THE PERILS OF LEAVING ISSUE TO THE LAST MINUTE: CLAIM AGAINST SOLICITORS WAS STATUTE BARRED – AMENDMENT DISALLOWED: ADDITION IS NOT A SUBSTITUTION
The judgment of the Court of Appeal yesterday in Godfrey Morgan Solicitors (a firm) -v- Armes  EWCA Civ 323 illustrates the danger of late issue of proceedings. Issue was left until the last day. An additional defendant was added prior to service by amending the claim form. The “new”defendant succeeded in having the amendment disallowed. The action was statute barred.
The claimant/respondent issued proceedings against Godfrey Morgan Solicitors Ltd (“the company”). Those proceedings were issued on the last possible day for bringing the action. After issue, but before service, the claim form was amended to add Godfrey Morgan Solicitors (a firm) as defendant (“the firm”). After service the firm applied to have the amendment set aside as it was outside the limitation period. The firm’s application was refused at first instance. The firm appealed to the Court of Appeal.
“Amendments to statements of case
(1) A party may amend his statement of case at any time before it has been served on any other party.
(2) If his statement of case has been served, a party may amend it only –
(a) with the written consent of all the other parties; or
(b) with the permission of the court.
(3) If a statement of case has been served, an application to amend it by removing, adding or substituting a party must be made in accordance with rule 19.4. …
Power of court to disallow amendments made without permission
(1) If a party has amended his statement of case where permission of the court was not required, the court may disallow the amendment.
(2) A party may apply to the court for an order under paragraph (1) within 14 days of service of a copy of the amended statement of case on him.
Amendments to statements of case after the end of a relevant limitation period
(1) This rule applies where –
(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and
(b) a period of limitation has expired under –
(i) the Limitation Act 1980;
(ii) the Foreign Limitation Periods Act 1984; or
(iii) any other enactment which allows such an amendment, or under which such an amendment is allowed.
(2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.
(3) 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.
(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings started or has since acquired.
(Rule 19.5 specifies the circumstances in which the court may allow a new party to be added or substituted after the end of a relevant limitation period.)
Special provisions about adding or substituting parties after the end of a relevant limitation period
(1) This rule applies to a change of parties after the end of a period of limitation under –
(a) the Limitation Act 1980;
(b) the Foreign Limitation Periods Act 1984; or
(c) any other enactment which allows such a change, or under which such a change is allowed.
(2) The court may add or substitute a party only if –
(a) the relevant limitation period was current when the proceedings were started; and
(b) the addition or substitution is necessary.
(3) The addition or substitution of a party is necessary only if the court is satisfied that –
(a) the new party is to be substituted for a party who was named in the claim form in mistake for the new party;
(b) the claim cannot properly be carried on by or against the original party unless the new party is added or substituted as claimant or defendant; or
(c) the original party has died or had a bankruptcy order made against him and his interest or liability has passed to the new party.
(Rule 17.4 deals with other changes after the end of a relevant limitation period).”
THE JUDGMENT OF THE COURT OF APPEAL
The Court of Appeal allowed the appeal. The judges at first instance had erred. The amendment could only be allowed if a defendant was “substituted”. The addition of an additional defendant could not amount to a “substitution”.
“For the purposes of section 35(6)(a) of the 1980 Act and CPR Part 19.5(3)(a) the question was whether the judge could be satisfied that the Firm was “substituted” for the Company which had originally been named in the Claim Form as defendant in mistake for the Firm. These provisions draw a clear distinction between addition, on the one hand, and substitution on the other. The ordinary meaning of the word substitution connotes the replacement of one person or thing by another. As Pearce LJ observed in Davies v Elsby Brothers  1 WLR 170 at 173, when considering the substitution of a party permitted under the rules in different circumstances, “substitution involves the addition of a party in replacement of the party that is removed.”
