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Where’s the limit? A recent contrasting pair of lawyers’ liability cases on duty and limitation

A recent pair of lawyers’ liability cases have looked at the issue of continuing duties and limitation in two contrasting circumstances: one where the solicitors realised that they had made an error and set about rectifying it, and one where the lawyers did not think that they had been negligent. The two factual scenarios led to diametrically opposed outcomes.

Amanda Savage KC and Helen Evans KC examine these recent authorities and what they tell us about where the law is heading on both limitation and duty in lawyers’ claims.

Lonsdale v Wedlake Bell [2024] EWHC 712 (KB) tackled the question of whether the White v Jones  “disappointed beneficiary” line of  cases extends as far as lifetime gifts gone awry. It also considered when a Claimant obtains knowledge for limitation purposes when he knows of a mistake by his lawyers but believes it can be rectified. Identifying where a Claimant has acquired “the material facts about the damage” (being such damage that would cause a reasonable Claimant to sue) often causes trouble in professional negligence claims, particularly where lawyers are conscious of an error and continue to act in order to sort the problem out. This factual scenario also allows clients to argue that their lawyers were under a continuing duty to them in order to defeat a limitation defence.

 Al Sadik v Clyde & Co & Or[2024] EWHC 818 (Comm) picked up on both of these limitation issues albeit in a very different context, where the lawyers did not think they had fallen short, leading to the opposite result. The court’s approach in Al Sadik draws on recent law making clear that Claimants need to be able to show that their lawyers realised that they had been negligent in order to prompt a duty to advise about their conduct- making the case an interesting companion piece to the recent Supreme Court judgment about what is meant by “deliberate concealment” in Canada Square v Potter [2023] 3 WLR 963.

Lonsdale v Wedlake Bell: who’s got the cause of action and when does time start to run?

Who can sue?

The issue of when lawyers owe duties to third parties has recently occupied much attention in the Court of Appeal. Of the three classes of such case identified in Ashraf v Lester Dominic [2023] PNLR 14[1], the focus has largely been on when a professional is liability to non-clients for negligent statements. Until recently, little had been said about one of the other three types of case, established by White v Jones  [1995] 2 AC 207. That is the “niche” category where a professional is held to be liable to a disappointed beneficiary under a will because otherwise the beneficiary would be left without a remedy. This was the first point picked up in Lonsdale v Wedlake Bell.

Mr Lonsdale had instructed Wedlake Bell in relation to a discretionary trust made in 1987, intended to benefit his children, but with his nephews and nieces as “backstop” beneficiaries (who would benefit if, but only if, the primary trust failed). By reason of the solicitors’ admitted negligence, the trust erroneously conferred an equal benefit on Mr Lonsdale’s children and his nephews and nieces. The Trustees had the power to vary the trust before the right of any beneficiary crystallised at age 25. In 2011, shortly before the oldest beneficiary turned 25, Mr Lonsdale sought advice from Wedlake Bell to check that all was in order. Negligent advice was given, with the result that the opportunity to vary the Trust and rectify the position was missed.

Wedlake Bell informed Mr Lonsdale of the problem in 2018, and in the course of correspondence stated that they had taken advice from Counsel and “intend[ed] to do whatever we can to put matters on the correct footing”.

Just under 3 years later a claim was brought by Mr Lonsdale (in his capacity as Settlor and Trustee), the (other) Trustees, and the intended beneficiaries. Given the complexity in the reported authorities over who has the right to sue[2] it is not surprising that claims were advanced by so many potential claimants.  Wedlake Bell sought to strike out the claims on the basis that nobody other than the Settlor had standing to sue, and his claim was statute barred. Mr Justice Martin Spencer permitted all the claims to proceed.

In essence, the Defendant argued that the trust had not been diminished (and so had suffered no loss) and although the beneficiaries (children) had suffered a loss, no duty of care was owed to them. This brought into play the application of White v Jones [1995] 2 AC 20. The Defendant argued that this line of case law did not apply because there was no lacuna: unlike the position in White v Jones, this was a lifetime gift and the Settlor (Mr Lonsdale) had an arguable claim. The only reason he could not pursue the claim was that it was statute barred (by reason of a mistake on the part of his own agents). There was, said the Defendant, a critical distinction between a testator who had died and could not remedy the position, and a testator who remained alive and could (or could but for any limitation problem) remedy it.

