England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
On Appeal from Master Marsh

		Royal Courts of Justice Rolls Building, London, WC4A 1NL
		12 December 2014

HHJ David Cooke :

Introduction

1. The claimants appeal against the order of Master (now Chief Master) Marsh made on 6 January 2014, by which he granted summary judgment dismissing the claim on limitation grounds. The Master heard the application over 2 days in July and September 2013 and delivered his reserved judgment, which runs to 41 pages, on 6 January 2014. The Master himself refused permission, but it was granted by Barling J by order of 15 May 2014.
2. The background to the claim and summary judgment application was set out by the Master as follows:

"Background

2. This claim was issued on 22nd December 2011. It was preceded by standstill agreements entered into between the parties on 30th September 2010 and 27th September 2011. Under those agreements the claim was, for limitation purposes, deemed to have been issued on 30th September 2010…

3. The events that are material to this claim took place between 1990 and mid-2000. The company that is defined as "BSG" in the particulars of claim was the principal employer of the Britax Pension Fund ("BPF") from the date the BPF was set up in 1981 until 4 July 2001 when it was sold to the First Claimant ("the Company"). In 2005, certain assets, liabilities and members of the BPF were transferred into the Public Safety Equipment Limited Pension Fund ("PSE Scheme"). The Company's title to bring these proceedings arises out of assignments dated 12th October and 20th December 2011. The Second Claimant is the trustee ("the Trustee") of the BPF and the PSE Scheme. Mercer has at all material times provided actuarial and investment consultancy services to the BPF although the precise scope of Mercer's retainer and duties in the period between 1990 and mid-2000 is in issue.

4. The claim arises out of the events that followed the decision of the European Court of Justice in Barber-v-Guardian Royal Exchange Group (C-262/88) [1991] 1 QB 344. The ECJ held that it was unlawful to discriminate between men and women in conditions of employment. As a consequence of the decision, it was necessary for BSG to equalise the normal pensionable age ("NPA") of members of the BPF. In 1990, Mercer recommended that the NPA of all future employees should be raised to 65 at the earliest opportunity and Mercer was instructed to take the necessary steps…

5. An addendum to the explanatory booklet of the BPF was issued in October 1990 informing members of the equalisation of retirement ages at age 65 for new employees from 1st July 1990. An announcement was then made in February 1991 informing employees of the equalisation of retirement ages with effect from 1st April 1991. However, no amendment to the BPF rules under its 1981 Deed and Rules was made. On 21st December 1995, a new Trust Deed and Rules was executed retaining the NPA for female members at age 60 and male members at age 65. On 10th March 2000 a further new Trust Deed and Rules was executed providing for equalisation of NPA at age 65 for both men and women with effect from 1st April 1991.

6. It is alleged that Mercer advised on a number of occasions between 1990 and early 2000 that equalisation had taken place on 1st April 1991. Furthermore, the Claimants' case is that the 2000 Trust Deed and Rules was ineffective to change the NPA as from 1991 as the change could not be made retrospectively. They say that Mercer owed duties to each of them and that Mercer was negligent in the advice it provided following the Barber decision. Loss is claimed totalling £5.4 million plus £750,000 being the cost of investigations carried out by the Claimants…

7. Liability is denied by Mercers but for the purposes of the Part 24 application I will proceed on the assumption that, disregarding the limitation issue, the Claimants have a real prospect of succeeding at a trial.

8. The limitation issue arises out of paragraphs 42, 43 and 62 of the defence. In 2000, Britax Wingard Limited, a subsidiary of BSG, and a participating employer in the BPF, was sold to Reitter & Schefenacker GmBH & Co KG ("Reitter"). In the course of the sale, Reitter commissioned a financial due diligence report from Ernst & Young ("E&Y") and they produced a report dated 28th April 2000 running to 237 pages plus 12 appendices. Appendix 2 to the report comprises two letters from a firm of actuaries, Lane Clark & Peacock ("LCP"), addressed to Reitter. The first letter ("the LCP Letter") is 8 pages in length and deals with their findings concerning BSG's UK pension arrangements. The second letter deals with international pension arrangements. Paragraph 2 of the LCP Letter is headed "Britax Pension Fund". Paragraph 2.1 includes the following paragraph (it is one of eight paragraphs):

"It appears that the normal retirement ages were equalised at age 65 for males and females on 1st April 1991. Previously, the normal retirement ages were 65 for men and 60 for women. The method of equalising the benefits as set out in the Fund's rules appears to comply with legislative requirements. However, a different method and non-compliant method of equalising the benefits is set out in communications to members. We recommend that legal advice is sought on this inconsistency in the Fund's documentation."

