Defendants' difficulties when making strike out / summary judgment applications on limitation grounds in professional negligence claims
(1) SIR CHRISTOPHER EVANS (2) LADY ANNE EVANS v PwC LLP (2019)
In 2000, PwC ("the Defendant") was instructed by Mr and Mrs Evans ("the Claimants") to advise on the sale of company shares from a trust.
The Claimants wished to avoid paying capital gains tax ("CGT") and so the Defendant advised them to register the trust in a jurisdiction which did not tax capital gains, sell the shares, and then move the trust back to the UK ("the Scheme").
The Scheme was executed in 2001, utilising Canada, and the Claimants were appointed as trustees of the 'new' UK trust.
Subsequently, HMRC opened an enquiry and agreed with the Canada Revenue Agency that the trust was not resident in Canada for tax purposes during 2001 and that the UK could tax the gain realised by the trust on the disposal of the shares.
The Claimants paid tax and interest owed of £3.3 million and, in December 2016, issued negligence proceedings against the Defendant.
The Defendant applied to strike out, or for summary judgment on, the Claimants' claim on the basis that they were statute-barred under the Limitation Act 1980 ("the Act").
The Court found for the Claimants and dismissed the Defendant's application entirely.
In relation to the Claimants' claims for lost interest up to 6 years prior to the issue of proceedings and for wasted professional fees in dealing with HMRC, the Court's reasoning was that it was arguable that the Defendant was under a continuing duty to advise the Claimants to rectify the position until their retainer was terminated in 2011. Therefore, the 6 year primary limitation periods in contract and tort had not expired by the time proceedings were issued on 14 December 2016.
In relation to the remainder of the claimed losses – that is for the remainder of the interest and for the tax itself - the 6 year primary limitation periods in contract and tort had expired prior to the issue of proceedings.
However as far as the claims in tort for these losses were concerned, the Court found it was arguable that the Claimants did not have the requisite knowledge to bring the claims until HMRC concluded their enquiry in March 2014 and therefore it was arguable that the alternative, 3 year secondary limitation period under s14A of the Act had not expired.
In respect of the overall 15 year long-stop limitation period under the Act, the Court held that this arguably did not apply as, arguably, the Defendant was in breach of duty up to the conclusion of the Scheme on 18 December 2001 (i.e. just 4 days under 15 years from the date when proceedings were issued).
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