The Judge disagreed. He considered a number of cases including Richards v Hughes [2004] PNLR 35 and concluded that, since Mr Lonsdale had irrevocably divested himself of the trust estate and no variation was possible because the beneficiaries had reached age 25, he was in an analogous position to the testator in White v Jones and, as such, the solicitors owed the children a direct duty of care (para.  87).

Limitation

As to limitation, the Defendant solicitors argued that Mr Lonsdale has sufficient knowledge to start time running for the purposes of section 14A more than three years prior to the issue of the claim, in 2018. One of the requirements to trigger knowledge is for a Claimant to know “the material facts about the damage in respect of which damages are claimed” (s. 14A(6)(a)). As set out at s. 14A(7), this means “such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment”.

The Defendants argument on this point was not accepted: the solicitors’ correspondence had led Mr Lonsdale to believe it might be possible for matters to be put right, and he had acted reasonably in not issuing proceedings, and in not seeking independent legal advice, until after he received further correspondence from the solicitors – less than three years prior to the date of issue – which, effectively, conceded that matters could not be rectified.   On this point the case makes an interesting contrast with Al Sadik v Clyde & Co- where the Claimant’s belief that matters would turn out well for him in the end was not enough to stop knowledge accruing, albeit on very different facts.  Lonsdale demonstrates the difficulty that Defendants can sometimes have in showing that a Claimant had  the “material facts about the damage” where they have acknowledged problems with their work but put forward potential solutions.

The solicitors also argued that Mr Lonsdale’s knowledge should be imputed to the other trustees (so that their claims were all time barred). Given the judge’s finding that Mr Lonsdale did not have sufficient knowledge to start time running for the purposes of section 14A, that question did not arise but the Judge noted that, had he needed to make a decision, he would have been inclined to find that Mr Lonsdale was holding himself out as agent for the other Trustees and had their ostensible authority to do so[3].

It was further argued, on behalf of Mr Lonsdale, that his claim was in time irrespective of the application of section 14A, because the solicitors owed him a continuing duty (such that the claim was within the primary limitation period). The difficulty of making out this type of argument is apparent in many cases such as Sciortino v Beaumont and Al Sadik v Clyde & Co (discussed below). However, on the facts of  Lonsdale, the judge found that it was arguable that by continuing to act and to advise the Trustees and Beneficiaries, the solicitors had a continuing obligation so to act and advise upon the correct basis, and by failing to correct the erroneous advice given in 2011, they committed fresh breaches of duty which crystallised into fresh loss with the beneficiaries in turn attaining the age of 25. The Judge said:

Had the solicitors simply advised in 2011 and then had nothing more to do with the matter but had closed the file and become functus officio, the position would have been different, but the fact that they not just continued to act but to give advice and act in relation to the Trust accounts and the like makes the position crucially different. The court at trial which hears all the evidence will be in the best position to assess whether the solicitor’s continuing involvement and what they did amounted to, in effect, fresh consideration of the position, but I consider it likely that, given this involved assuming that the Trust gave the Children a quarter interest and that the solicitor carried out further work (for which they were paid) on that basis, it is likely that their continued retainer carried an implied obligation to advise upon the correct basis so that, on the facts of this case, there was a continuing breach”

The question of continuing duties arose again in the case of Al Sadik, decided some two weeks later (although apparently without reference to Lonsdale).

Al Sadik v Clyde & Co & Ors: when do lawyers have a duty to advise on their own errors and what does this do to limitation?

Mr Al Sadik’s case arose from ill-fated litigation in the Cayman Islands, Dubai and before the Judicial Committee of the Privy Council in London. He was represented in the Cayman proceedings by Harneys, plus a silk and a junior and in Dubai by Clyde & Co plus the same barristers.

Mr Al-Sadik had invested large sums of money with Investcorp in the Cayman Islands in 2009. He alleged that Investcorp had offered him guaranteed returns of 45%, had misrepresented its ability to make such returns, and had concealed the fact it was applying leverage to his investment (“the Original Claim”).