[this paragraph was referred to before the Master and before me as "the Passage"]

9. In paragraph 43 of the defence, Mercer pleads:

"It can reasonably be inferred from the circumstances that the E & Y report was provided to and seen by [BSG], the Trustee and/or their legal advisers."

In paragraph 62 of the defence Mercer pleads that the primary limitation period expired prior to 1st October 2004 and that the material facts on which the claims set out in the particulars of claims are based were known, or ought reasonably to have been known, by the Claimants prior to 1st October 2007. Thus, Mercer asserts that both the primary and secondary limitation periods had expired prior to the deemed date of issue of the claim.

10. The Claimants chose not to serve a reply to the defence...

12. The position in relation to limitation when the matter first came before me on 15th July 2013 can be summarised as follows:

(a) In the particulars of claim at paragraph 33 the Claimants asserted that they first acquired the requisite knowledge for the purposes of section 14A in 2010 when the failure validly to implement equalisation was discovered by advisers to the Trustee.

(b) Mercer asserted in the defence that the requisite knowledge for the purposes of section 14A was acquired in or around 2000 or, at the very least, prior to 1st October 2007 (being three years before the first standstill agreement).

(c) In the absence of a reply, the Claimants were taken not to admit the matters relevant to limitation raised in the defence but the Claimant had not made a positive case concerning whether or not the requisite knowledge had been obtained in 2000.

13. It is not now in dispute that the primary 6 year limitation period expired before the deemed date of issue of the claim under the standstill agreements… Mercer's case relies upon the provisions of section 14A [Limitation Act 1980] which provides that the limitation period is three years from the "starting date" as defined in section 14A(5). "

3. The Master proceeded on the basis that the claimants' case as to s14A at trial would be as set out in a draft Reply, which:

i) denied that the Passage had been (para 9.1) or ought reasonably to have been (para 10.2) seen or read by any director or sufficiently senior employee of the principal employer (BSG) or Trustee;

ii) denied that if the Passage had been read the employer or trustee would or ought reasonably to have known that the equalisation of pensions was 'non compliant' and ineffective (para 10.3);

iii) pleaded that the claimants (presumably referring to the Trustee and BSG) had taken all reasonable steps to obtain expert advice from the solicitors acting on the purchase (Eversheds) and from the defendants themselves but no matters had been brought to their attention which ought to have put them on enquiry, so that they did not acquire any knowledge relevant for s 14A at the time of the 2000 transaction, and

iv) pleaded that the claimants were first alerted to the defects alleged when the scheme documentation was reviewed by the Trustee's solicitors (Wragge & Co LLP) on a date after 20 May 2010.

4. The Master noted that the claimants had provided no evidence from the files of Eversheds or from Mr. Selway, the Managing Director of BSG who had been in charge of the sale in 2000. He held (para 36-8) that there was no good reason to think that evidence would be available from either source at trial which would assist the claimants. That conclusion is one of the matters challenged on this appeal.
5. s 14A Limitation Act 1980 provides as follows, so far as material:

"14A Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual

…(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.

(4) That period is …

(b) three years from the starting date as defined by subsection (5) below...

(5) … the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.

(6) In subsection (5) above "the knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge both—

(a) of the material facts about the damage in respect of which damages are claimed; and

(b) of the other facts relevant to the current action mentioned in subsection (8) below.

(7) For the purposes of subsection (6)(a) above, the material facts about the damage are 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.

(8) The other facts referred to in subsection (6)(b) above are—

(a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and

(b) the identity of the defendant…

(9) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above.

(10) For the purposes of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire—

(a) from facts observable or ascertainable by him; or

(b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek;

but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice."

6. The Master summarised the issue before him as follows:

"Knowledge

61. An evaluation of the evidence for the purposes of Mercer's application has to be underpinned by the principles that are applicable to a Part 24 application. At a trial, it will be for the Claimants to establish that they are entitled to the benefit of section 14A and that they did not acquire knowledge, as defined in that section, before 29th September 2007. I have to consider whether they each have a real prospect of doing so. I must not conduct a mini-trial but, equally, the court need not be credulous about the Claimants' evidence or ignore the gaps in it. The likelihood of anyone having a recollection of events 13 years ago in the absence of contemporaneous documents is plainly a material factor here. And I have already remarked about the lack of any evidence concerning the likelihood of (a) Eversheds' file being available and/or (b) Mr Selway providing a statement that assists the Claimants. This is not a case in which the Claimants can demonstrate that further evidence of a helpful nature can reasonably be expected to be available at a trial. It does not appear to me the Claimants can realistically say that a trial will lead to a fuller investigation of the facts that has a real prospect of providing additional evidence that is helpful to the Claimants in discharging the burden on them.

