The limits of limitation: the court’s discretion in applications to substitute parties after limitation has expired
Background
A claim was issued by the claimant at the 11th hour under the Consumer Protection Act 1987, which governs claims for the safety of goods, and therefore alleged manufacturing defects. It was issued, incorrectly, against an English subsidiary, rather than the manufacturer (an overseas company based in the European Union). Had the goods been manufactured after the UK left the EU, the position would likely have been different.
The English subsidiary applied to strike out the claim on the basis that it was not the manufacturer and therefore there were no reasonable grounds to bring the claim against it. In response, albeit after a short delay, the claimant applied to substitute our manufacturer client into the proceedings. By that point, limitation had expired.
In order to overcome an argument that his case was time-barred, the claimant sought to rely on Civil Procedure Rule 19.6(2), which states that a party may be substituted for another after limitation has expired if:
- the relevant limitation period was current when the proceedings were started; and
- the addition or substitution is necessary.
As detailed in the judgment, it was not disputed that the relevant limitation period was current when proceedings were started, and the Judge accepted that substitution was “necessary” because the claimant had made a “mistake” in naming the wrong party (see CPR 19.6(3)(a)).
However, whilst the claimant had satisfied both conditions under CPR 19.6(2), his application was nevertheless dismissed. The court retains the overriding discretion, and exercised it in our client’s favour in this case. The Judge found that, amongst other matters, the “significant delay on the claimant’s part in the pursuit of this matter” was a weighty factor against him. A key consideration in reaching this assessment was the fact that the goods had been sitting in storage for several years after the incident date, making it unlikely that the goods could properly be inspected by an expert.
Key takeaways
Get it right the first time
Carry out pre-action investigations at an early opportunity and don’t make assumptions – particularly when dealing with corporate defendants which are part of a group, often involving overseas entities. In this case, the correct party was publicly identifiable from internet searches and/or inspection of the relevant goods, meaning the mistake could have been avoided. These factors worked against the claimant in the Judge’s ruling.
In this regard, the importance of a pre-action protocol compliant letter of claim cannot be overlooked. The Judge was critical of the claimant’s purported letter of claim and found that it was not compliant. This ultimately meant he had contributed to his own demise, because his mistake was not identified pre-action due to key details, notably the cause of action, not being clear. The protocols detail what a letter of claim should contain. The Judge noted that the applicable pre-action protocol even includes a template letter, the use of which may have prevented the mistake.
Even if you think the intended defendant already has the information, should have it, or should be providing you with certain disclosure, that does not obviate the requirement for a compliant letter of claim. The Judge commented that a defendant is entitled to have that information in a compliant letter of claim. It is the claimant’s case to investigate, establish and progress – not the defendant’s.
Compliance with the rules
As can be seen from the above, a compliant letter of claim is a tool that can help you particularise your case properly and thus potentially avoid mistakes. However, it is also a rule that needs to be complied with in any event. The Claimant’s failure to comply with the rules worked against him in the exercise of the Judge’s discretion.
If you have made a mistake, act quickly
The Claimant’s delays in rectifying his mistake played a significant part in the Judge’s decision because it took him 6 months from being notified (in our first client’s defence) to make the application.
You should actively review whether applications are necessary, making sure you are on the lookout for relevant indicators in important documents such as defences. The Judge said that upon receipt of defence the claimant should have “attached very great importance to the question of identifying the manufacturer and should have taken all possible steps to establish that fact – and quickly”. Therefore, if an application is necessary, make it promptly. As the claimant, is it your case to progress. The burden is not on the defendant to spot or act upon your mistakes.
Delay is particularly relevant in cases requiring expert evidence. The Judge was not factoring in the Claimant’s delays solely as a punitive measure, but for practical reasons too. He noted that he had to balance the prejudice to all parties. Of particular weight for the Judge was the fact that the intended new party would be forced to face a claim over 5 years after the incident date were it to be substituted in. Given that the relevant good had likely deteriorated due to passage of time, expert evidence, and thus a fair trial, was likely impossible.
Wider lessons about limitation
It is trite that issuing before the limitation period is vital, but this case shows that it doesn’t necessarily end at getting the claim form in before the deadline. The Judge commented that “it is well established that a claim issued right at the end of a limitation period carries a high expectation of being pursued in a timely manner”.
This is a potent reminder that you have to get the right claim form in, with the correct details, otherwise you risk falling foul on limitation points even if have, on the face of it, issued within time.
Here, the claimant issued a week before limitation, potentially unnecessarily so given that it appears that he had identified his claim well in advance of that. Had he issued earlier, he may have been able to make the substitution application whilst the limitation period was still live – a significantly easier application.
If it is not possible to issue early, and you are in any doubt about the accuracy of your claim, then consider whether alternatives to issuing are more appropriate (for example, a standstill agreement).
Summary
This case was an interesting illustration of how the court will take all relevant factors into account when exercising its discretion in determining substitution applications, and arguably highlighted some wider principles relating to other applications involving requests for discretionary relief. It emphasised the significance of getting it right at an early juncture, the importance of complying with rules, and the need to act promptly if a mistake has been made – particularly if the case is likely to require expert evidence, and especially if that requires inspection of physical goods which tend to deteriorate over time, potentially making a fair trial impossible after a certain amount of time has passed.
