Family Law Hub

Russell v Cornwell [2014] EWHC 1509 (QB)

A client’s claim against a solicitor for breach of contract and professional negligence (for failure to advise correctly on property rights in light of the husband’s bankruptcy) was time barred where the claim had been issued over 11 years after the claimant had withdrawn her instructions.

  • Neutral Citation Number: [2014] EWHC 1509 (QB)

    Case No: TLQ/14/0077

    IN THE HIGH COURT OF JUSTICE

    QUEEN'S BENCH DIVISION

    Royal Courts of Justice

    Strand

    London WC2A 2LL

    Thursday, 3 April 2014

    BEFORE:

    HIS HONOUR DAVID MITCHELL

    -------------------

    BETWEEN:

    RUSSELL

    Claimant

    - and -

    CORNWELL

    Defendant

    -------------------

    MR LAWRENCE WEST QC (instructed by McMillan Williams) appeared on behalf of the Claimant

    MR MILES HARRIS (instructed by Clyde & Co) appeared on behalf of the Defendant

    -------------------

    Approved Judgment

    Court Copyright (c)

    -------------------

    Digital Transcript of Wordwave International, a Merrill Communications Company

    101 Finsbury Pavement London EC2A 1ER

    Tel No: 020 7421 6131 Fax No: 020 7421 6134

    Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com

    (Official Shorthand Writers to the Court)

    1. JUDGE MITCHELL: By agreement between the parties, this is a trial of a preliminary issue under the Limitation Act of 1980. The position is that the question which arises is whether or not the claimant has established that the action which is brought by the claimant, Mrs Russell, is within the limitation period. There has been agreement that it is not necessary to call in the evidence, and I have read the statements from each of the parties.

    2. The claimant is a lady who was undergoing separation and divorce from her husband as long ago as 2000 and 2001, and the defendant was acting as her solicitor. The defendant was instructed between 13 January 2000 and 14 February 2001. Mr Harris on behalf of the defendant, in commencing his submissions, described this as a "horribly stale claim", and one has to say that it is. This court has a great deal of experience of dealing with stale claims, and even when matters are documented as they are in this case the lapse of time can make it very difficult and indeed unfair for the parties and witnesses who are trying to cast their minds back over lengthy periods of years. However, as Mr West on behalf of the claimant submits, if the law permits the claim to go ahead then go ahead it must, and of course he is quite right.

    3. The claim arises in this way. It would seem that at the time of the matrimonial difficulties, Mrs Russell's husband was going through financial difficulties in addition. That was known to both parties and it would seem from the evidence that a failure to pay the Inland Revenue was one of the significant features. The claimant says she was advised that she should obtain a consent order which contained a declaration of solvency by the husband, and indeed that does not appear to be in dispute.

    4. On 10 April 2000 the claimant advised the defendant that she was worried she might lose her home. It is clear she was concerned, as many people are, particularly women with children, to provide a home for those children, and that was her chief concern and it is entirely understandable. The house was transferred to the claimant but only one of two endowments was transferred to the husband.

    5. In August of 2000 the husband's solicitors said it would not be possible to provide a declaration of solvency, and how right that proved to be in the light of what happened subsequently. By a letter dated 1 February 2001, the husband's solicitors wrote to the defendant saying that the husband's circumstances had changed dramatically in that two weeks earlier, that is to say, on 19 January 2001, the husband had presented his own petition in bankruptcy. Although a draft order had been prepared, the defendant says in her statement she advised the claimant that transactions prior to bankruptcy could be looked at and it was not likely the court would approve. She could not show that she had paid the husband a full consideration for his shares, and the claimant says the defendant failed to ensure that the order was drawn, but the fact is it is unlikely that the order would have been approved by a court.

    6. On 9 February 2001 there was a telephone call between the parties when the claimant said her concern was the children, she needed a home and their home was at risk and she could not afford to continue to pay the defendant. Sadly that is a not uncommon problem in this day and age, that parties cannot afford to pay for the advice that they so desperately need. As a result the retainer was terminated on 14 February 2001. Subsequently on 9 May 2006 the defendant disclosed her entire file to the trustee in bankruptcy. He had requested it, she had refused, but it was drawn to her attention that the trustee was entitled to the file but she did not remove any of the privileged documentation, for which she apologises in her statement.

