1st Option Consulting Services Limited v Peter George Rutherford

Discontinuance brings the claim against the relevant defendant to an end when the notice is served. A party who has thereby ceased to be a party cannot later be replaced under the rules governing substitution after limitation has expired. The distinction between substitution and addition is substantive: substitution replaces an existing party, whereas addition introduces a new party. The effect of discontinuance is not altered by the claimant’s intention, a possible application to set the notice aside, or a theoretical possibility of restoring the proceedings. The use of the past tense in CPR 19.6(3)(a) does not expand the rule. The essential requirement is that the new party be substituted for a party, not a non-party.

The claimant brought professional negligence proceedings concerning accounts prepared for Sansborders Consultants Ltd and served the claim on Lizst Price Accounting Ltd. He later applied to substitute 1st Option Consulting Services Ltd, alleging that Lizst Price had been named by mistake. The limitation period against 1st Option had expired.

Before the substitution application was heard, the claimant served a notice discontinuing the claim against Lizst Price. The Recorder nevertheless ordered that 1st Option be substituted for Lizst Price under CPR 19.6(3)(a), finding that the wrong company had been named by mistake. The appeal concerned whether substitution was legally possible after discontinuance, and whether CPR 19.6(3)(b) provided an alternative basis.

1. Appeal allowed. The Recorder’s order could not stand because, when it was made, Lizst Price was no longer a party to the claim.

2. Under CPR 38.5, discontinuance takes effect when the notice is served and brings the claim against that defendant to an end. The limited consequences preserved for costs, or the possibility of an application to set aside the notice, do not alter the defendant’s status in the proceedings.

3. The critical word in CPR 19.6(3)(a), and in section 35(6) of the Limitation Act 1980, is party. Substitution means replacing one party with another. It cannot replace a non-party. The past tense in the phrase party who was named in the claim form reflects the fact that the mistake necessarily occurred earlier and has no wider significance.

4. Substitution after expiry of limitation is permitted only where the correct party replaces the wrong party who was sued within the limitation period. Once Lizst Price ceased to be a party, the limitation period ran against it and had expired. The position was not changed by the claimant’s mistaken intention, a possible application to restore Lizst Price, or the theoretical possibility of extending time for service on Brookson.

5. CPR 19.6(3)(b) did not provide an alternative basis. The application and order were for substitution, not addition, and substitution was impossible for the same reason. The court therefore did not need to decide whether paragraphs (a) and (b) are mutually exclusive, or the precise construction of the carried-on requirement in paragraph (b).

6. The application to set aside the notice of discontinuance was not determined. The cross-appeal was dismissed.

• High Court (King’s Bench Division): appeal against the Recorder’s order of 14 October 2024 allowing substitution of 1st Option Consulting Services Ltd for Lizst Price Accounting Ltd. Appeal allowed.