The High Court clarifies the jurisdiction of the court to substitute parties under the Civil Procedure Rules 1998

Posted on
The High Court has handed down judgment in the case of American Leisure Group Ltd v Olswang LLP [2015] EWHC 629 (Ch).

Background to the appeal

A claim was brought in Florida, United States which alleged that American Leisure Group (ALG), the claimant in the current application, had made misrepresentations. ALG denied liability, but stated that if they were liable then this was at least partly due to the allegedly negligent legal advice of the defendant in the current application, Olswang LLP (OLLP).

ALG consequently issued a claim against OLLP, but the legal advice in question had been provided and paid for prior to OLLP becoming an LLP. Upon realising this, ALG accepted that they had no claim against OLLP and should instead have issued proceedings against the former partnership firm of solicitors (P). The limitation period in respect of that claim had expired, so ALG applied to amend the name of the defendant from OLLP to 'Olswang (a Firm)' pursuant to the provisions of CPR 19.5.

In May 2014 the master held that whilst he had jurisdiction to substitute the name of the defendant, he would not exercise his discretion to do so, and he struck out the case against OLLP. ALG appealed against the master's decision not to substitute, and OLLP cross-appealed against the master's decision that he had jurisdiction to make such a substitution. 

The appeal issues

The High Court had three points to consider: (i) did the master have jurisdiction to allow a substitution of the defendant pursuant to CPR 19.5; (ii) if the master did have jurisdiction, was the court entitled to interfere with the exercise of his discretion; and (iii) if the court was entitled to interfere, did the master err in his decision not to substitute.

The appeal decision

  1. Jurisdiction - For a court to apply r.19.5(3)(a), the mistake has to be of name rather than of identity or description of the party, applying the test in Owners of the Sardinia Sulcis v Owners of the Al Tawwab [1991] 1 Lloyd's Rep. 201. The master looked to the wording of the particulars of claim and was satisfied that the mistake was one of nomenclature, in that ALG mistakenly believed that OLLP provided the legal services. The master distinguished this from a situation in which a claimant knows Party A did not provide the negligent service, but mistakenly believes Party A to be legally liable for the alleged negligence of Party B. The court agreed that since the mistake was one of nomenclature, the master had jurisdiction to substitute, and the cross-appeal was dismissed.
  2. Appeal court's entitlement to consider the master's exercise of his discretion.  It was held that, using its limited jurisdiction to interfere with a case management decision, the High Court was entitled to consider whether the master had properly exercised his discretion. The High Court would, however, only intervene over errors of principle or decisions made outside of the master's generous ambit of discretion.
  3. The master's decision - In coming to his decision the master had taken consideration of AGL's unexplained level of delay throughout proceedings. Also considered significant was the fact that AGL had failed to enter into any correspondence with OLLP or P prior to issuing proceedings. The High Court held that the master had properly exercised his discretion in deciding that ALG's time delays coupled with its neglect to follow pre-action protocol caused P prejudice such that he should not exercise his discretion in favour of ALG. The appeal was dismissed.

Commentary

This case provides an example of when issuing proceedings on the wrong party will be considered a mistake of nomenclature (therefore allowing the courts to apply r.19.5(3)), or of identity and thus outside the courts' remit. It also serves as a reminder of the negative treatment that can follow when a party neglects to adhere to protocol or causes unnecessary time delays.  

.