Parkinson Engineering Services Plc v Swan
Jurisdiction | England & Wales |
Date | 2010 |
Court | Court of Appeal (Civil Division) |
Practice - Parties - Substitution - Defendants appointed administrators of company - Court subsequently discharging administration order and granting defendants release from liability - Company in liquidation bringing claim in negligence against defendants - Defendants pleading release as absolute defence to claim - Statutory provision allowing liquidator with court’s permission to seek contribution to company’s assets from administrators despite release - Liquidator applying after expiry of limitation period to substitute himself as claimant and to add claim for contribution - Whether substitution necessary to maintain original claim - Whether jurisdiction to allow substitution despite procedural differences between original and new claim - Whether substitution to be allowed and permission granted for contribution claim to proceed -
The claimant company was the subject of an administration order made in May 2003 and the defendants were appointed the joint administrators. In November 2003 the administration order was discharged and the company ordered to be wound up. Under that order the defendant administrators were released from liability under section 20 of the Insolvency Act 1986F1 with effect from February 2004. By a Part 7 claim form issued in April 2009 in the Chancery Division the liquidator caused the company to commence proceedings against the defendants claiming damages for negligence in the performance of their duties as administrators. The defendants pleaded that the claim was barred by the effect of the statutory release under section 20. To defeat that plea the liquidator applied in June 2009 for an order permitting the amendment of the existing proceedings by substituting himself as claimant and adding a claim for compensation under section 212(3) of the Insolvency Act 1986, a claim which could proceed, notwithstanding the release, provided the court gave permission pursuant to section 212(4). If the liquidator had commenced fresh proceedings in June 2009, any claim based on breaches of duty committed before the corresponding date in June 2003 would have been barred by limitation, whereas a new claim permitted to proceed by way of amendment to existing proceedings was, by section 35(1)(2) of the Limitation Act 1980F2, deemed to have been commenced on the same date as the original proceedings. The judge held that the original claim could not be maintained or properly carried on without the substitution; therefore, by section 35(5) of the 1980 Act and CPR r 19.5F3, he had a discretion to allow the liquidator to be substituted for the company. He went on to give the liquidator permission under section 212(4) to bring proceedings against the defendants and exercised his discretion in favour of allowing the substitution.
On defendants’ appeal—
Held, dismissing the appeal, that without substitution of the liquidator the original action could not be decided on the merits because of the defence under section 20 of the Insolvency Act 1986, whereas it could be maintained if the liquidator was substituted; that, save for minimal changes to the statement of case, the claim which the liquidator sought to assert for section 212 relief was identical to that which he had put forward in the name of the company by the original proceedings; that although proceedings under section 212 would normally be brought by an application or originating application in the Companies Court rather than by a Part 7 claim form in the Chancery Division the differences as to procedure and forum were immaterial; that, therefore, the court did have jurisdiction to allow the substitution; and that, in the circumstances, there was no reason to interfere with the exercise of the judge’s discretion either to allow the substitution or to permit the liquidator to bring proceedings notwithstanding the release (post, paras 26, 28, 31–32, 41, 42, 43, 44).
The following cases are referred to in the judgment of Lloyd LJ:
Adelson v Associated Newspapers Ltd
Brown v Beat [
Eurocruit Europe Ltd, In re
Martin v Kaisary (No 1)
Merrett v Babb
Roberts v Gill & Co
Sardinia Sulcis, The [
Weston v Gribben
No additional cases were cited in argument.
