Morgan EST (Scotland) Ltd v Hanson Concrete Products Ltd

This is an appeal from a judgment of HHJ Havery given on 22^nd July 2004. It is with his permission.

The Judge permitted an amendment of the proceedings so that two new claimants could be added to the sole original claimant and for consequential amendments. The defendants say he had no power to do that or that if he did he ought to have refused permission on the grounds of discretion.

In 1998 an engineering contractor, Miller Civil Engineering Ltd. (“company A”) built a large tunnel as part of a waste water treatment plant. It involved the use of pipe sections made by the defendants. Some parts of the pipe were damaged during a jacking process. As a result a significant number of pipe sections had to be removed and replaced. This took time and caused additional cost.

The pipe sections were bought from the defendants. It is said that the damage which occurred to them was due to defective manufacture or design and that accordingly the defendants are liable for breach of contract in the sum of about £1/2m. The defendants say that the pipes were perfectly good. In addition, however the defendants say they have a technical defence. This appeal is only about the latter and specifically about whether or not it can be overcome by the joinder of parties.

The points arise in this way. Shortly before the expiry of the limitation period the original sole claimant (“company B”, then called Morgan Est (Scotland) Ltd.) issued the proceedings. The claim form, correctly, asserted that company B was formerly called Miller Civil Engineering Services Ltd. But it went on to assert, wrongly, that the original pipe supply contract was between B and the defendants and that it, B, was the company which had the trouble with the defective pipes and that it was it which suffered the consequential loss and damage.

By their defence the defendants took inter alia the point that the original contractor was company A called Miller Civil Engineering Ltd and not B. They said they were never in contractual relationship with B. They added denials that they were in breach of the contract they did have with A and that any claim by A would now be statute barred.

The response was the application the subject of this appeal. It was to add two claimants, namely company A and a company called Morgan Est plc (“company C”). This was accompanied by an explanation of the position. This was as follows:

So there were two distinct blunders:

The application to join companies A and C and make appropriate amendments to the pleadings were made pursuant to CPR rules 17.4 or 19.5. The relevant rules read as follows:

“17.4

(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; or

(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.”

“19.5

(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

(c)

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 19.5 (note not rule 17.4) implements s.35 of the Limitation Act 1980. This reads as follows:

“35

New claims in pending actions: rules of court

(1)

For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced –

a.

In the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and

b.

In the case of any other new claim, on the same date as the original action.

(2)

In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either –

a.

The addition or substitution of a new clause of action; or

b.

The addition or substitution of a new party;

and “third party proceedings” means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings.

(3)

Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.

(4)

Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.

(5)

The conditions referred to in subsection (4) above are the following –

a.

In the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and

b.

In the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.

(6)

The addition or substitution of a new party shall not be regarded for the purposes of subsection (5)(b) above as necessary for the determination of the original action unless either –

a.

The new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party’s name, or

b.

Any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action.”

It may be noted that Rule 19.5 virtually adopts s.35 – and indeed neither side contended that the slight difference in wording made any difference to the meaning. It may further be noted that no “further restrictions” were imposed by the rules.

Prior to the 1980 Act there was no provision corresponding to its s.35. Limitation was governed by the Limitation Act 1939. The general rule for actions founded on simple contract or tort was that they:

“shall not be brought after the expiration of six years from the date on which the cause of action accrued” (s.2(1)).

Not infrequently the apparent black and white, unforgiving nature of that provision caused injustice. So, for instance, where a defendant was wrongly named in error. In 1965 that injustice was partly alleviated. But of course this could only be done within the constraints of the Limitation Act itself. Order 20 r.5 of the RSC provided:

“An amendment to correct the name of a party may be allowed under paragraph (2) notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party if the Court is satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause any reasonable doubt as to the identity of the person intending to sue or, as the case may be, intended to be sued.”

The inwardness of this rule was that it allowed amendment of the name of a party even if that apparently meant that a new party was being named, if in reality you could see who was really meant. It can in retrospect be seen as an application of the Mannai Investments principle [1997] AC 749. A graphic everyday example is when you accidentally use the dog’s name when talking to your wife about your son – she knows who you really mean. The rule did not fall foul of the Limitation Act because you were not in substance bringing in a new party.

The rule was made pursuant to the powers contained in s.99(1)(a) of the Supreme Court of Judicature Consolidation Act 1925. The rule survived an early attack on its vires made in Mitchell v Harris Engineering [1967] 2QB 703 where the earlier cases of injustice are discussed by Lord Denning MR.

