COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
DAVID RICHARDS J
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE SEDLEY
LADY JUSTICE ARDEN
| EDWARD JOHN GILES
|- and -
|CAROLINE BRIDGET TOWERS RHIND
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Mr Richard O'Dair (instructed by Direct Access Scheme) for the Respondent
Mr Rhind was not a party to this appeal.
Hearing date : 18 December 2007
Crown Copyright ©
Lady Justice Arden :
"32 Postponement of limitation period in case of fraud, concealment or mistake
(1) Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either—
(a) the action is based upon the fraud of the defendant; or
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
(c) 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.
References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.
(2) For the purposes of subsection (1) above, 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.
(3) Nothing in this section shall enable any action—
(a) to recover, or recover the value of, any property; or
(b) to enforce any charge against, or set aside any transaction affecting, any property;
to be brought against the purchaser of the property or any person claiming through him in any case where the property has been purchased for valuable consideration by an innocent third party since the fraud or concealment or (as the case may be) the transaction in which the mistake was made took place.
(4) A purchaser is an innocent third party for the purposes of this section—
(a) in the case of fraud or concealment of any fact relevant to the plaintiff's right of action, if he was not a party to the fraud or (as the case may be) to the concealment of that fact and did not at the time of the purchase know or have reason to believe that the fraud or concealment had taken place; and
(b) in the case of mistake, if he did not at the time of the purchase know or have reason to believe that the mistake had been made.
(4A) Subsection (1) above shall not apply in relation to the time limit prescribed by section 11A(3) of this Act or in relation to that time limit as applied by virtue of section 12(1) of this Act.
(5) Sections 14A and 14B of this Act shall not apply to any action to which subsection (1)(b) above applies (and accordingly the period of limitation referred to in that subsection, in any case to which either of those sections would otherwise apply, is the period applicable under section 2 of this Act).
"35 New claims in pending actions: rules of court
(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced—
(a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and
(b) in the case of any other new claim, on the same date as the original action.
(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either—
(a) the addition or substitution of a new cause of action; or
(b) the addition or substitution of a new party;
and "third party proceedings" means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings.
(3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.
For the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action.
(4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.
(5) The conditions referred to in subsection (4) above are the following—
(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; and
(b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.
(6) The addition or substitution of a new party shall not be regarded for the purposes of subsection (5)(b) above as necessary for the determination of the original action unless either -
(a) the new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party's name; or
(b) any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action.
(7) Subject to subsection (4) above, rules of court may provide for allowing a party to any action to claim relief in a new capacity in respect of a new cause of action notwithstanding that he had no title to make that claim at the date of the commencement of the action.
This subsection shall not be taken as prejudicing the power of rules of court to provide for allowing a party to claim relief in a new capacity without adding or substituting a new cause of action.
(8) Subsections (3) to (7) above shall apply in relation to a new claim made in the course of third party proceedings as if those proceedings were the original action, and subject to such other modifications as may be prescribed by rules of court in any case or class of case."
"423. Transactions defrauding creditors
(1) This section relates to transactions entered into at an under- value; and a person enters such a transaction with another person if -
(a) he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration; …
(2) Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for -
(a) restoring the position to what it would have been if the transaction had not been entered into, and
(b) protecting the interests of persons who are victims of the transaction.
(3) In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose -
(a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or
(b) of otherwise prejudicing the interest of such a person in relation to the claim which he is making or may make.
(4) In this section "the court" means the High Court or-
(a) if the person entering into the transaction is an individual, any other court which would have jurisdiction in relation to the bankruptcy petition relating to him;
(b) if that person is a body capable of being wound up on Part IV or V of this Act, any other court having jurisdiction to wind it up.
(5) In relation to a transaction at an under value, references here and below to a victim of the transaction to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as the "debtor".
424. Those who may apply for an order under section 423
(1) An application for an order under section 423 shall not be made in relation to a transaction except -
(a) in a case where the debtor has been adjudged bankrupt or is a body corporate which is being wound up or in relation to which an administration order is in force, by the official receiver, by the trustee of the bankrupt's estate or the liquidator or administrator of the body corporate or (with the leave of the court) by a victim of the transaction;
(b) in a case where a victim of the transaction is bound by a voluntary arrangement approved under Part I or Part VIII of this Act, by the supervisor of the voluntary arrangement or by any person who (whether or not so bound) is such a victim; or
(c) in any other case, by a victim of the transaction.
