Accoutant’s negligence — Duty of care to wife of client — Drafting of individual voluntary agreement for claimant’s husband — Claimant signing undertaking as to her interest in matrimonial home — Whether duty of care owed to claimant — Whether incorrect representations made — Claim dismissed
The defendants to the two actions were, respectively, a firm of accountants and S, who was at all material times either a partner in or consultant to the firm. The claimant’s husband instructed the firm to assist him in drafting an individual voluntary agreement (IVA). In that context, S sent a draft undertaking and confirmation to the claimant, asking her to confirm that she owned 50% of the interest in the matrimonial home, that she would co-operatewith its sale and would vacate the property when requested to do so. In a letter attached to the draft, S advised the claimant to seek independent legal advice before signing. In the event, she signed without doing so. Ultimately, no IVA was concluded. The husband then became bankrupt, with S acting as trustee in bankruptcy, and an order was made for possession of the matrimonial home. In the bankruptcy proceedings, the claimant’s share of the property was held to be 50%, largely on the basis of the undertaking. The husband brought proceedings against the firm and S in respect of alleged breaches of duty in advising him and the claimant on the IVA. The husband’s proceedings were almost entirelly unsuccessful despite several appeals, save that he obtained a stay of the possession order for a limited time.
The claimant brought her own negligence action against the firm, arguing that it had owed her a duty of care when acting for her husband in relation to the IVA. She contended that she owned more than 50% of the interest in the property, so that the undertaking and confirmation had been factually incorrect. She alleged that she had been induced to sign it on the basis of representations made by the firm and S as to its accuracy and its necessity in implementing the proposed IVA, in circumstances where S was aware that she would not seek independent legal advice.
The firm applied successfully to strike out that claim. The claimant sought permission to appeal against the strike-out, and further appealed against a decision of the registrar in the bankruptcy proceedings in refusing a renewed application for a further stay of the possession order and ordering her to pay S’s costs as respondent to the application.
Held: The appeals were dismissed.
(1) The letter attached to the draft undertaking could not be interpreted as giving rise to any contract between the claimant and the firm, let alone any contractual duty to advise the claimant. Nor did it contain any representations by S that the undertaking and confirmation was factually correct or necessary for the IVA, given that: (i) S had presented the claimant with the draft undertaking on the basis only of his own understanding of the beneficial ownership, taking the husband’s statement of affairs at face value; (ii) S had drawn attention to the need for independent advice; and (iii) he had given the claimant the opportunity to correct any misunderstanding. It had not been wrong for the firm or S to ask the claimant to sign a document that S understood to be factually correct and appropriate, even though it subsequently turned out to be incorrect and unnecessary. Nor had S represented that he was acting in the best interests of the claimant’s husband and his family, since his advice related solely to the mechanics and drafting of the IVA, not to its merits, and the clear intent was that the husband remained responsible for the contents of the document. An insolvency practitioner who acted for an individual in respect of an IVA proposal did not owe a duty to act in the best interests of that individual’s family simply by virtue of acting on the IVA. Furthermore, any representation would have been qualified by the reference to obtaining independent advice, making it impossible for the claimant to argue that such a representation was intended to be acted upon. Accordingly, the claimant had no real prospect of success in her negligence claim and the judge had been correct to strike it out pursuant to CPR 52.3(6)(a).
(2) The registrar’s conclusion that the claimant’s case against the firm was weak and did not justify the grant of a further stay of the possession order was one that he had been entitled to reach. It was open to him to award indemnity costs on the basis that the claimant’s application for a further stay was an abuse of process in the light of an earlier decision on a previous application by the claimant on exactly the same point and given the lack of any change in circumstances.
The claimant appeared in person and was represented by her husband, Mr RA Hurst; Alexandra Hilliard (instructed by Taylor Wessing) appeared for the defendant in the first appeal; the respondent in the second appeal did not appear and was not represented.
Sally Dobson, barrister
