Jersey Unreported Judgments

Trust - reasons for refusing to strike out plaintiff's claims against 2nd and 3rd defendants and for refusing to order determination by way of preliminary issue.

[2015]JRC014

Royal Court

(Samedi)

22 January 2015

Before     :		Advocate Matthew John Thompson, Master of the Royal Court, sitting alone.
Between	Niall Iain MacFirbhisigh (as Curator of Barry Lionel Ching)		First Plaintiff
	Barbara Mary Marvell Ching		Second Plaintiff
And	C. I. Trustees and Executors Limited		First Defendant
And	Steven Gidley		Second Defendant
And	Gary Killmister		Third Defendant
And	Kevin Manning		Fourth Defendant

Advocate I. C. Jones for the Plaintiffs.

Advocate G. A. H. Baxter for the First and Third Defendants.

Advocate C. B. Austin for the Second Defendant.

The Fourth Defendant did not appear.

CONTENTS OF THE JUDGMENT

		Paras
1.	Introduction	1
2.	Background	2-6
3.	The Legal Test	7
4.	A Preliminary Objection	8-10
5.	The Arguments	11-25
6.	Decision	26-38
7.	Preliminary Issue	39

judgment

the master:

Introduction

1.        This judgment represents my detailed reasons for refusing to strike out the plaintiffs' claims against the second and third defendants on the basis that such claims are prescribed and also for refusing to order that issues of prescription should be determined by way of a preliminary issue. 

Background

2.        The general background to this dispute is set out at paragraphs 18 to 24 of my previous judgment in this matter reported at MacFirbhisigh (Ching)-v-CI Trustees and Executors Ltd [2014] (1) JLR 244.  I adopt that summary for ease of reference for the purposes of this judgment. 

3.        The effect of my earlier judgment was to strike out claims for deceit, piercing the corporate veil and the majority of the claims for dishonest assistance.  I however allowed a claim for dishonest assistance against the third defendant based on an investment in a bond.  At paragraph 68 of my earlier judgment I stated as follows:-

"In relation to the second allegation of dishonest assistance, which is in respect of the investment in the AIB Bond, this allegation is made in paragraph 369 of the amended order of justice.  It is implicit in the plaintiffs' proposed pleading that the statements the sixth defendant is alleged to have made on 31^st January, 2007, (as set out at paragraph 6.3 of the proposed amended pleading) were untrue.  In particular, it appears to be the plaintiffs' case that the statements that Mr and Mrs Ching were extremely wealthy with substantial assets in Jersey and Canada, that there was a share portfolio of between £750,000 and £1 million, that Mr and Mrs Ching had sufficient assets from which they could derive an income for at least the next two to three years, and the investments were be held for a considerable number of years were all untrue and known to be untrue by the sixth defendant.  On balance I consider that this allegation is an allegation that the Jurats might conclude at trial amounts to a transgression of ordinary standards of honest behaviour if they were satisfied, as alleged, that the sixth defendant was motivated by obtaining secret commissions for his benefit or for the benefit of the first defendant which was wholly owned by him.  I should make it clear that I am not concluding that the sixth defendant was dishonest.  Rather I am concluding in relation to this allegation, that I am not persuaded to exercise my jurisdiction to strike out the pleading and that I am satisfied that there is an arguable allegation of dishonesty that can be considered by a trial Court.  In making such an allegation however the final version of the plaintiffs' pleading should make it clear that the matters I have referred to above were untrue (and known by the sixth defendant to be untrue)."

4.        In this judgment I shall refer to this part of the plaintiffs' claim as the "Bond Issue". 

5.        Otherwise by my previous decision I allowed the plaintiffs to effectively start again and to re-plead allegations of breach of trust, negligence, misstatement and breach of fiduciary duty.  

6.        Subsequent to my decision, each of the defendants filed answers in response to what is now described as the plaintiffs' substituted order of justice being the complete recasting of the plaintiffs case as permitted by my previous judgment.  Each of those answers pleaded a prescription for defence for the first time. 

