PRACTICE — Parties — Substitution — Claim by partnership against former partner for breach of restrictive covenants—Transfer of business and assets of partnership to company — Default judgment obtained against former partner —Application by company for substitution as a party — Whether order for substitution to be made after judgment — CPR, r 19.2

Dunwoody Sports Marketing v Prescott [2007] EWCA Civ 461

CA (Lawrence Collins and Toulson LJJ): 17 May 2007

The power to order substitution of a new party for an existing party to an action under CPR r 19.2 continued after judgment had been given.

The Court of Appeal so held, allowing in part the appeal of the defendant, Nicholas Prescott, against the default judgment of Simon J on 29 June 2006 granting an injunction and damages to the claimant, Dunwoody Sports Marketing, in respect of their claims for breach of restrictive covenants in a partnership agreement.

LAWRENCE COLLINS LJ said that CPR r 19.2(4) provided that the court could order a new party to be substituted for an existing one if the existing party’s interest had passed to the new party, and it was desirable to substitute the new party so that the court could resolve matters in dispute in the proceedings. The permission of the court was required; the application for permission could be made b y an existing party or a party who wished to become a party; and an application for an order for substitution of a new party where the existing party’s interest had passed could be made without notice but had to be supported by evidence: CPR r 19.4(1), (2), (3). There appeared to be no decision of the Court of Appeal on whether a new party could be substituted for an existing party after judgment. It was held under the former RSC, Ord 15 that substitution could be effected after judgment: see Ord v Belhaven Pubs Ltd [1998] BCLC 447; cf Stroud and Swindon Building Society v Stalp (unreported) 27 March 1997 (a decision of Phillips LJ on a leave application in relation to the former CCR, Ord 5 r 11) and Mercer Alloys Corpn v Rolls Royce Ltd [1971] 1 WLR 1520 (a decision on the inherent jurisdiction of the court to order substitution). It had been doubted whether there was a similar power in relation to joinder under CPR r 19.2 because the power was in relation to “matters in dispute in the proceedings” and there were no such matters following judgment: see Kooltrade Ltd v XTS Ltd (unreported), 10 December 2001. In his Lordship’s judgment, the power under CPR r 19.2 in relation to joinder and substitution existed after judgment as well as before: see also C Inc plc v L [2001] 2 Lloyd’s Rep 459 and The Selby Paradigm [2004] 2 Lloyd’s Rep 714.

TOULSON LJ agreed.

Appearances: The defendant in person; David Cavender (Boodle Hatfield) for the claimant

Reported by: Susan Denny, barrister