COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
Mr Justice Evans-Lombe
|Royal Courts of Justice|
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE JONATHAN PARKER
MR JUSTICE HARRISON
FREDDY JACOB EZEKIEL
Appellant - and - ABRAHAM MAYIR LEHRER Respondent
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Michael Pooles Q.C. and Mr Philip Moser (instructed by Messrs Pinsent Curtis Biddle for the Respondent)
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Ward :
“80. On 13th September 1990 I went to Avi Lehrer’s offices. I did so for the purpose of signing a second charge over the property pursuant to my agreement with the Bank for the facility for the new company and explaining the arrangements to the defendant. At the meeting, I told the defendant of the agreement I had reached with Mr Jackman [the Bank Manager] that a new charge was to be executed to be used for a new company to be known as Simon Technologies Ltd. I also explained that the charge was to be held in escrow pending my authorising its release upon the formation of the new company and that new company’s acceptance of the Bank’s facility.
81. At the defendant’s offices, I signed a charge over the Property (“the second charge”) in favour of the Bank so as to support the facilities of my new company which was to be known as Simon Technologies Ltd. A copy of the second charge is exhibited ...
82. The defendant had searched among his files and produced a charge form for me to sign. He asked me if there was to be a facility letter and I told him it would be issued when the new company was formed. We discussed the availability of the existing name for the new company. I told him that the proposed receiver had said to me that I could have this name. The defendant said that if the name on the charge form had to be amended the charge could be initialled. He said he would keep the signed charge form on file until it was to be released.”
“27. On 13th September 1990 and pursuant to the said agreement with the Bank on 12th September, the plaintiff went to the defendant’s offices and signed a charge (“the second charge”) in favour of RBS, expressed to be security for the borrowings of Simon Technologies Ltd. The plaintiff signed the second charge intending for it to be security for the new company (to be known at Simon Technologies Ltd.) and not STL (which was about to be put into receivership).
28. At this meeting on 13th September 1990, the plaintiff informed the defendant that the second charge was to be used for a new company and was to be held in escrow pending the plaintiff authorising its release upon the formation of the new company and that company’s acceptance of the facility [as arranged on 12th September].
29. Despite having been given clear instructions as to the basis on which the plaintiff was to sign the second charge (as to which see paragraph 28 above) the defendant proceeded to send the first [the charge to support the borrowings of Daniel] and second charges to H.M. Land Registry for registration. The first and second charges were registered at H.M. Land Registry on 1st October 1990.” (My emphasis added).
“13. The defendant’s actions [in registering the second charge] were a clear breach of my instructions to him. I can only believe that the defendant failed properly to record those instructions and became confused as to which charge should be sent off for registration and which charge should be held in escrow. Furthermore, he failed to appreciate (despite everything I told him) or to keep in mind the fact that the second charge was to secure the borrowings of a new company, not STL [the old company]. In any event, I never authorised the defendant to send off the second charge for registration since he was to hold the charge in escrow pending events that never occurred.” (My emphasis added).
“(i) The defendant failed to take or any proper instructions from the plaintiff regarding the second charge.
(ii) The defendant failed to take any or any proper instructions from the plaintiff as to whether the new company had been formed (it had not) and/or as to whether the escrow conditions had been fulfilled (they had not).
(iii) The defendant sent the second charge off for registration despite having been told that the second charge was to be security for a loan by RBS to a new company and that it was to be held in escrow.
(iv) The defendant sent the second charge off for registration without having received instructions to do so.
(v) The defendant failed to advise the plaintiff on the possible effect of signing the second charge in the form signed by the plaintiff.
(vi) The defendant failed to take any or any proper step to ensure that the second charge would be construed (both by RBS and any third party) as security for the new company’s borrowings along (and in particular could not be construed as security for the borrowing of STL [the old company]).
(vii) The defendant failed in the premises to act as a competent solicitor would have done.”
re 16 Nant Road, Cricklewood.
