Powis Street Estates (No. 3) Ltd v Wallace LLP & Anor

After limitation has expired, substitution of a defendant is permitted only where the statutory and procedural conditions for a necessary substitution are met. A genuine mistake as to the identity of the entity that provided the relevant services may satisfy those conditions. A mistaken belief about that entity’s legal liability is a different case and does not do so under the applicable mistake provision. Where substitution is available, the discretion must be exercised in accordance with the overriding objective, balancing delay, prejudice, the parties’ knowledge and the claimant’s alternative remedies.

The claimant brought a professional negligence claim concerning property transactions against solicitors and a property-agent LLP. The services had in fact been provided by an earlier partnership trading under a similar name. After the limitation period had expired, the claimant applied to substitute the partnership for the LLP and to amend its statement of case.

By agreement, the court determined the substitution application first. The central issues were whether the claimant had made a qualifying mistake, whether the claim could be maintained against the existing defendant, and, if substitution was available, whether permission should be granted.

1. Substitution permitted. The limitation periods were accepted to have been current when the claim was issued. The court therefore considered whether substitution was necessary because the original defendant had been named by mistake or because the claim could not be maintained without the substitute party.
2. The claimant had sued the LLP believing that it, rather than the partnership, had provided the services complained of. The evidence, including the pre-issue correspondence and statements of case, established a mistake of fact within section 35(6)(a) of the Limitation Act 1980 and CPR 19.5(3)(a). This was not merely a mistake about the LLP’s legal liability for the partnership’s earlier negligence.
3. The alternative mistake-of-law route was unavailable. Although the claim could not be maintained against the LLP, the claim against the partnership was not the same claim for the purposes of the applicable test, because the partnership had provided the relevant services and the pleaded causes of action were directed against the wrong entity.
4. Once the jurisdictional condition was satisfied, the discretion had to be exercised in accordance with the overriding objective. Delay was a factor, but it did not prevent substitution. The partnership had known of the claim since 2015, the defendants shared legal representation and insurance arrangements, and the second defendant had pleaded fully to the merits. The claimant would otherwise face a materially weaker loss-of-chance remedy against its former lawyers.
5. Having weighed the countervailing prejudice and the overriding objective, the court concluded that refusing substitution would be unjust. Permission was granted to substitute the partnership for the second defendant.

First-instance decision. No prior appellate decision is stated in the judgment.