In AIG Europe Ltd v McCormick Roofing Ltd and another, the High Court provided valuable guidance on how and when the court has jurisdiction to substitute one named claimant for another after the end of a limitation period. In so doing, it has suggested that CPR 19.5(3)(b) may occupy a more significant position than has hitherto been assumed.
This was a fire claim arising out of a fire at the AIG Building on Fenchurch Street in London, on 31 August 2013. One or both of the defendant companies (McCormick) were roofers who were working to create a roof terrace from what was previously a flat roof. They were undertaking hot works over a weekend, and the building caught fire. The fire caused approximately £4 million of loss and damage. The long lease of the AIG Building was at the time owned by AIG Europe Ltd, and it suffered the vast majority of the loss caused by the fire. A decision was taken to sue McCormick.
In late 2018, American Insurance Group Inc. (of which AIG Europe Ltd was a subsidiary) had undertaken a reorganisation of its European entities to prepare itself for Brexit. That reorganisation involved the separation out of part of AIG Europe Ltd’s business and its transferral to another company, American International Group UK Ltd (AIG UK Ltd); once that transfer was completed, the rump of the company was merged with AIG Europe SA (AIGE SA). AIG Europe Ltd’s cause of action against McCormick was assigned to AIGE SA as part of the merger, and AIG Europe Limited was dissolved. Unfortunately, the solicitors pursuing the claim against McCormick were not told about the changes and the proceedings were issued in the name of AIG Europe Ltd, just a few days before the end of the limitation period.
The particulars of claim came to be prepared a few months later, and the issue was spotted at that stage, before service of the claim form. The particulars of claim were prepared on the basis of the true factual position, namely that the cause of action had been assigned to AIGE SA. By this stage, any new claim being issued in the name of the correct entity would have been statute-barred. Therefore, at the same time as service of the claim form and particulars of claim, an application was made to substitute AIGE SA for the incorrectly named AIG Europe Ltd. The application was made under CPR 19.5(3)(a) and (b).
The relevant rule
CPR 19.5 (Special provisions about adding or substituting parties after the end of a relevant limitation period) applies to a change of parties after the end of a period of limitation under the Limitation Act 1980, the Foreign Limitation Periods Act 1984, or any other enactment which allows such a change, or under which such a change is allowed (CPR 19.5(1)). It provides (insofar as is material) that the court may add or substitute a party only if the relevant limitation period was current when the proceedings were started, and the addition or substitution is necessary (CPR 19.5(2)). It also provides that the addition or substitution of a party is necessary only if the court is satisfied that:
- 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)).
- 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 original party has died or had a bankruptcy order made against him or her and his or her interest or liability has passed to the new party (CPR 19.5(3)(c)).
That rule was enacted pursuant to section 35 of the Limitation Act 1980.
Sitting as a deputy High Court judge, Mr Roger ter Haar QC allowed the application to substitute. The judge’s decision provides welcome clarification on how to apply the relevant rules, and suggests that CPR 19.5(3)(b) may come to play a more significant role in applications of this type going forward. As indicated above, the application relied upon both CPR 19.5(3)(a) and (b).
Historically, most such applications in similar circumstances have relied upon the mistake provision under CPR 19.5(3)(a). For example, in Rosgosstrakh Limited v Yapi Kredi Finansal Kiralama AO, Andrew Henshaw QC sitting as a deputy High Court judge, allowed a very similar application made under CPR 19.5(3)(a). In that case, an insurance company assigned an insurance policy as part of a merger, and proceedings for declarations under the policy were started in the name of the old company rather than the new insurer; the new insurer, which was the old insurer’s successor company as part of a corporate reorganisation, was substituted. Unsurprisingly, AIGE SA relied heavily on Rosgosstrakh and put the application primarily under CPR 19.5(3)(a).
However, the case law under CPR 19.5(3)(a) is not altogether straightforward. Some would say that it has been significantly over-complicated by the continued reference to case law decided in relation to the rule’s forerunner, RSC Order 20, rule 5. That covered the same ground, but with an important difference in its wording: Order 20, rule 5(3) required that the mistake was “… not misleading or such as to cause any reasonable doubt as to the identity of the person intending to sue…”
As such, the case law which developed in relation to Order 20, rule 5(3) drew a distinction between mistakes as to name, and mistakes as to identity, which were misleading or caused reasonable doubt as to the relevant party. The former could be rectified by substitution, the latter could not be, as explained by Lloyd LJ in The Sardinia Sulcis.
However, as illustrated by the facts of The Sardinia Sulcis itself, the test to be adopted in distinguishing the two classes of mistake was a generous one to the substituting party: the claim had been started in the name of the company believed to be the owner of the ship The Sardinia Sulcis. However, it transpired that before issue, the ownership of the ship and the cause of action had been transferred and the claimant company had ceased to exist. An application to substitute was made, and allowed, on the basis that “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… The description of the intended plaintiffs was clear enough. It follows that Mr Pertwee’s mistake was a mistake as to name, and not a mistake as to identity.” (Lloyd LJ at paragraph 207.) A number of judges have since questioned whether this observation can really have been right, while still applying the test, no doubt because taking a stricter view would risk causing serious injustice by preventing substitution.