    7. On 2 March 2007 a letter was sent by the trustee in bankruptcy's solicitors, and this was referred to in his submissions by Mr West, who quoted from it, and I also quote from it because it sets out the position really in a nutshell concerning the transfer of the property into her sole name and it sets out the position of the trustee:

    "The Property was transferred from your ex husband to you on 22 May 2000. The stated consideration was 'pursuant to an agreement between the Husband and the Wife in matrimonial proceedings to be embodied in an Order of the Court'. However, no such Court Order was made. It appears that the only payment your ex-husband received for his share in the Property was your half interest in two endowment policies worth approximately £23,000.00 (meaning he received £11,500.00).

    "Our client has obtained a retrospective drive-by valuation of the Property [an interesting concept] and, at the time of the transfer, the Property was worth in the region of £140,000.00. The documentation we have seen suggests that you and your ex husband agreed the Property was worth £150,000.00 at that time. The mortgage at the time was £39,910.08, meaning there was approximately £110,000.00 equity in the Property. Therefore, the true reflection of your ex husband's interest in the Property was £55,000.00 and not the £11,500.00 which he received."

    And then later on in the letter:

    "We understand the Property is now worth approximately £220,000.00 and in the circumstances, we would require a payment of £78,500.00 (being the difference between the consideration given to your ex husband in May 2000 and the equity he would have had on the value at today's date), plus interest and costs to date."

    What happened was the claimant took legal advice and eventually paid the trustee in bankruptcy some £68,000.

    8. So far as the commencement of these proceedings is concerned, they did not commence until 14 February 2013, and in her statement the claimant says that her son had suffered a very serious accident and there was litigation concerning it and his case was not heard until late 2009. She said that she suffered depression, presumably as a result, and she was on medication until 2010 and did not want to be involved in two sets of proceedings. I can be sympathetic to that, but it does not really explain why the proceedings were not commenced earlier than 14 February 2013; that is to say, in perhaps 2011 or 2012.

    9. The issue for me is: when did the cause of action arise? There is no dispute that the limitation period for an action in contract or in negligence which does not involve personal injury is six years. The claimant's case is that the cause of action arose with the letter of 2 March 2007 and so she is within the six-year period, and the issue for me to decide is whether that is right or not. The defendant submits there four other previous dates which are potentially the dates the cause of action arose and the action is well out of time.

    10. The claimant relies substantially on the case of Law Society v Sephton & Co [2006] 2 AC 423. It is a decision of the House of Lords. That case concerned an action by the Law Society against a firm of accountants. Between 1989 and 1995 a partner signed eight reports claiming he had examined all relevant documents and was satisfied the solicitor's practice was being run in accordance with the Solicitors Accounts Rules. In fact he had not made a proper examination and the solicitor involved had misappropriated funds in the sum of £750,000. The Law Society sued for their losses and the case was struck out by the judge at first instance out on the grounds that it was statute-barred. The Court of Appeal and the House of Lords reversed that and the House of Lords held that the solicitor's misappropriation gave rise to a liability to pay a grant out of the fund contingent upon the misappropriation not being otherwise made good. Although such a liability would only be enforceable in public law, it would still count as damage. A contingent liability such as the possibility of an obligation to pay money in the future was not itself damage until a claim was actually made. No loss or damage had been sustained by the fund and no cause of action had accrued. Accordingly the Law Society's claim was not statute-barred.

    11. The plank of Mr West's argument is that until the trustee made a claim, time did not begin to run. He also relies on the authority of Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd [1997] 1 WLR 1627, which is in the bundle at tab 4, and I quote the headnote:

    "The defendants, as valuers, were required by the plaintiffs to value a property on the security of which they were considering advancing money on mortgage. The defendants considerably overvalued the property at £3.5m. The plaintiffs, in March 1990, advanced £2.45m. to the borrower, which they would not have done if they had known the true value of the property. The borrower defaulted at once, and the plaintiffs obtained possession of the property and sold it, in February 1993, for £345,000, the market having fallen substantially in the meantime. The plaintiffs brought an action against the defendants for damages for negligence and breach of contract. The judge found that at the date of valuation the property had been worth £2m., or at most £2,375,000. He gave judgment for the plaintiffs for a sum including damages in respect of their loss attributable to market fall. The Court of Appeal dismissed an appeal by the defendants. The House of Lords allowed the defendants' appeal, holding that the damages should be reduced to the difference between the defendants' valuation and the true value of the property at the date of valuation, subsequently agreed by the parties at £2.1m. The plaintiffs were ordered to pay the defendants' costs of the appeal to the House of Lords and their costs in the Court of Appeal on the issue of quantum. The question of interest was adjourned.