7.        The other relevant background information for the purposes of this application is that the first plaintiff was appointed as curator of Mr Ching on 25^th November, 2008.  The second and third defendants were not originally parties to the proceedings issued by the plaintiffs in 2009 and were only added as parties by an amendment approved by the court on 30^th November, 2011.  Both were also only served on 16^th December, 2011.  It was agreed by all parties that for the purposes of a limitation defence, an amendment to add a party does not relate back to the date of the original order of justice but only to the date upon which a defendant is effectively joined as a party i.e. when the relevant defendant is served.  The parties were right to take this approach which is consistent with the position found in the Supreme Court Practice 1999 ("the White Book") at paragraph 20/8/2 page 377 and 378.  It was therefore common ground that the second and third defendants were only joined as parties more than two years after proceedings were issued by the plaintiffs.  It was because more than three years had elapsed since the matters complained of and because the plaintiffs' claims were said to be claims in tort that the second and third defendants argued that the claims against them were prescribed. 

The Legal Test

8.        It was not in issue between the parties that I could strike out a claim that was clearly prescribed by reference to my decision in Classic Herd Limited v JMMB [2014] JRC 127 at paragraphs 2 to 5.  On appeal the entirety of the claim was struck out but there was no challenge to the basis upon which a prescribed claim might be struck out (see Classic Herd Ltd v JMMB [2014] JRC 217).  The same approach was taken in Re Woolley [1991] JLR Note 11c and Minories Finance Limited v Arya Holdings [1994] JLR 149. 

A Preliminary Objection

9.        As part of his submissions, Advocate Jones for the plaintiffs effectively raised a preliminary objection that the defendants could not make their application because it was an application that should have been made at the time of my earlier decision.  In summary Advocate Jones contended that the second and third defendants could have applied last January to strike out the plaintiffs' claims on the basis that they were already prescribed and therefore the plaintiffs should not have been allowed to amend their claims further. 

10.      I did not accept this objection.  This was because the argument before me on the last occasion was whether the proposed substituted order of justice arose out of the same facts and matters already pleaded in the order of justice issued in 2009 and the amendments to that order of justice which took effect from 30^th November, 2011.  The issue of whether or not the claims were prescribed was not raised before me.  While I accept it could have been raised, the application of the plaintiffs to amend was effectively to start again.  The defendants were therefore given leave to completely re-plead their case in response to the reformulated case of the plaintiffs.  It was in doing so that the defendants pleaded limitation.  It was not suggested by Advocate Jones, and I do not see how it could have been, that the second and third defendants were not entitled to plead prescription in response to a completely reconstituted order of justice.  If the second and third defendants were entitled to plead prescription, they were also entitled to ask the court, to determine at trial that the claims were prescribed.  If the defendants were entitled to argue at trial that a claim was prescribed they are also entitled to issue an application in advance of the trial having raised a properly pleaded issue of prescription, to ask the court to strike out the plaintiffs' claim.  Finally, the correct approach to any questions of an application being late in terms of seeking to strike out a claim, is that if such an application is successful but late, then I should consider what effect that might have on any costs orders already made or following on from a late strike out application.  Such scenario, which is a matter for another day, might lead the court in a particular case to deprive a party successfully striking out a claim, albeit late, of some of its costs or to pay some of the plaintiffs' costs because of the delay in bringing the application. 

The Arguments

11.      The arguments of the second and third defendants started by reference to the fact that they were not served until 16^th December, 2011.  Accordingly, as set out above, it was accepted by all parties that the allegations contained in the substituted order of justice related to matters that occurred more than three years before the second and third defendants were added as parties. 

12.      This was significant because the applicable limitation period for all of the claims brought against the second and third defendants was three years.  In the case of claims for negligence, negligence misstatement or breach of fiduciary duty the relevant limitation period runs from when damage was suffered.  In this case, in view of the complaints made by the plaintiffs that they were incorrectly advised to sell two properties and to transfer the proceeds of sale into trust, the loss occurred at the point of sale of the relevant assets.  Similarly, in respect of the allegation that Digger Shares should have been sold rather than sell properties and transfer the proceeds into a trust, a loss was occasioned when the defendants failed to act to sell the shares.  All of these matters occurred at least five years before the second and third defendants were served with the proceedings. 

