Ford & Warren v Warring- Davies

INTRODUCTION

The claimant, Dr. Kenneth Warring-Davies, retained the defendant, Ford & Warren, to act as solicitors to assist him in bringing his heart-monitoring invention (“HeartSmart”) to the commercial market. Their retainer agreement was dated 17 May 1999. In late 2003/early 2004, the claimant had agreed the terms of a proposed option agreement with a company called LNT HeartSmart Ltd (“LNT”), exercisable within six months, to take out a license to commercialise HeartSmart. These agreements were never formally concluded and in the middle of January 2004, LNT pulled out of the negotiations.

In these proceedings, the claimant blames the defendant for the failure to reach concluded agreements with LNT. In particular, the claimant says that the defendant should have completed the option agreement by dating it, and that they failed to comply with his instruction to do just that. Despite the antiquity of the relevant events, the damages remain unparticularised.

The claim form is stamped with an issue date of 12 November 2010. Although Mr. Douthwaite sought to argue, by reference to some vague evidence from the claimant that he thought he had taken the claim form personally to Bradford County Court ‘on about 15 October’, I consider that I must take the issue date as being that stamped as such on the claim form. There is therefore almost 7 years between LNT’s decision to withdraw from the proposed agreements in January 2004, and the issue of the claim form in which the claimant blames the defendant for the failure to complete those agreements. In consequence, the defendant avers that the claim is statute-barred. In response, the claimant alleges deliberate concealment, pursuant to Section 32 of the Limitation Act 1980.

On 9 November 2011, the defendant issued an application to strike out the claim on grounds of limitation. That application was heard, over the course of two days in January 2012, by HHJ Shaun Spencer QC, sitting in the Bradford County Court. In his lengthy written judgment, dated 16 May 2012, the judge dismissed the application. The defendant sought permission to appeal and, although the judge refused permission, Briggs J granted the defendant permission to appeal on 24 July 2012. Because of the parties’ wish that both counsel who appeared before Judge Spencer were present at the appeal hearing, the appeal itself was not heard until 29 November 2012.

In the light of the volume of material relevant to this appeal, and the parties’ submissions before me, I have not felt it necessary to set out large parts of Judge Spencer’s judgment. I do accept Mr Allen’s criticism that the judge did not analyse clearly the particular issues to which the averment of deliberate concealment gives rise. Accordingly, with due respect to Judge Spencer, I have concluded that the better course must be to deal afresh with the issues raised by the application.

THE ISSUES

In my judgment, there are five issues raised by this appeal. They are:

I propose to set out in Section 3 below the relevant evidence. At Section 4 below, I summarise the law relating to deliberate concealment. Then at Sections 5-9, I deal respectively with Issues 1 to 5 noted above. There is a short summary of my conclusions at Section 10 below. I should express my gratitude to both counsel for the clarity and crispness of their submissions.

THE RELEVANT EVIDENCE

The original retainer agreement was dated 17 May 1999. It was in the form of a letter from the defendant to the claimant. It contained the following provisions:

“2.

Work Covered.

The goal of this project is a commercial deal by which (through your assignment of licensing of rights in relation to the Medics group of inventions) a medical products company is permitted to manufacture or sell products incorporating any Medics inventions.

I am prepared to commit that all work which we do to that end is covered by this fee arrangement, and will be billed only on the contingency basis.

…

3.

Fees and Expenses.

Save for disbursements (as described on the card, see below) we would only charge fees in the following circumstances (when, however, fees will be due immediately on invoice, not after a further 30 days as normal).

The main circumstance is, naturally, your achievement (by whatever means and however long it takes) of the goal defined in the first paragraph of section 2 above.

The only other circumstance is if for any reason you cease instructing us on the project prematurely. That might be through your choice or through your death or incapacity. In these circumstances we would lose contact with the project but, since your IP rights would still be of commercial value and no doubt would be commercialised in time, it would be unrealistic and unfair for us simply to forego our fee. If that circumstance arises we will be entitled to charge all work to date, at the contingency rate or, such be the case, at a rate scaled down from that to reflect immediate payment. That rate would however be at our discretion.

Our profit fee would not be payable in any other circumstances.

In recognition of our risk in commitment we will charge on the basis that my hourly rate is scaled up to £300 per hour, and the rate chargeable by other fee earners will be scaled up in the same proportion…”

It is agreed that this was the only agreement between the claimant and the defendant and remained in force throughout the relevant period.

By March 2003, the defendant had done a huge amount of work on behalf of the claimant, and fees in excess of £200,000 had accrued, although no billable event had yet occurred. As a result of the work done by both the claimant and the defendant, it had become apparent that two investors, Mr Des Collett and Mr John Clarke, were prepared to enter into a deal to commercialise HeartSmart. They formed LNT for this purpose. But there was a problem with their ability to discharge the claimant’s liability to pay the defendant’s fees at the moment that any agreement was reached between LNT and the claimant.

On 10 March 2003, Mr Richard Jennings, the partner at the defendant firm who dealt principally with the claimant, wrote to him, noting that the claimant was close to a commercial agreement with LNT. Mr Jennings went on:

“Under our fee agreement the success fee would then become due. Obviously that would put you in an impossible position since the agreement puts no funds in your hands at once, and quite possibly nothing for a year. In practice, you would, rather than put your head in that noose, simply refuse to sign the five year license agreement.