    "On that question:-

    "Held, (1) that the plaintiffs' cause of action had arisen when a relevant and measurable loss had first been revealed; that, since the borrower had defaulted at once and the amount lent had at all times exceeded the value of the property, that had been at or about the time of the loan transaction; and that interest should be awarded on £1.4m. from the date at which the plaintiffs had sustained their full allowable loss of £1.4m., namely 12 December 1990 ..."

    12. Mr West submits that if she had been advised to take a much less advantageous transfer from the husband, the situation of the trustee in bankruptcy asking for money would not have occurred and the problem could have been solved also by giving the husband a charge. He submits that the measure of damages is not the £68,000 which Mr Harris pointed out is claimed first of all in the prayer of the claim but he submits that it is specifically pleaded in paragraph 21 that had the claimant been properly advised the compromise would have been properly documented so as to eliminate the risk of the trustee claiming the transfer of the property was at an undervalue. Mr West's point was that when the property was transferred the claimant was, to use his phrase, "quids in" after the agreement with the husband. It was only when the trustee made a claim that she suffered loss and time runs from the date of that claim; that is to say, perhaps a day or two after the letter of 2 March 2007, to allow for delivery.

    13. It is not in dispute that the burden is on the claimant to establish the claim is within the limitation period, and it is also not in dispute that the cause of action accrues when a claimant first suffers actionable damage. The issue in this case is when that occurrence actually happened.

    14. I was then taken through sections 339, 341 and 342 of the Insolvency Act 1986, which I need not set out because it is not in dispute that the trustee has powers to apply to the court in respect of transactions immediately within specified periods before the bankruptcy occurred, and as regards an undervalue and as I have indicated, the trustee's position is set out clearly in the letter of 2 March 2007 to which I have already referred.

    15. Mr Harris submits this is not a contingency case like the case of Law Society v Sephton. He submits that from the outset the claimant, Mrs Russell, had a flawed interest in the property because it had been made clear that the husband's bankruptcy could affect her position and indeed it did as things turned out. That is the defendant's basic position and I will deal with it in a little more detail. Mr Harris sets out the allegations from the claim in his skeleton argument and I quote from those now, and the claim is alleging that the defendant:

    "... acted in breach of contract/negligently in that she:

    "a. Failed to advise properly or at all in respect of the risks attendant upon persisting in the compromise which she had reached with H after he was declared bankrupt;

    "b. Failed to take any or any adequate heed of the claimant's financial position;

    "c. Failed to advise the claimant that if the Trustee should have the transfer of the Property set aside, her liability to the Trustee for the undervalue would increase with the value of the property;

    "d. Failed to advise the claimant to ensure the settlement with H was varied so as to avoid creating evidence of a transfer at an undervalue;

    "e. Failed to advise the claimant that all assets transferred between herself and H should be properly documented in a Court Order and that any charge given to H thereafter should be in an amount sufficient to avoid the transfer being at a clear undervalue;

    "f. Disclosed the claimant's files to the Trustee. This was on 9 May 2006."

    16. Leaving aside for a moment the issue of disclosure of the file, which I will deal with separately, Mr Harris draws attention to the fact that although it is clear that the matters in (a) relate to the period after the husband was adjudged bankrupt on 19 January 2001, it is not clear when the other matters arose. Well, it does seem to me that whilst it may not be clear specifically, they must have arisen certainly during the period when the defendant was instructed by the claimant. But Mr Harris submits there are four separate dates when the cause of action could have arisen: first of all, the initial transfer of the legal and beneficial interest on 22 May 2000; secondly, the bankruptcy on 19 January 2001; thirdly, when the claimant became liable to pay the defendant's costs. Those are all pre-bankruptcy, and post-bankruptcy the claimant could have negotiated with the trustee and got a court order.

    17. Mr Harris submits that the claimant was vulnerable because it exposed her to an avoidable contingency under section 339 of the Insolvency Act. He submits that as the claimant was seeking an order "unwinding the transaction", it left her with in interest in property but with rights that were vulnerable.