13.      Furthermore the first plaintiff with effect from 2006 had a curator.  The second and third defendants therefore argued that the first plaintiff could have issued proceedings against the first, second and third defendants much earlier through the fourth defendant.  Any failure to pursue the second and third defendants therefore lies at the door of the fourth defendant, but did not justify allowing the claim to continue against the second and third defendants. 

14.      It was further contended that even if some form of empêchement applied to allow the first plaintiff to pursue the fourth defendant for not pursuing the second and third defendants, as Mr Ching had no means of challenging that decision because he was under a continuing curatorship, that position ceased once Mr MacFirbhisigh was appointed.  Mr MacFirbhisigh was therefore able to pursue the second and third defendants before he did and had the knowledge to do so.  Reliance was placed in particular on affidavits sworn by Mr MacFirbhisigh on 22^nd October, 2009, where he deposed that in 2006 he was aware that Mr and Mrs Ching had been told they needed to sell their property (paragraph 5) that he assisted in obtaining a better price for sale of the property.  (Paragraph 13), he helped sell a car, (paragraph 17) and that Mrs Ching was going to sell her flat in England.  

15.      Reliance was also placed on the fact that by June 2008 Mr MacFirbhisigh got involved in the affairs of Mr and Mrs Ching because Mr and Mrs Ching had received a letter saying the trustee was going to cease to make payments.  A meeting took place sometime in June 2008 (see paragraph 24 of Mr MacFirbhisigh's affidavit) Mr MacFirbhisigh further deposed at paragraph 28 that it was clear that Mr and Mrs Ching had relied on the advice of the second defendant to sell assets and to create a trust.  Around this time, Mr MacFirbhisigh also had some knowledge of a possible share lending deal in relation to the Digger Shares (paragraph 33). 

16.      Advocate Baxter relied upon this material to contend that Mr MacFirbhisigh, once he was appointed curator, had sufficient information in order to commence proceedings long before he did and certainly within three years of his appointment, and so the claims were time barred. 

17.      He made similar arguments in respect of the state of knowledge of Mrs Ching by reference to an affidavit she also swore on 22^nd October, 2009, where at paragraph 17 she recorded the advice given to her in 2006 that she had been advised to set up a trust, that she knew that she and Mr Ching owned some shares in Digger personally as distinct from other individuals, that she started to become concerned at some point that something was wrong, probably in 2006 and that the Digger Shares had value in 2008.  Again it was contended this was sufficient for the allegations now made to have been made much earlier in time. 

18.      Advocate Jones for the plaintiff in response firstly contended that the first plaintiff was under empêchement de droit against the second and third and fourth defendants for so long as Mr Manning was curator. 

19.      When the first plaintiff replaced the fourth defendant as curator the empêchement de droit ceased but was replaced with an empêchement de fait which confirmed until such time as the Royal Court ordered the Ching Trust to be terminated in 2010.  It was only at this point that the first plaintiff had sufficient information to review the advice given by the second and third defendants to decide whether or not to bring proceedings. 

20.      Alternatively, Mr Ching was under an empêchement de fait as regards the second and third defendants because it was they who had arranged for the appointment of the fourth defendant as curator.  In such circumstances the fourth defendant was neither going to challenge the advice given by the second and third defendants as to what the plaintiffs should do with their assets and was not going to consider issuing proceedings. 

21.      In respect of the second plaintiff, Mrs Ching, for the period Mr Manning was acting as curator, she was under an empêchement de fait by reason of her reliance on the defendants.  Such an empêchement ceased only after the trust was terminated and once relevant information was provided to the first plaintiff. 

22.      Advocate Jones relied on the fact in particular that after the first plaintiff was appointed as curator, information from the defendants was not readily forthcoming and ultimately an application had to be made to wind-up the trust to obtain trust records and information about the trust.  It was only when information about the trust arrived that the plaintiffs could then evaluate whether it was right to issue proceedings.  As an illustration Advocate Jones contended that even if the advice was wrong, the plaintiffs also had to consider whether any such advice had given rise to a loss.  That could only occur once access to information about the trust had been received and what assets it held.  He also contended that there was a difference between a party having sufficient information to issue proceedings and a party having concerns and asking questions to obtain information to try to protect its position.  Merely because a party was asking questions did not mean that a party was not under an empêchement until such time as questions were answered or information sought by the questions obtained. 

23.      Finally he argued that simply because Mr MacFirbhisigh knew that certain assets had been sold or transferred into trust did not mean that he appreciated that the original advice to do so was wrong.  Mr MacFirbhisigh's knowledge when he was approached by Mr and Mrs Ching was about difficulties they were having with the fourth defendant and the trust and a lack of information, not that advice was incorrect. 

24.      In reply Advocate Baxter posed the question as to what information it was that the plaintiffs did not have in order to issue proceedings.  The information they were seeking was about trust assets not about incorrect advice.  The allegations that incorrect or wrong advice had been given were not to do with a claim for breach of trust. 

25.      Advocate Austin for the second defendant also raised briefly that particular claims against his client were time barred.  Insofar as the plaintiffs complained that the second defendant had received improper payments in the amount of £28,245 from either the fourth defendant or the first defendant, the allegation is ultimately the second defendant received these payments through companies on his behalf.  At this stage of the proceedings I consider this is a matter for trial as to whether the plaintiffs are entitled to recover these sums. 

Decision

26.      I firstly deal with the claim against the third defendant for dishonest assistance.  During argument Advocate Baxter fairly accepted that he could not say when the plaintiffs first became aware that the third defendant had received any secret commission.  By reference to paragraph 68 of my earlier judgment, set out above, it was the combination of the third defendant allegedly making untrue statements and the possibility of the Jurats concluding that the third defendant was motivated to obtaining commissions that led me to allow this allegation of dishonest assistance to remain.  As Advocate Baxter was unable to say when the plaintiffs knew about the commission, he accepted it was not possible for me to conclude that the dishonest assistance claim was prescribed. 

27.      I now turn to deal with the allegations of negligent misstatement, negligence and breach of fiduciary duty.  I agreed with Advocate Baxter that the relevant limitation period for all of these claims is three years, as there is no evidence of a contract between the plaintiffs and either of the second and third defendants and no such contract is pleaded.  The factual matters underlying the claim also occurred more than three years before the defendants were joined as parties.  The key issue that I had to determine was therefore whether there was an arguable case of empêchement which would be a matter for trial or whether it was clear on the pleadings and the other material before me that a prescription defence would in any event succeed. 

28.      The leading judgment on empêchement is well known decision of the Court of Appeal of Boyd v Pickersgill & Le Cornu [1999] JLR 284 which follows the earlier decision of Public Services Committee v Maynard [1996] JLR 343.  At page 289 line 34, Beloff J. A. stated as follows:-

"In Maynard (4), this Court recognised that the maxim upon which the Appellant relies (para. 21 above) was part of the customary law of Jersey.  A comprehensive analysis was made of such classic commentators as Terrien: (Commentaries du Droit Civil du Pays et Duché de Normande) and Poingdestre: (Les Lois et Coustumes des l'lle de Jersey).  Southwell JA. said at p.354:

"We can summarise our conclusions so far on the application of the maxim in Jersey law in this way:-

(a)       it is common ground that the maxim can apply to the customary law of prescription of claims in contract up to 10 years, and is preserved by Article 2 of the 1960 law in relation to prescription of claims in tort up to 3 years;

(b)       the principle underlying the operation of the maxim in Jersey law was the practical impossibility of the Plaintiff being able to exercise his rights;

(c)       mere ignorance does not bring the maxim into operation;

(d)       where there is an impediment creating such a practical impossibility, of which ignorance is part, then the maxim may come into operation and prevent time running."

In those circumstances I see no reason, even were it open to us to do so, to review the authorities further."

