Zacaroli: Two claims not the same
A now-defunct law firm has won a Limitation Act argument over two negligence claims initially brought against the firm that the claimants wrongly believed to be its successor practice.
The Court of Appeal allowed the appeals in a decision its barrister described as “a seismic shift in the approach to substitution of a defendant after expiry of the limitation where the claimant realises that they have sued the wrong defendant”.
Reading firm Pitmans merged with Bircham Dyson Bell (BDB) in 2018 to form BDB Pitmans, which rebranded as Broadfield in December 2024. There was, however, no novation of liabilities from Pitmans to BDB.
Pitmans is now known as Adcamp, following its dissolution and return to the register of companies.
In the two cases, heard together, the claimants issued against BDB in the mistaken belief that BDB had, as a matter of law, assumed responsibility for Pitmans’ liabilities. By the time they realised their error, the limitation period had passed.
Section 35(5) of the Limitation Act 1980 requires the addition or substitution of a party to be “necessary for the determination of the original action”.
Section 35(6) says it is not to be regarded as necessary unless either “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” (called the first gateway by the Court of Appeal) or “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” (the second gateway).
In one case, Deputy High Court Judge David Halpern KC concluded that the case fell within the second gateway on the basis that the new claim was the same claim as the old one.
In the other, Deputy High Court Judge Caroline Shea KC decided that the claimants had a realistic prospect of establishing at trial that any liability Pitmans had was novated to BDB, or that BDB was estopped from denying that it had assumed liabilities, or that the claimants could rely on the doctrine of acknowledgment.
That meant the application for substitution became unnecessary but she nevertheless dealt with it and reached the same conclusion as Judge Halpern.
Giving the main ruling of the Court of Appeal, Lord Justice Zacaroli disagreed. It was common ground that, in order to comply with the second gateway, the original and new claim must be the same, and he decided that they were not here as “substitution would involve a substantive change to the identity of the person against whom the claim is asserted”.
The question was whether the two claims “are in substance the same, not whether every pleaded fact is the same”, he added.
Zacaroli LJ concluded: “Mistake is specifically catered for in the first gateway but, according to authority binding on this court, the drafter of the 1980 Act deliberately limited the circumstances in which a mistake can be relied on to where it is a mistake as to name not identity.
“If that is correct, then it is difficult to construe the second gateway in such a way that it covers the type of mistake which is deliberately excluded from the first gateway.”
If there was a problem with the interpretation of the first gateway, that would be for the Supreme Court to look at.
The judge acknowledged that, as a result, second gateway may not work in one of the possible scenarios “expressly contemplated” by the statute, namely the substitution of a defendant, but said that could be explained by its legislative history.
Key to the case were the obiter dicta of Leggatt J in the 2014 case of Insight Group Ltd v Kingston Smith, which arose in similar circumstances.
Jamie Carpenter KC, who represented Adcamp, said in a briefing that the ruling represented a “seismic shift” by holding that Leggatt J’s decision should not be followed.
At the same time, he said the distinction Leggatt J drew between two categories of case “now really matters”.
In one category was a case where the claimant intended to sue the entity which had done the work complained of and wrongly believed that the named defendant was that entity.
In the other category was a case where the claimant knew that the named defendant had not done the work but wrongly believed that it had acquired the liabilities of the original entity.
“Substitution can be permitted in the first type of case, but not the second,” Mr Carpenter explained.
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