    18. Mr West took me through paragraphs 7 and 9-31 of Lord Hoffman's speech in the Sephton case; similarly, paragraphs 37 and 40-45, 48, 50 and 51 of Lord Walker's speech; and 69 and 71-73 of Lord Mance. I have since, being in court on Tuesday, re-read those passages. I hope that Mr West will forgive me for not reading out all those passages, for which, if this matter were to go higher to the Court of Appeal, I know I would get absolutely no thanks from the court for doing that task, and so I refrain from doing so.

    19. The issue seems to me to be whether the case falls into the Sephton contingency, so as Mr West argues, liability only arises when the trustee intimates he is going to apply to set the transaction aside, or whether, as Mr Harris argues, this case is similar to the following authorities: Forster v Outred [1982] 1 WLR 86; Bell v Peter Browne & Co [1990 2 QB 495; Knapp and Knapp v Ecclesiastical Insurance Group Plc [1998] Lloyd's Rep IR 390; Thom v Davys Burton [2008] NZSC 65; and also the case of AXA Insurance v Darby [2010] 1 WLR 1662.

    20. The latter case in my judgment is particularly helpful in illustrating what view the Court of Appeal takes of the consequences of the decision in Sephton and the other cases to which I just referred. The case of AXA Insurance v Darby involved after-the-event insurance which enabled members of the public to bring personal injury claims on a no win, no fee basis. The rights were conferred on the insurer by a policy which included the right to receive and retain premiums and the right to discontinue cover if it considered that reasonable prospects for a recovery of damages had ceased to exist. A panel of solicitors was retained to vet claims and conduct cases with reasonable care and notify insurers if prospects of success fell below 50 per cent or where it became clear damages would not exceed £1,000. The claimant, an assignee of the insurer, brought proceedings against the defendant panel alleging negligence and breach of duty in the vetting and conduct of claims. On a preliminary issue as to when the damage had occurred, the judge held that where the policy had been underwritten more than six years before the commencement of proceedings, those claims were statute-barred, and in the case of breaches the judge held that the failure to notify the insurer had occurred more than six years prior to commencement of proceedings and such claims were also statute-barred. The Court of Appeal by a majority upheld these contentions. In doing so they dealt with the principle in Sephton and what the Supreme Court had had to say. Longmore LJ, who was one of the majority, said at paragraph 70 at page 1687:

    "Law Society v Sephton has made it clear that 'damage' for the purpose of the accrual of a cause of action in the tort of negligence will not be constituted by a mere contingent liability. Another way of making the same point is to say that a contingent liability does not 'of itself' constitute 'damage'. There must be something more."

    Arden LJ was also one of the majority. At paragraph 30-32 she said this:

    "30. It follows from Sephton that there can be cases, like that of Mrs Forster, where a contingent liability is incurred but it does not crystallise into an actual liability until a future date but where damage occurs for the purposes of the commencement of the limitation period at the time when the transaction is entered into so that time starts running from that time. I will call this 'the damaged asset rule'. As a matter of outcome, this rule benefits the wrongdoer, but that is a policy decision made in Sephton and is the result whenever a cause of action becomes time-barred. The fact that the wrongdoer benefits and the claimant has no knowledge of his claim against him may partly explain why Sephton creates a rule for purely contingent liabilities. If the consequence of Sephton is that the result in Forster is to be translated into the world of insurance, it could mean that the mere underwriting of a policy of insurance would constitute damage, and start the running of the limitation period. The insurer would then be placed in the same position as Mrs Forster. The beneficiary would again be the alleged wrongdoer. In the case of longtail business (such as employers' liability), the insurer may not know that he has suffered a loss as a result of a wrong until the limitation period for bringing an action in respect of that wrong has expired. The exception to that would be where he is able to bring himself within the provisions of s 14A of the Limitation Act 1980 dealing with latent damage.