(2) An application made under any of the paragraphs of subsection (1) is to be treated as made on behalf of every victim of the transaction."
"With regard to the unjustifiable extravagance in living, the learned County Court judge said that the debtor acted under the bonâ fide belief which was shared by others, that trade would soon revive. Now, a man, of course has a perfect right as long as he is solvent, to determine that he will go on with a business, although it may be a losing business. He may trust that before he becomes insolvent matters will change, and he will again be in a condition of prosperity. But the moment he becomes insolvent, then he is no longer going on at his own risk in case of failure; he is going on at the risk of his creditors, in case things do not mend as he hopes they will. In my judgment a man has no right to do that. The moment things have got to such a pitch that he cannot pay 20s. in the pound, but he nevertheless thinks that if he goes on he may be able to retrieve his position, in my opinion he ought to call his creditors together, and leave them who will have to bear the loss in case his calculations are wrong, to determine whether that course of going on shall be proceeded with or not. Now, the learned County Court judge says the extravagance in living was done with a view to maintain his position and keep up appearances, and further that it was necessary for the purpose of enabling him, should such an improvement not take place, to sell his iron foundry at a larger price. I confess I cannot understand at all that view. A man is bound not to keep up appearances, but to pay his debts, and if his profits will not allow of his living at the particular rate he has been accustomed to live at, then his plain duty is to reduce his scale of living, and not to go on living out of the money of his creditors. As to keeping up the reputation of the business, that again I fail to understand, because, it is meant by that that an intending purchaser seeing him living at a particular rate, will assume from that that the business is a profitable one, and give more than he otherwise would for the business. That cannot be commended, certainly, as being honest to the purchaser. It is an attempt to delude him by a fictitious appearance of prosperity. I cannot regard that as being a reasonable excuse for spending more money than the trader is aware he is able in justice to his creditors to expend."
"41. Sub-section (2) applies where there has been a "deliberate commission of a breach of duty". This requires a deliberate breach of duty: Cave v Robinson James & Rolf  1 AC 384. A transaction to which section 423 applies clearly involves the deliberate commission of an actionable wrong but does it involve a "breach of duty" within the meaning of section 32(2)? In my judgment, it does. It is true that "breach of duty" most obviously connotes a breach of a duty owed by the defendant to the claimant, such as a contractual, fiduciary or tortious duty. Section 423 is in a sense more amorphous. If a person enters into a transaction to which it applies, a range of possible claimants, including many who may not exist as such at the date of the transaction, may subsequently apply to set it aside or for other relief. It would however be unjustifiably restrictive to construe breach of duty as confined in the way indicated above. In my view, it is no more than the obverse of "right of action" in sub-section (1)(b) and means simply legal wrongdoing, that is acts or omissions giving rise to a right of action. That was undoubtedly the position under section 26 of the Limitation Act 1939, which section 32 replaced: see, for example, King v Parsons & Co  1 WLR 29 at 33 per Lord Denning MR. There is nothing in the Report of the Law Reform Committee (Cmnd 6923), which led to the provisions now contained in section 32, or elsewhere to suggest that sub-section (2) was intended to limit the scope of the pre-existing law."
"only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings."
"19. Leaving aside the limitation issue, to which I will return, I have concluded that it would be right to allow this amendment. Clearly serious questions arise as regards the reliability and credibility of Mr Giles' evidence. These can, and I have no doubt will be, fully explored in cross-examination. But I do not consider that it would be right, without hearing Mr Giles' evidence, to say that his account is so incredible as to make his case unsustainable. It is also true that, as Mr Giles had the memorandum before him in January 2006, it would appear that the new case, even if true, was not pleaded as a result of a culpable level of carelessness on the part of Mr Giles. I have taken that into account. I have, however, concluded that if in fact the deed was created in 1994 and back-dated to 1992 the greater injustice would be to deny Mr Giles the opportunity of establishing that case."
i) Does a claim under s 423 of the 1986 Act amount to an allegation of a "breach of duty" for the purposes of s 32(2) of the 1980 Act?
ii) Did Mr Giles become a "victim" for the purposes of s 423 of the 1986 Act as soon as Mr Rhind acted in breach of his duty of confidence in November 1993?
iii) Did the judge err in the exercise of his discretion in giving permission to amend with respect to (a) proportionality or (b) the issues as to Mr Giles' disclosure and as to his credibility or (c) as to the weakness of the claim that the deed was executed in 1994?
iv) Did the amendments arise out of substantially the same facts so that s 35 of the 1980 Act was available?