Rules were indeed made to implement s.35 of the 1980 Act after it came into force. But these were by way of amendment of RSC Ord. 15 r.6. It is not necessary to set these out for present purposes.

The courts considered rule 20.5 in a number of cases, the effective culmination of which was The “Sardinia Sulcis [1991] 1 Lloyd’s LR 201. Lloyd LJ in giving the leading judgment said this after quoting the rule:

“The first point to notice is that there is power to amend under the rule even though the limitation period has expired: see O.20, r. 5(2). The second point is that there is power to amend, even though it is alleged that the effect of the amendment is to add a new party after the expiration of the limitation period. But the Court must be satisfied (1) that there was a genuine mistake, (2) that the mistake was not misleading, (3) that the mistake was not such as to cause reasonable doubt as to the identity of the person intending to sue, and (4) that it would be just to allow the amendment”, p.205.

Later he said (p.207):

“It is thus established by three or more decisions of the Court of Appeal that a name may be “corrected” within the meaning of O. 20, r. 5(3), even though it involves substituting a different name altogether, and the name of a separate legal entity, and even though it is objected (see per Lord Justice Donaldson in Evans v Charringon & Co at p.822) that the effect of substituting the new name will be to substitute a new party. But the amendment will not be allowed where there is reasonable doubt as to the identity of the person intending to sue or intended to be sued.”

He was here of course using the very words of the rule.

He then grappled with the words identity of the person intending to sue…” (this being a “wrong plaintiff” case). He did so, however, by considering mainly “wrong defendant” situations. He said (p.207):

“In one sense a plaintiff always intends to sue the person who is liable for the wrong which he has suffered. But the test cannot be as wide as that. Otherwise there could never be any doubt as to the person intended to be sued, and leave to amend would always be given. So there must be some narrower test. In Mitchell v Harris Engineering the identity of the person intended to be sued was the plaintiff’s employers. In Evans v Charrington it was the current landlord. In Thistle Hotels v McAlpine the identity of the person intending to sue was the proprietor of the hotel. In The Joanna Borchard it was the cargo-owner or consignee. In all these cases it was possible to identify the intending plaintiff or intended defendant by reference to a description which was more or less specific to the particular case. Thus if, in the case of an intended defendant, the plaintiff gets the right description but the wrong name, there is unlikely to be any doubt as to the identity of the person intended to be sued. But if he gets the wrong description, it will be otherwise. The point can be illustrated by the facts of Rodriguez v R J Parker. In that case the identity of the intended defendant was the driver of a particular car. It was held that there was a mistake as to name. But if the plaintiffs had sued the driver of a different car, there would have been a mistake as to identity. He would have got the wrong description.”

Lloyd LJ’s distinction between cases of right description/wrong name and a wrong description/wrong name served as the basis for the further application of RSC Ord. 20 r.5. The courts did not find it particularly easy to apply. Even in the Sardinia Sulcis itself it was applied liberally in favour of allowing amendment. What had happened was the vessel had been damaged in a collision with another vessel. The charterers had paid for the repairs. The charterers then started proceedings in the name of the owners against the owners of the other vessel. But the name was wrong: the original owner had merged with another company and ceased to exist. By Italian law it was that other company which was the owner of the vessel and of the right to sue. It was alleged against the solicitors that the claim was by a non-existent company and they were sued for breach of warranty of authority. An application to amend to put matters right was made. When Lloyd LJ came to apply his test he said this:

“Returning to the facts of the present case, there could be no reasonable doubt as to the identity of the person intending to sue, namely, the person in whom the rights of ownership were vested at the date when the writ was issued. That was, as Mr Connoley says in his affidavit, the whole point of the exercise on which Messrs Richards Butler had embarked, as the defendants well knew. The description of the intending plaintiffs was clear enough. It follows that Mr Pertwee’s mistake was a mistake as to name, and not a mistake as to identity. I would hold that condition (3) has been satisfied.”

This is very close to saying that the description amounted to the person who had the right to sue.

The Sardinia Sulcis interpretation of Ord.20 r.5 was further explained by Evans LJ in International Bulk Shipping and Services Ltd v Minerals and Metals Trading Corporation of India [1996] 2 Lloyd’s LR 474 at p. 480:

“The rule envisages that the writ was issued with the intention that a specific person should be the plaintiff. That person can often but not invariably be identified by reference to a relevant description. The choice of identity is made by the persons who bring the proceedings. If having made that choice they use the wrong name, even though the name they use may be that of a different legal entity, then their mistake as to the name can be corrected. But they cannot reverse their original identification of the party who is to sue. This interpretation of the rule derives not only from the phrase “correct the name of a party” but also from the requirement that the mistake must not have been such as to cause any reasonable doubt as to the identity of the person intending to sue.”

