England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE GRENFELL)

		Royal Courts of Justice Strand London WC2
		Friday 25 May 2001

1. LORD JUSTICE PILL: I will ask Lady Justice Arden to give the first judgment.
2. LADY JUSTICE ARDEN: This is an appeal by the defendants in this action, with the limited permission of Chadwick LJ, against the order of His Honour Judge Grenfell, sitting as a Deputy Judge of the Queen's Bench Division, dated 30 January 2001.
3. The claimant had been adjudged bankrupt on 16 February 1988. She was discharged from bankruptcy in February 1991. Proceedings were begun in February 1993. They allege that the defendant's solicitors gave negligent advice in 1987 culminating in her bankruptcy in 1988. It is common ground that her claim for damages is a hybrid claim because it is a claim partly for damages of a personal nature, such as distress and inconvenience caused by the bankruptcy, and partly for damage to her personal property. Accordingly it is common ground that this claim vested in her trustee in bankruptcy: see Ord v Upton [2000] Ch 352.
4. The original defence was filed in 1993, but in August 2000 the defendants amended their defence so as to plead that she lacked capacity to bring these proceedings. This led to an assignment dated 11 December 2000 whereby the claimant's trustee in bankruptcy assigned to the claimant all his interest and right in the causes of action and related remedies being pursued in the action on the terms set out in the deed of assignment ("the assignment"). Hence a preliminary issue was formulated for determination by the judge whether the claimant had cured the defect in her standing to bring these proceedings by taking the assignment.
5. By his order the judge determined the preliminary issue in favour of the claimant and permitted the claimant to amend her proceedings so as to plead the assignment. Pursuant to the limited permission granted by Chadwick LJ, the sole issue before us is whether the judge was right to conclude that the effect of the amendment was to alter the capacity in which the claimant sued and was therefore within CPR 17.4(4).
6. CPR 17.4 provides in material part:

"(1) This rule applies where -

(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and

(b) a period of limitation has expired ...

(2) ...

(3) ...

(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings were started or has since acquired.

(Rule 19.4 specifies the circumstances in which the court may allow a new party to be added or substituted after the end of a relevant limitation period)."

7. In his judgment, the judge referred to Mulkerrins v PriceWaterhouse Coopers [2001] BPIR 106, a decision of this Court which holds that a bankrupt cannot bring proceedings in respect of a hybrid cause of action. The cause of action is vested in the trustee in bankruptcy and the trustee in bankruptcy would hold any damages on constructive trust: (1) for the bankrupt as respects any damages which did not vest in him under s.304 Insolvency Act 1985; and (2) for the creditors as to the balance.
8. In the course of his judgment, Jonathan Parker LJ, with whom Kennedy and Laws LJJ agreed, referred to enquiries that had been made as to whether the Official Receiver, as trustee in bankruptcy of the claimant in those proceedings, would be willing to assign the cause of action to the claimant, the former a bankrupt. The Court of Appeal expressed themselves in a way which made it clear that if there had been such an assignment, it would have cured the defect in the commencement of the proceedings. The judge relied on these observations in determining that he had jurisdiction to give permission for the amendment sought under CPR 17.4(4). He held that before the claimant obtained the assignment she had no capacity to sue and after the assignment she had capacity to sue as assignee from the trustee; hence CPR 17.4(4) applied.
9. Mr Evans for the appellants submits:

(1) The claimant had no title to sue before the assignment.

(2) There was no change of capacity. He relies on Robinson v Unicos Property Corporation Limited [1962] 1 WLR 520. In that case, the plaintiffs originally sued as individuals, but later took an equitable assignment and sought to amend to sue as assignees after the limitation period expired. The question was whether the plaintiffs were making a new claim. The Court of Appeal held that they were not making a new claim. Holroyd Pearce LJ, with whom Harman and Davies LJJ agreed, said in the course of his judgment:

"Nor are [the plaintiffs] suing in a different capacity. Although they now wish to claim by virtue of their right as equitable assignees to the benefits of the principal to the original contract, they still sue in their personal capacity as principals through the same agency on the contract albeit through an assignment of the benefit to them." (as 526).