    31. It is clear from the speeches in Sephton that there are other situations where loss is suffered immediately. The speeches refer to cases such as D. W. Moore v Ferrier [1988] 1 WLR 267. In that case, the plaintiff did not discover the deficiencies in a restrictive covenant in an employee's contract of employment until the covenant was challenged several years later. It was held that damage occurred when the agreement was executed since at that point in time the plaintiff received a worthless covenant rather than a valuable chose in action. Accordingly time began to run from this point. Likewise in Bell v Peter Browne & Co [1990] 2 QB 495, where the defendant solicitors failed to register the interest of a husband in a house following the terms of a separation agreement, time began to run from a failure to take the necessary steps and not from the time when the husband discovered that the house had been sold and the proceeds dissipated. In these cases, there was a bilateral transaction under which the claimant should have received certain benefits but owing to the negligence of his professional adviser did not do so. I will refer to this situation as "the package of rights rule". There is no reason in principle why this line of authority should not apply where what the claimant by virtue of the bilateral transaction places himself under a contingent liability. Lord Hoffmann at [22] of his speech in Sephton expressly contemplates that situation (see also the first sentence of the passage from the judgment of Saville LJ in Humberts which Lord Walker cited at [44] of his speech). The judge considered that what I have called the package of rights rule applied to this case.

    32. In my judgment, the damaged asset rule and the package of rights rule are best regarded not as a series of independent qualifications on the basic rule in Sephton that the assumption of a 'pure contingent liability' does not cause the limitation period to start to run, but as different cases in which the courts have tried to express a central idea. That idea has to be found by seeking the ultimate ratio in Sephton, that is, a ratio which expresses the reason for the decision on which, despite the differences in expression, all the members of the House in that case were agreed. As I see it, the concept on which all the members of the House agreed was that there had to be measurable loss before time began to be run, that is to say, loss which is additional to the incurring of a purely contingent liability. In my judgment, for this purpose, rights of contribution or subrogation must be ignored because those rights arise by operation of law, unless excluded by agreement or statute. If they were taken into account, they would undermine the basic rule which is clearly established in Sephton that a pure contingent liability is not damage.

    33. In my judgment, the central idea in Sephton is that there has to be loss additional to that resulting from the incurring of a purely contingent liability."

    And furthermore a further paragraph from Arden LJ's judgment at paragraph 57:

    "57. I now turn to my conclusions. In my judgment, it is clear from Sephton that the incurring of a purely contingent liability which may result in an actual liability at a future point in time does not cause the limitation period to start to run. However, this is not the case where in addition to incurring a contingent liability the claimant suffers damage to a particular asset of his, for example because he also executes security over his property, as in Forster. In that case, time began to run from the date of execution of the security. In my judgment, there is no difference between the case where security is given over a tangible asset, such as real property, and the case where security is given over an intangible asset, such as a debt. In either case, the claimant's property is damaged. Likewise, the principle that the incurring of a purely contingent liability is not itself damage does not apply where the claimant acquires a contingent liability as a part of a package of rights under a bilateral transaction and the value of that package has been diminished by the negligence of the defendant (see Sephton, per Lord Hoffmann at [30] and per Lord Walker at [45])."

    21. I just referred to the Bell v Peter Browne case upon which Mr Harris places reliance, and it is worth adding that Nicholls LJ said at 503C of that case:

    "... in the case of failure ... [to protect the plaintiff's interest in the house or proceeds of sale by lodging a caution, the plaintiff] did not receive the protection he ought to have received ... He was at risk, from the outset. His interest was vulnerable."

    22. Mr Harris submits that is precisely the situation here, that the claimant's interest was already vulnerable, and he relies upon in his skeleton argument a passage from the case of Knapp and Knapp v Ecclesiastical Insurance Group Plc, and I quote:

    "...the cause of action can accrue and the plaintiff have suffered damage once he has acted upon the relevant advice "to his detriment" and failed to get that to which he was entitled. He is less well off than he would have been if the defendant had not been negligent. Applying this to the present case, the Plaintiffs paid their renewal premium without getting in return a binding contract of indemnity from the insurance company. They had acted to their detriment: they did not get that to which they were entitled. The fact that how serious the consequences of the negligence would be depended upon subsequent events and contingencies does not alter this; such considerations go to the quantification of the Plaintiffs' loss not to whether or not they have suffered loss. The risk of loss existed from the outset and in the absence of better evidence would have to be evaluated and assessed as a risk and damages awarded accordingly ... The plaintiffs suffered loss as soon as they received an insurance contract which was not binding upon the insurers. The subsequent events, the question whether or not the insurers would thereafter avoid the policy and with what consequences, went only to the quantification of loss not to the identification of the first moment at which a plaintiff suffered loss and the tort became actionable."

    23. And subsequently also in the case of Thom v Davys Burton, a further passage at paragraph 48:

    "... Davys Burton advised him about protecting his Rotorua house 'to guard against' a matrimonial property claim. And in evidence the plaintiff stated that the 'whole purpose' of the agreement 98 from his perspective was to 'protect' the house as his separate property ... The agreement failed to achieve this outcome ... and loss therefore resulted ... at that time.

