Home Information Cases Insight Group Ltd & Insightsoftware.com Ltd v Kingston Smith (A Firm) (2012)

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Insight Group Ltd & Insightsoftware.com Ltd v Kingston Smith (A Firm) (2012)

Summary

In view of its very wide ambit, the test in Owners of the Sardinia Sulcis v Owners of the Al Tawwab [1991] 1 Lloyd's Rep. 201 as to whether it was possible to identify an intended claimant or defendant "by reference to a description which was more or less specific to the particular case" had to be interpreted as meaning to identify the relevant description of the intended party by reference to what description was material from a legal point of view to the claim made.

Facts

The appellant (X) appealed against a master's decision setting aside an order to substitute the respondent partnership (K), a firm of chartered accountants, as defendant to its claim in place of the limited liability partnership (LLP) which K had formed in May 2006.

X lost ownership of intellectual property rights in the software it developed as a result of the striking off of the company to which they had been transferred on K's advice. In November 2010, X brought a claim against the LLP seeking damages for losses arising between 1999 and 2006 from alleged failures of K in the performance of its function as an auditor and in the provision of fiduciary or administrative services, which had resulted in the loss of rights. By the time the particulars of claim were prepared in April 2011, X had realised that they were suing the wrong defendant, given that the majority of the acts complained of took place before the formation of the LLP. X therefore obtained an order substituting K as defendant in place of the LLP. That order was set aside and, as X had no viable claim against the LLP, its whole claim was consequently struck out.

Relying on the Limitation Act 1980 s.35(6)(a) and CPR r.19.5(3)(a), X contended that the name of the LLP had been given "in mistake" for K's name when the action was commenced. Alternatively, X relied on s.35(6)(b) of the Act and CPR r.19.5(3)(b) in arguing that it could not carry on the relevant claims unless K was substituted as defendant in the action.

Held

(1) In Adelson v Associated Newspapers Ltd [2007] EWCA Civ 701, [2008] 1 W.L.R. 585 it was decided that, in order to fall within CPR r.19.5(3)(a), the mistake had to be as to the name rather than as to the identity of the party, applying the generous test in Owners of the Sardinia Sulcis v Owners of the Al Tawwab [1991] 1 Lloyd's Rep. 201 as to whether it was possible to identify the intended party "by reference to a description which was more or less specific to the particular case", Adelson and Sardinia Sulcis followed. In holding that that test still applied, the Court of Appeal could not have intended to suggest that it remained necessary to show that the mistake was not misleading or such as to cause any reasonable doubt as to the identity of the person intended to be sued. The only way in which the Sardinia Sulcis test was workable was to identify the relevant description of the intended party by reference to what description was material from a legal point of view to the claim made. In the instant case, the relevant description of the defendant was that of professional adviser, because it was that capacity which potentially gave rise to legal liability. If X was suing the LLP in the mistaken belief that it was the LLP which provided negligent services, not K, then the court had power to grant relief. However, if X knew that the services were provided by K but mistakenly believed that the LLP was legally liable for K's negligence, then there was no such power. On the evidence, the LLP had been named in the claim form in the mistaken belief that it had provided the professional services which were the subject of the claim. The mistake was therefore as to which body satisfied the description of auditor and provider of fiduciary services during the relevant period. It was not simply an error of law as to the legal liability of the LLP for K's prior negligence. The mistake therefore satisfied the Sardinia Sulcis test and the requirements of s.35(6)(a) of the Act and CPR r.19.5(3)(a). It followed that the court had power to order substitution of K for the LLP as defendant (see paras 29, 35, 43, 52, 56-57, 82-83, 85 of judgment). (2) The court had power to order substitution under s.35(6)(b) of the Act and CPR r.19.5(3)(b) if a claim made in the original action was not sustainable by or against the existing party, and the same claim would be carried on by or against the new party, Parkinson Engineering Services Plc (In Liquidation) v Swan [2009] EWCA Civ 1366, [2010] Bus. L.R. 857 and Irwin v Lynch [2010] EWCA Civ 1153, [2011] 1 W.L.R. 1364 followed. In the instant case, however, the claims which X sought to carry on against K were not the same as those made against the LLP; the claims asserted against K after X had realised its mistake alleged that K, not the LLP, acted as auditor and provided the relevant services (paras 95-97). (3) The master had not been justified in refusing to make an order for substitution which was necessary to enable viable claims to be carried on and which caused no prejudice to the new party, namely K. The Master's order was therefore varied so as to substitute K as defendant in relation to claims which became time-barred between November 11, 2010 and April 11, 2011 (paras 112-114).

Appeal allowed

Queen's Bench Division
Leggatt J
Judgment date
18 December 2012
References

LTL 20/12/2012 : [2012] EWHC 3644 (QB)

Practice areas

professional-negligence-and-regulation-discipline,Professional Negligence & Regulation/Discipline