29.      Beloff J. A. then continued at page 290, line 16 onwards to explore further what was meant by a practical impossibility.  He stated:-

"In my view, the epithet "practical" deployed in Maynard softens rather than strengthens the concept of impossibility.  It requires a consideration of what is in fact, not in theory, possible.  While ignorance of a cause of action does not per se trigger a suspension of the limitation period, it may, in appropriate circumstances, constitute or create a relevant impediment.  The issue before us is of what those circumstances may consist.

The test, as it seems to me, is whether the ignorance of the cause of action is reasonable in all the circumstances, reasonable that is both in respect of the facts giving rise to the cause of action and that a cause of action arises in such circumstances.  While ordinary cases of professional negligence, as in this case, may be against a lawyer for advice unconnected with court proceedings, it is difficult to see how it could ever be reasonable to assert that one was unaware that a lawyer owed obligations in contract.  There may be cases, however, where the law is uncertain e.g. in respect of an advocate's conduct connected in some way with court proceedings, where ignorance even of the possibility of a cause of action may be reasonable."

30.      Beloff J.A. also went on to explore the position where the lack of knowledge might be due to the defendant.  At page 291, line 45 onwards he stated as follows:-

"In Cartledge -v- E Jopling & Sons Ltd [1963] AC 758 (a personal injury case) Lord Pearce said at p.782 "Past cases have been decided on the basis that the time runs from the accrual of the cause of action, whether known or unknown and no case has been cited in which the plaintiff's lack of knowledge has prevented the time from running where that lack of knowledge has not been induced by the defendant".  This suggests that, at least where a defendant bears responsibility for a plaintiff's lack of knowledge, time may for limitation purposes stand still.

It may well not be practically possible for a layman to evaluate legal advice given by a lawyer.  It is certainly prima facie practically impossible for a layman to identify that he or she has not been given appropriate legal advice.  Nor would it be reasonable, in ordinary circumstances, to expect him or her to do so.  As a matter of policy it may indeed be asked, as the amicus put it, why a lawyer should be excluded from contractual liability for a hidden vice (i.e. failing to give advice) which manifests itself later?  The lawyer would become the author of his own good fortune.  As the Appellant observed, equally pithily:

"if you take legal advice in relation to a dispute with another person, and your lawyer on whom you rely negligently fails to advise you on an aspect of that dispute and you suffer loss as a result of that negligent omission then you could lose your right of action against your lawyer by expiry of the limitation period without ever knowing you had such a right"."

31.      On the facts Beloff J.A. included that there was no practical possibility of Mrs Boyd knowing of the failure of the respondents to advise her of the licitation procedure.  He then went on to state at page 292, lines 18 to 23 as follows:-

"Whether particular circumstances exist which dislodge that prima facie conclusion and show that the Appellant could reasonably have become aware (or even did become aware) of her right to sue the Respondents for breach of contract and the basis for such action more than 10 years before she instituted such proceedings will, I repeat, fall to be investigated, if at all, at any trial."

32.      Southwell J.A. in describing the test to be applied in respect of empêchement stated:-

"the test is to be applied objectively to a reasonable person in the particular circumstances in which the plaintiff was placed.  It is not a subjective test."

33.      Sumption J.A. stated:-

"I am satisfied that the law regards ignorance as reasonable as a matter of legal policy where there was no means by which the particular plaintiff could reasonably have been expected to discover the facts on which her cause of action was based."

34.      He then went on to differentiate ignorance of the facts from ignorance of the existence of a legal remedy. 

35.      Applying the above principles to the present case, I have reached the following conclusions. 

36.      Firstly, I am not satisfied that an empêchement de droit exists as against the second and third defendants.  Any empêchement de droit can only operate in respect of a claim against i.e. the fourth defendant Mr Ching's former curator.  This is because Mr Ching was able to act through Mr Manning.  His inability to act was limited to an inability to replace or sue Mr Manning as his curator.  An empêchement de droit in my judgment therefore only operates as between an interdict and a curator and not against the world at large. 