Registration of the charges relating to the above property have now been completed. Accordingly, I enclose my account for dealing with this matter and look forward to receiving your remittance as soon as possible. I also enclose a copy of the Land Registry entries for your own records. I would remind you that the first charge covers the debt of Daniel Smith to the bank and the second charge the debts of Simon Technologies Ltd. to the bank.
The fee note is for professional charges for legal services for granting of two charges:-
“one as a third party charge in favour of debts due to the bank by Daniel Smith and the other in respect of debts due to the bank by Simon Technologies Ltd.”
The office copy entries include an entry on the charges register as follows:-
“1. October 1990 – charge dated 13th September 1990 registered on 1 October 1990 to secure the monies including the further advances therein mentioned.”
“99. Following receipt of that letter, I telephoned the defendant. The letter had enclosed a bill relating to the first and second charges. I said to the defendant that I thought that I had already paid for any work done is respect of the first charge as it had been carried out so long ago. He gave a flippant answer saying I should thank my lucky stars he had not billed me for it earlier. I asked him about the second charge. He would not answer my questions and said that he had to take another call or that he interrupted another call to speak to me and was busy. He did tell me to address my queries to Mr Owen who had instructed him to register the charges.
100. I telephoned Mr Owen shortly after I spoke to the defendant. I said to Mr Owen that the defendant had told me that Mr Owen had instructed him to register the charges. Mr Owen confirmed readily he had done so. I said that I had thought the second charge was not to be completed until next year. He said we had agreed this and that I had told him I would give the second charge to secure the debts of STL. He said he was busy and the call ended.
At this time, I accepted Mr Owen’s answer because I trusted both Mr Constable [the manager] and Mr Owen absolutely and Mr Owen’s ready admission that he had indeed instructed the defendant to register the second charge assured me. I thought that if Mr Owen told me that I had freely agreed to give the second charge to secure the debts of STL then his recollection of events must be correct (and that mine was therefore incorrect).
I first learnt of the completion of the second charge about the end of November 1990. At the time, my memory was hazy due to the heavy medication for my heart condition that I had been advised to take when necessary by the (now deceased) consultant cardiac surgeon who had treated me at the Royal Free Hospital during January 1981 and for some years thereafter. I ceased taking such medication since 1993, however unwell and ill I feel.
101. In about March/April 1991 I telephoned Mr Owen and again called into question the existence of the second charge. I raised this matter a second time because I could not recollect what Mr Owen had led me to believe. I could not credit that I had done something so unrealistic. I was not sanguine that I had granted a charge so as to support the liabilities of STL to the bank, and indeed my recollection of events was that I had not granted any such charge. However, during the second conversation Mr Owen again assured me that I had freely given the second charge to secure the debts which STL had incurred for the development of my N/A and its components and the payments made for Daniel’s conversion of the property. As I have already stated, since I placed absolute trust in Mr Owen I believed (at the time) that my angina medication had caused amnesia and that his account of events was correct and that my recollection of events was therefore incorrect.
102. These conversations had a devastating effect on my mind and self-confidence. I stopped being able to rely on my own memory which I had previously thought of as good. I thought that if I could not accurately remember agreements I had made with the bank, or the purposes for which I had used money advanced by the bank through STL, then I could not trust myself in relation to other matters.” (Emphasis added by me).
“15. Until that time I had been unaware that the second charge had been registered. Following receipt of that letter I telephoned the defendant and asked him about the first and second charges.
16. The defendant ought to have informed me during this conversation:
(i) That my instructions had been that the charge should be in favour of the new Simon Technologies Ltd.;
(ii) That my instructions had been that until the company had been formed the charge should be held in escrow;
(iii) That the escrow conditions had not been fulfilled and that I had not authorised him to register the charge; and
(iv) That in the circumstances he had acted in breach of my instructions and in breach of his duty to me by sending the charge for registration.
However, in breach of his duty, the defendant refused to answer my questions about the second charge and told me to address my queries to Mr Owen and ask him about the second charge. Further the defendant did not advise me to seek independent advice.”
