England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice
		11th December 2007

MR. JUSTICE AKENHEAD:

1. This is an application by the claimant and third party, Dewrace Ltd. and David Frankling(?), to substitute as claimant David Frankling in place of Dewrace Ltd., and there is also an application for leave to amend the particulars of claim.
2. Mr. Frankling is an architect who provides architectural and sometimes other services. In about 1991 he began to be retained by Mr. Brown (a USA citizen resident in Hong Kong) or by companies with which Mr. Brown had some connection. At some stage around about 1994 Mr. Frankling incorporated a company called Dewrace Ltd., which is the current claimant in these proceedings. Mr. Frankling was retained on a variety of projects over the years. A number of those were in London and several were outside London. It seems, although I make no final finding about this, that all or a number of those developments were owned or came to be owned by companies with which Mr. Brown had some connection. That connection I am not aware of and whether it extends of ownership or not, I make no findings. It appears that those services in respect of different projects were carried out between about 1991 and as late as 2004. Again, I am not making final findings about precise dates.
3. On 21^st May this year, Dewrace Ltd., trading as Frankling Associates, issued a claim in the Newbury County Court. It is in very simple terms, in handwriting, written out by Mr. Frankling himself, and at that stage it appears that he or Dewrace were not advised by solicitors. Mr. Brown was named as the defendant and an address in Brompton Square in London was given as the address. The brief details of claim were these:

"Architectural services as detailed on fee note 335 dated 6^th October 2006, less money received on account on 15^th December 2006. The claimant claims interest under section 69 of the County Courts Act 1984 at the rate of 8% a year from 6^th October 2006 to 18^th May 2007 of £13,301.69 and also interest at the same rate up to the date of judgment or earlier payment at the daily rate of £56.63."

The balance of the fee note is said to be £257,433.21, which together with interest produced a total claim of £270,734.

4. For reasons which are not wholly clear to me, the defence and counterclaim took some time in arriving. I do not mean to attach criticism in saying that but it was served on or about 6^th September 2007. It unequivocally raised a defence. First of all, that there was no contract with Dewrace at all and that such contracts as there were, were with Mr. Frankling personally, and that the organisations who had employed him were limited companies in all respects except in respect of one project at 27 Brompton Square where a Benjamin Brown, who is said to be Mr. Brown's son, was said to be the employer. Neither in the particulars of claim nor in the defence and counterclaim was any reference made to a project known as Flat 14 Eldon(?) House, London ("14 Eldon House").
5. Over the last month or two there has been a substantial amount of activity procedurally, and that resulted in this case being transferred to the TCC here in London. Indeed, I made the relevant order last week about that. Prior to that various applications had been issued in the County Court which I am now addressing. As I said, two subjects of applications relate to the substitution of Mr. Frankling for Dewrace Ltd. and the amendment of the particulars of claim. There is also a striking out application issued by Mr. Brown on three grounds which I have not yet addressed, although it has to be said that if I give leave to substitute and leave to amend, elements of that striking out application will not need to be considered.
6. So far as substitution is concerned, which I will deal with first, Mr. Joe Gorrit(?), who is Mr. Frankling's solicitor, says this in his second statement at paras.4 and 6:

"4. It was agreed between the third party and the defendant that the third party would invoice for work carried out by him through whatever trading vehicle he chose and that the defendant would arrange payment to be made to whatever trading vehicle he chose. However, the contract or contracts for the work were made between the third party and the defendant, and all dealings relating to the contracts were between the third party and the defendant.

6. These proceedings were commenced by the company acting in person through the third party who is a director of the claimant. The third party considered the company to be the correct claimant on the basis that this was the trading vehicle that had issued the invoice for which payment was sought. However, having taken advice from legal representatives, the company and the third party acknowledge that the claim was mistakenly commenced in the wrong name and that the third party should be substituted as claimant on the basis of the contract or contracts that form the subject of these proceedings were made between the third party and the defendant."

7. I should have mentioned that Mr. Frankling has effectively been joined in, in the County Court, as a third party, in effect to the counterclaim brought by the defendant. That counterclaim not only seeks damages for breach of contract but in respect of two projects pleads that there was a tortious duty of care owed by Mr. Frankling to Mr. Brown and damages are claimed pursuant to the tort of negligence.
8. It is somewhat unclear from all the papers as to when limitation began to have an effect, if any, on Dewrace's or Mr. Frankling's claims. It is clear from a number of different statements, as I have said, that work has been carried out since 1991 and given that the appropriate limitation period is six years, it might be thought at first sight that services provided prior to May 2001 would be time-barred. However, it is equally clear that some services (the value of which I certainly cannot identify from the papers) were carried out in the latter half of 2001, going into 2002, 2003 and possibly 2004. How much of Mr. Frankling's claims relate to services provided before December 2001 and before May 2001 is not clear. Suffice it to say that Mr. Howells, who appears on behalf of the defendant, says that there is at the very least a very real risk that elements or significant elements of the claims were time-barred as at the institution of the County Court proceedings in May of this year, and that more elements of the claims will have become time-barred, so to speak, since May up to the date of the hearing of these applications.
9. The rules which specifically deal with amendments which involve the substitution of parties are dealt with in CPR Part 19.2:

"(1) This rule applies where a party is to be added or substituted except where the case falls within rule 19.5 (special provisions about changing parties after the end of a relevant limitation period).

(2) The court may order a person to be added as a new party if -

(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or

(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.

(3) The court may order any person to cease to be a party if it is not desirable for that person to be a party to the proceedings.

(4) The court may order a new party to be substituted for an existing one if -

(a) the existing party's interest or liability has passed to the new party; and

(b) it is desirable to substitute the new party so that the court can resolve the matters in dispute in the proceedings.

10. Essentially, when examining Rule 19.2 it is clear that verbally the draftsman has drawn a distinction between the addition of a new party and the substitution of another party. That appears not only from the wording in 19.2(1) but also in 19.2(2) and (4). That distinction, coincidentally, is continued in other provisions such as Rules 19.4 and 19.5, which differentiate verbally apparently between adding or substituting a party.
11. It could therefore be said (wrongly, as I think) that 19.2(4) is the only applicable subrule here, because it talks about the court ordering a new party to be substituted in certain circumstances. It seems to be common ground now that 19.2(4) is not applicable. If that concession has been made, it has properly been made because this is not a case where it can be said that Dewrace's interest or liability has passed to Mr. Frankling. It is simply a case where a mistake has been made as to the party to be named as claimant. So 19.2(4) does not apply and, if that is right, then it could be said that 19.2(2) does not apply here because there is an addition, namely what is sought is not the addition of a new party but the replacement of Dewrace by Mr. Frankling.
12. That said, however, I think that it is necessary to interpret 19.2 in the textual context of the overriding objective. Whether one interprets Rule 19.2 in the light of the overriding objective or applies the overriding objective separately perhaps does not matter ultimately. But it seems to me that one is not restricted by the precise wording in 19.2(4) as to the circumstances in which substitution could be allowed. The notes in the White Book at 19.2.2 refer to the case of R (Johnson) v. Secretary of State for Health [2006] EWHC 288 (Admin), 23^rd February 2006, in which Silber J. considered this topic. The note says (and I consider correctly), as follows:

"In a case in which it was held that in the circumstances it could not be said that an interest had passed to a new party it was said that the terms of r.19.2(4) are permissive and do not preclude a new party being substituted under any other appropriate provision. For example, the provision granting the court power to make any other order for the purpose of furthering the overriding objective. (CPR r.3.1(2)(m). However, there would have to be very cogent reasons for permitting substitution of the party before the court would rely on that particular other provision."

Reference is then made to the Johnson case.

13. It seems to me that in a simple case if the facts were that it was accepted that it was Mr. Frankling who had provided the requisite services, say, wholly last year, the overriding objective would suggest very strongly that he should be allowed to be substituted for the name of Dewrace. All that would be served in those circumstances by refusing the application and then effectively dismissing the claim would be that Mr. Frankling would commence new proceedings at significant cost to him, added administrative burden to the court and it cannot seriously be suggested in those circumstances that that waste of time, resource and cost should be ignored.
14. However, that is not necessarily this case because Rule 19.5 deals with what is to happen to a change of parties after the end of the period of limitation, and its forerunner in O.20, r.5 of the old White Book has been the subject matter of constant attention over the last 30 or 40 years by the courts. Rule 19.5(2) and (3) say as follows:

"(2) The court may add or substitute a party only if -

(a) the relevant limitation period was current when the proceedings were started; and

(b) the addition or substitution is necessary.

(3) The addition or substitution of a party is necessary only if the court is satisfied that -

(a) the new party is to be substituted for a party who was named in the claim form in mistake for the new party;

(b) the claim cannot properly be carried on by or against the original party unless the new party is added or substituted as claimant or defendant; or

(c) the original party has died or had a bankruptcy order made against him and his interest or liability has passed to the new party.

15. The first question to consider here is whether or not the burden remains on the claimant, the applicant, for the substitution to demonstrate whether or not the period of limitation has expired or not, as the case may be. It seems to me that it is incumbent on the claimant and the third party in this case to establish whether or not the period of limitation has expired. I am certainly not satisfied on the evidence that has been put before me that the period of limitation has not expired. There is reason to think as at this date that some elements at least of the claims by Mr. Frankling have, or may have, become time-barred. I make no absolute findings about that. But as it is clear that services continued to be provided throughout 2001, there is at least a very real possibility that limitation would provide an appropriate defence for causes of action which have arisen between the issue of these proceedings and today.
16. So one needs to consider Rule 19.5. Rule 19.5 is not taken on its own. One needs to consider Rule 19.2 in the context of 19.5. If an addition or a substitution of a party which would theoretically come under 19.2 arises after the end of the period of limitation, then it is to 19.5 that one primarily goes. 19.5 is an important provision because it provides, in effect, a concession to a party seeking to add or substitute a party to be permitted to do so in relatively limited circumstances. The grounds in Rule 19.5(3) which must be relied upon is that the new party, Mr. Frankling, is to be substituted for a party who was named in the claim form in mistake, that is Dewrace, for the new party.
17. There has recently been an important decision by the Court of Appeal which both parties accept, I understand, I am bound by, which reviewed the law relating to Rule 19.5 and in particular 19.5(3), definitively. The Lord Chief Justice said at para.5 of his judgment:

"When granting permission to appeal, Sir Henry Brooke, remarked that CPR 19.5 (3) is 'notoriously causing problems'. Indeed it is. There are conflicting decisions of this court in relation to its effect. We propose by this judgment to clarify this difficult area of procedural law."

18. The Court of Appeal then proceeded to analyse the decisions under the old rules, O.20, r.5, and under the CPR. It sought to analyse the previous law and the law under the CPR. In effect, the Court of Appeal have held that considerable weight should be given to the decisions under O.20, r.5 of the old rules. I will not read large elements of the judgment but I refer to the conclusions at paras.55 to 56 in which it is said as follows:

"55. CPR 19.5(3)(a) makes it a precondition of substituting a party on the grounds of mistake that the new party is to be substituted for a party who is named in the claim form in mistake for a new party. It is clear from this language that the person who has made the mistake must be the person responsible directly or through an agent for the issue of the claim form. It is also clear that he must be in a position to demonstrate that had the mistake not been made, the new party would have been named in the pleading.

56. The nature of the mistake required by the rule is not spelt out. This court has held that the mistake must be as to the name of the party rather than as to the identity of the party. Applying the general test of this type of mistake laid down in Sardinia... the 'working test' suggested in Western v. ... in as much as it extends wider than the Sardinia... test should not be relied upon."

19. The Court of Appeal, in effect, has decided that CPR 19.5(3)(a) can come into operation where there is a mistake as to nomenclature as opposed to identity. I must therefore briefly review into which category the mistake comes. I have formed the view that the mistake that has been made here is not a mistake as to nomenclature. I have quoted those paragraphs from Mr. Gorrit's statement that addresses this issue, and, in my view, they establish clearly that Mr. Frankling issued the proceedings in the name of Dewrace because he believed - wrongly, as it has turned out - that because Dewrace had issued the invoice to Mr. Brown some months before, it had to be Dewrace who issued the proceedings. Now, that is obviously a mistake and it was accepted as such, but it is not a mistake as to the name of the party, it is a mistake as to the identity of the party, and therefore the authority of the Court of Appeal requires me to proceed on that basis. Therefore under Rule 19.5 it is not open to the court to make the substitution.
20. I then ask myself whether I can and should have regard to the overriding objective, and as to whether there are very cogent reasons, notwithstanding the fact that Mr. Frankling cannot, unfortunately, bring himself within 19.5(3), as to whether the overriding objective requires me to nonetheless allow the substitution.
21. Unfortunately, I do not see that there are very cogent reasons to permit this. In fact there are possibly more cogent reasons suggesting that I should not go down the route of the overriding objective. That relates to the question of limitation. Because I cannot decide, on the available evidence, finally whether various causes of action have expired between May and December, it would be fairer in the circumstances on the defendants, or whoever the correct defendants are, to give them the benefit of that doubt so that, if Mr. Frankling wishes to issue new proceedings, which he can do tomorrow if he so wishes, if he has not already issued other proceedings, that area of doubt can be tested in separate proceedings without the defendant being prejudiced in the circumstances.
22. There are various other points that have been raised here, and I think they, on analysis, go to whether there are very cogent reasons. Mr. Howells has made it clear that even if the substitution is not made and the proceedings are, so to speak, struck out, his client's counterclaim in tort alone will remain. Mr. Rowntree makes the wholly arguable point that in those circumstances it will be open to his client, as defendant to the counterclaim, to raise by way of set off and counterclaim the various claims that are made by Dewrace at the moment. That may be. However, there is a real issue between the parties as to whether the claims which Mr. Frankling has are against Mr. Brown personally or against the companies or other persons who owned the various properties. Therefore, I do not see that that is a point which adds to the cogency in support of the application. If it be the case that the contracts were with Mr. Brown, then Mr. Rowntree may have a good point, but I cannot determine that now on this application. In those circumstances, I do not see that that is a point which should properly sway me. So therefore, for those reasons, I refuse the application to substitute.
23. What I now proceed on is a question of obiter, which is the second application to amend, which I will deal with fairly shortly. The application to amend the particulars of claim, if Mr. Frankling had been named as claimant, involved a much better pleaded case about Mr. Frankling's position on the variety of contract. However, Mr. Frankling sought to add a new claim in respect of 14 Eldon House, and the money that is said to be claimed is either by way of quantum meruit or pursuant to an implied term of payment for a reasonable sum, so the claim is either in contract or in equity.
24. It is clear from the draft pleading that, on its face, a significant amount of the services provided, which were more in the nature of property management services, were carried out substantially more than six years before the issue even of these proceedings in May. It is not clear from the pleading when any other services were carried out. Therefore I am satisfied that it is right to proceed on the basis that there is, or is likely to be, potentially a good limitation defence. I am not, however, on the available evidence, ruling out the possibility of a claim being brought in the future and what I say now is not intended to create any res judicata or issue estoppel. Parts of the pleading are vague as to the dates and although it is clear that some services were provided indeed prior to 1995, more than 12 years ago, other parts of the pleading suggest at least the possibility that a variety of services continued to be provided thereafter.
25. That brings us to CPR Part 17, Rule 17.4. This rule applies where the period of limitation has expired and a party wishes to amend its statement of case. Subrule (2) says:

"The court may allow an amendment whose effect will be to add or substitute a new claim but only if a new claim arises out of the same facts or substantially the same facts as the claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."

26. On the available information it seems to me that on at least elements of this claim the period of limitation has expired. I cannot, however, say what(?), but certainly elements appear to have expired on the basis of the draft pleading. However, this claim does not arise out of the same facts or substantially the same facts as the existing claims. Most of the other claims in these proceedings relate to the provision of architectural services. The services in respect of 14 Eldon House appear to have been more property management services, at least initially and possibly later, although it is possible that it may then have extended to some works, albeit possibly only maintenance works, being carried out at 14 Eldon House. It is not suggested that this had any particular connection with any of the other contracts or projects that were being performed and I am therefore not satisfied that it arises out of the same facts or substantially the same facts. Therefore I would, if I had had to deal with it, have refused the application for leave to amend paras.64 to 75 and 81 of the draft particulars of claim.
27. I will need in the judgment, when I get it back, to deal also, Mr. Rowntree, with the undertaking your client has given and the limitation point relating to the breakdown in the suggestion that your client was to have a property transferred to him by way of fees. I will address that but, in the interests of time, I hasten to say that those would not have assisted me sufficiently.
________