In recent years a number of professional practices carried on by partnerships have incorporated themselves as limited liability partnerships. What happens where a claimant issues proceedings for professional negligence against the LLP but the correct defendant was in fact the old partnership and any such claim is now statute barred? Leggatt J considered this problem in Insight Group v Kingston Smith (2012).
CPR 19.5 permits the court to allow a change in the defendant’s name if:-
- The new defendant is to be substituted for a party named in the claim form “in mistake for the new party”
- The claim cannot be carried on against the original party unless the new party is added or substituted as defendant
The first limb – CPR 19.5(3)(a)
The first limb of the rule hinges on a factual analysis of the type of mistake made by the claimant. Substitution will be permitted if the claimant has sued the LLP in the mistaken belief that it was the LLP and not the partnership which provided the services said to have been performed negligently. By contrast, substitution will not be permitted where the claimant mistakenly believes the LLP is legally liable for the negligence of the prior partnership.
This could be analysed as permitting substitution where the claimant makes a mistake of fact about the identity of the defendant but not where the claimant makes a mistake of law in concluding that the LLP has inherited the partnership’s liabilities.
The second limb – CPR 19.5(3)(b)
However, any comfort for defendants and their insurers is rudely stripped away by Leggatt J’s approach to the second limb of the rule. He concluded that substitution should be permitted if a claim is not sustainable against the original party but the same claim will be carried on against the new defendant. This seems to allow substitution where the claimant has made precisely the type of mistake of law which will not permit substitution under the first limb.
The earlier case law on the first limb is difficult and complex. The second limb has not been considered by the courts until recently. The decision is surprising because, contrary to the leading authority of Adelson v Associated Newspapers Ltd, it liberalises rather than tightens the limitation regime. The story may not end here.
In the meantime, professional defendants, their insurers and their lawyers need to be cautious – especially where the claimant or his representatives ask for information about the past history of the defendant practice because they don’t know who to sue.
Any analysis of the first limb is critically dependent on evidence about the thought process of the claimant and his representatives showing what mistake was made, and how it came to be made. For another recent example of how this works in practice, see Quayle v Rothman Pantall & Co, which also concerned an LLP defendant.
It remains to be seen whether the appellate courts accept Leggatt J’s approach to the second limb which seems to make substitution more or less inevitable where the wrong defendant has been named. Until then, care should be taken when deciding whether to contest applications under CPR 19.5.
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