Quayle v Rothman Pantall & Co (a firm)

This judgment arises out of my hearing three applications:-

This can be distilled briefly from the proposed Re-Amended Particulars of Claim. The Claimant was until 12^th April 2006 a shareholder and managing director of Edinburgh House Estates Ltd (“EHEL”) the holding company of a property investment group.

The Defendant at all material times is a firm of chartered accountants carrying on business in Havant Hampshire and elsewhere.

It is alleged that the Defendant on 7^th February 2002 tendered to EHEL for professional services and was appointed as the Group’s tax advisors on 7^th October 2002. In addition until November 2007 it is alleged that the Defendants acted as personal tax planning and financial advisors to the Claimant and also gave tax planning and financial advice to other shareholders and directors of EHEL.

It is alleged that the Defendant thereby owed the usual implied contractual duty of skill and care and alternatively a duty of care to like effect. In the proposed Re-Amended Particulars of Claim (paragraph 4B) it is proposed to be pleaded that on every occasion when EHEL was advised in relation to matters which affected the Claimant’s shareholding the Defendant was under a duty to have regards to the implications of its then current advice on the original and/or subsequent advice provided to the Claimant regarding the availability of Business Asset Taper Relief (“BATR”).

The Claim Form in action HC10C01403 was issued on 8^th December 2009. The Second Claim Form in HC12A1404 was issued on 2^nd April 2012 and amended on 25^th April 2012.

The allegations in the existing Amended Particulars of Claim allege that the Defendant failed to give correct advice in relation to the availability of BATR arising out of the Claimant’s shareholding in EHEL. The allegation is that Claimant was wrongly told that if his shareholding in EHEL would not exceed 10% overall he would obtain the BATR relief. It is alleged that the advice that should have been given was that the 10% limit applied to any class of shares that he had so that for example whereas he held less than 10% of the overall shares in EHEL he actually owned 16.11% of B shares and 17.78% of C shares.

The present claim refers to advice given between December 2002 and 2^nd April 2003 and advice given in spring 2005.

Between those dates the Claimant entered into a re-structuring of EHEL (“the Walbank Restructuring”) but it is not said any specific advice was given in respect of that transaction and in the current Amended Particulars of Claim there is no allegation of loss occasioned by that transaction.

The Claim Form having been issued on 8^th December 2009 prima facie any cause of action which accrued before 8^th December 2003 will be time barred. There is an existing limitation issue raised in the Amended Defence (paragraph 30) in respect of advice given in December 2002. The Claimant responds in paragraph 13 of his Amended Reply dated 5^th August 2011 asserting that he did not have the requisite knowledge of any claim in respect of advice given in December 2002 until he received a report between 27^th March and 9^th April 2009. That will not of course save a contractual claim. In addition there is a claim for deliberate concealment which will apply to the contractual claim. These matters are live matters for the trial although the allegation of deliberate concealment is not in the proposed Re-Amended Particulars of Claim. The burden of proof in respect of the Section 14A Limitation Act 1980 point (postponing knowledge) and the deliberate concealment response to limitation is on the Claimant and ought to be set out in the Re-Amended Particulars of Claim or at least in his Reply. The question of the deliberate concealment however is not before me as I have said.

There are a number of amendments to which no objection is made.

The major objections are to paragraph 4B which provides:-

“Further and in any event, on each and every occasion when advising EHEL in relation to matters that affected the Claimant’s shareholding in EHEL, the Defendant was under a duty to have regard to the implications of its then current advice to EHEL on the original and/or subsequent advice provided to the Claimant regarding the availability of BATR on his shares.”

In essence this is a plea in effect that the Defendant was under a continuing duty to review its advice first given in 2002 through to the termination of their retainer on 29^th November 2007 after the letter of claim sent on 31^st October 2007.

This is not a novel plea see Midland Bank v Het Stubbs and Kemp [1979] Ch 384 (cp Bell v Peter Browne [1990] 2 QB 495 and Jackson & Powell “Professional Liability” paragraph 5-030).

The plea given the continued retainer of the Defendant between 2002 and 2007 is in my view plainly one that has a real prospect of success.

