Name claimants correctly or fix mistakes quickly - substituting parties after the limitation period has expired (Addlesee v Dentons)

What are the practical implications of this case?

Substitution after the expiry of the limitation period (provided that the limitation period was current when the claim was issued) is permitted provided that a ‘gateway’ under CPR 19.5 can be passed through. The relevant gateways under CPR 19.5(3) for this claim were either:

• ‘the new party is to be substituted for a party who was named in the claim form in mistake for the new party’ (CPR 19.5(3)(a)), or
• ‘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’ (CPR 19.5(3)(b))

The court determined that neither gateway could be passed through because insufficient evidence had been adduced, and because of the significant delay in making the application. This case highlights the necessity, when relying on the grounds of mistake, for actual evidence to be adduced regarding the mistake. It is not enough simply to rely on inference or surmise, or to assert an obvious mistake. In circumstances where (as in this case) the mistake happened some years ago, the court will need to see evidence that a search has been undertaken for files or contemporaneous notes to establish how it is asserted that a mistake was made.

Further, where the mistake has been drawn to the claimant’s solicitors’ attention, the court will expect any application for substitution to be made promptly. The speed with which corrective action is taken is relevant to the exercise of the court’s discretion. Where no action has been taken over a period of years, the court will not look favourably on the application.

What was the background?

The claimants were some 240 investors in an allegedly fraudulent gold dust investment scheme promoted by a Cypriot company, Anabus Holdings Ltd (now dissolved). The defendant, which at the time was known as Salans LLP but has since merged with Dentons, acted as legal advisor for Anabus. The claimants claim that Dentons negligently or fraudulently facilitated the investment scheme and induced the claimants to invest, by affording the scheme apparent respectability by endorsing it as Anabus’s legal advisor.

The claim was issued in 2016, shortly before the limitation period in negligence would have expired (the Initial Claims). Following a disclosure hearing in 2020, the claim was amended to plead new causes of action against Dentons, including unlawful means conspiracy and dishonest assistance (the New Claims). The claimants argued that while the limitation period for the Initial Claims had now expired, the New Claims were within the limitation period. The claimants relied on section 32 of the Limitation Act 1980 (the Act) on the grounds that it was only after initial disclosure that they knew or could reasonably have discovered the matters giving rise to the New Claims. The claimants argued that substitution should be permitted in relation to the New Claims under CPR 19.2 and in relation to the Initial Claims under CPR 19.5.

The substitution was required because a number of the investors had been identified in the claim form as individuals whereas the investments had actually been made by limited companies, of which the individuals were directors.

What did the court decide?

In relation to the Initial Claims, the court accepted that the limitation period had been current when the claim was issued but that it had now expired.

Following a careful review of the authorities, however, (in particular, Various Claimants v G4S [2021] EWHC 524 (Ch), in which Mann J’s judgment in Adelson v Associated Newspapers Ltd [2007] EWCA Civ 701 was cited with approval), the court found that insufficient evidence had been adduced to meet the ‘mistake’ gateway under CPR 19.5. It was impermissible to rely on ‘surmise and inference’. The mistake must be demonstrated by evidence and it had not been. Accordingly, substitution was not permitted on the grounds of mistake. In relation to one claimant (for whom substitution was also sought on the grounds that the claim could not be properly carried on without it), the court held that while the claim might be doomed to fail, it could be carried on without the substitution. No evidence had been adduced as to why the individual had not been the intended claimant and the claim had been carried on for many years without the substitution.

In relation to the New Claims, the court did not accept that sufficient evidence had been adduced to satisfy the requirements of s32 of the Act. In particular, the claimants had not addressed what could, with reasonable diligence, have been discovered within the normal limitation period. In those circumstances, the court held that it would be unjust to permit the substitution which would, in effect, deprive Dentons of a limitation defence. The court held it would be consistent with the overriding objective to reject the substitution application, given that the limited companies would not be prevented from bringing new claims.

Finally, in circumstances where this issue had actually been brought to the claimants’ attention by Dentons’ solicitors in correspondence dating back to 2017, the court found that even if its analysis were wrong, it would not have exercised its discretion to grant substitution in any event given the apparent deliberate failure to address the point in the preceding four years.

Case details

• Court: Chancery Division
• Judge: Deputy Master Nurse
• Date of judgment: 30 September 2021

This article was first published on Lexis®PSL on 14 December 2021