The power to allow an amendment by substitution because of a mistake in nomenclature now found in CPR Rule 19.5(3)(a), reflecting section 35 of the 1980 Act, did not make a substantive change to the earlier approach found in RSC 20 r.5(3). The 1980 Act followed the recommendations of the Law Reform Committee. In the Adelson case Lord Phillips of Worth Matravers CJ noted at para 23:
“So far as the amendment of the names of parties in order to correct the effect of mistake is concerned, there is reason to doubt whether the 1980 Act was intended to make any change in the law. The preamble to the Bill, which became that Act without relevant amendment, stated that it implemented most of the recommendations made in the Law [Reform] Committee’s 21st Report on Limitation of Actions (Cmnd. 6923). That Report, published in September 1977 referred to O.20, r 5(3) at paragraph 5.16 and commended its wording and the result that it achieved. The Report recommended that the law should be changed in a number of respects to allow the addition of parties in order to validate a claim and Brooke LJ drew attention to these in Martin v Kaisary (No 1)  EWCA Civ 594;  PIQR 5. In general, however, the Report made it plain that the Committee did not recommend any relaxation of the restrictive effect that the Limitation Act 1939 had had on the grant of permission to amend pleadings out of time.”
The recommendations referred to by Lord Phillips found legislative form in sections 35(5)(b) and 35(6)(b) of the 1980 Act. But there is continuity between the old RSC and the new CPR as they apply to substitution as a result of misnomer.
RSC 20 r.5(3) in specified circumstances allowed the correction of a name of a party notwithstanding that the effect of the correction might be to substitute a new party outside the limitation period. A common example would be the naming of a corporate entity as the employer defendant in a personal injury action, when the employer was part of a group with multiple component parts. The claimant makes a mistake and identifies the wrong company within the group. The error is one of nomenclature. Mitchell v Harris Engineering Co Ltd  2 QB 703 was such an employment related case. The rule was not concerned with cases of uncertainty about which of two (or more) different legal persons was responsible for the alleged wrong giving rise to the cause of action, with the consequence of allowing new parties to be added outside the limitation period. Substitution was the key. That appears, for example, from the judgment of Donaldson LJ in Evans Construction Co Ltd v Charrington & Co Ltd  QB 810 at 821:
“In applying Ord 20, r 5(3) it is, in my judgment, important to bear in mind that there is a real distinction between suing A in the mistaken belief that A is the party who is responsible for the matters complained of and seeking to sue B, but mistakenly describing or naming him as A and thereby ending up suing A instead of B. The rule is designed to correct the latter and not the former category of mistake.”
The key under the old rule was that the claimant must have intended to sue A instead of B, not in addition to B. In my judgment, it remains the key when applying CPR Part 19.5(3)(a).
The provisions of section 35 of the 1980 Act and the CPR do not invest a court with power to allow an amendment to proceedings to bring in a new party after the expiry of a limitation period whenever it considers it equitable to do so. That would be to replicate the provisions of section 33 of the 1980 Act (the power to disapply the limitation period in personal injury actions) in much wider circumstances. Parties are entitled to rely upon limitation as providing protection, save in so far as legislation and rules of court otherwise provide. The position is different before the limitation period expires: a claimant may issue proceedings against whomsoever he chooses. If he has joined a party who can demonstrate that it cannot be liable, a claim may be struck out, or summary judgment obtained. There may be costs implications. Equally, amending to join an additional party within the limitation period is not subject to the same strictures.
In my opinion, the concept of “substitution in the alternative” does not have any basis in CPR Part 19.5(3)(a). The introduction of the Firm as a defendant amounted to the addition of a new party outside the limitation period not sanctioned by the rules. Its purpose was to allow the claimant to pursue both defendants for so long as necessary to establish which was vicariously liable for any negligence on the part of Mr Clegg at the time he entered into the compromise with the Council on the claimant’s behalf. Whilst the judge contemplated that issue not being resolved until trial, in reality it is likely that the position would have become clear when the defences were served. At that point, no doubt, the claimant would have discontinued against one of the defendants. It was only because the claimant’s solicitors had not reached the stage of being able to decide between the Company and the Firm as the time for service of the proceedings approached that the Firm was added on an “and/or” basis.
CPR 19(5)(a) is concerned with substitution. Save for the limited circumstances envisaged in the Adelson case, where an existing party may remain in the action after another has been substituted on a cause of action by cause of action basis, that rule requires the party named by mistake to fall out of the proceedings and for the new correctly named party to stand in its place. The argument that the Company and the Firm have been substituted for the Company whilst an ingenious attempt to circumvent the obvious meaning of “substitute”, does not assist the claimant. It remains an addition.
The claimant/appellant had earlier been successful in defending a claim for fees brought by the company. In March 2013 he successfully argued that he was not liable to pay fees as he had no contractual relationship with the company, his contract was with the firm. These proceedings were issued in October 2013 and proceedings were issued against the company. The clues were there…