The continuing duty plea is repeated in paragraph 4L to extend to all reorganisations which took place between 2003 and 2005. This consequently introduces the Walbank claim as a claim for loss for the first time. The loss occurred in 2004 which is less than 6 years before the Claim Form was issued but clearly more than 6 years before I considered the application to Re-Amend. The limitation date taken is when the order is made not when the application is issued.

It is also alleged (paragraph 7B) that the Walbank Restructuring should have been revisited as part of the review of the Claimant’s position prior to or as part of the 2005 buy out which occurred (“the Rutterford Buyout”).

In paragraph 9 and following of the proposed Re-Amended Particulars of Claim a claim in respect of the Walbank Restructuring is brought in directly and not merely as part of the continuing duty to consider. It is alleged that had the Claimant been properly advised some of the losses that had occurred could have been mitigated although it is accepted it was too late by then to “reset his taper relief clock” (paragraph 9 B).

This is therefore a different claim for loss under a different transaction which although referred to in the Amended Particulars of Claim was merely referred to narratively as opposed to giving rise to a claim for loss and damage.

The obligation to review previous advice is carried in to the Rutterford Buyout which occurred in July 2005.

Neither of these claims would have been statute barred at the time of the issue of the Claim Form but are statute barred as at the date of consideration of the Claimant’s application to Re-Amend.

If permission is granted to Re-Amend the amendments will operate retrospectively to the date of the issue of the Claim Form so that the causes of action and complaints will not be statute barred.

The allegations of negligence and breach of contract are set out in paragraph 15 the effects of which I have summarised above. If the argument of continuing duty is correct down to 28^th March 2006 and permission to Re-Amend the Particulars of Claim is granted all the claims will be within 6 years of 8^th December 2009 and therefore not statute barred.

The significance of the Claim Form in action HC12A01404 is that it was issued protectively on the basis of the causes of actions accruing between 17^th March 2006 and 28^th March 2006. The limitation expiry dates were by agreement by the Defendant deferred to 4^th April 2012. I will deal with that in a separate section of the judgment below.

The objection of the Defendant to the proposed amendments are that they are claims which are (a) new claims (b) the limitation period in respect of which has expired and (c) the new claims do not rise out of the same facts or substantially the same facts as the claim in respect of which the Claimant has already claimed a remedy.

The relevant statutory provisions are set out in section 35 Limitation Act 1980 as follows:-

“S.35 Limitation Act 1980 (Footnote: ¹):

(1)

For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced –

(a)

...

(b)

in the case of any ... new claim, on the same date as the original action.

(2)

... a new claim means ... any claim involving ... –

(a)

the addition or substitution of a new cause of action; ...

(b)

....

(3)

Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.

...

(4)

Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.

(5)

The conditions referred to in subsection (4) above are the following –

(a)

in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; ...”

The relevant rules arising out of section 35 are now CPR 17.4 (1) and (2) as follows:-

“(1)

This rule applies where –

(a)

a party applies to amend his statement of case in one of the ways mentioned in this rule; and –

(b)

a period of limitation has expired under –

(i)

the Limitation Act 1980;

...

(2)

The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”.

It is not disputed that the time for determining whether a claim is barred by limitation is when the application is heard and determined not when the application is issued. The issue of an application to amend does not stop time running.

If the amendments are allowed in this case they will operate retrospectively to the issue of the Claim Form and the allegations will no longer be statute barred and will thus deprive the Defendant of a reasonably arguable limitation defence.

I accept the Defendant’s submission that the court does not hold a mini trial on the evidence to determine whether in fact a relevant limitation period has expired. It asks merely whether the Defendant has a reasonably arguable limitation defence.

If there is a reasonably arguable limitation defence the normal principle is to refuse permission to amend leaving the Claimant to issue fresh proceedings. The balance then will be that if the Defendant’s assertion as to limitation turns out to be wrong and no limitation period has expired the Claimant will have suffered no prejudice. Conversely it is argued that if the amendment is granted and a retrospective revival of a statute barred claim occurs the Defendant suffers prejudice see Paragon Finance v VB Thakerer & Co [1999] 1 All ER 400 at 404 d-g:-

“The proper approach to an application for leave to amend ... was considered by this court in Welsh Development Agency v Redpath Dorman Long Ltd [1994] 4 All ER 10, [1994] 1 WLR 1409. The court observed that a new claim is not made by amendment until the pleading is amended. It follows that the relevant date for the purpose of calculating the limitation period is the date at which the amendment is actually made, which by definition must be no earlier than the date at which leave to make the amendment is granted. The court also held that leave to amend by adding a new cause of action should not be given unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation which will be prejudiced by the new claim or that the new cause of action arises out of the same or substantially the same facts as a cause of action in respect of which he has already claimed relief. By this means the injustice to the defendant of depriving him of an arguable limitation defence is avoided without denying the plaintiff the right to bring a fresh action to which, if he is correct, there is no limitation defence.” (Per Millett LJ).

The plea for continuing duty will eliminate any limitation point clearly because it will run until the retainer was terminated on 29^th November 2007. I cannot see that the continuing duty plea is an argument that has no prospect of success.

It follows therefore that I can see no basis for objecting to that amendment on grounds that there is a possible limitation defence.

If the continuing duty plea fails then different considerations arise. A claim not already intimated in the existing Amended Particulars of Claim will be statute barred if the events complained of which gave rise to the claim (subject of course to all other issues to challenge a limitation point) will be statute barred if the event in question or the loss in question arose earlier than May 2006 i.e. 6 years before the hearing of the application to Re-Amend. The amendment if granted in respect of these matters will of course save them from limitation if the events complained of occurred after 8^th December 2003. All of the proposed amendments fall within that category.

It will be seen that in effect the Claimant now wishes to make an allegation covering the events that occurred in 2004. He already has allegations in respect of events that occurred in 2003 and ones that occurred in 2005. If these claims are free standing (i.e. they do not fall within the continuing duty plea) they are arguably statute barred in my view. They will not be saved by the plea in the Amended Reply that the Claimant did not have knowledge until 27^th March – 9^th April 2009. That is more than 3 years from May 2012 so that would not save them and they will still be statute barred despite that plea relying on section 14A Limitation Act 1980.

I was referred to the observations of Robert Walker LJ in Smith v Henniker-Major [2003] Ch 182 at paragraph 96 as the need to compare the bare minimum of essential facts abstracted from the original pleading to be compared with the minimum as it would be constituted under the amended pleading.

The Defendant alleges that the necessary components of a “cause of action” are the existence of a duty, a breach of that duty and loss flowing there from. The Defendant submits that the allegations of breaches occurring between 2^nd April 2003 and January 2005 are plainly new causes of action. There is no breach or loss originally pleaded in the Amended Particulars of Claim. Accordingly the Defendant submits that if those new claims are brought in new proceedings issued now the claims arise prior to May 2006 and will be statute barred. I accept that analysis. If the amendments are allowed they will be treated as if they were made on 8^th December 2009 and they would therefore not be statute barred.

Further the standstill agreement entered into on 13^th March 2012 will not save it because that expired on 4^th April 2012.

The question therefore arises as whether the Claimant can save the prima facie limitation point by relying upon CPR 17.4 (2) namely that the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.

I was referred again to the well known decision of Paragon Finance where the Claimant there wished to amend a pleading of negligence by adding a pleading of fraud. Millett LJ said this (paragraph 418 e-h):-

“Whether one cause of action arises out of the same or substantially the same facts as another was held by this Court in Welsh Development Agency v Redpath ... to be essentially a matter of impression. In borderline cases this may be so. In others it must be a question of analysis. In the Thakerer case Chadwick J observed that it would be “contrary to common sense” to hold that a claim based on allegations of negligence and incompetence on the part of a solicitor involved substantially the same facts as a claim based on allegations of fraud and dishonesty. I respectfully agree. In all our jurisprudence there is no sharper dividing line than that which separates cases of fraud and dishonesty from the cases of negligence and incompetence”.

I was also referred to the observations of Robert Walker LJ in Smith v Henniker-Major at paragraph 101 where he observed that the assessment of whether a new claim was on the same or substantially the same facts “is very much a matter of impression…..”

