Court of Appeal as to the proper approach under the old rules at [43] and, in particular, to principle (iii):
These authorities have led us to the following conclusions about the principles applicable to Ord 20, r5. (i) The mistake must be as to the name of the party in question and not as to the identity of that party. Such a mistake can be demonstrated where the pleading gives a description of the party that identifies the party, but gives the party the wrong name. In such circumstances a ‘mistake as to name’ is given a generous interpretation. (ii) The mistake will be made by the person who issues the process bearing the wrong name. The person intending to sue will be the person who, or whose agent, has authorised the person issuing the process to start proceedings on his behalf. (iii) The true identity of the person intending to sue and the person intended to be sued must be apparent to the latter although the wrong name has been used. (iv) Most if not all the cases seem to have proceeded on the basis that the effect of the amendment was to substitute a new party for the party named.
    1. As to the Judge’s conclusion assuming that, if a genuine mistake were made, it was such as to cause reasonable doubt as to the identity of the claimant, Mr Penny was critical of the Judge postulating an alleged agency on behalf of Mr Bennett. He submitted that there was no proper basis for such a view. He accepted that the Particulars of Claim included a claim for the combined losses of Mr Bennett and BFVG and that it also included losses based on the Peterborough practice which could not form part of Mr Bennett’s losses; but he submitted that the Judge gave too much weight to these matters. They were simply claims that could be struck out.
    2. Having considered these points, I have concluded that the Judge was entitled to the view he took on the first two questions. The difficulty with Mr Penny’s argument is that there is no evidence from the person who might be expected to have given it: Mr Bennett. The evidence shows that ‘Best Friends’ and ‘BFG’ were manifestations of BFVG and it is common ground that BFVG was the company through which Mr Bennett carried out his veterinary business. Mr Bennett is the person who best knows how his overall business is conducted. It was he who must have given instructions for the bringing of the claim; and he must have been consulted before the allegation of deliberate concealment was made in the Reply. It is a matter of professional obligation that a statement of case containing an allegation of fraud must be based on clear instructions to make such an allegation. Mr Duffy has given explanations of a series of mistakes and misunderstandings on his side; but the fact remains that claims were made for losses that were not the losses of Mr Bennett (at least in relation to the £212,000 claim and the Peterborough practice). In these circumstances, it seems to me, that it was open to the Judge to find that there was a degree of calculation in keeping all possible options open; and that there was sufficient justification for his view that the conduct of the litigation was such as to cause reasonable doubt as to the identity of the claimant.
    3. Having reached his conclusions on the first and second questions, the Judge turned to the third question: the exercise of the court’s discretion under CPR 17.4; and, decided that, if it had come to it, he would have exercised his discretion against Mr Bennett at [23]:
The mistake, if it was such, was one which was apparently appreciated as long ago as March 2015. But rather than making a proper and prompt application to correct the mistake, if indeed there was one, the claimant has undertaken a series of convoluted processes to maintain and justify its actions, including making a serious allegation of deliberate concealment which was not in the end pursued.
The result has been months of delay, incurring a huge amount of unnecessary costs, all caused by what [counsel then instructed for Mr Bennett] himself described to me as ‘sheer incompetence.’ I do not consider, in those circumstances, that it would have been appropriate to exercise my discretion to permit an amendment had I otherwise been satisfied that the requirements of CPR 17.4 were met.
  1. Mr Penny submitted that the Judge’s conclusion involved a penal approach to the exercise of discretion which led to a disproportionate result. He referred in this context to the decisions in Insight Group Ltd v. Kingston Smith (A Firm) [2014] 1 WLR 585; and American Leisure Group Ltd v. Olswang LLP [2105] EWHC 629 (Ch). I would accept at once that it is not for the court to exercise its discretion so as to punish a party for a harmless error by its legal representative. However, I do not consider that this is what occurred. The Judge was rightly concerned by the delay in making the application. The Claim Form has been issued at the end of (and in relation to the 2006 swap, after the expiry of) the limitation period. The claim was conducted without any of the urgency that it should have had. Even when the issue of the proper identification of the claimant was specifically raised in the Defence on 15 July 2015, nothing was done to put the matter right. Instead of a prompt application to amend the Claim Form an unwarranted allegation of deliberate concealment was made. Although there has been no waiver of privilege which might have enabled the Judge to assess it, previous counsel’s characterisation of what occurred as ‘sheer incompetence’ was neither a sufficient explanation nor such as to come near to a justifiable excuse to what were repeated failures in the conduct of the litigation in what is a specialist court, where high standards of efficiency and expertise are expected of practitioners.
  2. The Judge made a discretionary decision at a Case Management Hearing based on an evaluative judgment of the relevant facts. In the ordinary course appellate courts do not disturb such decisions unless the Judge is shown to have erred in principle or reached a conclusion that was plainly wrong. For what is only the most recent authoritative restatement of this well-established approach, see Barton v. Wright Hassall LLP [2018] 1 WLR 1119, Lord Sumption JSC at [15].
  3. In his clear and comprehensive judgment, the Judge refused the application to amend and struck out the claim. In my view the challenge to his decision and order fails. I would accordingly dismiss the appeal.