In Adelson v Associated Newspapers Ltd, the Court of Appeal held that The Sardinia Sulcis was still good law and that the test it laid down was still applicable, even under CPR 19.5(3)(a). In so doing, it expressly disavowed its own previous comments in Morgan Est (Scotland) Ltd v Hanson Concrete Products, where Jacob LJ had said that CPR 19.5(3) was intended to represent a liberalisation of the law as compared with the position under Order 20, rule 5.
In this case, RSA, which had intervened on behalf of its insured, McCormick, relied heavily on this comment by the Court of Appeal, and sought initially to submit that CPR 19.5(3) included the same requirement as to “not [being] misleading or such as to cause any reasonable doubt as to the identity of the person intending to sue”. Although much of this submission was abandoned, the judge in terms rejected it and clarified that there had indeed been a liberalisation of the law insofar as this requirement had been excised, and was not present in CPR 19.5(3). In providing this clarification, he was in good company: the same point had been made by Leggatt J (as he then was) in Insight Group v Kingston Smith.
The judge went on to hold that, just as in Rosgosstrakh, and indeed as in The Sardinia Sulcis, if one takes the generous approach to the question which was set out in The Sardinia Sulcis, then the mistake which had been made by AIGE SA’s solicitors, as a result of them not being given the full facts, was a mistake as to name and not as to identity. AIGE SA therefore passed through the jurisdictional gateway of CPR 19.5(3)(a).
Practically, the judge also provided important guidance in terms of what one might expect to find on a claim form in cases where CPR 19.5(3)(a) applied. RSA and McCormick argued that there needed to be words on the claim form which identified the true claimant. This was not the approach taken by the judge, and one can see why. While there may generally be such words if the dispute is about the identity or name of the defendant, if the cause of action has been assigned to a different company and the solicitors preparing the claim form are unaware of the assignment, it is highly unlikely that there will be such relevant words on the claim form. Repairing such words would therefore place claimants at a significant disadvantage when substituting.
In many respects, the most useful and interesting aspect of Mr ter Haar QC’s decision was the primacy that he gave CPR 19.5(3)(b). Although it was taken second by AIGE SA, it was taken first by the judge.
The case law under CPR 19.5(3)(b) is considerably simpler than that under the first gateway, and the three leading cases are Roberts v Gill, Parkinson Engineering Services PLC v Swan and Irwin v Lynch.
Roberts v Gill was a case in which a claimant applied to add a claim in a representative capacity, where he had previously sued in a personal capacity as beneficiary of his late grandmother’s estate. CPR 19.5(3)(b) was relied upon, alongside CPR 17.4. The Supreme Court upheld refusals at first instance and in the Court of Appeal; in short, the claim in a representative capacity was not necessary to decide the claim in a personal capacity. The substitution being sought was not necessary within the terms of the rule, and the judge rightly distinguished it because what was being sought was the addition of a new cause of action, rather than the regularisation of an already pleaded cause of action.
Conversely, Parkinson and Irwin were cases were substitution was permitted; they were in many factual respects opposite sides of the same coin.
In Parkinson, a liquidator caused the company to commence a claim against the previous administrators of the company, in the name of the company, after they had had their release. They therefore had a complete defence to the company’s claim, but would not have had that defence if the claim was brought in the name of the liquidator under section 212 of the Insolvency Act 1986. The liquidator therefore applied to substitute himself and to put the claim (which involved the same allegations) under section 212. He succeeded.
In Irwin, an administrator sought to bring proceedings against the directors of a company under section 212, but faced with a strike out application on the basis that he was not a person entitled to bring a claim under section 212, he succeeded (on appeal) in substituting the company for himself.
Here, the judge held that CPR 19.5(3)(b) was “the more natural place to start”, because the claim as pleaded could not be maintained against McCormick unless AIGE SA was substituted for AIG Europe Ltd, this jurisdictional gateway was satisfied. It was therefore indistinguishable from Parkinson and Irwin.
The judge went on to exercise his discretion to permit AIGE SA to be substituted for AIG Europe Ltd.
Although he described his decision on the discretion as one of considerable difficulty, the key factors pointed towards allowing the application: it was an innocent mistake, as a result of which no one was misled, and where (although there had been delay in the issuing of proceedings) there had been investigations very early on (such that there was better evidence than usual as to what had actually happened to cause the fire).
The two main points relied upon by RSA and McCormick were the the loss of the limitation defence, and the personal hardship which the individuals behind McCormick were suffering as a result of the litigation. However, as the judge observed, a limitation defence was by definition being lost under CPR 19.5(3), and the hardship would have been suffered quite apart from the mistake as to the name of the entity suing.