In Darlington v O’RourkeJames Scoffield & McCarthy [1998] EWCA Civ 1664 Sir Iain Glidewell contemplated comparison of the un-amended and amended pleadings in order to determine whether a different duty had been pleaded, whether the breaches pleaded differ substantially and the nature and extent of damage of which complaint is made.

A number of examples are set out in the notes to the Supreme Court Practice (paragraph 17.4.4) on particular cases when the courts determined that in proposed new causes of action arose out of the same or substantially the same facts. In Aldi Stores Ltd v Homes Buildings Plc [2003] EWCA Civ 1882 the Court of Appeal confirmed that the matter was largely a matter of impression (see paragraph 29 per Dyson LJ). The other Judges agreed with that paragraph.

If I analyse the situation it seems to me that the only conclusion that can be properly made is that the proposed amendments arise out of the same or substantially the same facts. The Defendant’s retainer and advice they gave in respect of that retainer between 2002 and 2007 is already a question that the courts will consider in the existing pleading. It is artificial in my view to consider that the courts will look at what happened from 2002 to 2003, ignore what happened in 2004 and recommence looking in 2005. As I have already observed the Walbank Restructuring is already descriptively in the existing pleadings. The plea of continuing duty cannot be challenged on the grounds of limitation in my view. That reinforces the fact that the whole of the Defendant’s activities during the period will be considered by the court.

On the first point then I conclude that the proposed amendments of substance as set out above are prima facie statute barred and are new causes of actions but arise under the same or substantially the same facts for the reasons I have set out. I therefore will grant permission to amend in respect of the substantive alterations. I would ask the Counsel for the parties to agree the amendments in the light of that finding.

This is linked to the cross application by the Defendant to disallow the amendment to the Claim Form in the second action and to strike that action out.

The background to the amendment of the Claim Form is set out in the second and third witness statements of Patrick John Gardiner the partner in the firm of Michael Simkins LLP who is acting at all material times for the Claimant. The witness statements are dated 25^th April 2012 and 2^nd May 2012 respectively.

Mr Gardiner’s firm issued a protective writ on 2^nd April 2012. This was to address the possible failure of the Claimant to obtain permission to Re-Amend the Particulars of Claim in the first action. It was sent to the Defendant’s solicitors Clyde & Co for information only on 5^th April 2012. The Defendant in the Claim Form sent to Clyde & Co is Rothman Pantall LLP. Mr Gardiner tells me that he overlooked the naming of the Defendant as Rothman Pantall LLP rather than Rothman Pantall & Co. Mr Gardiner asked the Defendant’s solicitors whether they were instructed to accept service and set out that the Claimant intended to issue an application to consolidate and its purpose and asked for an extension of time in which to serve the Particulars of Claim in the second action. No response was received so a chasing letter was sent a week later on 12^th April 2012.

In the meantime Mr Gardiner had drawn to his attention the apparent misnaming of the Defendant. On 16^th April 2012 Clyde and Co queried why the protective claim had not been issued in the name of Rothman Pantall & Co.

On 17^th April 2012 Mr Gardiner responded that joinder of Rothman Pantall LLP might be correct if the relevant liabilities of Rothman Pantall & Co had been adopted. If that turned out not to be the case it was suggested that the discrepancy could be rectified under the slip rule by an amendment to the name of the Defendant on the Claim Form. The response of Clyde & Co on 20^th April set out that although on formation Rothman Pantall LLP had indemnified the partners of Rothman Pantall & Co in certain aspects this did not render the LLP liable in any way to the Claimant thus making it clear by implication that the correct party was the former firm. However the Defendant served a witness statement by James Shaw on 20^th April 2012 in response to the application to Re-Amend stating that the business assets and liabilities of Rothman Pantall & Co were transferred to Rothman Pantall LLP. As a result of the potential difficulties the Claim Form was amended on 25^th April 2012.

