knowledge 16 May 2016 |

Substituting a Plaintiff: The Court of Appeal’s View

In Stapleford Finance Ltd v Lavelle,¹

the notice party bank had begun summary proceedings against Mr Lavelle in 2013. The bank, by deed of 23 May 2014, transferred loans including Mr Lavelle’s to Stapleford. Stapleford had applied to the High Court to be substituted as sole plaintiff in the proceedings in place of the bank. The High Court made the order for substitution. Mr Lavelle appealed on the grounds that the transfer of the debt was not an event which permitted substitution under the procedural rule,² because he claimed that the rule was confined to extraneous events such as death or bankruptcy.

The relevant rule provides that:

“[w]here by reason of death or bankruptcy, or any other event occurring after the commencement of a cause or matter and causing a change or transmission of interest or liability, or by reason of any person interested coming into existence after the commencement of the cause or matter, it becomes necessary or briefing desirable that any person not already a party should be made a party, or that any person already a party should be made a party in another capacity, an order that the proceedings shall be carried on between the continuing parties, and such new party or parties, may be obtained ex parte on application to the Court upon an allegation of such change, or transmission of interest or liability, or of such person interested having come into existence.”

Assignment of Loan is a Change of Interest Permitting Substitution

The Court of Appeal affirmed the High Court’s conclusion that the assignment by the deed was a change of interest within the rule. No compelling reason was provided as to why the rule should be interpreted as narrowly as Mr Lavelle contended, and the procedural rules should be interpreted as facilitative and as serving justice rather than potentially inhibiting the court from deciding matters genuinely in dispute.³

Mr Lavelle had argued that it was not possible to assign an existing cause of action, and that if the underlying chose in action (in this case, the loan) was assigned, any proceedings in being to enforce the chose in action, no matter how far they had progressed, must cease and the assignee must start new proceedings. The court rejected this argument, noting that this interpretation was inconsistent with the wording of legislation which allowed assignment of a cause of action by the bank; could lead to very considerable wasted time, effort and expense, and costs (and the procedural rules were silent on what happens to costs of such prematurely terminated actions); and would create an unreasonable risk of the cause of action being statute-barred. The procedural rule provided that the application for substitution could be made ex parte (without notice to the defendant), indicating the “somewhat procedural and simple nature of the application”.⁴

The Court of Appeal was supported in its conclusion by English authority on the corresponding rule that the circumstances in which substitution is permissible are far wider than death or bankruptcy, and not limited by the rule: “no system of law could view with equanimity the absence of some procedure to cater for the transmission or devolution of the cause of action or the liability in respect thereof during the course of subsisting proceedings”⁵ and “it seems self-evident both that any existing proceedings, properly constituted within the limitation period, should be allowed to continue for or against the party to whom the relevant right or obligation has been transferred in law; and this should be permitted whether the transfer occurs before or after the expiry of the limitation period”.⁶

Conclusion

It is extremely useful to have confirmation at appellate level that, absent unusual circumstances around the assignment, a substitution application should normally succeed as a matter of course where the legal basis of the assignment to the new plaintiff of the exiting plaintiff ’s legal interest in the litigation is clearly established in an affidavit grounding the substitution application.