KA-2024-000202 - [2025] EWHC 1646 (KB)

The Recorder’s order was based on rule 19.6(3)(a). He therefore ruled that the appellant could be substituted for Lizst Price because Lizst Price had been named in the Claim Form by mistake.

Although he expressed a view that the different test in rule 19.6(3)(b) was also satisfied, that was not the basis of the application before him and he had heard no argument on the point. As it was not made an alternative basis for his order, his view on that point is not directly relevant to this appeal.

I accept Ms Veerabathran’s submission that, at the time of the Recorder’s order, the appellant could not be substituted for Lizst Price because Lizst Price was no longer party to the claim. That was the effect of the Notice of Discontinuance, applying rule 38.5.

That clear effect, important enough to be stated in terms by rule 38.5(2), is not altered by the fact that an issue of costs could still have been raised under rule 38.5(3) or that Lizst Price could have made an application to set aside the Notice of Discontinuance under rule 38.4 or by any possibility of the claimant applying to set the Notice aside (as he now has).

Contrary to the Recorder’s conclusion, I do not consider that the use of the past tense in rule 19.6(3)(a) has any significance. It refers in that way to “a party who was named in the Claim Form by mistake” simply because, in any case where substitution is sought to correct the mistake, the mistake must have occurred in the past.

Instead, it seems to me that the important word in that sentence is “party”. Once a Notice of Discontinuance takes effect under rule 38.5, the party named in it ceases to be a party to the claim (save for the limited purposes referred to in rule 38.5(3) and 38.4). So, at the point when the Recorder made his order, the appellant was substituted for a non-party and not for a party.

The same analysis applies to the very similar wording contained in section 35(6) of the 1980 Act.

That conclusion is supported by the following propositions which Ms Veerabathran successfully established:

I was less persuaded of the relevance of North Thames RHA v Sheppard Robson and another (1995) 50 Con LR 79, a pre-CPR case in which the Court of Appeal held that in litigation between a building client and a contractor, it would be inappropriate to make a declaration as to the effect of a sub-contract where proceedings against the sub-contractors had been discontinued. It was suggested that they could be re-joined to the proceedings, but Simon Brown LJ described that suggestion as “cloud cuckoo land” and said that “the clock cannot be turned back”. Those comments were based on analysis of the rules of court as they then stood and obviously were not and could not be of assistance in interpreting the CPR. They do however emphasize that discontinuance has always been designed to have a fundamental and, with whatever limited exceptions, final effect.

Ms Tew was not able to gainsay the propositions listed above. She observed correctly that none of these cases is directly on point. However, their cumulative force lends considerable support to my conclusion above. The key feature of substitution under rule 19.6(3)(a) is that it enables a defendant to be brought into a claim even after expiry of the limitation period. It is possible only where the right party is substituted for the wrong party who has been sued within the limitation period. After service of the Notice of Discontinuance in this case, regardless of the claimant’s solicitors’ intentions, Lizst Price was a non-party against whom the limitation period was now running and indeed had run.

That reality is not changed by any theoretical or other possibility of Lizst Price being brought back into the case. In relation to the rule 3.10 application I heard argument about the case of Toplain Ltd v Orange Retail [2012] EWHC 4254 (Ch) where Roth J at [14] ruled that the rule 3.10 power could be used to set aside a Notice of Discontinuance served by mistake. Ms Veerabathran submitted that that case either could be distinguished or was wrongly decided but I do not need to decide those issues. That is because a mere theoretical possibility of an application, and an order, restoring a party to proceedings does not change the fact that the party in question has left the proceedings. The position is analogous to that of a claim after judgment at trial on all issues, and once time for any appeal has passed. At that time a claim must be treated as having come to an end. That is so despite the fact that, at any time in the future, an application could be made (e.g. on grounds such as fraud) to set the judgment aside or (if there is good reason) for an extension of time to apply for permission to appeal.

Similarly, my conclusion is unaffected by the fact that, in theory, an application could have been made, at any time before the Recorder’s order, for permission to extend the time for service of the Claim Form on Brookson. The fact is that the effect of the Recorder’s order was not to substitute the appellant for Brookson, whether or not that would have been a possibility.

In discussion it was canvassed that this effect of a Notice of Discontinuance was a trap for the unwary but as Ms Veerabathran pointed out, the lack of any case directly on point suggests that the problem has not arisen often, if at all. Whilst the Recorder may have viewed the appellant’s arguments as promoting form over substance, I do not, for the reasons set out above.

The appeal therefore succeeds on grounds 1-4.

I am also not persuaded that there is any merit in the Respondent’s ground A. And, if anything turned on the Recorder’s comment that rule 19.6(3)(b) was satisfied, I would also allow the appeal on ground 5.

The simplest reason is that, although paragraph (b) differs by allowing addition of a party, as well as substitution of a party, in this case substitution of a party under paragraph (b) was impossible for the same reasons as made it impossible under paragraph (a).

The claimant’s application which was before the Recorder and which is the subject of this appeal unambiguously sought “substitution”, and the Recorder’s order was for the appellant to be “substituted as a Defendant in place of” Lizst Price. Ms Tew conceded before me that she could not, instead, seek an order for the appellant to be added, rather than substituted, as a defendant.

Accordingly, reliance on paragraph (b) adds nothing to the claimant’s case.

I therefore do not need to resolve the question of whether paragraphs (a) and (b) of rule 19.6(3) are mutually exclusive. It has been said that they are, by Fraser J (as he then was) in TRW Pensions Trust Ltd and another v Indesit Company Polska Sp. Z.o.o. and another [2020] EWHC 1414 (TCC) at [49], echoing an observation by Lloyd LJ in Irwin v Lynch [2010] EWCA Civ 1153 at [20]. If they are, then this case could only fall within paragraph (a), not paragraph (b). That is because of the Recorder’s unappealed finding of fact that the wrong party was named in the claim by mistake.

Nor do I need to decide a question about whether, to trigger paragraph (b), the claim could not have been “carried on against [Lizst Price] unless the new party [was] added or substituted as … defendant”, notwithstanding Ms Veerabathran’s forceful submission that the claim, at least as originally framed in the Claim Form, could in fact have been continued against Lizst Price for losses arising from the 2013 and 2014 accounts.