Mr Gardiner amplified this in his third witness statement of 2^nd May 2012. The position was that the draft protective claim had been drafted by his assistant solicitor Tom Iverson. He had checked online to confirm the Defendant’s address and he found a note that the Defendant at some stage apparently converted to an LLP. He assumed therefore that the LLP must have taken on the business and liabilities and accordingly inserted the name Rothman Pantall LLP as the Defendant on the Claim Form. He did not discuss that with Mr Gardiner and draw to his attention the fact that he had substituted the name of the LLP. Mr Gardiner confirmed that he did not notice that when he signed the Claim Form. The Claimant’s case is that it was always intended that the proceedings would be instituted against the partnership effectively unless there had been an express assumption of the liabilities of the partnership by the LLP. The position of the Defendant is in my view ambiguous when one looks at the evidence set out above.

That evidence is not challenged by the Defendant.

There is power under CPR 17.4 (3) to allow an amendment to correct a mistake to a name of the party but only where the mistake was genuine not one which could cause reasonable doubt as the identity of the party in question. This amendment power is capable of being exercised after the end of the relevant limitation period.

I cannot see that it is anything other than a mistake. The mistake was that the assistant solicitor believed from the information he had obtained on the website that the proper Defendant should be the LLP because of that statement. If anything Mr Shaw for the Defendant seems to be of the same view. This explains Mr Gardiner’s firm’s letter of 17^th April 2012 where they believe that the relevant liabilities have been adopted by the LLP. That is a mistake. The Defendant knows that is a mistake because it knows what happened to the liabilities when the partnership dissolved and the LLP was created. Only it knows what actually transpired. The Claim Form was amended before it was served.

It is difficult to see how it can be realistically argued on that material that the Claimant’s solicitors intended to do anything other than serve the proper Defendant in respect of the protective writ. They believed (wrongly) initially that it was the LLP. However their intention of course was always to bring a claim against the partnership if the partnership was the correct Defendant but not of course if the LLP had in some way assumed the liabilities. That is plainly in my view a mistake. The Defendant cannot possibly have been misled as to the basis of the Protective Claim Form and indeed they queried it being issued with the LLP named as the Defendant. They knew what they were supposed to receive and they received a Claim Form with the wrong name on it. The position is set out in commentary under the relevant rule in paragraph 17.4.5 of the Supreme Court Practice.

Alternatively the Claimant contends that the amendment could be made under CPR 19.5 (3) (a). In that rule it is provided that a party can be added or substituted under this rule if the relevant limitation period was current when the proceedings were started and the addition or substitution is necessary. Clearly the proceedings were commenced within the limitation period and the addition or substitution is necessary because the LLP has no liability to the Claimant whereas the partnership has.

The power to amend is set out in sub rule (3) which provides:-

“the addition or substitution of a party is necessary only if the court is satisfied that:-

(a)

the new party is to be substituted for a party who was named in the Claim Form in mistake for the new party

(b)

the Claim cannot properly be carried on by or against the original party unless the new party is added or substituted as Claimant or Defendant ……”

It seems to me that the requirements are satisfied in this case self evidently.

The action cannot proceed against the LLP and amendment is required under either sub rule (a) or (b) as otherwise the action would be struck out. For all the reasons I have set out above this was plainly a mistake.

There is plainly no prejudice suffered by the Defendant except that it might be deprived of an opportunity to have the second proceedings struck out because they are out of time. This is not a relevant factor in my view.

For all those reasons I will accede to the Claimant’s submissions and dismiss the Defendant’s application to dismiss the second action.

As a result of my decision above the second action is not necessary. However there is always the possibility that my decision might be subject to challenge and that the challenge might be successful. In that eventuality the amendments might be set aside so that the Claimant will have to fall back (if he can) on the second set of proceedings.

The trial is set for October this year. It seems to me that taking into account that possibility I should not consolidate the actions as they might effectively be de-consolidated as a result of any decision that might be made in the Court of Appeal (if any).

I would therefore suggest that the parties agree a timetable of the service of the formal material necessary to take the second action to trial. I envisage service of Particulars of Claim and Defence and Reply as there may be other limitation issues which arise in the second action.

Unless there is fresh material I would direct that the disclosure and witness statements in the first action should stand as witness statements in the second action and that the second action should be heard at the same time as the first action in October.

I would ask the parties to consider any other factors with a view to having the matter properly organised so the trial date is not disturbed.