Who do I sue?

If asked whether it is important to know who to sue, all litigators will readily agree that this is a fundamental point. However, there are many examples of a claimant failing to take account of the changing structure of the professional practices which they instructed, and against whom they wanted to make a claim. 

When the claim is against a solicitor, the successor practice rules are commonly misunderstood, as was evidenced in a recent professional negligence case in Manchester. 

Background

The claim, which was strongly denied by the firm, and which the judge indicated was optimistic, suggested that the firm had failed to give appropriate advice on a divorce. It was said that as a result, the claimant had paid his ex-wife around £2.25 million more than was necessary. 

The firm in question was an LLP at the time of the allegedly negligent advice variously given in April and September 2011. By 2015, the firm converted from an LLP to a limited company. The claimant issued proceedings against the limited liability company rather than the LLP. Although notice of the change of structure was given to clients at the time, and anyone checking the Companies House website would have seen that the limited company was incorporated long after the events in question, the firm had used the same trading name throughout, even though they were different legal entities.

Proceedings were issued in September 2017, without the claimant adopting the protocol. After we were instructed, we asked the claimant’s solicitors specific questions about why the proceedings had been issued against the limited company. They confirmed, as suspected, that they thought the limited company was liable for the acts of the LLP, given the limited company was the successor practice. 

No-one ever doubted that the limited company was the successor practice to the LLP. Therefore the LLP’s insurance would always respond to any claim made against the limited company. However, the successor practice rules do not make a party liable, as a matter of law, for the acts of others. 

The claimant’s application

After the issue was raised in the defence, the claimant’s solicitors made an application to substitute the LLP as the correct claimant. Their argument was that the mistake caused no confusion. Permission should be granted since it should have been “obvious” who they intended to sue. They argued that their error was one as to the name of the correct defendant, rather than being an error about the identity of that defendant. 

The distinction was an important one, following Insight v Kingston Smith (2014). If the error was truly an error as to the correct name only then the court would be able to substitute the LLP for the limited company and the claim could have proceeded. If the error was based on a confusion as to the identity of the defendant and who was legally liable for the alleged breach, then in accordance with Insight, the court would not have the power to substitute at all.

The decision

Despite attempts to categorise their error as being one about name only, the District Judge agreed that the key issue was to explore the claimant’s solicitors’ thought process at the time of issue. In that respect, their correspondence was crucial. They had misunderstood the successor practice rules and had sued the limited company since they thought it was the defendant who was liable as a matter of law. 

This misunderstanding of the successor practice rules is a common one. Quite often the point is not taken but this case reinforces the need to explore it, especially if there is a potential limitation defence. If handled properly then a large value claim (especially one which, like here, is thought to have very limited prospects of success) can be resolved relatively quickly and cheaply, and without any claim payment.

The key points to consider are:

• The claimant’s thought process at the time of issuing proceedings is key. A defendant should try to elicit information from the claimant’s solicitors about the reasoning. In the absence of some evidence from them, an application like this is likely to be harder
• Neither the defendant nor their solicitors have a positive duty to or correct any potential errors on the claimant’s part, but any responses to the claimant need to be carefully considered
• A court has to have regard to the overriding objective under CPR Part 1 and they will want to act fairly, so this will always be a difficult application. However, that shouldn’t put a defendant off from making it