(3) The passage in Mulkerrins relied on by the judge is distinguishable. It was obiter. It was not clear whether full argument had been addressed. CPR 17.4(4) could not apply in that case because limitation was not an issue. Accordingly the Court of Appeal might simply have taken the view that it was much better to allow an amendment to avoid circuity of proceedings.

(4) CPR 17.4 is concerned with changes in capacity as where a person suing in his own right wishes to amend the statement of case so as to sue in a representative capacity, for example as an executor, administrator, or on behalf of the members of a Lloyd's syndicate.

(5) In Ingall v Moran [1944] 1 KB 160, the plaintiff purported to sue in a representative capacity as administrator of his son's estate but did not obtain letters of administration until after the expiration of the limitation period. His claim was struck out. The suggestion in the notes to the Civil Procedure 2001 at 17.4.6, that CPR 17.4(4) would now remove the difficulty in this case, was incorrect (on Mr Evans' submission) since the plaintiff had purported to sue as administrator from the outset. However, Mr Evans accepts that the true position may be that in Ingall v Moran the plaintiff should be treated as having sued in an individual capacity because he did not have a representative capacity in fact.

(6) The courts should construe CPR 17.4(4) narrowly so as to avoid abuse. If it is construed widely, a person may be able to start proceedings without any title to the relevant causes of action and then seek assignments from the people entitled to the causes of action after the expiration of the limitation period. This would be undesirable. (7) Any amendment would now be outside the limitation period and so should not be permitted, because if permitted the amendment would date back to the commencement of the proceedings, thus depriving the defendants of their limitation defence.

(8) It is no objection to the refusal of leave to amend that the defendants did not raise this point until August 2000. If they had raised it in their original defence, it is unlikely that any action would have been taken by the claimant within the limitation period.

10. Mrs Jane Giret QC for the respondent submits as follows:-

(i) The respondent is entitled in equity to any personal damages that may be obtained in this action; Mulkerrins v PriceWaterhouse Coopers, above.

(ii) CPR 17.4(4) is not limited to administrators and executors.

(iii) The Robinson case was dealing with the separate question of whether there was a new claim and has no bearing on the appeal in this case.

(iv) If there were to be any abuse such as is suggested by Mr Evans in his submissions, this can be addressed by the Court's discretion under CPR 17.4(4). In addition if the amendment involves the addition of a new claim, the concluding words of CPR 17.4(4) would apply.

(v) For the purposes of CPR 17.4(4), capacity to sue includes ownership of the legal title to a cause of action.

Conclusion

11. In my judgment, the crucial question in this case is the meaning to be attached to the word "capacity" in the context of CPR 17.4. There is no guidance in the glossary to the CPR and we have not been referred to any judicial definition. The judge refers to the concept as the proverbial "elephant". The meaning of CPR 17.4(4) was not a question considered in the Mulkerrins case, as to which I accept Mr Evans' submissions. Some guidance however can be obtained from section 35 of the Limitation Act 1980 and other parts of the CPR.
12. CPR 17.4(4) is derived from section 35 of the Limitation Act 1980, which provides in material part as follows:-

"(4) Rules of court may provide for allowing a new claim to which subsection(3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.

(5) ...

(6) ...

(7) Subject to subsection (4) above, rules of court may provide for allowing a party to any action to claim relief in a new capacity in respect of a new cause of action notwithstanding that he had no title to make that claim at the date of the commencement of the action.

This subsection shall not be taken as prejudicing the power of rules of court to provide for allowing a party to claim relief in a new capacity without adding or substituting a new cause of action."