In late 2011 and shortly before trial was due to start, Mr Al Sadik applied to amend the Original Claim to add allegations that the Investment Management Agreement had been a sham, that any investment decisions were void and that his money had been paid over to Investcorp under a mistake of fact (“the New Case”). The introduction of the New Case was hotly contested by Investcorp and on 1 December 2011, the amendments were not permitted.

Mr Al Sadik ploughed on towards trial on the Original Claim- and his case was that he nonetheless thought he had good prospects of success. However, he lost at trial on every aspect of his case, with the judge in his later negligence claim describing the proceedings as “catastrophic”. He attempted to appeal, but ultimately lost in June 2018 before the Judicial Committee of the Privy Council. An attempt to bring separate proceedings in Dubai was scuppered by an anti-suit injunction in November 2018. By late 2018 Mr Al Sadik had been left with nothing (apart from a costs bill).

Mr Al Sadik then turned his attention to suing his lawyers. He sought to blame Harneys and the barristers for failing to identify and plead the New Claim in time for it to be heard at trial in Cayman. The trouble was, that by the time Mr Al Sadik sued, more than 6 years had passed since the amendments had been disallowed. He therefore had a limitation problem on his hands.

Mr Al Sadik’s first line of attack was to seek to rely on s. 14A of the Limitation Act 1980. As noted above, one of the requirements to trigger knowledge is for a Claimant to know “the material facts about the damage in respect of which damages are claimed” – i.e. such damage that would cause a reasonable Claimant to sue.

Since Mr Al Sadik’s case was that he thought that losing his amendment application was merely a temporary setback before likely victory on the Original Claim, he denied that he had realised that he had suffered sufficiently serious damage when he lost the ability to pursue the New Claim.

Harneys and counsel disagreed, and applied to strike out Mr Al Sadik’s claim against them on the grounds that it was statute barred. Although the judge hearing the strike out application depicted the Claimant’s point about damage as a “clever submission”, ultimately he decided that it was “flawed”. This was because as soon as the amendment application was denied, Mr Al Sadik had known that he could no longer pursue the New Claim. The fact that he thought that defeat at trial might be averted by winning on the Original Claim did not mean that he had no knowledge of losing the New Claim. Furthermore, Mr Al Sadik knew that he would or was likely to have to pay the costs of the amendment application, which formed part of his claim against his lawyers.

The case is therefore a useful resource to any professionals facing an argument that a client had not realised he had suffered loss because he hoped to make up for lost ground through another means- at least where the lawyers have not taken steps to reassure a client that matters can be rectified (as had been the case in Lonsdale).

Mr Al Sadik’s alternative line of attack was to assert that Harneys and counsel had been under a continuing duty to reconsider their conduct in relation to the New Claim, so as to start the primary limitation period running again and again. As set out above, this was one of the Claimants’ winning arguments in Lonsdale, albeit where solicitors had realised their error and set about trying to make it right.

However, on different facts, the argument suffered from being founded on the losing case in authorities such as Sciortino v Beaumont [2021] EWCA Civ 786. There, Coulson LJ had said that the idea that  a lawyer owes a continuing duty to review earlier advice was a “contention that often arises”, but that absent special circumstances (such as a lawyer trying to rectify an error) it had been “comprehensively rejected” (para. 47). He described the law in the following terms (at para 50):

“Where a defendant’s breach of duty has caused a claimant some loss outside the limitation period, the fact that further loss is caused by that same breach within the limitation period will not save the claim from being statute-barred. What is more, that result cannot generally be avoided by the suggestion that there was a continuing duty on the part of the lawyer to review his or her previous advice”.

In Al Sadik the Claimant argued that his lawyers had owed him a continuing duty which extended to advising him if they had acted negligently and/or if they perceived a conflict of interest between them and the Claimant. He contended that if the Defendants had complied with their continuing duty to give him proper advice, he would have sought independent legal advice earlier and pursued his negligence claim against his lawyers earlier. He therefore claimed damages based on the loss of the chance to do so.

This was not a case like Lonsdale where solicitors realised they had made a mistake and had set about trying to make it right. Therefore, to try and get his case that Defendants should have revisited their own earlier acts or omissions off the ground, Mr Al Sadik relied on the fact that the judge hearing the amendment application in Cayman had expressly remarked that it should have been made earlier.  Mr Al Sadik’s counsel sought to distinguish his case from the unpromising line of authorities summed up in Sciortino by asserting that it should have been “blindingly obvious” to the legal team on the facts of the disastrous amendment application that they had been negligent.