    [49] [...] The asset which the plaintiff acquired was, as a result of the combined negligence of his solicitors and himself, defective in that it did not give him the protection which it was his purpose to obtain. The product which he instructed his solicitors to procure for him was created with an inherent flaw. That flaw represented actual damage or harm ..."

    In my judgment, as Mr Harris submits, those situations are analogous to the situation which arose in this case.

    24. Mr West relied heavily upon Nykredit. I have quoted the headnote, but he specifically relied on six paragraphs commencing at pages 1631B-F, to which I will refer:

    "More difficult is the case where, as a result of negligent advice, property is acquired as security. In one sense the lender undoubtedly suffers detriment when the loan transaction is completed. He parts with his money, which he would not have done had he been properly advised. In another sense he may suffer no loss at that stage because often there will be no certainty he will actually lose any of his money: the borrower may not default. Financial loss is possible, but not certain. Indeed, it may not even be likely. Further, in some cases, and depending on the facts, even if the borrower does default the overvalued security may still be sufficient.

    When, then, does the lender first sustain measurable, relevant loss? The first step in answering this question is to identify the relevant measure of loss. It is axiomatic that in assessing loss caused by the defendant's negligence the basic measure is the comparison between (a) what the plaintiff's position would have been if the defendant had fulfilled his duty of care and (b) the plaintiff's actual position. Frequently, but not always, the plaintiff would not have entered into the relevant transaction had the defendant fulfilled his duty of care and advised the plaintiff, for instance, of the true value of the property. When this is so, a professional negligence claim calls for a comparison between the plaintiff's position had he not entered into the transaction in question and his position under the transaction. That is the basic comparison. Thus, typically in the case of a negligent valuation of an intended loan security, the basic comparison called for is between (a) the amount of money lent by the plaintiff, which he would still have had in the absence of the loan transaction, plus interest at a proper rate, and (b) the value of the rights acquired, namely the borrower's covenant and the true value of the overvalued property."

    25. Mr West also relied on the five subsequent paragraphs which I need not quote at length. His basic submission was that you had to look at the claimant's position of what it would have been has she been properly and competently advised and compare it with the position in which she was, namely in a position which subsequently led to the trustee intervening and requiring her to pay.

    26. I am by no means convinced that this authority, dealing as it does with negligent valuation, is helpful in the context of the situation which has arisen here. The reason I make that observation is I have not been referred in detail to the evidence but I have been referred to the letter written by the defendant on 7 February 2001, to which I will refer. This letter was written just after the defendant became aware of the husband's bankruptcy and it is seeking to advise the claimant, and right at the beginning of the letter the solicitor says that she is not a specialist in insolvency law but she sets out her understanding of the general position, first of all that the estate of the husband will vest in the trustee in bankruptcy. Then she goes on to say this:

    "Following the Bankruptcy Order the Trustee in Bankruptcy will look to see whether Mr Russell entered into any transactions before his bankruptcy which amounted to transactions at an undervalue or a preference over other creditors. There are certain time limits which apply to each situation.

    "In your case the transfer of the matrimonial home into your sole name took place on the 22nd May 2000. That was less than five years before the bankruptcy so the Trustee can ask the Court to set the transaction aside if he can show that you did not give full value for Mr Russell's share of the matrimonial home. His share was worth approximately £55,000. It can be argued on your behalf that you transferred the endowment policies (worth £23,000) to him so he received your half share, amounting to £11,500. We could also argue that you agreed not to pursue your claim for periodical payments for yourself or for the children. It may, for example, be possible to argue that you have surrendered the right to claim child support for the two children for at least five years until they are 18 years of age at, say, £400 per month i.e. a value of £24,000."

    And then it goes on to say this:

    "The immediate decision you have to take is whether or not to proceed with an application to the Court to approve the Minute of Consent Order.

    "On the one hand completion of the Consent Order would strengthen your argument about the claims that you have given up in consideration of the transfer of the property to you. On the other hand, completion of the Consent Order would result in the dismissal of all your financial claims arising out of the marriage so that you could not make any further claims against your ex-husband in the future even if his financial circumstances have improved after his discharge from bankruptcy (usually after three years).