13. Section 35 implemented recommendations of the 21st Report (Final Report on Limitation of Actions) of the Law Reform Committee (1977) (Cmnd 6923). Accordingly, this report may be referred to for the purposes of examining the mischief to which CPR 17.4 is addressed. I find this:-

"Amendment to change capacity of party

[the committee first dealt with a point concerning actions against deceased persons, with which we are not concerned]

"5.14 The second case arises when it is sought to alter the capacity of a party so that he can sue as administrator of a deceased person's estate. R.S.C. Order 20, rule 5 enables the court to allow a "post-limitation" amendment to alter the capacity of a party who is also an executor, because the executor's title relates back to the death of the deceased. But this rule does not cover a party who is also an administrator, since an administrator's title dates only from the grant of representation. The result is that, for example, a widow who is not an executrix and who sues in her personal capacity as a dependant under the Fatal Accidents Act cannot, if she obtains a grant of administration after the expiry of the limitation period, amend her writ so as to claim also as administratrix on behalf of the estate.

5.15 It would not be within our terms of reference to consider whether this distinction between executors and administrators should be abolished for the purposes; indeed, we can see that there might be serious objection to such a course. We do, however, think that the particular case of the widow/administratrix illustrates a potential defect in the current law and that it should be remedied. The rules we have referred to do, we are advised, go as far as the Rule Committee considered permissible under the existing substantive law. We go into this question in more detail in the context of new parties, at paragraphs 5.22 to 5.29 below, and we therefore recommend that the rule-making power should be extended to allow the capacity in which a party sues to be amended after the limitation period has expired, so as to enable him to sue as administrator, notwithstanding that, at the date the proceedings were instituted, he could not have sued as such."

14. The final recommendation on this point was recommendation 47 which is not limited to administrators:-

"47. A plaintiff should be able to amend his pleadings out of time so as to sue in another capacity (including that of an administrator), and the rule making powers of the Supreme Court and County Rule Committee should be extended for this purpose (paragraph 5.15)."

15. These passages shed light on the reason for what is now CPR 17.4(4), though I bear in mind that the patch which the rule may cover may be wider than the hole it was intended to cover.
16. I then turn to the CPR. CPR 16.2(3) and (4) state as follows:-

"(3) If the claimant is suing in a representative capacity, the claim form must state what that capacity is.

(4) If the defendant is sued in a representative capacity, the claim form must state what that capacity is."

17. This requirement is amplified in the notes to the claim form. Civil Procedure Form N1A states:

"You must provide the following information about yourself and the defendant according to the capacity in which you are suing and in which the defendant is being sued. When suing or being sued as:-

an individual:

All known forenames and surname, whether Mr, Mrs, Miss, Ms or other (eg Dr) and residential address (including postcode and telephone number) in England and Wales. Whether the defendant is a proprietor of a business a partner in a firm or an individual sued in the name of a club or other unincorporated association, the address for service should be the usual or last known place of residence or principal place of business of the company, firm or club or other unincorporated association.

Where the individual is:

under 18 write '(a child by Mr Joe Bloggs his litigation friend)' after the name. If the child is conducting proceedings on their own behalf write '(a child)' after the child's name.

a patient within the meaning of the Mental Health Act 1983 write ('by Mr Joe Bloggs his litigation friend)' after the patient's name.

trading under another name you must add the words 'trading as' and the trading name eg 'Mr John Smith trading as Smith's Groceries'.

suing or being sued in a representative capacity you must say what that capacity is eg 'Mr Joe Bloggs as the representative of Mrs Sharon Bloggs (deceased)'.

suing or being sued in the name of a club or other unincorporated association add the words 'suing/sued on behalf of' followed by the name of the club or other unincorporated association.

a firm enter the name of the firm followed by the words 'a firm' eg 'Bandbox - a firm' and an address for service which is either a partner's residential address or the principal or last known place of business.

a corporation (other than a company) enter the full name of the corporation and the address which is either its principal office or any other place where the corporation carries on activities and which has a real connection with the claim.

a company registered in England and Wales enter the name of the company and an address which is either the company's registered office or any place of business that has a real , or the most, connection with the claim eg the shop where the goods were bought.

an overseas company (defined by s744 of the Companies Act 1985) enter the name of the company and either the address registered under s691 of the Act or the address of the place of business having a real, or the most, connection with the claim."

18. There may well be other places in the CPR where the term "capacity" is used. But the ones set out above make it clear that capacity is being used in the sense of legal competence or status to bring or defend a claim. It is a competence that one may have in one's own right or on behalf of another person.
19. In my judgment the same meaning of capacity must apply in CPR 17.4(4). This means that the alteration in capacity which is referred to is an alteration from a representative capacity, or personal capacity to another representative capacity, or (in the case of a representative claim) to a personal capacity.
20. So the question is whether an assignment can give rise to a change in capacity. The judge thought that it could do so because before the assignment was pleaded the claimant had no capacity to bring the action, whereas after the assignment was pleaded she had full capacity to do so. In my judgment on its true analysis assignment is a question of contract rather than status. As the court held in the Robinson case, the position in law is that the claimant brings a claim in her personal capacity both before and after the assignment. Capacity has a much more limited meaning than that for which the respondent contends and does not alter in these circumstances. It denotes the characteristics which a person has and which give him an ability to sue or be sued on the claim or restrict that ability.
21. The new rule can clearly be used where a party has brought a claim both as a dependant and as an administrator before obtaining letters of administration, and later an amendment is sought to be made to alter the capacity in which the claimant has brought the proceedings (which can only be in a personal capacity) to plead newly granted letters of administration. It would be odd if the rule could not be used where the claim had only ever been made by the claimant as administrator. Mr Evans' primary submission is that that situation is not covered by the rules and that the decision in Ingall v Moran has not been negatived. While that situation does not arise for decision in this case, my view is that the court does have jurisdiction under CPR 17.4 in this situation since, before the application for permission to amend, the claimant can only be suing in individual capacity whatever the statement of case may say. Although the court is dealing with an application to amend a statement of case, in my judgment its jurisdiction is not restricted by the label which has been given to the party in the statement of case.
22. The effect of CPR 17.4(4) is therefore to remove the effect of Ingall v Moran, the technicalities of which Singleton LJ in Finnegan v Cementation Co Ltd [1953] 1 QB 688 described as a "blot upon the administration of the law".
23. In the circumstances, in the present case there was not, in my judgment, a change of capacity for the purpose of CPR 17.4(4) when the claimant took an assignment of the cause of action against the appellants from her former trustee in bankruptcy. Accordingly the judge could not make the order which he made, which accordingly must be set aside.
24. It may be that this is a result which the Law Commission should take into account in its current project on Limitations of Actions, as it was not a problem considered by the Law Reform Committee when they made their report in 1977. The Law Commission's provisional recommendations include an initial limitation period of three years from the date when the claimant knows or ought to know that he has a cause of action (see Limitation of Actions, consultation paper no 151 (1998)). Most bankrupts do not obtain their discharge from bankruptcy before three years have elapsed from the commencement of the bankruptcy (Insolvency Act 1986, section 279).
25. In the circumstances I would allow this appeal.
26. LORD JUSTICE PILL: I agree. Civil Procedure Rule 17.4 deals with a number of situations in which amendments to statements of case may be permitted outside the relevant limitation period. Paragraph 2 permits a new claim to be added or substituted in some circumstances. Paragraph 3 permits an amendment to correct a mistake as to the name of a party in some circumstances. Paragraph 4 provides:

"The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings were started or has since acquired."

27. In this case the claimant sued the defendant when she had no title to do so because she was bankrupt. Any rights were in her trustee in bankruptcy. The limitation period has expired and the defendant has been permitted to raise the defence of limitation.
28. The claimant seeks to rely on CPR 17.4 as conferring a power on the court to amend. The trustee in bankruptcy has now assigned to the claimant on terms his "causes of action and related remedies being pursued in this action". The claimant submits that the assignment involves an alteration in the "capacity in which a party claims" within the meaning of 17.4(4). Previously she had no title to claim, now she has a right of action because the trustee has assigned his right to her. That, it is submitted, is a change in the capacity in which she claims.
29. I cannot accept that submission. The assignment of rights to her does not involve a change in her capacity within the meaning of 17.4(4). The rule in 17.4(4) is to the same effect as the former RSC Order 20 rule 5(4). That rule was introduced pursuant to powers conferred in section 35(4) of the Limitation Act 1980. Lady Justice Arden has also referred to a study by the Law Commission. The effect of the introduction of that rule in the Rules of the Supreme Court, as the editors of the White Book put it in paragraph 20/8/18 of the 1999 edition, was "to negative" earlier cases cited in the note. I mention only two of them: Ingall v Moran [1944] 1 KB 160 and Finnegan v Cementation Company Ltd [1953] 1 QB 688, both decisions of this court.
30. I mention Ingall and Finnegan as cases in which claims were brought in a representative capacity which the claimant did not at the time possess. In those cases the actions had been brought in the capacity of administrator or administratrix of the estate of a deceased person. In Finnegan the claimant was not an administrator within the meaning of that term in the Act. She had obtained letters of administration only in the Republic of Ireland. The plaintiff sued in the wrong capacity and time had run before the point was raised by the defendants. The court held that she could not raise an action in a new capacity. Singleton LJ stated that the technicalities involved in such a decision were "a blot upon the administration of the law".
31. Each of the cases cited to us involved someone suing, or purporting to sue, in a representative capacity. CPR 16.2(3) provides:

"If the claimant is claiming in a representative capacity, the claim form must state what that capacity is."

32. Detailed guidance as to the particulars to be contained are set out in the form to which Lady Justice Arden has referred.
33. The effect of CPR 17.4(4) is to provide a possible escape from failures which arise from failing to state correctly the capacity in which a party claims; failures or alleged failures which befell personal representatives in the several cases cited to us. No such consideration arises upon an assignment to a bankrupt by a trustee in bankruptcy of a right of action and the power conferred in 17.4(4) does not arise upon the facts of this case.
34. Support for that conclusion comes from the decision of this court in Robinson v Unicos Property Corporation Limited [1962] 1 WLR 520. The defendants in that case sought to rely on a defence of limitation, arguing that a new cause of action had arisen and also that the amendments sought by the claimant involved a change in the capacity in which the claimant sued and was not under the then existing rules permissible. The claimant sought the same damages under the same interest, but sought by way of amendment to claim as equitable trustees. Holroyd Pearce LJ, with whom Harman and Davies LJJ agreed, stated at page 526:

"Nor are they suing in a different capacity. Although they now wish to claim by virtue of their right as equitable assignees of the benefits of the principal to the original contract, they still sue in their personal capacity as principals through the same agency on the contract albeit through an assignment of the benefit to them."

35. In referring to the claimants seeking to sue in a "different capacity" the headnote to the report is, in my view, misleading.
36. The present claimant has never claimed for anyone but herself and does not do so now. She has throughout made what she perceived to be a claim made in her own right. She now has a right to claim by reason of the assignment, subject to the defence of limitation but there is no alteration in the capacity in which she makes the claim.
37. The Law Commission may of course take this decision into account as Lady Justice Arden suggests, but I see no injustice in the result which the CPR require in this case.
38. I agree that the appeal should be allowed.
Order: Appeal allowed with costs. Action dismissed. No costs of and incidental to the preliminary issue. Legal Aid taxation direction up to 16 May 1997 not to be enforced without leave of the court. Liberty to apply within 21 days. Leave to appeal to the House of Lords refused.