It will be seen that Evans LJ, quite understandably, indeed necessarily, focussed on the language of the rule itself.

The first of these was Gregson v Channel Four Television 11 July 2000, The Times, 11 August 2000. The claimant had sued for an alleged libel which had been broadcast and put on the internet. The company sued was dormant but had a very similar name to the company responsible for the broadcast and internet site. Amendment was allowed under CPR rule 17.4(3). The defendant argued that rule did not apply and the case could only come within Rule 19.5. The point of this was that he could (or thought he could) then argue that the proceedings had not been served in time. May LJ said:

“16.

There were provisions in the former Rules of the Supreme Court providing for cases where an application was made to correct a mistake in the name of a party or to substitute a new party for one who had been joined by mistake. The Civil Procedure Rules are a new procedural code and there is, in my view, no basis for supposing that these new rules were intended to replicate, or for that matter not to replicate, the former provisions. It is not generally appropriate to refer to authorities decided under the former rules to determine what the new rules mean or how they should be applied.”

Peter Gibson LJ was to the same effect:

“33.

I do not find assistance from a comparison between the new rules and the Rules of the Supreme Court and the cases decided thereunder. We can and should decide this case on the new rules, interpreting both r. 17.4 and r. 19.5 having regard to the overriding objective. The judge, in my view, dealt with the case justly under r. 17.4(3) by correcting the erroneous name. For these as well as the reasons given by May LJ I would dismiss this appeal.”

One might have thought that from then on the Sardinia Sulcis would have been considered as sunk. But it has, as will be seen, resurfaced or at least its ghost has.

May LJ went on in Gregson to note the difference between r.17.4 and r.19.5. He said:

“The second set of circumstances is that addressed by r. 19.5(3). (Although at the end of r. 17.4 it is stated “(Rule 19.4 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)”, the reference to r. 19.4 would appear to be in error for r. 19.5). The circumstances are that a party has been named in the claim form in mistake for another person. Nothing more is said about the mistake, but it is clear from the rule as a whole that the relevant mistake is one necessitating a change of parties. By comparison and contrast with r. 17.4(3) that mistake is not a mere mistake as to a name such as causes no reasonable doubt as to the identity of the party in question but is something more fundamental which can only be cured if a new party is substituted.”

“Mr Tugendhat submits that there are three possible kinds of mistake in naming a party to litigation. Firstly, there may be a mistake as to identity. A wrong party is named and it is necessary to substitute the right party. He concedes that there was no mistake as to identity in this case. Secondly, there may be a mistake as to the name where the name is not the correct name of the intended defendant, nor is the name of any other person. Thirdly, there may be a mistake as to the name where the mistaken name is the name of some other person. He submits that the present case is an example of the third of these, not the second, since Channel Four Television Company Limited is the name of a company, although a dormant one. Mr Tugendhat then submits that, since a wrong person was originally named in the claim form, it is necessary to substitute the correct person and rule 19.5 applies. I accept that it is possible in the abstract to identify the three kinds of mistake to which Mr Tugendhat refers. But I do not accept that every case in Mr Tugendhat’s third category comes within rule 19.5 to the exclusion of rule 17.4(3).”

It was in the next case that the Sardinia Sulcis reappeared. This was Horne-Roberts v SmithKline Beecham [2001] EWCA (Civ) 2006, [2002] 1 WLR 1662. The claimant alleged that he had been damaged by a vaccine. He sued Merck but, after the limitation period, discovered that the vaccine had been made by SmithKline. So he applied to substitute them for Merck and was allowed to do so pursuant to the rule 19.5 power. Keene LJ said this:

“31.

Reliance is placed on two decisions. The first is Evans Constructions Co Ltd v Charrington & Co Ltd [1983] QB 810. This was a Court of Appeal decision concerned largely with the former Rules of the Supreme Court, Ord 20. r 5, but that rule, in so far as it dealt with the substitution of a new party, was intended to reflect the provisions of section 35(6)(a) of the 1980 Act. In dealing with amendments to writs or pleadings to correct the name of a party after the expiry of a limitation period, Ord 20, r 5(3) provided that such an amendment might be allowed even though the effect would be to substitute a new party.”

And

“40.