The following additional cases, although not cited, were referred to in the skeleton arguments:
Aldi Stores Ltd v Holmes Buildings plc
Barclays Mercantile Business Finance Ltd v Sibec Developments Ltd [
Clasper Group Services Ltd, In re [
Cohen v Selby [
Cropper v Smith (
D’Jan of London Ltd, In re [
Etic Ltd, In re [
Fabric Sales Ltd v Eratex Ltd (Practice Note) [
French v Cipolletta
Giles v Rhind (No 2)
Horne-Roberts v SmithKline Beecham plc
Lloyd’s Bank plc v Rogers
Parsons v George
Powerstore (Trading) Ltd, In re [
Shilena Hosiery Co Ltd, In re [
Thurrock Borough Council v Secretary of State for the Environment, Transport and the Regions [
Vacher & Sons Ltd v London Society of Compositers [
APPEAL from Floyd J
By a Part 7 claim form dated 17 April 2009 the claimant, Parkinson Engineering Services plc (in liquidation), brought a claim against the defendants, Julie Swan and Peter Yeldon (its former administrators), for damages for negligence and breach of statutory duty in the performance of their duty as administrators. By an application dated 3 June 2009 the claimant’s liquidator, Mr Abdulali sought, inter alia: (1) an order permitting the claim form and the particulars of claim to be amended (a) to substitute himself as claimant, and (b) to add a claim for compensation pursuant to section 212(3) of the Insolvency Act 1986; and (2) an order under section 212(4) of the 1986 Act permitting him to bring the section 212 claim notwithstanding that the defendants had been released from liability pursuant to section 20 of the 1986 Act. By a judgment given on 12 June 2009 Floyd J granted the orders sought.
Pursuant to an appellant’s notice and permission granted by the judge, the defendants appealed on the following grounds. (1) The judge had erred in permitting the liquidator to be substituted as claimant. It was not a case where substitution was necessary for the maintenance of an otherwise viable claim, as required by section 35 of the Limitation Act 1980 and CPR r 19.5. (2) The judge had erred in permitting the section 212 claim to be added to the Part 7 proceedings. The claim deriving from section 212 was fundamentally different from a damages claim commenced under Part 7. (3) If the court had had a discretion to permit the amendments then the judge should not have exercised it in the liquidator’s favour. (4) The judge had wrongly exercised his discretion to permit the liquidator to make an application under section 212(4) of the 1986 Act. The evidence relied on by the claimant did not disclose that there was a good arguable claim against the defendants and other factors such as delay militated against leave being given. (5) If he had been reasonable to permit the application the judge should not have held that leave was to be retrospective to the date of issue of the Part 7 proceedings.
The facts are in the judgment of Lloyd LJ.
Jonathan Hough (instructed by
Peter Shaw and Joseph Curl (instructed by
The court took time for consideration.
21 December 2009. The following judgments were handed down.
LLOYD LJ
1 This appeal raises again the scope of the court’s power to permit an amendment as regards parties outside a limitation period. The amendment in this instance was to substitute one claimant in place of another, namely the liquidator of a company instead of the company itself. The principles are well established. The difficulty is in applying them to a new situation. The resolution of the appeal was assisted not only by the clear and economical presentation of their arguments, in writing and orally, by both counsel, but also by the exemplary preparation of the bundles, especially that containing the authorities relied on.
2 Parkinson Engineering Services plc was the subject of an administration order on 7 May 2003, made by Laddie J. The defendants were appointed as joint administrators. The purposes for which the order was made were (a) the survival of the company and the whole or part of its undertaking as a going concern (b) the approval of a voluntary arrangement and (c) a more advantageous realisation of the company’s assets than would be effected on a winding up. On 14 November 2003 Park J discharged the administration order and ordered that the company be wound up. Under that order the administrators were to be released from liability under section 20 of the Insolvency Act 1986 with effect from 13 February 2004 except in relation to claims against them notified to them in writing...
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Irwin and another v Lynch and another
...CPR r 19.5 to allow the joinder of the company (post, paras 12–14, 19, 21, 24–26, 28, 29, 30).Parkinson Engineering Services plc v Swan [2010] Bus LR 857, CA applied.Decision of Judge Cooke sitting as a judge of the Chancery Division in Birmingham [2010] EWHC 3724 (Ch) reversed.The followin......
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...to allow substitution of a new party under CPR r 19.5(3)(b) was considered. The two cases are Parkinson Engineering Services plc v Swan [2010] Bus LR 857 and Irwin v Lynch [2011] 1 WLR 1364.93 In the Parkinson Engineering case the Court of Appeal held that the rule permitted the liquidator ......
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...or defendant.” 29 I was referred to relevant authority. 30 First, Parkinson Engineering Services plc v Swan [2009] EWCA Civ 1366; [2010] Bus LR 857. In that case, the claimant company was the subject of an administration order made in May 2003 and the defendants were appointed the joint ad......
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