62. Mercer's application is based upon constructive knowledge, rather than actual knowledge, but given the very limited evidence that the Claimants have provided the distance between the two on the facts of this case is not great. Mercer's case is that Appendix 2 must have been read by someone of suitable seniority as part of Project Rhinestone but for the purposes of the Part 24 application actual knowledge is not relied upon. In considering whether the Claimants had constructive knowledge for the purposes of section 14A I have to look at two elements. First, is it fanciful to think that the Passage ought reasonably to have been read by an employee of both Claimants of sufficient seniority? Secondly, if that threshold is passed, is it fanciful to think that the statutory test as to knowledge will not be met on the facts of this case."

7. He went on to hold that it was fanciful to think the claimants would succeed at trial in showing that the Passage ought not to have been read by a senior employee of BSG (para 63) or that if it had been it would not have sufficiently alerted the reader to a potential issue regarding equalisation justifying further investigation. Such investigation would have involved taking legal advice as the Passage envisaged (although it was of course directed to the purchaser not BSG) which would have required an examination of the scheme documentation in place at the time of the Barber decision that would have revealed the issues now the subject of the claim (para 66). In those circumstances BSG (and through it the Trustee) were fixed with constructive knowledge under both s14A (10) (a) and (b). In relation to the latter, the claimants would not be able to avoid the imputation of knowledge by showing that they had taken all reasonable steps to obtain expert advice, because they had not asked for any advice about the Passage or the appendix in which it was included (Para 78).

Grounds of Appeal

8. There were five grounds of appeal:

i) The Master had applied the wrong test in determining the issue of constructive knowledge, wrongly relying on a passage from Haward v Fawcetts [2006] 1 WLR 682 which it is said applies only to actual knowledge (the "Wrong Test" ground)

ii) The Master despite stating that he should not conduct a mini trial of disputed fact then proceeded to do so, in the course of which he relied on his own views as to how a corporate transaction should have been conducted, wrongly refused to admit expert evidence tendered by the claimant on that issue and made findings of fact without hearing evidence and on the balance of probability, rather than asking whether it was fanciful to suppose the claimants could make good their case at trial (the "Summary Judgment Approach" ground)

iii) The Passage had been wrongly construed to reach the conclusion that it alerted the reader to a potential problem with equalisation (the "Passage Construction" ground)

iv) The Master had wrongly concluded that Eversheds' retainer in 2000 did not extend to pensions issues (the "Expert evidence" ground) and

v) It was wrong to conclude that having instructed both Eversheds and Mercer their collective retainers did not amount to taking all reasonable steps to seek expert advice (the "Collective Retainers" ground).

Wrong Test

9. In relation to the first ground, on the (assumed) facts of this case what has to be determined for the purposes of s14A is the date at which the claimants first had "knowledge" of the material facts about the damage now complained of, and that such damage was attributable to defective advice by Mercer. The material facts about the damage could be summarised as being that the known obligation to equalise pensions had not been effectively implemented prior to the adoption of the second set of new Rules in 2000, and that that change did not as a matter of law have retrospective effect. No doubt this could be broken down into smaller components, but the composite summary is sufficient for present purposes.
10. The claimant in Haward had bought shares in a company on the advice of the defendant firm of accountants. He was told at the time that it needed a cash injection of £100,000 to make it profitable, but although he put in that amount and more over subsequent years the company nevertheless failed and he lost his investment. The fact that he had lost his investment through insolvency was known more than three years before the action began. The question was whether it was sufficient on the question of attributability that he knew he had invested on the advice of the accountants, or whether he had also to know (and if so with what degree of certainty) that the advice was flawed, ie that the company was a poor investment at the start rather than one that had failed as a result of subsequent events. Would that require that he knew their advice was negligent, a consideration expressly excluded by s 14A(9)?
11. Their Lordships expressed their conclusions in different ways, but the majority held it would be sufficient if he knew that there was at least a serious possibility that there was some fault in the advice given at the time of purchase, enough to begin investigating further. The Master quoted at paras 19 and 20 of his judgment passages from the opinion of Lord Nicholls dealing with the degree of certainty required before a claimant could be said to have knowledge of a matter, and what was meant by the word "attributable". His central conclusion was set out at para 66 as follows:

"66. Applying the Haward test, would BSG and the Trustee have obtained sufficient knowledge to justify setting about investigating the possibility that Mercer had been negligent in the steps taken upon their advice to equalise NRD at 65? The reader of the LCP letter was not directed to Mercer's involvement with equalisation but that does not matter. In my judgment, the reader of the letter was plainly informed that something serious might be wrong with the method of equalisation and it would have been obvious that such a problem might have caused significant financial loss. I agree with Mr De Verneuil Smith that it is fanciful to think other than that had legal advice been sought, the legal advisors would have required to see the Fund's rules in place at the time of Barber, and subsequently, together with the booklets and communications to members. A review of those documents in the light of the query about whether a compliant methodology had been used would have led to a review of the methodology recommended by Mercer and, on the balance of probabilities, the issue that forms the subject matter of this claim would have been revealed. This is not just speculation, as Mr Anderson QC suggested, but a deduction based on the facts. It is fanciful to think that the obtaining of legal advice would not have revealed the problem. The Passage was, therefore sufficient knowledge to make it reasonable for the Claimants to begin to investigate further."

12. This is criticised as applying the test as to whether what is known (actually or constructively) amounts to "knowledge" with the requisite degree of certainty of (eg) the "material facts about the damage" for the purposes of s 14A(6) to the logically prior question of what is deemed to be constructively known by virtue of s 14A(10). Mr. Anderson puts it in this way, that the court must first ascertain what facts are known or deemed to be known, and secondly whether those facts are cumulatively sufficient to satisfy the requirements of subsection (6). It is only at the second stage, he says, that it is relevant to ask whether the facts known amount to sufficient knowledge.
13. I do not fully accept that way of expressing the matter, since it implies that something is not known unless it is a "fact". I would prefer to say that what must be ascertained is as I set it out above. I do accept however that what the Master referred to as "the Haward test" is to be applied only after the court has determined what is actually known and deemed to be known by virtue of s 14A(10).
14. That said, the question to be asked for the purpose of s 14A(10) is somewhat similar in effect. In asking what knowledge "he might reasonably be expected to acquire from facts observable or ascertainable by him", the court must establish what the claimant could himself have observed or ascertained and whether in light of that it would have been reasonable for him to make further enquiry that would have led to additional knowledge. For purposes of subsection (b) the enquiry extends to whether in the circumstances it would have been reasonable to seek expert advice, and if so what knowledge would have been ascertainable with that advice.
15. This is the enquiry the Master in fact made, as is clear from the extracts below. It makes no difference that he described it in para 66 as "applying the Haward test"; he was following the process required by subsection 10. If he was right to conclude from that process that the claimants had constructive knowledge that equalisation had not been effectively implemented prior to 2000, there is no doubt that the failure was attributable to Mercer's advice, since on the assumed facts they were the only professionals involved in giving advice as to that implementation.
16. There is thus no issue as to attributability that requires consideration of the matters dealt with in Haward, and I do not have to address the arguments presented by Mr. Anderson about the relationship between what was said in that case and later in AB v Ministry of Defence [2012] UKSC 9 at para 118.
17. Mr. Anderson's submission was that the Master should have concluded that there were no "facts" relevant to the claim observable or ascertainable from the Passage, since it did not refer to Mercer's involvement with the equalisation process, still less suggest they may have been negligent. Indeed insofar as it indicated there may be an issue with equalisation it was not the issue now complained about- failure to implement the necessary rule change prior to 2000- but something different, ie an inconsistency between the method of equalisation set out in material given to members and that provided for by the Rules. If there were no "facts" observable from the Passage, he said, it was wrong to embark on any enquiry as to what might have been found by investigating further.
18. I do not accept that submission. The receipt of the E&Y Report was itself a "fact" observable by the claimants (and there is no doubt that both of them received it) and in my judgment the Master was right therefore to regard the issues as being whether it would be reasonable to expect that some suitably senior employee would read the Report (or cause it to be read) in sufficient detail to become aware of the Passage, if so whether it would have been reasonable to make further enquiry (including by taking expert advice) and whether that in turn would have revealed the equalisation issue now complained about. Since he was dealing with the issues on a summary judgment application, the correct approach was, as he recognised, to ask whether it was fanciful to suppose that if the matter went to trial all these matters would not be found against the claimants.
19. The steps followed by the Master appear from the following (for ease of reading I repeat some paragraphs already extracted above):

"Knowledge

61. An evaluation of the evidence for the purposes of Mercer's application, has to be underpinned by the principles that are applicable to a Part 24 application. At a trial, it will be for the Claimants to establish that they are entitled to the benefit of section 14A and that they did not acquire knowledge, as defined in that section, before 29th September 2007. I have to consider whether they each have a real prospect of doing so. I must not conduct a mini-trial but, equally, the court need not be credulous about the Claimants' evidence or ignore the gaps in it. The likelihood of anyone having a recollection of events 13 years ago in the absence of contemporaneous documents is plainly a material factor here. And I have already remarked about the lack of any evidence concerning the likelihood of (a) Eversheds' file being available and/or (b) Mr Selway providing a statement that assists the Claimants. This is not a case in which the Claimants can demonstrate that further evidence of a helpful nature can reasonably be expected to be available at a trial. It does not appear to me the Claimants can realistically say that a trial will lead to a fuller investigation of the facts that has a real prospect of providing additional evidence that is helpful to the Claimants in discharging the burden on them.