Not surprisingly the approach to be adopted to the construction of section 35(6)(a) is not free from authority, even though the cases often concentrate more on the wording of the rules of court implementing that provision than on the wording of the provision itself. A helpful analysis of the authorities as they then stood was provided by the Court of Appeal in The Sardinia Sulcis [1991] 1 Lloyd’s Rep 201.

Mr Andrew Bartlett QC, for the respondents, submits that the Court of Appeal here proceeded on an erroneous assumption. The previous Ord. 20(5) was not intended to implement s.35 of the 1980 Act at all. It predates the Act and was intended to allow party substitution subject to what could be permitted by the Limitation Act 1939. The Sardinia Sulcis cannot be regarded as an authority on s.35. Hence it cannot be regarded as an authority on CPR 19.5 which implements s.35. Mr William Norris QC for the appellants found no answer to this. To the consequences of this I shall return.

Before passing from Horne-Roberts I should mention two other points. First that it shows the width of the Sardinia Sulcis test itself – to allow a complete stranger to be sued outside the limitation period is a very strong thing. The other is that the court (see per Keene LJ at para. 44) saw the backstop as being the discretion under s.35.

The next case referring to the Sardinia Sulcis was Parsons v George [2004] EWCA (Civ) 912 [2004] 1 WLR 3264 at p. 3273. Here the claim was by a tenant against his landlord. The landlord was wrongly named in the claim form. The tenant was allowed pursuant to rule 19.5 to substitute the correct landlord who had not in any way been misled. Dyson LJ said:

“25.

It would be surprising if the effect of the CPR were to deny to the court jurisdiction to allow the addition or substitution of parties after the expiry of a relevant limitation period in circumstances where the court had previously enjoyed such jurisdiction.”

“41……The meaning of section 35(6)(a) of the 1980 Act and of rule 19.5(3)(a) was considered by this court in Horne-Roberts v SmithKline Beecham plc [2002] 1 WLR 1662. As appears from paras 40-45 of the judgment of Keene LJ, the court adopted the test suggested by Lloyd LJ in The Sardinia Sulcis [1991] I Lloyd’s Rep 201, 207 that the power to change a party after the expiry of a limitation period can be exercised where a party has been wrongly identified, but “it was possible to identify the intending plaintiff or intended defendant by reference to a description which was more or less specific to the particular case”. Thus, for example, if it is clear that the claimant intended to sue his employer or the competent landlord, but by mistake named the wrong person, an application to substitute the person who in fact answers the description of employer or competent landlord would come within rule 19.5(3)(a).

42.

In other words, the court rejected the argument that rule 19.5(3)(a) is directed only at cases of misnomer in the strict sense, and adopted a more liberal approach such as that applied in the Evans case and the Signet case.”

Finally there is Kesslar v Moore & Tibbits [2004] EWCA (Civ) 1551. The claimant wished to sue her former solicitors for negligence. By the time she sued, the firm, called Kundert and Co., had ceased to exist. The former partners worked for a firm which called itself Moore and Tibbits (incorporating Kundert and Co). She used that name in her claim form. Amendment to substitute the names of the former partners was allowed pursuant to rule 19.5. Buxton LJ applied the Sardinia Sulcis right description/wrong name test. He said in para. 13:

“[Keene LJ in Horne-Roberts]then referred to a number of previous authorities upon Order 20 Rule 5 which however, like our rule, depended on section 35 of the Limitation Act. He said that he found helpful the case of The Sardinia Sulcis [1991] 1 Lloyd’s Rep 201 …”

This repeats the error about the basis of Ord. 20 r.5. But it was not necessary to his decision.

Of more relevance to the present case is this sentence in para 23:

“The best source for what the claimant actually intended is to be found in the points of claim.”

Sedley LJ agreed. He further had regard to the overriding objective. His concluding sentence is important. He said:

“30.

I would want to leave for future consideration whether there is in this field of law a material dichotomy of identity and capacity or of nomenclature and liability.”

Latham LJ agreed with both judgments. I take this as leaving it open whether the Sardinia Sulcis test sets out the ambit of rule 19.5.

Before the Judge the principal argument was whether or not the case fell within the Sardinia Sulcis principle as embodying the limits of Rule 19.5. Before us, by his respondents’ notice, Mr Bartlett widened the debate – as to whether that principle truly embodied the limits of rule 19.5. In the alternative he submits that this case falls within the principle, supporting the Judge’s reasoning.

I have come to the clear conclusion that the Sardinia Sulcis right description/wrong name test does not set the limits of Rule 19.5. It was devised for a wholly different rule and not for s.35 of the 1980 Act under which rule 19.5 was made. If anything it is more relevant to r.17.4 with its requirement that the mistake be “not one which would cause reasonable doubt as to the identity of the party in question.” It is those words which echo the former Ord. 20 r.5 “not misleading or such as to cause any reasonable doubt as to the identity of the person intending to sue or, as the case may be, intended to be sued.”

In so holding I have of course considered whether I am bound by the use of the Sardinia Sulcis test in the trinity of post-CPR cases, Horne-Roberts, Parsons and Kesslar. I do not think I am for the following reasons:

I conclude that the right approach is to apply the words of rule 19.5 without regard to the Sardinia Sulcis but with regard to the overriding objective, bearing in mind however that the limit of the rule must be the limit set by the empowering section, s.35. Much the better approach is that set out in Gregson. Citation of old authorities under different rules simply obscures the debate. The Sardinia Sulcis should be allowed to sink back to the ocean bottom. It muddies the waters.

The same goes for the application of rule 17.4 – though the wording here is much closer to the old rule. And it should be remembered that there may be overlap between the two rules (see Gregson). It does not matter if there is, save possibly on some point of discretion or service, neither of which arise here.

With that I turn to see whether rule 19.5 applies to this case. One goes through a series of steps:

There is no reason to construe “in mistake” restrictively. On the contrary it is important to remember that the source of the rule was the 1980 Act which had the obvious intention of liberalising the position from that under the 1939 Act. Likewise the overriding objective of doing justice is likely to be undermined if one gets finicky about different sorts of mistake. The jurisdiction is for putting things right.

In the present case there was clearly a mistake about naming B. The very form of the particulars of claim suggest that it was A that was intended to be named (see Buxton LJ quoted in para. 28 above). The rather meagre, muddled and second-hand evidence in support of the application by a Mr Sayers does say this much:

“It was the intention throughout to bring the claim in the name of the party holding the right to bring the claim …… At the date the proceedings were issued it was believed the correct claimant was B”

Assuming that was so it is a little difficult to see why the assignment to B was not pleaded. A more logical view is that it was intended to name A. But I do not think it matters – there was a clear mistake one way or another. Things can and should be put right by substituting A for B. There is no prejudice to the defendants. They are deprived of an unmeritorious defence arising solely from a blunder by the other side – that does not count as prejudice.

Mr Norris objected that if one says “I intended the claim to be by the party holding the right to the claim” one is using the wide test expressly eschewed by Lloyd LJ in the Sardinia Sulcis. That may be so, but why does that matter if no-one is prejudiced?

Actually, however, I would, if necessary, hold that the case does fall within the Sardinia Sulcis. I need say no more than that I think the learned Judge was right when he said:

“There can be no doubt that the claimant and Kennedys [the solicitors] intended that the claimant should be that person [i.e. the person holding the right to sue.] One can describe that person in three ways: as the contracting party (an erroneous description), as the assignee of the contracting party, or as the person holding the right to sue the defendant under the contract. In Evans v Charrington & Co Ltd and Parsons v George, tenants were allowed to amend who had intended to sue particular persons who had been the relevant landlords in the erroneous belief that they were the relevant landlords. In my judgment, those actual decisions justify adopting the wider description of the intending claimant as the person holding the right to sue the defendant under the contract, as opposed to the narrower description as the contracting party or the assignee of the contracting party.”

Accordingly I would allow the substitution of B by A. As to C, the current beneficial owner of the right to sue, it can and ought to be joined pursuant to the provisions of rule 19.5(3)(c). As beneficial owner it ought to be present so that it will be bound by the result, see Three Rivers District Council & Ors v Governor and Company of the Bank of England [1996] QB 292 at p.313 (per Peter Gibson LJ). I did not understand Mr Norris to object to such joinder if A is joined.

Mr Norris had a second point – that in respect of a case said to be within r.19(3)(a) only substitution of a party can be permitted. It falls away if B is taken out as a party, as Mr Bartlett was happy should happen. So there is no need to rule on the point.

Finally Mr Norris had two points on discretion. First that the evidence in support and by way of explanation of the mistake was, as I have already said unsatisfactory and second that the blunder was of the claimants’ own making. The Judge considered both points and nonetheless allowed the amendment. I can see no error of principle here – indeed the second error (own making) will generally be the case where someone is trying to put something right.

Subject, therefore, to B being removed from the case, I would dismiss the appeal and allow the case to go forward in the names of A and C.

I agree.