Trilogy Management Ltd v Harcus Sinclair [2016] EWHC 170 (Ch)

WTLR Issue: Summer 2017 #168

TRILOGY MANAGEMENT LIMITED (A company incorporated in the Bailiwick of Jersey)

V

HARCUS SINCLAIR (A firm)

Analysis

This was an application by the defendant firm of solicitors (D) for the particulars of claim and reply to be struck out on the ground that they disclose no answer to the limitation defence or summary judgment dismissing the entirety of the claim on the basis that the claimant (C) has no real prospect of success because the claim is statute barred.

The proceedings arose out of a family dispute concerning a charitable trust (F) established by the deceased (OM). By his will OM left his shares in a Jersey investment company (JY) and in the trustee company of F (YT) to the executors and trustees of his will. Advice was received that the meaning of the relevant will clause was uncertain, that the trust might not be exclusively charitable and the trust was potentially exposed to adverse tax treatment. Thus, the family members negotiated a way to deal with the shares in the capital of JY and YT without exposing F to adverse taxes.

In April 2004, proceedings began in the Royal Court of Jersey regarding the effect of the relevant clause. YT was a respondent represented by D and Jersey advocates. By 11 June 2004, various matters were agreed and subject of a memorandum of understanding. Eight new charitable sub-trusts were to be established, each with one of OM’s children as its guardian, capital distributions from JY would be paid to the trustees of the sub-trusts in equal shares and the articles of association of JY (Article 96) were to be amended to provide for a minimum distribution of profits. The draft documents to give effect to the compromise were not finalised until a fortnight after that date.

After the Memorandum of Understanding was shown to the court, a revised form of wording was proposed for Art 96 and approved by the court retrospectively. The articles of JY were duly amended and the eight sub-trusts were created.

In December 2004, three sisters complained to YT about reluctance to distribute assets to the sub-trusts in a timely manner, that the revised wording of Art 96 was not included in the draft which had been circulated and had been added without agreement.

In November 2010, C (which had been appointed trustee of the three sisters’ sub-trusts in August 2005), commenced new proceedings in Jersey seeking removal of YT as trustee of F. In those proceedings the 2004 negotiations were examined in close detail. The court held that the words added in the revised Art 96 significantly affected the meaning and effect of Art 96 on the distributions to be made to the sub-trusts.

In March 2014, the claim form in these proceedings was issued claiming damages for breach of contract and/or duty of care in tort/and or breach of fiduciary duty arising out of or in connection with D’s retainer to act for YT and/or JY in June 2004.

D denied that it owed any duty of care to F or the charitable sub-trusts, that the revised wording of Art 96 reflected the terms agreed by the parties to the 2004 proceedings and raised a limitation defence.

In reply to the limitation defence, C alleged that the alteration of Art 96 was a fact relevant to C’s cause of action and was not discovered until the provision of documents by way of affidavit in March 2011 and could not have been discovered before then by reasonable diligence. Alternatively, D deliberately altered the words of Art 96 without ensuring that they had instructions to do so, in a manner which was a breach of duty of care which they admit they owed to YT and which was unlikely to be discovered for some time.

Held:

  1. 1) C had inadequately pleaded its reliance on the Limitation Act 1980 s32 in response to the limitation defence. Further, on the particulars of claim as presently framed, C had no real prospect of rebutting the limitation defence. C nowhere stated in the reply that the breaches were committed with knowledge that they were wrongful (s32(2) of the Limitation Act 1980 and Cave v Robinson [2003] 1 AC 384 considered). It appeared from the letter sent by the three sisters in December 2004 that they were aware at that time of the revised wording having been inserted.
  2. 2) C could only rely on s32(1)(b) if the fact of insertion of the wording at the administrative direction of the partner at D was deliberately concealed from it and the three sisters and could not have been discovered with reasonable diligence until at earliest 24 March 2011. As the particulars of claim were worded, the only thing that the three sisters or C needed to know that was not expressly stated in the three sisters’ letter of December 2004 was that D was physically responsible for making the drafting change to Art 96. It is entirely fanciful to think that, if the action proceeded to trial, the court would find the three sisters or C could not have discovered that fact with reasonable diligence within the usual six year limitation period or could not reasonably have been expected to have acquired that knowledge within that period from facts ascertainable by them. Those facts were known to the three sisters’ lawyers at all relevant times.
  3. 3) Regarding the allegation that D was in breach of duty of care to C in making the amendment to Art 96 without instructions from YT, that was distinct from the allegation that they wrongfully failed to fulfill their duty of producing accurate documentation. Section 35 of the Limitation Act 1980 and CPR 17.4 gives the court a discretion to permit a new claim if the new claim arises out of the same facts or substantially the same facts as already in issue. That condition is satisfied because the question of what instructions D was given by YT would be in dispute at any trial.
  4. 4) C has an arguable case that it was not until disclosure in the second Jersey proceedings at earliest that it could with reasonable diligence have discovered or reasonably be expected to have acquired knowledge that D, in altering and sending out the revised version of Art 96, acted without instructions. The most cost effective and efficient course would be to permit C to apply for permission to amend to raise the new cause of action on terms that D be entitled to raise and rely on any limitation defence it would have if C issued fresh proceedings at the date of amendment.
  5. 5) Application adjourned to enable C to place before the court proposed amended particulars of claim and to make an application for permission to amend.
JUDGMENT THE CHANCELLOR OF THE HIGH COURT (SIR TERENCE ETHERTON): [1] This is an application by the defendant firm of solicitors, Harcus Sinclair, for an order that the particulars of claim and the reply be struck out pursuant to CPR 3.4 or the inherent jurisdiction of the court on the ground, among others, that they …
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Counsel Details

Catherine Newman QC (7 Stone Buildings, Lincoln’s Inn, London WC2A 3SZ, tel 020 7406 1200, e-mail clerks@maitlandchambers.com) and Jordan Holland (5 Stone Buildings, Lincoln’s Inn, London WC2A 3XT, tel 020 7242 6201, e-mail clerks@5sblaw.com) instructed by Addleshaw Goddard (Milton Gate, 60 Ciswell Street, London EC1Y 4AG, tel 020 7606 8855) for the claimant.

Christopher Butcher QC (7 King’s Bench Walk, Temple, London EC4Y 7DS, tel 020 7910 8300, e-mail clerks@7kbw.co.uk) instructed by Reynolds Porter Chamberlain (Tower Bridge House, St Katharine’s Way, London E1W 1AA, tel 020 3060 6000) for the defendant.

Cases Referenced

  • Arcadia Group Brands Limited v Visa Inc [2015] EWCA Civ 883
  • Cave v Robinson [2003] 1 AC 384
  • Cooke v Gill (1873) L.R.8 C.P. 107
  • Darlington Building Society v O'Rourke James Scourfield & McCarthy [1999] PNLR 365
  • Goode v Martin [2001] EWCA Civ 1899
  • Hemmingway v Smith Roddam [2003] EWCA Civ 1342
  • Senior v Pearson & Ward [2001] EWCA Civ 229

Legislation Referenced

  • Limitation Act 1980, s14A, s32, s35