62. Mercer's application is based upon constructive knowledge, rather than actual knowledge, but given the very limited evidence that the Claimants have provided the distance between the two on the facts of this case is not great. Mercer's case is that Appendix 2 must have been read by someone of suitable seniority as part of Project Rhinestone but for the purposes of the Part 24 application actual knowledge is not relied upon. In considering whether the Claimants had constructive knowledge for the purposes of section 14A I have to look at two elements. First, is it fanciful to think that the Passage ought reasonably to have been read by an employee of both Claimants of sufficient seniority? Secondly, if that threshold is passed, is it fanciful to think that the statutory test as to knowledge will not be met on the facts of this case.

63. As to the first stage, it seems to me it is fanciful to think that the Claimants will succeed at trial in establishing that the Passage ought not to have been read by a senior employee of BSG. The factors that lead me to that conclusion include:

(a) Project Rhinestone was a substantial transaction that warranted attention from senior management of BSG and the Trustee. BSG was a large business and should have had adequate resources to devote to the transaction. It could not reasonably have been left to the advisers to run with 'light touch' supervision by management and by the Trustee. Undoubtedly Mr Selway was very actively involved but it is fanciful to think that it was reasonable for him to have handled a £180 million transaction largely on his own, save for the involvement of Lazards and Eversheds. As a matter of common sense, other senior managers were needed to assist him, to attend meetings and to consider the project documentation. Persons other than Mr Selway and Mr Duffield must have attended the PowerPoint presentation and could reasonably have been expected to do so.

(b) Even if pensions were not at the heart of the transaction, they were a material consideration and both the UK and international pension position had the capacity to affect the purchase price and the scope of liabilities BSG would retain either in the form of potential liability under warranties or by way of the indemnity. Furthermore, the UK pension position had to be considered because a transfer value was negotiated and agreed. That exercise may have been carried by external consultants but they had to be instructed by a senior manager to do so. It follows that it is reasonable to expect documents about pensions provided by Reitter as part of the E&Y Report to have been read, and fanciful to think otherwise.

(c) The terms of the pension warranties and the indemnity had to be negotiated. Appendix 2 should have been of vital interest to BSG in that connection, particularly in relation to the giving of an indemnity.

(d) The Trustee owed fiduciary duties to members of the BPF and a document such as Appendix 2 was one the Trustee was bound to review.

(e) BSG could not reasonably have taken account only of the executive summary to the E&Y Report. Both Claimants had the full report in their possession and responsible management of the purchase would have involved arranging a review of the entire report by senior managers with the relevant expertise. A superficial review of the E&Y Report would have easily spotted that Appendix 2 dealt with pensions and arrangement for someone with suitable experience to review it. It is fanciful to think that it would not reasonably have been passed on to the Trustee for review.

(f) The draft reply (and I will assume there would have been a willingness for a director of each Claimant to have signed the statement of truth) at paragraph 9.1 denies the Passage in the LCP letter "was seen or read by any director or requisite senior employee …" of each of the claimants. I am bound to say that I do not see how that denial could be made in the absence of evidence from Mr Selway and in view of the equivocal nature of the remaining evidence.

64. Assuming that the Passage ought reasonably to have been read by a person of suitable seniority, what, applying the test as explained in Haward, should the words have conveyed and did that amount to Section 14A knowledge. The test is what should the words have conveyed regardless of that person having any special understanding of pensions or the BSP scheme?

65. The LCP Letter conveyed that there was an inconsistency between the Fund's rules and communications to members. The inconsistency concerned whether a compliant method of achieving equalisation had been used. The rules demonstrated, according to the letter, that a compliant method had been used. Communications to members said otherwise. Furthermore, and crucially in my judgment, the letter would have conveyed the sense that the inconsistency was sufficiently serious to warrant obtaining legal advice. Such a statement from an actuary who could be expected to have a good deal of expertise in the field to my mind should have been seen as a 'red light'. Even if the advice could have been seen as cautious, it would have been incautious to have ignored it. To paraphrase, the letter from LCP was saying: "we are not certain that there is a problem with the method of equalisation, but there may be and it ought to be investigated by taking legal advice"."