“I raised this matter because I still could not comprehend how I had come to grant a charge so as to support the liabilities of STL to the bank, and indeed my recollection of events was that I had always refused to grant any charge on the property to secure STL, which was not my company. ... As I have already stated, I placed absolute trust in Mr Owen who convinced me, because of my over-medication at that time, that my recollection must be incorrect and his was correct. By this time I believed what Mr Owen told me, namely that I had granted a second charge of the property as security for the debts of STL. I attempted to discuss the matter again with the defendant, I believe around this time and later, but he was very busy and abrupt and so unwelcoming that we drifted away thereafter, using other solicitors.” (Once again emphasis is added by me).
“(i) Given the instructions which the claimant gave the defendant on or before 13th September 1990 ... and the fact that the defendant sent the second charge off for registration in late September 1990 or thereabouts, the claimant will ask the court to infer that by the time of the telephone conversation [after receipt of the fee note in late 1990] the defendant knew that he had committed a breach of duty in sending the said charge off for registration.
(ii) ... The defendants refusal to answer questions [during the course of that telephone conversation] relating to the second charge was a deliberate act which would inevitably have and which had the effect of concealing from the claimant facts involved in the breach of duty. These facts were and are relevant to the claimant’s cause of action.
(iii) The claimant will say that given the matters set out in paragraph (i) above the defendant was under a duty to inform the claimant of the defendant’s negligence further or alternatively to inform the claimant to seek independent advice. The defendant’s failure to give such advice in the circumstances ... itself amounted to a breach of duty. The claimant will ask the court to infer ... that the failure to give such advice was deliberate and that in the circumstances the claimant was unlikely to discover this further breach of duty for some time.
(iv) In fact by reason of the defendant’s refusal to answer questions relating to the second charge and Mr Owen’s statements ... the claimant believed that the second charge had been validly granted until 1996 and accordingly did not discover the defendant’s breaches until 1996.”
“117. In early 1996 a water pipe burst in my son Mark’s office at 398 Finchley Road. Whilst clearing up, at or in about the middle of March 1996, Mark found two letters dated 12th September 1990 [the letter he wrote to the bank confirming the arrangements made that day and the letter from his son-in-law to put the company into receivership]. I had not seen these letters since September 1990. Mark told me that he had found them in an envelope for the wages of a Mr Jack Moses (a relative) which he opened out of curiosity. Mr Moses had been working for me in 1990. I can only presume that he put them in such an envelope to keep them dry or a similar reason. I had not, therefore, found these letters when I was looking through my papers relating to the second charge.
118. After Mark showed me these letters, I started to think and reflect on what I had been led to believe by the managers of the bank and to investigate the past. By May 1996 I realised that Mr Owen was wrong when he stated that I had granted the second charge so as to secure the liabilities of STL. Indeed, rather than believing Mr Owen’s statement as to the second charge, I realised that my own recollection of events was true and accurate and that Mr Owen had misled me (whether inadvertently or deliberately) as had the defendant also when I had called him on 21st March 1996, and he had denied that I had told him I was signing the charge to escrow for him to hold for the new company, pending its formation and the purchase of the assets of the old company from the receiver with a facility to be provided by the bank secured on that charge.
119. The discovery of these letters (in due course over the next three years) freed me from doubting my own mind. I now believe in myself and my memory.” (Emphasis added by me).
“29. The claimant relies on s. 32(1)(b). He pleaded, but did not in argument place reliance on, s. 14A of the Limitation Act 1980.
30. I accept that if it is established that there was a telephone conversation between the claimant and the defendant in late 1990 in which the subject of the second charge was raised by the [claimant], at a time when the defendant knew he had broken his instructions from the claimant with relation to the second charge, in the course of which conversation the defendant did not reveal that he had done so and advised the claimant to seek legal advice elsewhere, then his conduct would constitute “deliberate concealment” within s. 32. See Markes v Coodes  PNLQ 252. Failure to make his position clear would constitute a “deliberate” act within s.32 even if the defendant’s actions were not motivated by any intention to deceive the claimant: see Brocklesby v Armitage & Guest (a firm)  1 AER 172.