    "Even if successful in applying these arguments it is not likely to be possible to show that you have paid to Mr Russell full consideration for his £55,000 share in the former matrimonial home. For that reason, it is likely that the Trustee in Bankruptcy will attempt to apply for an order setting aside the transfer of the home and for an order for sale in order to recover your husband's half share ... for the benefit of his creditors. If that situation arises, the Court will make such as Order as it thinks just and reasonable, having regard to [five matters which she sets out].

    "The problem is that even if the Court finds that there are circumstances justifying postponement of the sale, it cannot postpone that sale for more than twelve months after the Bankruptcy Order unless there are 'exceptional circumstances'. Hardship for you or the children is not an exceptional circumstance but the likelihood of the creditors being paid in full is an exceptional circumstance. Consequently a great deal depends upon the amount your husband owes because it might well be worth your while paying it off to protect your home.

    "It is my opinion that on balance it would be better not to enter into the Minute of Consent Order but rather to leave your potential claims for financial relief against your husband live so that you can resurrect them, if necessary, in the future. Entering into the Order would not significantly reduce the risk of a Trustee in Bankruptcy making a claim against the property."

    27. It was as a result of receiving that letter that, as I have already recited in this judgment, the claimant telephoned to say to the solicitor that she could not afford to continue to instruct her, that her home was at risk and she needed a home for the children. This was not in my judgment a contingency; it was in some respects by this stage a gamble, and a gamble that failed.

    28. In my judgment the submissions of Mr Harris that the transaction was vulnerable from the time that it was entered into succeed, and it seems to me that this case sadly is another example of the authorities to which I have referred and upon which he has relied. In my judgment the limitation period in some ways could have begun to run at the time of the transaction, it could begin to run at the time of the bankruptcy, but in my judgment it certainly began to run at a time when the defendant was instructed and I need not, I do not think, say any more than that, so that in effect by the time the retainer was discharged on 14 February 2001 the limitation clock had begun running.

    29. It seems to me that in a sense that letter was pointing out the pitfalls of the position and the difficult decisions that the claimant had to take, and really it seems to me that at that stage the ball was placed very much in her court. In saying that I am not in any way making any criticism of the claimant. She was in a very difficult position. I have every sympathy for her wanting to protect a roof over her own head and the heads of the children, but that does not give rise in my judgment to a cause of action necessarily against a solicitor. In my judgment Mr Harris is right when he submits that this is analogous to the situations in Thom, Knapp and Bell and Forster.

    30. That leaves one matter, which is really paragraph 20(6) of the Particulars of claim, namely:

    "She disclosed her files relating to the claimant to the trustee."

    In her statement the defendant explained she refused to give the trustee the file. On 3 February 2006 she was made aware that if she did not do so an application could be made to the court. She discussed it with the claimant and released the file on 16 March 2006, which included privileged material for which she apologises.

    31. Mr Harris submits there is nothing in the Particulars of Claim to support the allegation that the privileged material has assisted the trustee in endeavours to press his claim relating to an undervalue. In my judgment that is right, but perhaps the simplest answer on this point is that the onus is on the claimant to establish the claim is within the limitation period. The file was sent on 16 March 2006. The limitation of six years for contractual negligence would have run out in March 2012, and there is not a shred of evidence why a claim in relation to that aspect of the case was not commenced within that period of time, particularly latterly. As I have already indicated, the claimant indicated her difficulties certainly up as far as 2010. The result of this is that the limitation issue is disposed of in favour of the defendant and in my judgment the claim is indeed statute-barred.

Judgment, published: 14/05/2014

Topics

See also


Published: 14/05/2014

Copyright 

Copyright in the original legal material published on the Family Law Hub is vested in Mills & Reeve LLP (as per date of publication shown on screen) unless indicated otherwise.

Disclaimer

The Family Law Hub website relates to the legal position in England Wales and all of the material within it has been prepared with the aim of providing key information only and does not constitute legal advice in relation to any particular situation. While Mills & Reeve LLP aims to ensure that the information is correct at the date on which it is added to the website, the legal position can change frequently, and content will not always be updated following any relevant changes. You therefore acknowledge and agree that Mills & Reeve LLP and its members and employees accept no liability whatsoever in contract, tort or otherwise for any loss or damage caused by or arising directly or indirectly in connection with any use or reliance on the contents of our website except to the extent that such liability cannot be excluded by law.

Bookmark this item