20. There is then the conclusion, set out in para 66 of the judgment above, that it would be fanciful to think that a legal advisor reviewing the documentation to investigate the apparent inconsistency as to method of equalisation would not appreciate that it did not validly effect equalisation at all prior to 2000.
21. I do not consider that in following this chain of reasoning the Master was wrong in his conclusions, or that, read as a whole, his judgment shows that he committed any of the other errors alleged along the way.
22. Firstly, it was not challenged that both the company and the Trustee had the full E&Y Report. That in itself would have been somewhat unusual; it was a detailed due diligence report prepared for a purchaser and would normally be expected to be confidential to the purchaser. It was no doubt disclosed, as the claimants' witnesses said, for the purpose of negotiating a reduction in price based on the matters it referred to. It would also have been relevant to negotiation of warranties and indemnities. It is not credible to suggest that BSG and the Trustee would not both be expected to look at it to see what issues might have been identified by E&Y relevant to them in the context of the sale.
23. There is no doubt that the Report was seen by someone senior at BSG, because someone (presumably Mr. Selway though that was not I think conclusively shown) prepared a slide show presentation considering in some detail the main points that might be relevant to negotiation of the terms of the deal. To do that he or she marked up fairly heavily the Executive Summary section of the Report, though not the main body of it. The fact there was such a presentation shows that a number of people at the company, not just Mr. Selway, were involved in the transaction at a sufficient level of seniority to be considering the issues relating to the negotiations.
24. Given the importance of the transaction and the significance of the report, the conclusion that both claimants could reasonably be expected to look at its content was in my view inevitable. It would have been slapdash not to do so. While it would not necessarily be the case that such a review would require every page or statement in it to be considered in detail, it would at least require that the principal sections be looked at to identify any points of potential significance for the transaction. The Master was right to say that pensions and the transfer from the pension fund were material parts of the transaction, and it seems to me inevitable that the seller, and the trustee of the fund involved, could reasonably be expected to review what the purchaser had disclosed in relation to its due diligence investigations. The letter from the actuaries was an important part of the section dealing with pensions, and it follows that it would be reasonable for those involved in the transaction dealing with pensions issues to have read that, including the Passage.
25. If such a review had been carried out, therefore, the Passage would have been read by someone with responsibility for the pensions aspects of the transaction. The content of the Passage would therefore have been within the knowledge of both claimants. That content falls in my judgment within the scope of the constructive knowledge imposed by s 14A(10)(a), since the chain of enquiry thus far is one it would be reasonable to expect the claimants themselves to follow, even if they might have delegated it to an advisor. The content of the Passage (as distinct from the import of that content) was not a matter ascertainable only with expert advice.
26. Would it then be reasonable to expect that one or other of the claimants once aware of the Passage would cause further enquiry to be made, by taking legal advice? In my judgment the Master was again right to conclude that it would be, for the reasons he gave. Although as was pointed out the actuary's letter was not directed to the claimants but to the purchaser, it flagged up what might obviously be a significant problem and it would be, as the Master said, incautious to ignore such a warning from a responsible and knowledgeable source.
27. Mr. Anderson submits that it could have been reasonably concluded from the Passage that implementation had been validly achieved, because it stated that the method "set out in the Rules appears to comply with legislative requirements". But this it seems to me misses the point; what the Passage points out is that it appeared that the Rules say one thing but members have been told another, a situation which has obvious potential to cause problems that might have significant financial implications.
28. It was suggested that if legal advice had in fact been taken directed at the suggested inconsistency of method of equalisation, it was possible that it would not have revealed the issue of non-implementation. That suggestion was not however strongly pressed, and in my view was unrealistic. The Master's conclusion was that a solicitor investigating the inconsistency would have needed to see the scheme Rules in force since the equalisation announcement had been made, from which it would be immediately apparent that no rule changes had been made until 2000 and, on the claimants case, that the change then made was not retrospective in effect. That knowledge would be constructive knowledge imposed by s 14A(10)(b), since the legal issue that the change of rules did not have its purported retrospective effect would not be one that the claimants could be expected to have realised without expert advice.
29. I accordingly reject the Wrong Test and Passage Construction grounds of appeal.