"53. Before us, it was argued that a new claim sufficiently "arises out of" the same facts as an existing claim if there is a sufficient nexus between the old and the new claim, in the sense that some or a substantial part of the facts relied on to promote the new claim were relied on to promote the old claim. That takes far too broad an approach to the rule, which it effectively rewrites. The new claim does not arise out of the facts on which the old claim was based if, in order to prove it, new facts have to be added. That is why this court has said that the basic test is whether the plea introduces new facts: Goode v Martin  1 WLR 1828 at paragraph 42."
a. The wider meaning is a legitimate meaning of breach of duty.
b. S 32(2) was enacted pursuant to the recommendations of the Law Reform Committee's report on limitation in 1977 and the court can look at that report to see the mischief to which s 32(2) was directed. That Committee did not recommend that the new provision be limited to some causes of action only.
c. The general structure of the 1980 Act indicates that s 32(2) is consistent with the wider meaning.
d. The expression "breach of duty" is used in s 11 of the 1980 Act but in a different context and so does not necessarily restrict the meaning of "breach of duty" in s 32(2).
e. S 32 does not require the phrase to be given the narrower meaning.
f. The narrower meaning does not promote any part of the statutory purpose of s 32.
"The word "fraud" here is not used in the common law sense. It is used in the equitable sense to denote conduct by the defendant or his agent such that it would be 'against conscience' for him to avail himself of the lapse of time. The cases show that, if a man knowingly commits a wrong (such as digging underground another man's coal); or a breach of contract (such as putting in bad foundations to a house), in such circumstances that it is unlikely to be found out for many a long day, he cannot rely on the Statute of Limitations as a bar to the claim: see Bulli Coal Mining Co v Osborne  AC 351 and Applegate v Moss  1 QB 406. In order to show that he 'concealed' the right of action 'by fraud', it is not necessary to show that he took active steps to conceal his wrongdoing or breach of contract. It is sufficient that he knowingly committed it and did not tell the owner anything about it. He did the wrong or committed the breach secretly. By saying nothing he keeps it secret. He conceals the right of action. He conceals it by 'fraud' as those words have been interpreted in the cases. To this word 'knowingly' there must be added 'recklessly': see Beaman v ARTS Ltd  1 KB 550, 565-566. Like the man who turns a blind eye, he is aware that what he is doing may well be a wrong, or a breach of contract, but he takes the risk of it being so. He refrains from further inquiry least it should prove to be correct: and says nothing about it. The court will not allow him to get away with conduct of that kind. It may be that he has no dishonest motive: but that does not matter. He has kept the plaintiff out of the knowledge of his right of action: and that is enough: see Kitchen v Royal Air Force Association  1 WLR 563. If the defendant was, however, quite unaware that he was committing a wrong or a breach of contract, it would be different. So if by an honest blunder he unwittingly commits a wrong (by digging another man's coal), or a breach of contract (by putting in an insufficient foundation) then he could avail himself of the Statute of Limitations." (emphasis added)
"2.22 The essential feature of the concealed fraud approach (as distinct from the date of knowledge approach) is that it operates on some degree of blameworthiness on the part of the defendant beyond his mere failure to comply with his legal obligations; the traditional expression is 'unconscionable conduct'."
"I am of opinion that the conduct of the defendants, by the very manner in which they converted the plaintiff's chattels in breach of the confidence reposed them, and in circumstances calculated to keep in ignorance of the wrong that they had committed amounted to a fraudulent concealment of the cause of action."
"…there must be either active concealment of a fact relevant to a cause of action, or at the least the intentional concealment by omission to speak of a fact relevant to a cause of action which the defendant knew himself to be under a duty to disclose. There is no decision that anything less than a duty to disclose will suffice in the absence of active concealment." ()
Lord Justice Sedley:
Lord Justice Buxton: