Analysis
The first claimant brought a claim in his individual capacity as settlor and trustee for professional negligence against the solicitors he had instructed in relation to a settlement made in 1987, which created a discretionary trust (the trust) in favour of a number of beneficiaries including the first claimant’s children. The first claimant intended to benefit his own children (the children) with his nieces/nephews as backstop beneficiaries should the trust in favour of the children fail. However the terms of the trust, which gave the beneficiaries the right to income when they attained the age of 25, conferred equal rights on all the beneficiaries, whether the children or his nieces/nephews. The trustees had the power to vary the trust before the right of any beneficiary crystallised at age 25. However, shortly before the eldest beneficiary (the fifth claimant) attained the age of 25 in 2011, negligent advice was given whereby the trustees lost the opportunity to vary the trust so as to comply with the first claimant’s wishes. The negligent advice was not corrected until 2018. In the interim, the rights of more beneficiaries crystallised by their attaining the age of 25.
Damages were sought based upon the loss and damage alleged to have been suffered by the claimants: individually by the first claimant, or as trustees in the case of the first four claimants, or as the intended beneficiaries in the case of the remaining claimants, the children. The solicitors admitted negligence, but made an application to strike out the claim, alternatively for summary judgment on four grounds:
- (i) no loss was suffered by the trustees;
- (ii) no duty of care was owed to the children and they did not fall within the White v Jones [1995] (White) exception;
- (iii) although the first claimant had an arguable claim, this had become statute-barred; and
- (iv) the claim by the trustees was also statute-barred.
Held (dismissing the applications):
The position of the trustees in the case was analogous to the position of the executrix in Chappell v Somers & Blake [2003]. It was arguable that the solicitors owed a duty to the children as the beneficiaries who had suffered loss as a result of the negligence, and who had a valid claim against the solicitors. In those circumstances, it was desirable that the trustees should also be claimants so that there was no arguable gap in the recoverability of the losses claimed. This meant that at the stage of strike-out or application for summary judgment, it was not appropriate to strike the trustees out as claimants or award the defendants summary judgment.
As long as the court was astute to ensure that there was thereby no double recovery at trial, it was appropriate for all the interested parties to be parties to the claim so as to ensure that all the legitimate claims were covered and all the legitimate interests were protected. The trustees should have the right to argue at trial a point relating to sub-division of the beneficiaries’ interests as they had relied on the negligent advice and to the detriment of the other beneficiaries who might have a claim against them.
The judge went on to consider the claims of the children on the application of the dicta of Lord Goff in White. A question arose in the present case as to whether the first claimant was in an analogous position to the testator in White, or whether, because he remained alive and was able to sue the solicitor for damages which could be applied to the disappointed beneficiaries to make good their losses, he was in the same position as the donor in Lord Goff’s example. The claimants should have the right to argue at trial that as a result of the decision in White and subsequent decisions, the law had moved on and now allowed for recovery where the claimant fell within the principles laid down by Caparo Industries plc v Dickman [1990]. It was also arguable that the law recognised a duty owed by the solicitors to the children given that it was specifically their interests which the first claimant was seeking to protect when he sought advice from the defendants.
Counsel for the claimants was arguably right when she submitted that the rationale behind the exclusion of claims in the case of inter vivos transactions was directed to causation because the donor could do something to give effect to their intention and thus remedy the position. It was also arguable that where the donor had irrevocably divested themselves of the estate, the legal ownership of which was now vested in the trustees, it was much neater and legally more satisfactory for the cause of action arising from the negligence to lie with the trustees and beneficiaries, and much less likely to result in over-recovery or under-recovery.
Given this was a strike-out/summary judgment application, the decision of the Court of Appeal in Hughes v Richards (t/a Colin Richards & Co) [2004] was highly pertinent. The observation of Peter Gibson LJ in that case applied, namely that where a relevant area of law was still subject to some uncertainty and developing and where it was highly desirable that the facts should be found so that any development of the law should be on the basis of actual and not hypothetical facts, the correct approach was that the court must be certain that the claim was bound to fail; if it were not, the case would be inappropriate for striking out. The position in principle should not be affected by whether or not the first claimant was in a position to sue. It was also arguable that Ferris J in Yudt v Leonard Ross & Craig (a firm) [1998/99] was correct to distinguish between beneficiaries under a disposition already made and disappointed beneficiaries under a disposition which was not made at all because of the negligence of solicitors. The solicitors owed the children a direct duty of care in circumstances where the disposition had been completed and where the effect of the solicitors’ negligence was to make the disposition irrevocable.
Since it was arguable that the children had a valid claim, the action would proceed as there was no argument that the children’s claims were statute-barred. Further, it was arguable that by continuing to act and to advise the trustees and beneficiaries, the solicitors had a continuing obligation to do so upon the correct basis, such that it was likely that their continued retainer carried an implied obligation to advise upon that correct basis so that, on the facts of the case, there was a continuing breach. The critical provision for the purpose of limitation was s14A(7) of the Limitation Act 1980, on the application of which it was not sufficiently clear that the first claimant acquired sufficient knowledge to start time running for the purposes of s14A, whereby the claims would be statute-barred such as to justify striking out the claims or granting summary judgment.
In summary:
- (1) The trustees and the children both had viable claims against the defendants and it was desirable that they should all be claimants to avoid any lacuna in recovering the loss occasioned by the solicitors’ negligence, so long as the court was astute to avoid double recovery.
- (2) The primary limitation period of six years had expired by the time the proceedings had been issued on 16 December 2021, except for the claim relating to the youngest beneficiary and the claims arising from the additional loss accruing to the children from the youngest beneficiary attaining 25 without any variation to the trust.
- (3) The first claimant did not acquire the necessary knowledge for the purposes of s14A of the Limitation Act 1980 until at least January 2019, so the claims were in time and therefore not statute-barred.
- (4) On any application for summary judgment the court retained a discretion.
The judge concluded by saying that even if he was wrong about the above matters, this was a case in which he would be inclined to exercise his discretion not to strike out the claim or to grant summary judgment given that the full evidential position would only become clear at trial and the law remained in a state of development.
JUDGMENT MR JUSTICE MARTIN SPENCER: [1] By their application dated 12th May 2023, the First and Third Defendants seek to strike out the claim, alternatively they apply for summary judgment. [2] The claim arises out of admitted negligence on the part of solicitors instructed principally by the First Claimant, Mr James Lonsdale, in relation to …Continue reading "Lonsdale & ors v Wedlake Bell LLP & ors [2024] WTLR 1007"