Captain Nigel Collingwood & Anor v Irwin Mitchell LLP

On applications for summary judgment and substitution of a defendant, limitation issues arising from solicitors’ negligence are ordinarily fact-sensitive. Where the pleaded case raises competing possibilities as to when actionable damage occurred, the issue should proceed to trial rather than be finally determined summarily.

A successor firm is not directly liable for a predecessor firm’s contractual or tortious conduct merely because it acquired the predecessor’s business and trade. Direct liability requires novation or another contractual basis involving the claimant. However, substitution may be permitted where the claimant intended to sue the predecessor but mistakenly named the successor, the limitation rules permit substitution, and the balance of justice favours it.

The claimants alleged that Thomas Eggar LLP negligently failed to advise them about limitation, urgency and available recovery claims following an alleged pension investment fraud. They issued proceedings naming Irwin Mitchell LLP, believing that it was Thomas Eggar LLP’s successor entity. Irwin Mitchell applied for strike out and summary judgment, arguing that the claim was statute-barred and that it had been sued as the wrong defendant.

The claimants applied to substitute Rhealisation LLP, the entity formerly known as Thomas Eggar LLP. The court had to determine whether the limitation issue could be resolved summarily, whether Irwin Mitchell was directly liable, and whether substitution was permitted under the relevant limitation and procedural provisions.

1. Limitation. The claim was not plainly statute-barred on the pleaded facts. The authorities establish that negligence claims accrue when actionable damage is sustained, but whether the claimants suffered an earlier diminution in recovery prospects, or instead lost the relevant opportunity only when limitation expired, depended on factual findings. The court could not determine whether the alleged failures constituted one wrongful act or several without a trial. Strike out and reverse summary judgment were therefore refused on limitation grounds.
2. Wrong defendant. Thomas Eggar LLP and Irwin Mitchell LLP were separate legal entities. The acquisition of Thomas Eggar’s business and trade did not, without more, make Irwin Mitchell liable to third parties for Thomas Eggar’s earlier contracts or wrongful acts. A novation or other contractual agreement to which the claimants were party would have been required. The claimants had no realistic prospect of establishing direct liability against Irwin Mitchell, so paragraphs 4 and 5 of the Particulars of Claim were struck out.
3. Substitution. The claimants had intended to sue Thomas Eggar LLP, and their mistake was one of name rather than merely law. The requirements for substitution under CPR r 19.6 were satisfied. The limitation position was reasonably arguable, but the commercial arrangements meant that substitution would not materially alter the defence of the claim. Applying the overriding objective, the prejudice to the claimants from refusing substitution outweighed the prejudice to Rhealisation LLP. Rhealisation LLP was substituted as defendant in place of Irwin Mitchell LLP.
4. The court warned that no further delay in prosecuting the claim was likely to be tolerated.