37.      However, I am of the view that it is arguable that Mr Ching was under an empêchement de fait as against the second and third defendants for so long as Mr Manning was acting as curator.  This is because I accepted it was arguable, as Advocate Jones contended, that because the fourth defendant was appointed as curator on the recommendation of the second and third defendants, that he was not going to act contrary to their advice or to take steps to pursue them for such advice being negligent.  I accepted such a failing may give a rise to a claim against the fourth defendant.  However, I did not consider it appropriate to determine on a strike out application that the scenario advanced by Advocate Jones on behalf of the plaintiffs of an empêchement de fait as between the plaintiffs and the second and third defendants could not succeed.  In my judgment whether an empêchement arises and therefore whether or not the defence will succeed can only be properly determined at a trial having heard evidence from each of the second, third and fourth defendants and the plaintiffs as well as legal submissions on the limits of any empêchement doctrine. 

38.      Once Mr MacFirbhisigh was appointed as curator, again I consider it a matter for trial for the Jurats to determine when a reasonable man in the position of Mr MacFirbhisigh had sufficient information in order to commence proceedings.  In particular, I consider it is a matter for the Jurats to evaluate when there was sufficient information known to the plaintiffs or which ought reasonably to have been known to enable them to conclude that the advice of the second and third defendants was wrong.  While it is clear that the plaintiffs were seeking information about the trust assets, including why an English Law trust had been set up and what had happened to the trust assets, it is a matter for the Jurats as to whether it was practically possible for a person in the position of the plaintiffs to evaluate the advice that had been given.  I am not therefore satisfied that the second and third defendants, despite the potential force of the rhetorical question asked in reply by Advocate Baxter, have reached the required threshold to enable me to strike out the plaintiffs' claims against the second and third defendants on the basis that such claims, other than dishonest assistance, are prescribed.  I do not consider it possible to answer what the plaintiffs knew or ought to have known about the advice that they received and what had happened in relation to assets without hearing from all the witnesses and without seeing all relevant documents.  The epithet of practical impossibility softens rather than hardens the test for an empêchement to apply.  There is also a danger of looking at matters through the prism of hindsight rather than the actual context in which individuals were operating.  The history of this litigation and matters leading to the proceedings is reasonably complicated and in my judgment not one that can be determined on a strike out application.  Rather it is best left for consideration at trial. 

A Preliminary Issue

39.      Finally, I was invited by Advocate Baxter to order the question of prescription to be determined as a preliminary issue.  I refused to do so.  This was firstly because again in the Maynard case Southwell JA at page 359 lines 5 to 19 warned against the dangers of ordering preliminary issues, in particular singling out points of law.  Similar concerns were expressed in X v Minister for Health and Social Services [2011] JLR 772.  In my judgment, if I had ordered a preliminary issue I would have been running the risks identified in Maynard and the X Children case.  The present matter is also one that has been running for a number of years.  Proceedings were issued in 2009.  The matter is also listed for trial later this year.  If I were to order a preliminary issue on prescription only, the trial dates would have to be vacated.  If the preliminary issue was unsuccessful, this would lead to a delay in any final decision.  Moreover, to resolve the preliminary issue appeared to me to require the Royal Court to look at much if not all of the evidence that the Royal Court would have to consider at trial.  Finally, the application has been brought late in the day.  Although I have ruled that the second and third defendants were entitled to bring this application, in deciding whether or not to order a preliminary issue, I have to take into account the fact that this a late application.  At this stage of the proceedings the right course is for the question of prescription to be resolved at trial. 

Authorities

MacFirbhisigh (Ching)-v-CI Trustees and Executors Ltd [2014] (1) JLR 244.

Supreme Court Practice 1999 ("the White Book").

Classic Herd Limited v JMMB [2014] JRC 127.

Classic Herd Ltd v JMMB [2014] JRC 217.

Re Woolley [1991] JLR Note 11c.

Minories Finance Limited v Arya Holdings [1994] JLR 149.

Boyd v Pickersgill & Le Cornu [1999] JLR 284.

Public Services Committee v Maynard [1996] JLR 343.

X v Minister for Health and Social Services [2011] JLR 772.