Summary Judgment Approach, Expert Evidence and Collective Retainer

30. It is suggested the Master fell into error by wrongly conducting a mini-trial on the facts, dismissing the claimants factual case without hearing their evidence and relying instead on his own view of the way corporate transactions ought to be conducted. I do not accept these points. Firstly, insofar as the Master was considering what knowledge the claimants might reasonably be expected to acquire, that is primarily an issue of law, though of course it has to be considered in the factual context to which the evidence might be relevant. The factual case allegedly rejected was that pleaded by the Reply that the Passage had not been seen by any employee of the requisite seniority. But since the application was dealt with on the basis of constructive knowledge, the question was whether some relevant individuals ought reasonably to have read the Passage, not whether they did in fact do so.
31. It was argued that the claimants' case at trial would be that the transaction was conducted by way of a "light touch" by Mr. Selway on the basis of general instructions given to Eversheds and Mercer to advise proactively on whatever was necessary. Further, they sought to adduce expert evidence from an actuary, Mr. Punter, to the effect that a seller would not have expected to read the E&Y report himself but would "inevitably" rely on that being done by the relevant professional advisers. The Master had excluded that evidence, it is said wrongly. Thus it was said he was wrong to conclude that the Passage itself should reasonably have been seen by employees rather than those advisers, and further insofar as sub para (10)(b) is relied on, that the instructions given to the advisers either individually or collectively amounted to taking all reasonable steps to obtain the necessary expert advice.
32. So far as Mr. Punter's evidence is concerned, the Master's decision to exclude it was well within his discretion. It was produced in the course of the hearing, I was told because of concerns at the views it appeared the Master was forming during the first day. It was thus very late, and the defendant had no opportunity to respond to it. If the claimants had wished to rely on evidence as to the invariable method of conducting such transactions, there was no reason they could not have sought permission for it earlier. Further, the Master held that it would be unlikely to assist the court and would have been refused if applied for at the earlier CMC. I agree; the idea that there is an invariable way of dealing with documents received during a corporate transaction, let alone that the responsible employees of the seller invariably do not read such documents themselves, is incredible.
33. Mr. Selway's actual approach to the transaction was a matter of fact that Mr. Punter could not deal with. Other witnesses spoke to it, but there was no evidence from Mr. Selway and, as the Master held, no reason to think that he would give evidence at trial. Mr. Anderson submitted that his appearance could not be ruled out, but that is not enough. The claimants had had ample time to contact him and obtain his evidence if it would assist them, and there was no reason beyond wishful thinking why they might be more successful in future.
34. In relation to Eversheds, there was no evidence before the Master that they actually saw the E&Y report, or any part of it at all (Judgment, para 77). Although the claimants said it was inconceivable Eversheds had not seen it, they had no evidence that this was so either from their witnesses or disclosure. There was certainly no evidence of Eversheds having been specifically asked to review any part of the E&Y report, or of their having given any advice about it, or even having referred to it. In the absence of Eversheds file or evidence from Mr. Selway, there was no reason to think this would change before trial. As with Mr. Selway, the claimants had had ample time to obtain Eversheds file if they were going to, and of course had access to their own files of communication during the transaction. There was no reason to think that any further evidence would emerge from that source to assist the claimants. Without such evidence, the claimants had no real prospect, it seems to me, of establishing that it was any part of Eversheds' retainer to review or advise upon the Report, let alone the Passage. However wide that retainer was in relation to Project Rhinestone and however proactive they were expected to be, if they did not receive the report they could not be expected to advise on it.
35. The Master concluded further that even if Eversheds had seen the report, a general retainer in relation to a transaction would not bring with it an obligation to advise on pensions compliance issues such as the Passage recommended. I agree, though that would not prevent Eversheds being under an obligation by virtue of a suitably general retainer to have read the Report and drawn attention to the Passage so that instructions could be given as to whether to follow it up. This does not however make any difference to the result, given the conclusion, in my view correct, that the claimants could not show that Eversheds received the Report at all.
36. It follows that the claimants cannot rely on any retainer of Eversheds, alone or in combination with Mercer, to show either that they could not themselves reasonably be expected to have obtained knowledge from the Report or, for the purposes of subsection 14A(10)(b), that they took all reasonable steps to obtain expert advice.
37. In relation to Mercer, the evidence is that a copy of the pensions appendix to the E&Y report, including the actuary's letter containing the Passage, was found on Mercer's file. There is no copy of the whole report. The appendix is not accompanied by any covering letter or other document indicating how it came to be received. It is marked on the front with an indication of the file it relates to, but not otherwise annotated. There is no reference to it in any other document and in particular no indication that Mercer were specifically asked to, or did, give any advice in relation to it. The claimants' witnesses were not able to say how it was sent to Mercer or whether they were specifically asked to advise on it, though they did say that they regarded it as incumbent on Mercer to review and advise on anything they thought important in the context of the transaction. Mr. Edwards, the actuary at Mercer principally responsible for the transaction, said he had no recollection of receiving it but that it must have been either handed to him at a meeting or possibly sent under a compliments slip by the trustee, since if it had come from any other source, particularly from the purchaser's advisers, there would be a covering letter.
38. Clearly, someone must have considered the Report to the extent necessary to identify and separate the pensions appendix from it. In the absence of evidence that the Report had been seen by Eversheds, or that the appendix was sent to Mercer from some other source, this can only have been someone at the company or the trustee. The fact that this was done must substantially undermine any factual case that no consideration was given to anything other than the Executive Summary. At its highest, the claimants' case must be that although the appendix was separated out no employee actually read the Passage, and that they relied on Mercer by virtue of their general retainer to identify anything important in the pensions appendix and advise on it.
39. The Master held (para 80ff) that instructing the allegedly negligent adviser to advise was not sufficient to show that the claimants had taken all reasonable steps to obtain appropriate expert advice. In doing so, he must it seems to me have started from the assumption that the claimants were deemed to have constructive knowledge of the content of the Passage, since it is only at that point in the chain of constructive knowledge that any expert advice becomes necessary. That assumption is in my view correct; ascertaining the content of the Passage having been provided with the Report is something the claimants could reasonably be expected to do and not something that requires expert knowledge. The fact that the claimants may have chosen (as their case is) to hand the task of reading the pensions appendix over to a professional adviser does not therefore prevent them having constructive knowledge of the contents, because the proviso to s 14A(10) does not apply to that step in the chain.
40. That point was in my view open to the respondent to take on the appeal in any event, since it related to the Master's own reasoning. It was additionally made in support of the point raised in the Respondent's notice that a solicitor's advice on the law was not to be considered expert advice for the purposes of s14A(10)(b). I do not need to deal with that point in the light of the view I have taken on the claimants' own grounds, but I note among the authorities Mr. De Verneuil Smith cited the passage from the judgment in Henderson v Temple Pier Co Ltd [1998] 1 WLR 1540 at 1545:

"Even if the solicitor is to be regarded as an appropriate expert, the facts were ascertainable by him without the use of legal expertise. The proviso is not intended to give an extended period of limitation to a person whose solicitor acts dilatorily in acquiring information which is obtainable without particular expertise."

The same would apply in the case of an expert such as Mercer, to the extent that the relevant "fact" is only the content of the document the expert is asked to read. It cannot make a difference that the adviser is at fault in failing to pass information on at all to his client rather than merely delaying in doing so.

41. The claimants were thus fixed with constructive knowledge of the content of the Passage indicating a potential issue in relation to equalisation for which Mercer were known to be responsible and including the recommendation (to the purchaser) that legal advice should be sought. In my view the Master was plainly right to conclude that relying on Mercer to advise on this point could not be considered to be "taking all reasonable steps"; see his judgment at paras 83 and 85. If the issue had been thought about at all it would have been obvious that it was inappropriate to ask Mercer to advise on what may have been their own mistake.
42. Accordingly I reject the "Expert Evidence" and "Collective Retainers" grounds of appeal.
43. I recognise that this conclusion involves the apparent oddity that the claimants are fixed with the consequences of failing to take particular advice on an issue when, on their case, the question of the need to take such advice never actually came to their attention at all. But if that is so it would be because of a breach by Mercer of their retainer arising in the Project Rhinestone transaction, which cannot affect the operation of s 14A in relation to the matters complained of in this action. I make clear that I am not making any finding of such a breach; merely taking the claimants own case at its highest, as is necessary for the purposes of summary judgment.
44. I do not accept the argument that the Master impermissibly reached conclusions of fact that required consideration of evidence at trial, or that in reaching his conclusions he wrongly applied a "balance of probabilities" standard. It is true that at some points in his judgment he made reference to that standard (see for example para 66 above) but reading his judgment overall it is in my view clear that he was aware of and applied the standard of considering whether it was fanciful to think the claimants would establish at trial a case on the facts that would enable them to succeed (see for example the concluding sentence of para 66 itself).
45. He noted, justifiably in my view, the difficulty the claimants would have in establishing that the Passage was not in fact seen by any sufficiently senior employee in the absence of evidence from Mr. Selway, but his conclusions did not rest on any finding that it was so seen, and the criticism that he rejected the claimants factual case is therefore unjustified. His conclusions were throughout based on the finding that it ought to have been so seen, which was sufficient to fix the claimants with the constructive knowledge that the application before him relied on. For the reasons given above, in my view he was correct in that conclusion.
46. It was submitted that a conclusion on constructive knowledge generally required expert evidence, relying on a remark made in AB v Ministry of Defence at para 48. But that submission takes the remark referred to wholly out of its context (a discussion as to why the reported cases on difficulties of attribution of personal injury to alleged acts of fault by the defendant are mostly based on actual rather than constructive knowledge). It is not authority that judges cannot reach conclusions on constructive knowledge in general without expert assistance. The Master was in my judgment perfectly able to consider for himself whether it was reasonable to expect the claimants having been provided with a copy of the E&Y report to read it to a degree sufficient to notice the Passage.
47. I reject therefore the "Summary Judgment Approach" ground.
48. The appeal is therefore dismissed. I will list a hearing at which this judgment will be handed down, in Birmingham. There need be no attendance. I invite the parties to agree the order resulting; if they are unable to do so or there are matters arising that require a hearing they should contact my clerk with an agreed time estimate so that it can be listed.