I have long indicated that in this type of situation I would not expect Ford & Warren’s fee to fall due, and that when the time came I would need to write to you confirming that the agreement in question would not be regarded as a billable event.

This is not that letter – just yet! Before I write to you in those terms I need to make arrangements with you which secure Ford & Warren’s position better in the long term. These arrangements we have already discussed in principle, but at a time when they were complicated by applying to Des as well, then further complicated by David Wilson’s input.”

The letter identified the claimant’s liability to the defendant at £220,000, then made various proposals as to how this “painful degree of exposure” might be dealt with. One was the suggestion that a new company, Medics Ltd, might replace the claimant as client, with the necessary personal charges and guarantees being provided by the claimant.

On 1 July 2003, Mr Jennings wrote to the claimant to say that one of the critical requirements was to “square off your position with Ford & Warren as regards the triggering of fees”. On 3 July, Mr Jennings wrote to the claimant again, following further discussions with Mr Collett of LNT. Mr Jennings said this about Mr Collett:

“He was looking, as you know, to give some fairly substantial help towards the fee due from Medics to Ford & Warren anyway, so the premium would cover that contribution…we then have a chicken and egg problem, since we all want the license agreement signed up urgently, but until the funding is in place LNT Heartsmart Limited cannot usefully or meaningfully commit to the premium.”

The letter said that one way forward was an option agreement, entitling LNT to take up the license within 6 months. If the option was exercised, LNT became bound to pay the premium.

At the same time, the negotiations between the claimant and LNT were far from smooth. In an email dated 8 July, Mr Collett made a number of fierce criticisms of the claimant’s approach and attitude, noting that “we have met two world class players and directly and indirectly Ken has scuppered both these opportunities”.

In his letter of 5 August to the claimant, Mr Jennings proposed revised fee charging arrangements, in order that the license agreement with LNT could go forward “without your being saddled with an immediate personal fee liability to Ford & Warren.” The letter set out the proposal in some detail, but made plain that the claimant should use that letter “to brief an independent law firm”. That demonstrated that the defendant was properly aware that, given that the fees due to them were now a matter being directly addressed in the negotiations with LNT, there was a clear conflict of interest.

The proposal was in this form:

“The present position is that you are personally liable for our legal fees on the project to date, on a success only basis. The creation of the proposed license agreement with LNT Heartsmart Limited would constitute “success” in the relevant sense, so triggering the entire fee. The amount of that fee is rising every day, of course. See below for more detail, but it will be over £250,000 excluding VAT.

You cannot meet a fee demand of that scale immediately on the LNT Heartsmart Limited license being entered into, because the project will not by then have generated the wherewithal. In addition it is Medics Limited (as patent applicant) which is going to benefit from this license and it is right, in your own interest, that our primary client for billing purposes is now recognised as being Medics Limited, not yourself.

Basically Ford & Warren is offering to meet both these requirements subject to its position being fully secured.

That security starts with a debenture over the assets of Medics Limited, in other words basically the patent application. It also encompasses a promise that payment streams from LNT Heartsmart Limited will come through our client account, because fundamental to this whole arrangement is that Des Collett has sought to create a feasible situation from Ford & Warren’s point of view by incorporating a front end premium payment in the license agreement (provisionally to be £150,000+VAT) the sole purpose of which is to enable Medics Limited to meet a proportion of our legal fee entitlement as soon as possible.”

The letter went on to set out the terms of the new client care agreement with Medics Limited. As to timing, Mr Jennings went on:

“I am hopeful that Des might be available for signing of the option deed on 14 August but he has not yet confirmed. From your point of view, Ford & Warren’s fee entitlement must be squared off by then at the latest.”

The claimant took the defendant’s advice and went to another law firm, Lee and Priestley. They wrote to the defendant on 12 August 2003 noting that it was now unlikely that any commercialisation deal would produce initial up-front cash to settle the whole of the claimant’s liability for the defendant’s fees. They went on:

“Given the circumstances are now different it seems not unreasonable to me that you should take a view on accepting that the payment of your Success Fees beyond the initial £150,000 will be dependant on the income generated by commercialisation. Ken [the claimant] should not have any risk that he can be left with both a failed commercialisation and an ongoing liability to you for the unpaid element of the Success Fees.”

It is worth noting that both the defendant’s proposal and the counter-proposal put forward on behalf of the claimant envisaged the payment of at least £150,000 ‘up-front’ to the defendant.

The further negotiations between the claimant and LNT took some time. However, by 2 December 2003 there were two separate, but interlocking, sets of documentation. There were the proposed agreements between LNT and the claimant, including an investment agreement, a licence agreement and an option agreement. There was also, apparently, a second package (which was not included in the documents before me) but which included a new client care letter, a debenture, and a deed of guarantee, all concerned with the change in the defendant’s client from the claimant to Medics Ltd.

There was a meeting on 2 December involving the claimant, Mr Jennings and Messrs Collett and Clarke. The meeting was acrimonious, because Collett and Clarke said that the claimant was supplying inadequate and changing information.

There was a further meeting on 4 December 2003, involving the same people. It appears that LNT were still unhappy that important information was not available. Despite this, the investment agreement, licence agreement and option agreement were all signed (but not dated), although the initial premium to be paid to Medics Ltd (the sum out of which the defendant would be paid at least some of the monies due under the original retainer agreement) was left blank. That is consistent with Mr Collett’s witness statement which makes plain that, by this stage, LNT could not afford to pay a premium at all. The minutes of the meeting of 4 December 2003 also made plain why the documents were left undated:

“All parties agree to proceed on this basis and the documents were signed to be held over by Ford & Warren pending the signature of the documentation relating to Medics Limited taking over responsibility for Ford & Warren’s fee costs. This documentation would be signed once approval had been received from the managing partner at Ford & Warren that the documentation was acceptable.”

At one point, it was suggested that the two packages of documents of documents could and should have been treated separately, so that (for example) the option agreement could have been dated and concluded, even though the defendant had not agreed the changes to its client and remuneration noted in the other package. A study of the proposed agreements makes plain the fallacy of this suggestion; the proposed agreements with LNT all pre-suppose that the relevant contracting party was Medics Ltd and that they were the defendant’s client (see, for example, clause 5 of the option agreement) and envisaged the payment of a premium out of which some monies could be paid to the defendant (see, for example, clause 4 of the licence agreement).

The same day, LNT wrote to Medics Ltd and the defendant identifying the outstanding information required from the claimant. Although it is suggested that this document is somehow fraudulent, and was created after the event by the defendant, I reject such an assertion as fanciful. I accept the explanation in paragraphs 15 and 16 of Mr Gilbert’s second statement. In any event, the information that was being sought in the letter was entirely consistent with the information which it is agreed was sought by LNT, both at the meetings in December, and subsequently. The letter suggested that the information was required before the option agreement could be completed.

On 8 December 2003, the defendant sent the claimant copies of the investment agreement, the option agreement and the license agreement, noting that “they all currently stand undated at this office, pending resolution of the fee position with Ford & Warren”. Although the claimant alleges that he did not get that letter, its statement of the position was the same as that set out in the minutes of the meeting on 4 December 2003 (paragraph 19 above).

On 5 January 2004, Mr Collett at LNT wrote directly to the claimant, again seeking outstanding information. The letter, which appeared to assume that the various agreements were now in force, made clear that this information was required urgently for the purposes of meetings with investors later in the month. However, the claimant wrote back on 8 January in intemperate terms, refusing to provide the information sought. No explanation was or has been given as to why the claimant refused to provide this information, or the deliberately rude terms in which the refusal was couched. In addition, the claimant complained about the “adversarial meeting” that Mr Collett had conducted on 2 December 2003.

In the course of his 8 January letter, the claimant said, “As I understand it, Ford & Warren need some documentation signing by LNT.” Given the terms of the minutes of the meeting of 4 December, it is not clear to what the claimant was referring; the documents ball was plainly in the defendant’s court, as the minutes of the meeting on 4 December made clear. However, to the extent that the claimant thought that any delay in signing documents was the responsibility of LNT, that matter was resolved by the defendant’s letter of 13^th January 2004 to Mr Collett. In that letter (which again the claimant denies having received, but which was apparently copied to him), the defendant refers to his discussions with the claimant that morning and says that “any delay in entering into the option and investment agreements is entirely down to Ford & Warren and has not been contributed to by any action, or indeed inaction, of yours”.

There can be no doubt that, as at 8 January 2004, the claimant was aware that the proposed agreements between Medics Ltd and the defendant had not been signed off, and that the agreements with LNT remained undated. He knew the agreements had not been dated because of his attendance at the meeting on 4 December and his conversation with Mr Jennings on 8 January (to which he later referred in his letter of 15 January, see paragraph 27 below). As to the former, in his letter to Mr Jennings of 8 January 2004, the claimant said expressly that he was aware that the agreement between Medics and the defendant had ‘not been signed off as intended’ and said that he was seeking legal advice as to the question of paying interest to the defendant. He asked for a copy of the retainer agreement to be sent to Jonathan at Lee and Priestley (which Mr Jennings sent them on 13 January). He went on to say: “I will not be signing the agreement between Medics Limited and Ford & Warren until I have taken further advice from Lee and Priestley.”

As to the missing information which the claimant was refusing to provide, Mr. Jennings noted in the letter to Mr Collett of 13 January 2004 (paragraph 24 above) that “there are evidently very real difficulties in relating and reconciling the different scientific environments of Ken and John and that this needs continuing mediation…”

On 15 January, the claimant wrote a lengthy letter to Mr Jennings explaining how and why he was not willing to provide the further information to Mr Collett. The claimant also confirmed that Mr Jennings had given him information “as to Ford & Warren fault for not resolving whatever issues there were” arising from the proposed agreements, and goes on to make the point that if he could accept that, then so too should LNT. This showed that he had had the conversation to which Mr Jennings’ letter of 13 January referred (paragraph 24 above) in which the defendant had agreed that they were responsible for any delay because they had not yet agreed to the proposals. This makes the claimant’s alleged non-receipt of the letter of 8 January immaterial for present purposes.

On the same day, 15 January, LNT wrote to the claimant and the defendant to withdraw their signatures from the proposed option agreement and license agreement. In a longer letter, also dated 15 January, and replying to the claimant’s intemperate letter of 8^th January, LNT gave fuller reasons for their decision. As to delay, Mr Collett noted that “the only delaying factor is that you have not come to terms with one of your business associates” (i.e. the defendant). The letter then went on to say that, because the claimant had refused to provide the basic information required, the proposal could not be taken forward.

There were no letters from the claimant to LNT either asking for fuller explanations or attempting to revive the deal. This may very well be because, by then, the claimant had decided not to proceed with LNT in any event. As he said to Mr Jennings in his long letter of 15 January:

“…if they [LNT] want to throw ‘out the baby with the bath water’ then that is up to them. I will make sure with or without LNT HeartSmart will come to the marketplace, it will just take a little while longer.”

On 19 January, Mr Jennings sent the claimant’s belated answers to LNT’s questions but the information was not enough to persuade Mr Collett to change his mind. Instead, on 23 January, he emailed Mr Jennings saying that he would not do business with the claimant directly again, and asking for the various agreements to be destroyed.

There was no communication between the claimant and the defendant until 19 October 2004 when the claimant wrote to Mr Hearn, the senior partner of the defendant firm, complaining that the defendant’s behaviour “falls short of the professional standard expected from the senior partner of Ford & Warren”. The claimant went on to say that he intended to meet Mr Collett to find out why the agreements did not proceed. He also said that Mr Jennings had not told him why the senior partners of the defendant had not signed off the documents and concluded:

“My gut feeling is something went very wrong here of which I do not know of, but I will now find out why Ford & Warren and LNT Heartsmart did not complete that venture at some considerable cost to me I guess.”

On 22 October 2004 Mr Hearn replied to say this:

“You raise some implication of underhand dealing in relation to the agreement with Mr. Collett. I do not follow the inference in connection with our signature of any deal. If by this you refer to it being necessary for us to waive our fees before the deal could go ahead then I would begin to understand. If that is your point, then my answer is simply that we had no obligation to waive our fees.”

The claimant took up that point in a reply dated 25 October 2004, saying he was entitled to know why the agreements were not signed off by the defendant and seeking a full written explanation. Similar points were made in the claimant’s letter of 27 October 2004.

On 26 November 2004 Mr Hearn replied and amongst other things said this:

This was not a question of Ford & Warren signing off an agreement as if it were some administrative act or some duty on our part. Ford & Warren were being asked by the transacting parties to amend the fees agreement. We did not consent to any alteration of our position and nor did we wish to enter into the proposed transaction. I do not have to explain that, because that is our business decision. It was a matter for you and the other contracting party to address your obligations to Ford & Warren and you have no right to assume - nor demand - that Ford & Warren do something which they were neither legally nor ethically obliged to do. We have no duty whatsoever to enter into a transaction on behalf of ourselves where we do not wish to do so.”

On 10 December 2004, the claimant wrote again to Mr Hearn. In that letter he made many of the allegations which lie at the heart of these proceedings, to the effect that the defendant was obliged to follow his instructions and had failed to do so, putting their own interests before his own. He concluded:

“Succinctly, Mr. Hearn, you put your own and Ford & Warren’s interest before that of the client thereby sabotaging those agreements and a domino effect upon the contingency agreement I have with Ford & Warren.”

The ‘sabotage’ point was repeated in a letter of 7 January 2007, in which the claimant repeated a number of the same allegations against the defendant. The claimant concluded that the defendant “had irrevocably breached the terms and conditions of the agreement.” Later that year, on 1 June 2007, the claimant took “great pleasure” in enclosing a proposed claim against the defendant in the form of a manuscript claim form. This noted that in December 2003 documents had been signed which required the senior partners of the defendant firm to sign off the documents but that this did not happen and “the deal collapsed”.

On 22 December 2008, the claimant wrote to Mr Jennings to say that Mr Collett had told him that all the money was in place to meet the commitments to he defendant, including a payment of £70,000 immediately. He asked what had happened. In a reply dated 9 January 2009, Mr Jennings, who no longer worked for the defendant, said:

“You do need to remember, Ken, that I advised you right the way through the negotiation with Des that anything you negotiated would need clearance by Keith Hearn so as not to trigger an immediate large fee due to Ford & Warren, and that he was perfectly entitled to refuse that clearance if he saw fit.”

In another email which is undated but which the claimant claims was also sent on 9 January by Mr Jennings, there was this paragraph:

“You are entirely right to recall that the negotiation over the cash flow for payment of Ford & Warren’s fees was effectively with the new joint venture company which Des was setting up for the purpose, not with you. It could hardly have been otherwise: Des was where that cash had to come from. I negotiated the best deal for Ford & Warren that I could with Des, and to be fair I believe Des helped me as much as he could knowing that he only had a deal if Ford & Warren’s position could be squared off satisfactorily. I then took the deal to Keith Hearn, managing partner of Ford & Warren, for approval and made clear that I recommended it as the best outcome for the form in the circumstances. Keith Hearn turned it down, as he had a perfect right to do. My impression is that his mood was one of assuming that, whatever I had achieved for the firm, I could and should have tried harder. He was wrong in that, as subsequent events demonstrated – but I do think that was his privilege as managing partner.

The deal with Des then collapsed as a direct result of Ford & Warren’s non approval…”

As noted above, the claim form was issued on 10 November 2010. No part of the £250,000 fees owing to the defendant has ever been paid by the claimant.

THE LAW

Section 32 of the Limitation Act 1980 provides as follows:

“32 Postponement of limitation period in case of fraud, concealment or mistake.

(1)

Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either –

(a)

the action is based upon the fraud of the defendant; or

(b)

any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or

(c)

the action is for relief from the consequences of a mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it…

(2)

For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

The leading case on deliberate concealment is Cave v Robinson Jarvis and Rolf (a firm) [2002] UKHL 18, [2003] 1 AC 384. Lord Millett justified both the standard limitation period, and the significance of section 32, at paragraph 15 of his speech:

“In the absence of any intentional wrongdoing on his part, it is neither just nor consistent with the policy of the Limitation Acts to expose a professional man to a claim for negligence long after he has retired from practice and has ceased to be covered by indemnity insurance.”

The interrelationship between s32(1)(b) and s32(2) were dealt with by Lord Scott of Foscote at paragraph 60 of his speech:

“I agree that deliberate concealment for section 32(1)(b) purposes may be brought about by an act or an omission and that in, either case, the result of the act or omission i.e. the concealment, must be an intended result. But I do not agree that that renders subsection (2) otiose. A claimant who proposes to invoke section 32(1)(b) in order to defeat a Limitation Act defence must prove the facts necessary to bring the case within the paragraph. He can do so if he can show that some fact relevant to his right of action has been concealed from him either by a positive act of concealment or by a withholding of relevant information, but, in either case, with the intention of concealing the fact or facts in question. In many cases the requisite proof of intention might be quite difficult to provide. The standard of proof would be the usual balance of probabilities standard and inferences could of course be drawn from suitable primary facts but, nonetheless, proof of intention, particularly where an omission rather than a positive act is relied on, is often very difficult. Subsection (2), however, provides an alternative route. The claimant need not concentrate on the allegedly concealed facts but can instead concentrate on the commission of the breach of duty. If the claimant can show that the defendant knew he was committing a breach of duty, or intended to commit the breach of duty - I can discern no difference between the two formulations; each would constitute, in my opinion, a deliberate commission of the breach - then, if the circumstances are such that the claimant is unlikely to discover for some time that the breach of duty has been committed, the facts involved in the breach are taken to have been deliberately concealed for subsection (1)(b) purposes.”

In addition, at paragraphs 64 and 65, Lord Scott makes the point that, whilst the statutory language does not require the behaviour of the defendant to be unconscionable, he said it was difficult to think of a case of deliberate concealment under s32(1)(b) that would not involve unconscionable behaviour and that most cases of deliberate commission of breach of duty for s32(2) purposes ‘would be in the same state’.

The other important case concerned with deliberate concealment is the decision of the Court of Appeal in The Kriti Palm [2006] EWCA Civ. 1601. At paragraph 307 of his judgment, Rix LJ stressed the importance for the purposes of s32(1)(b) of demonstrating that, because of the deliberate concealment, the claimant lacked sufficient information to plead a complete cause of action (the so-called ‘statement of claim’ test). He said that it was therefore important to consider the facts relating to an allegation of deliberate concealment vis a vis a claimant’s pleaded case.

Rix LJ developed this point further at paragraphs 323 – 325 of his judgment where, by reference to Johnson v Chief Constable of Surrey (Court of Appeal, unreported, 19 October 1992), he said that the words “any fact relevant to a plaintiff’s right of action” were to be given a narrow rather than a wide interpretation and that what mattered was that there was a fact unknown to the claimant “without which the cause of action is incomplete”. That was in contrast to facts which merely “improve prospects of success”. He noted that the same approach had been followed by the Court of Appeal in C v Mirror Group [1997] 1 WLR 131, where Neill LJ had said that “the relevant facts are those which the plaintiff has to prove to establish a prima facie case”.

Finally, in Paragon Finance PLC v DB Thakerar and Co. [1999] 1 All ER 400, the Court of Appeal dealt with the test incorporated by the words “could with reasonable diligence have discovered it” in s32(1). In his judgment, Millett LJ said:

“The question is not whether the plaintiffs should have discovered the fraud sooner; but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable period of limitation is irrelevant. In the course of argument May LJ observed that reasonable diligence must be measured against some standard, but that the six year limitation period did not provide the relevant standard. He suggested that the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency. I respectfully agree.”

ISSUE 1: THE NATURE OF THE CLAIMANT’S CAUSE OF ACTION

The claimant’s pleaded case is for breach of contract/negligence and breach of fiduciary duty. The critical part of the particulars of claim is at paragraphs 18 to 21 which read as follows:

“18.

The claimant’s instructions to the defendant (from which Mr. Jennings did not dissent) were to conclude the transaction by dating the Option and he understood from Mr. Jennings that all that remained for this to happen was for the defendant’s Managing Partner to approve the documentation substituting the second claimant [Medics Ltd] for the claimant and the Option would be dated and come into immediate effect.

19.

Contrary to the claimant’s instructions to complete the transaction and date the Option, the Defendant failed to approve the documentation and failed to date the Option and complete the transaction. Moreover, the defendant failed to inform either claimant or LNTH that this was the case and the reasons therefore, which led to Mr. Collett to believe that the claimant had delayed completion of the transaction and the claimant to believe that delay was caused by LNTH.

20.

As a result the Option was never dated, the transaction did not proceed and was lost.

21.

The Option was not dated and the transaction was lost owing to the negligence and breaches of duty of the defendant.”

The paragraph then sets out nine particulars of negligence/breach of fiduciary duty. These are all related to the defendant’s alleged failure to complete the proposed agreements and the alleged failure to explain to the claimant and LNT “the true reason” why they were not completed. There was also an allegation that, as at December 2003/January 2004, there was a conflict of interest about which the defendant had failed to advise the claimant.

It is therefore beyond doubt that the claimant’s pleaded case is one of breach of contract/duty because, in December 2003/January 2004, the defendant failed to date/complete the agreements that had been signed on 4 December. For completeness, I should note that, at paragraph 54 of his judgment, Judge Spencer also concluded that this was a case that centred round the allegations that the defendant failed ‘to carry out the claimant’s instructions to complete the transaction’.

Not only did Mr Douthwaite not suggest that the inclusion of allegations of breach of fiduciary duty made any difference to that straightforward analysis, but it is also my view that, as a matter of law, such claims do not affect the limitation analysis. In Paragon Finance, although the allegations related primarily to fraud, there was also a pleaded allegation of breach of fiduciary duty. Millett LJ made plain that this could have no effect under the Limitation Act and could not put the claimant in a better position than he would otherwise have been in by reference to the fraud allegations. As he put it, “the plaintiffs’ case cannot sensibly be described as based on breach of fiduciary duty. Their case is that they were swindled.” The same is true here: the claimant’s case against the defendant is that they failed to comply with his instructions and that, as a result, a valuable commercial opportunity was lost.

Accordingly, on the claimant’s pleaded case, the cause of action for breach of contract/breach of duty accrued in January 2004, when the breach occurred and the deal with LNT was irrevocably lost. Thus, subject to the deliberate concealment argument, the limitation period expired 6 years thereafter, in January 2010, at which time these proceedings had not been commenced.

ISSUE 2: IS THE REASON WHY THE DEFENDANT DID NOT DATE THE VARIOUS DOCUMENTS A FACT “WITHOUT WHICH THE CAUSE OF ACTION IS INCOMPLETE”?

Very wisely, in his particulars of claim, Mr Douthwaite anticipated the limitation argument. Accordingly, at paragraph 23, he pleaded as follows:

“If and to the extent that the defendant contends that any cause of action claimed in this claim is barred by reason of the provisions of the Limitation Act 1980, the claimants will contend that

(1)

The facts relevant to the claimant’s right of action were deliberately concealed from the claimants until receipt of an email from Mr. Jennings on or about 9 January 2009, alternatively

(2)

That the ‘starting date’ for the purposes of section 14A of the Limitation Act 1980 is the date of receipt of the said email from Mr. Jennings on or about 9 January 2009.”

During the course of the oral submissions, and as set out in his helpful written skeleton, Mr Douthwaite referred to the email(s) of 9 January 2009 (paragraph 37 above). He said that this was the first time that the claimant knew why the defendant had not dated the agreements and allowed them to proceed. The plain inference was that, unless and until the claimant knew why his instructions had not been followed, he had no complete cause of action. For a number of reasons, I do not accept that submission.

First, it needs to be stressed that the claimant was not saying that he did not know that the agreements themselves had not been completed until 9 January 2009. As set out in paragraphs 25-28 above, he knew on 15 January 2004, both that the agreements had not been completed and that LNT had changed their minds and were not going to proceed. And if that were wrong, it is beyond argument that he was aware that “the senior partners of Ford & Warren did not sign off those documents” on 19 October 2004, because that is what he himself said in his first post-transaction letter to the defendant on 19 October 2004 (paragraph 31 above). So the claimant’s case is not that he did not know that the agreements had not been completed, but that he did not know why they had not been completed.

As set out in paragraphs 43-44 above, the test that the claimant has to meet in order to activate s32 is that the relevant fact which was deliberately concealed from him was one “without which his cause of action is incomplete”. Thus, on the claimant’s case, he needed to know why the defendant had failed to comply with his instructions before he had a complete cause of action against the defendant for breach of contract and/or negligence. In my judgment, such a proposition only has to be stated in these terms for its fallacy to be exposed.

It is wholly unnecessary for a claimant to know why the other party has breached the contract or failed to comply with its duty in order for a cause of action to accrue. It is the breach itself that gives rise to the cause of action, not the explanation for it. Indeed, there are many cases of negligence and breach of contract where, even at the end of a trial, no one knows precisely why the defendant acted in the way that he did; where the reason why something was done that should not have been done, or was omitted altogether, is never explained. Sometimes the person who committed the act or omission has disappeared or is long dead. To say that a claimant needs to know the defendant’s motive for committing the breach before having a complete cause of action is, in my judgment, misconceived.

There is a complete lack of correlation in the particulars of claim between the contents of the email(s) of 9 January 2009, and the allegations of breach of duty or breach of contract. In paragraphs 18-21, the claimant has not pleaded anything at all which is said to arise from or relate solely to the contents of the email(s) of 9 January. That omission demonstrates that the alleged concealment did not go to the core of the claimant’s cause of action.

On that analysis, of course, the cause of action crystallised in January 2004, when the breach occurred. If, as I find, the claimant’s understanding of the precise reasons for the breach was immaterial to the accrual of the cause of action, then Section 32 of the Limitation Act cannot run and this claim is statute-barred.

ISSUE 3: IF SUCH KNOWLEDGE IS REQUIRED TO COMPLETE THE CAUSE OF ACTION, WHEN DID THE CLAIMANT HAVE IT?

Now assume that my analysis under Issue 2 is incorrect, and that, in some way, the claimant’s knowledge of precisely why the defendant did not follow his instructions is a critical element of his cause of action. When, on the material before the court, did that knowledge arise?

I find that the claimant was aware throughout 2003 and into 2004 that everything turned on securing the defendant’s agreement to the new financial position under any changed regime. Mr Jennings had said that in his letter to the claimant on 10 March 2003. It was reiterated clearly in the letter of 5 August 2003 (with its use of the expression “subject to its [the defendant’s] position being fully secured” and the reference to £150,000 by way of initial payment). And it was emphasised by the last part of that letter which talked about the need for the defendant’s fee entitlement to be “squared off” before the option was signed. It was also an integral part of the response by Lee and Priestley on 12 August.

At the time that the agreements had been drawn up in December 2003, the defendant’s interest in securing its position (both in terms of the amount of any premium and the change from the claimant to Medics Limited as the defendant’s client) was also plain to all. That explains item 7 in the minutes on 4 December, with the clear statement that everything was dependant on the agreement of the defendant’s senior partner. No alternative explanation for that minute has ever been suggested.

Accordingly, in my judgment, the claimant knew throughout that these agreements hinged on the parties being able to reach an acceptable commercial arrangement with the defendant. The fact that some of those negotiations were carried out directly between the defendant and LNT is nothing to the point, since it was LNT who were going to be providing the money for any initial payment to the defendant. On this basis, the claimant knew or ought to have known why there was ongoing doubt and concern on the part of the defendant: that the proposals, taken together, did not provide the security which, as Mr Jennings had advised him throughout, the defendant required.

Accordingly, whilst it might not have been spelled out to the claimant in words of one syllable that the proposed absence of a premium and the security arrangements were not commercially acceptable to the defendant, I find that he knew (or should have known) throughout the negotiations that the defendant would only date and complete these agreements if the premium and the other arrangements were considered acceptable. He knew or should have known by late December 2003/early January 2004 that this was the only reason why the various agreements had not been completed.

That proposition can be easily tested. As noted above, the claimant knew as a matter of fact that the proposed agreements had not been completed. If he did not know why they had not been completed, and if that knowledge was of importance to him, then he would have asked the defendant why they had not dated/completed the documents. What could have been more straightforward? He did not do so, and I find that that was because he did not need to ask any such question.

Accordingly, even if the knowledge of why, on the claimant’s case, the defendant had not completed the agreements was an integral part of his cause of action, I find that he had the requisite knowledge in January 2004. Again, therefore, s32 is not engaged and the cause of action is statute-barred.

ISSUE 4: WHAT WERE THE ACTS OF DELIBERATE CONCEALMENT?

The analysis under Issues 2 and 3 above, both of which are unfavourable to the claimant, is confirmed by a consideration of what the acts of deliberate concealment could be. I have set out Lord Scott’s analysis at paragraph 60 of his speech in Cave v Robinson (paragraph 41 above). Although, as he makes plain, s32(1)(b) provides an alternative to s32(2) they have one thing in common: there must be something intentional, something deliberate, in the defendant’s conduct. Thus under s32(1)(b) the claimant has to show an intention of concealing the fact or facts in question, whilst under subsection (2), the claimant has to show that the defendant knew that they were committing a breach of duty which would be unlikely to be discovered for some time.

On the facts of this case, the claimant gets nowhere near demonstrating either route. Taking s32(1)(b) first, there was no evidence of any intention on the part of the defendant to conceal any of the relevant facts. As I have already said, the defendant made plain throughout that everything hinged on their agreement to the changed contractual regime; it was that which needed to be ‘squared off’. They did not seek to conceal the fact that they had not agreed to that new regime; that was the express reason why those documents remained undated as at 4 December and thereafter. Indeed, it is worth noting that, even in the longer email allegedly sent on 9 January 2009, on which the claimant relies so heavily, Mr. Jennings reminds the claimant that he had throughout advised that Mr Hearn of the defendant could – indeed, was entitled to – turn down the proposals. I agree with Mr Allen that the documentation emanating from the defendant could not possibly be read as concealing anything of any relevance from the claimant.

Taking the alternative approach under s32(2), I find that the claimant has not shown even an arguable case that the defendant knew that, by not dating or otherwise completing the agreements, it was committing a breach of duty which would not be revealed for some time. Indeed, the opposite is the case, given that the defendant had made plain throughout that the proposals had to be acceptable to them and that was why, at the meeting on 4 December 2003, the documents were not dated. Minute 7 of the meeting spells out that the documents could not be completed without the defendant’s agreement; in my view, that is the opposite of concealment.

Furthermore, on this aspect of the case, the claimant has also not shown that the circumstances were such that the breach would be unlikely to be discovered for some time. On the contrary, if the breach was the failure to date/complete the option agreement, that was known from 4 December 2003 onwards. This is not a solicitor’s negligence case which turns on the small print of a will or a trust settlement which only became the subject of scrutiny years or decades after it was drawn up. On the claimant’s case, this was a failure to follow instructions then and there, for all to see. The fact that the claimant was dilatory in doing anything about the alleged failure for so long should not be confused with the proposition that the breach was unlikely to be discovered for some time; on the contrary, the breach (if that is what it was) was transparent and discoverable immediately.

Accordingly, I consider that the claimant has not demonstrated that there were acts of deliberate concealment, even arguably, under either of the routes available under s32. That is a further reason why, in my judgment, s32 cannot run and that this claim is statute-barred.

ISSUE 5: WHEN COULD THE CLAIMANT WITH REASONABLE DILIGENCE, HAVE DISCOVERED THE RELEVANT FACTS?

Now assume that, not only were the reasons why the defendant did not date/complete the agreements critical to the claimant’s cause of action, and that the claimant did not, as a matter of fact, find out the reason for that until 2009 as a result of acts of deliberate concealment on the part of the defendant (all of which assumptions are contrary to my primary findings). It is then necessary to consider, by reference to the test of reasonable diligence considered in Paragon Finance, when the claimant could, with reasonable diligence, have discovered those facts.

In my judgment, if they were not already known, such facts – the reason why the agreements were not completed - could reasonably have been discovered within a few weeks of LNT’s decision on 15 January 2004 not to proceed. If it be the case that LNT pulled out because of a genuine misunderstanding about delay (because they thought that the claimant was delaying dating the agreements whereas, in fact, that was down to the defendant), and if that was the reason why they pulled out of the agreements, then all the claimant had to do was to reply to the LNT emails of 15 January, asking why LNT had had a change of heart. If, on 15 January 2004, the claimant had really wanted the deal with LNT to go ahead, it is nothing short of astonishing that no such question was asked.

If the claimant had asked the logical question (“Why are you pulling out of these deals when they are so close to fruition?”) then, on the claimant’s case, LNT would have replied that it was because the defendant had not dated or otherwise completed the proposed agreements (which was no more than a variation on what they actually said on 15 January, that “the only delaying factor is that you have not come to terms with one of your business associates”). On this assumption, the claimant would then have spoken to the defendant to find out why that had not happened, and they would have said that it was because the terms were unacceptable to them. None of that was particularly difficult or shrouded in any sort of secrecy. I am confident that, within a few weeks, at the very most, of LNT’s decision to withdraw, then – on the assumption that the claimant was genuinely ignorant of these matters - the claimant would have obtained the answers which, on his case, were needed to complete his cause of action.

The submission as to reasonable diligence was put forward with some vigour by Mr Allen, and Mr Douthwaite was unable to address it because, in my judgment, there is no answer to it. On that analysis, s32 could, at most, have extended the accrual of the cause of action by a month or so, to the middle or end of February 2004, which was not long enough to save this cause of action from the effects of the Limitation Act.

Although not directly relevant to the limitation issue, I am aware that the defendant also runs a causation argument, to the effect that the agreements did not ultimately proceed because of the claimant’s failure to provide the relevant information to LNT at the end of December 2003/early January 2004. On the basis of the contemporaneous documents, I consider that such a case is overwhelmingly likely. The claimant was repeatedly asked for information that he could not, or would not, provide.

That has two indirect effects on this application. First, it means that the claimant’s pleaded case is an inherently unattractive one, because he is seeking to rely on LNT’s signing of the relevant documents as being the critical event (which entitles him to blame the defendant for their eventual non-completion), when, even if the agreements had been completed, he would then have immediately got into a dispute with LNT about his failure to provide information which would have meant that the licence agreement would never have been taken up by LNT anyway.

Secondly, I conclude that the ongoing problems with information, and the breakdown in the relationship between Mr Collett and the claimant, explains why the claimant did not ask LNT any questions about why the deal had fallen through. He knew why: he had not provided the information LNT needed. But he did not care about that, because he was confident (wrongly, as it turned out) that he could take HeartSmart to the market with other commercial partners.

CONCLUSIONS

For the reasons set out in Section 5 above, I consider that the claimant’s claim is a relatively straightforward claim for breach of contract/breach of duty.

For the reasons set in Section 6 above, I conclude that the reason why the various agreements were not dated/completed by the defendant was irrelevant to the claimant’s pleaded cause of action. That accrued in January 2004, regardless of the defendant’s motive in not completing the proposed agreements, or the claimant’s knowledge of such motive.

For the reasons set out in Section 7 above, I conclude that, even if this knowledge was in some way critical to his cause of action, the claimant had that knowledge by January 2004.

For the reasons set out in Section 8 above, I consider that the claimant has not demonstrated even an arguable case that there were any acts of deliberate concealment pursuant to either limb of s32 of the Limitation Act 1980.

For the reasons set out in Section 9 above, I consider that, even if I was wrong about everything else, the claimant could, with reasonable diligence, have found out the relevant information (which was, on his case, why the agreements were not dated/completed by the defendant) in about February 2004. On that basis, s32 would have extended the period by a month. The claim form was issued 6 years and 8 months after that, so was still statute-barred.

For all these reasons, I am no doubt that the claimant’s claim against the defendant is statute-barred and that the claimant is unable to rely on section 32 of the Limitation Act 1980 in order to extend the relevant statutory period, either at all or such as to come within the 6 year cut-off. Accordingly, I allow the defendant’s appeal against the judgment of Judge Spencer and dismiss the claimant’s claim in these proceedings. I have deliberately not dealt with any question of costs.