His case however failed. The judge said that if Mr Al Sadik’s approach represented the law, then “in very many cases in which there was a continuing retainer, there would be a continuing duty to advise about past negligence, and hence a greatly extended limitation period. It does not seem to me that that is the law” (para. 161).  The judge also cited a number of authorities explaining why lawyers should not generally have to look continually over their shoulders.

The judge held (at para. 171) that there was “an important distinction to be drawn between a scenario in which the professional actually knows that he has been negligent, but chooses to say nothing, and a scenario in which the professional is not aware of the negligence.” The Al Sadik case did not involve a fear that something had gone wrong combined with a conscious decision to say nothing – and therefore the lawyers were under no continuing duty to reconsider their own conduct.

The Al Sadik case seems to be us to be part of a wider set of authorities making clear that allegations founded on conflict of interest tend to require conscious disloyalty- another being Cutlers Holdings Limited v Shepherd & Wedderburn LLP [2023] EWHC 720 (Ch). There, the claim for breach of fiduciary duty failed because the solicitors had not appreciated that there was a conflict of interest and had therefore not taken a deliberate decision not to inform the client that they may have been negligent.

Furthermore,  the case also shuts off a potential escape route that might otherwise help circumvent the Supreme Court’s clear indication in Canada Square v Potter [2023] 3 WLR 963 that an extension of the limitation based on deliberate concealment under s. 32 of the Limitation Act 1980[4] also requires intentional hiding of information.

Conclusions

Lonsdale is a noteworthy for the Judge’s clear view that the White v Jones principle should extend to an inter vivos trust, at least where there has been an irrevocable settlement.  But of equal interest is the contrasting approaches taken to both material facts about the damage and continuing duties in the limitation context in the two cases. The cases pull in different directions on the basis of their differing facts: Lonsdale had a positive outcome on limitation for the Claimant because his lawyers had realised their error and set about making it right; Al Sadik allowed the Defendants a limitation defence where the lawyers had not been aware of the alleged negligence.


[1] The three types of case are as follows:

  • Where the purpose of a retainer is to confer a benefit on a third party, i.e. a disappointed beneficiary under a will such as in White v Jones [1995] 2 AC 207;
  • Where a professional makes representations on which another party reasonably relies in circumstances where the professional could reasonably foresee that reliance; and
  • The so-called “Al Kandari” principle, where a professional steps out of their role acting for one party and takes on duties to another (e.g. by holding a passport securely in family proceedings).

[2] See for instance Vinton v Fladgate Fielder [2010] PNLR 26.

[3] This was, as the Judge explicitly recognised, clearly obiter.

[4] Section 32(1) of the 1980 Act provides, ‘where in the case of any action for which a period of limitation is prescribed by this Act, either –

  • the action is based upon the fraud of the defendant; or
  • any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or
  • 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.’

Section 32(2) provides that ‘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.’


© Amanda Savage KC and Helen Evans KC, 4 New Square Chambers, June 2024

This article is not intended as a substitute for legal advice. Advice about a given set of facts should always be taken.

Amanda Savage KC was called in 1999 and appointed silk in March 2020. Amanda specialises in professional liability, regulatory and insurance work, and has particular experience of claims against lawyers, being regularly instructed by leading solicitors’ insurers and BMIF. She is often instructed on regulatory cases and has particular experience in representing barristers before the Bar Disciplinary Tribunal. Before taking Silk, Amanda was named “Professional Negligence Junior of the Year”. She is Vice Chair of the Professional Negligence Bar Association and an editor of Jackson & Powell on Professional Liability.

Helen Evans KC was called in 2001 and appointed silk in March 2022. Helen specialises in professional liability, regulatory, contempt of court, fraud and insurance coverage work, with a large part of her practice focusing on lawyers’ and accountants’ liability and disciplinary matters. Helen is a co-editor of the solicitors and barristers chapters in Jackson & Powell on Professional Liability. She is highly recommended in the directories. Prior to taking silk, in November 2021 Helen was named “Professional Negligence Junior of the Year” and in April 2022 was named “Times Lawyer of the Week.”

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