31. However it must be borne in mind that what the claimant, according to his account of events, was doing in that conversation was raising his recollection of the instructions which he had given to the defendant on 13th September 1990 in a conversation consequent on receiving the defendant’s letter of 26th November some seven weeks earlier. It follows that on receipt of the 26th November letter the claimant was in possession of all the facts relevant to his cause of action, that is, his instructions to the defendant and the fact of the breach of those instructions by the defendant. That he subsequently allowed himself to be persuaded by Mr Owen that no such instruction had been given and, in consequence, no such breach had taken place does not, it seems to me, affect this situation. It follows that s. 32(1)(b) does not assist the claimant.
32. Even if that conclusion is wrong and the claimant’s conversation with the defendant must be taken as having, in some way, expunged his recollection of his instructions to the defendant (which is not how the claimant describes this as happening since he says that this was brought about by the persuasiveness of Mr Owen) it seems to me to be clear from the claimant’s own description of the events in his pleadings and in his witness statements that he could, with reasonable diligence, have quickly discovered that he had been misled.
37. In my judgment there is no real prospect that the claimant will succeed in bringing his case within s. 32(1)(b) of the Limitation Act 1980 on which the success of that case depends. It follows that I must dismiss the claimant’s proceedings.”
“Section 32(1)(b) of the 1980 Act prevents the limitation period from running if there has been an intentional action which has resulted in any fact relevant to the cause of action being rendered invisible to the claimant. It seems to me that the purpose of s. 32(2) of that Act is to treat breaches of duty which are “deliberate” (in the Brocklesby sense), in the same way. That is to say, it deems intentional commission of a breach of duty which is unlikely to be discovered in the same way as if it were a deliberate concealment of the facts which are necessary to maintain the action for breach of duty. Thus even if all the facts are known to the claimant, the intentional commission of the breach of duty in circumstances where that breach is unlikely to be discovered, results in the creation of a legal fiction, namely that the facts are unknown.”
(i) the sending of the letter of 26th November and the subsequent telephone calls were deliberate acts which had the effect of concealing a relevant fact – his own instructions – from the claimant; and/or
(ii) the deliberate commission of the breach of duty to advise is another concealment of the facts involved in that breach of duty;
(iii) that deliberate concealment is “the starting point” and that as soon as a relevant fact is concealed, the clock stops and time does not run until the facts are discovered.
(a) That there was a meeting on 13th September 1990 at which the plaintiff instructed the defendant that :-
(i) the second charge was to be used for a new company,
(ii) it was to be held in escrow,
(iii) it was not to be released without the plaintiff authorising that release after the new company had been formed and accepted the Bank’s facility.
(b) The defendant was in breach of his duty specifically because:-
(i) the defendant failed to take instructions from the plaintiff about the new company or the escrow conditions.
(ii) the defendant sent the charge off for registration without instructions to do so and when it should still have been held in escrow.
(c) As a result of registration the claimant suffered damage because his property was now security for the debts of the ailing old company which had been put into receivership by the time the letter of 26th November was written, as a result of which the claimant’s property was at risk of the foreclosure which eventually occurred.
“I thought that if Mr Owen told me I had freely agreed to give the second charge to secure the debts of STL then his recollection of events must be correct (and that mine was therefore incorrect).”
“For myself, I do not find it absurd that the effect of s. 32(1) is to afford to the plaintiff a full six-year period of limitation from the date of the discovery of the concealment. In such a case, the plaintiff must have been ignorant of the relevant facts during the period preceding concealment: if he knew of them, no subsequent act of the defendant can have concealed them from him. If the defendant then deliberately takes a step to conceal the relevant facts (a step which is by ordinary standards morally unconscionable if not necessarily legally fraudulent) it does not seem to me to be absurd that a plaintiff who had been prevented by the dishonourable conduct of the defendant from learning of the facts on the basis of which to found his action should be afforded the full six-year period from the date of the discovery of such concealment to bring his action.”
The italicised sentence kills the claimant’s case stone dead because the claimant cannot have been ignorant of the ”clear” instructions he gave his solicitor during the period leading up to the seeds of doubt being sown by the conversations with Mr Owen.
“By the conduct of the defendant then and subsequently and also the subsequent assurances of the Bank’s officer, Mr David Owen, I was persuaded that I must have subsequently given consent for a charge (i.e. at some time after I had instructed Mr Lehrer to hold it in escrow for the new company STL).
Accordingly and for the absolute avoidance of doubt, I confirm that my evidence is that I could recall having executed the charge and giving instructions for it to be held in escrow, but as a direct result of the misrepresentations and deliberate concealment of my solicitor and the Bank manager, I was led to believe that I must have subsequently countermanded those instructions or given oral authority to the Bank manager or solicitor for the charge to be completed.”
This is explicit in acknowledging that he recalled the instructions he had given for the charge to be held in escrow, he knew those instructions had not been carried out because the charge had in fact been registered and that damage had resulted. He clearly knew the relevant facts necessary for him to bring the cause of action upon which he now relies. Having carefully considered his letter, I see no reason to change my conclusions: on the contrary they are reinforced.
“It seems to me that there is no opposition to the costs of the application being the defendant’s costs. The question is should the defendants have the entire costs of the action or should some order be made as to costs which reflect the fact that this application to strike out was very late in coming as a result of which a number of costs incurred in preparing for the trial which was to start in April need not have been incurred if the application had been made in good time and this result had followed. It seems to me appropriate therefore that the claimants should have their costs up to 24th July 2000 but as to the remainder of the costs there should be no order.”
Jonathan Parker LJ:
“For myself I do not find it absurd that the effect of section 32(1) is to afford to the plaintiff a full six-year period of limitation from the date of discovery of the concealment. In such a case, the plaintiff must have been ignorant of the relevant facts during the period preceding the concealment: if he knew of them, no subsequent act of the defendant can have concealed them from him.”
“The [appellant] will say that given the matters set out at paragraph (1) above the [respondent] was under a duty to inform the [appellant] of the [respondent’s] negligence further or alternatively to seek independent advice. The [respondent’s] failure to give such advice in the circumstances set out at paragraph 12.1 above itself amounted to a breach of duty. The [appellant] will ask the court to infer .... that the failure to give such advice was deliberate and that in the circumstances the [appellant] was unlikely to discover this further breach for some time.”
The appellant thus seeks to allege a separate breach of duty, on the back, as it were, of the original breach of duty in completing and registering the charge; and he contends for a separate period of limitation in relation to that later breach of duty.
“Mr Davidson [for the defendants] rightly warns against the court being too easily persuaded by the claimant that he has a fresh cause of action against his solicitor on the basis that the solicitor failed to advise, at some point after his initial negligence, that he had been negligent. If such an argument were too readily accepted, it would have two unsatisfactory consequences. First, it would enable the provisions of the 1980 Act to be evaded in many cases in an artificial way. Secondly, it would effectively impose on a solicitor some sort of implied general retainer. Accordingly, I would accept that it would be a relatively exceptional case where the court would be prepared to hold that a solicitor’s negligence claim that was otherwise statute-barred could, albeit in a slightly different guise, be resurrected on the basis that, at a time within the limitation period and less than six years before the issue of proceedings, the solicitor failed to advise that he had been negligent. Only if the facts clearly warrant such a conclusion should the court adopt it, in my view.”
I respectfully agree with those observations of Neuberger J.
Order: appellant's appeal dismissed; respondent's cross-appeal allowed and order below set aside insofar as it concerns the costs of the claim; costs of the appeal and the cross-appeal and the costs of the claim to be paid by the appellant to the respondent, to be assessed on the standard basis if not agreed; application for permission to appeal dismissed.