Practice and procedure – Limitation of action – Fraudulent misrepresentation – Respondents purchasing property partially funded by S – Appellant instructed in connection with purchase – Appellant misleading respondents as to S’s involvement – Court deciding respondents held 50% of property on trust for S – Respondents seeking indemnity against appellant – Judge rejecting submission that claim statute-barred – Appellant appealing – Whether judge erring in law – Appeal dismissed
The first respondent acquired the registered long leasehold interest in commercial property at 306-308 Elgin Avenue, London W9. It was subsequently transferred to the second respondent company.
The appellant was a solicitor instructed in connection with the purchase. There was no dispute that part of the funds required for the purchase came from S, and the rest from the first respondent.
The appellant was subsequently found to have misled the first respondent to the effect that he would be the owner of the property and that the money that S provided was a loan from the appellant to assist with the purchase. However, unknown to the first respondent, the money had been paid by S himself.
On 14 January 2021, the county court concluded that the property was held initially by the first respondent, and then by the second respondent, on trust as to 50% for S, and ordered various accounts against the respondents. The respondents claimed over against the appellant on the basis of fraudulent misrepresentation. The respondents’ claims were upheld and the appellant was ordered to indemnify them against S’s claims and their own costs.
The court rejected the appellant’s argument that the respondents’ claim against him was statute-barred. The High Court dismissed the appellant’s appeal: [2022] EWHC 1712 (Ch).
The appellant appealed solely on the question of limitation. He contended that correspondence in 2009 between his limited liability partnership and the first respondent provided the latter with actual or constructive knowledge of the fraud. Therefore, when the respondents commenced their Part 20 claim against him in 2019, it was time-barred under to section 32(1) of the Limitation Act 1980.
Held: The appeal was dismissed.
(1) Where an action was based on the fraud of the defendant, section 32(1)(a) of the 1980 Act provided that the period of limitation did not begin to run until the claimant had discovered, or could with reasonable diligence have discovered, the fraud. That meant that in a claim based on the tort of deceit, where the limitation period was six years, the claimant had six years from when he discovered, or could have discovered, the fraud to bring an action.
In a fraud case, time started to run when the claimant had discovered enough to plead their case. Where limitation was raised as a defence at trial and dealt with after the judge had made a decision on the merits, the question of limitation had to be addressed by asking when the claimant discovered (or could reasonably have discovered) the fraud. The only relevant question was whether the action for that fraud was statute-barred, which could only be answered by asking when the claimant discovered the facts relevant to that claim. There was nothing in the authorities which required the court to confine its attention to the case as pleaded by the claimant: the question was when he discovered the essential facts of the fraud found proved by the court: Barnstable Boat Co Ltd v Jones [2008] 1 All ER 1124 considered.
On the facts, the 2009 correspondence was enough to show that the first respondent actually discovered in 2009 that instead of being a sole owner, it was being said that he was only a 50% owner. He knew that he was being threatened with an action for breach of trust; and he had discovered enough to know that if that claim was good, he must have been misled by the appellant into buying the property on a false basis. That would be enough to plead a claim for an indemnity, even if only on a contingent basis.
(2) The second question was how section 32(1)(a) applied where the appellant deceived the first respondent into entering into a transaction by telling two lies, and the first respondent discovered one of them, but not the other, more than six years before bringing his action. Limitation operated by barring particular causes of action.
The relevant question was whether the second lie gave rise to a different cause of action from the first lie. Taking the case where a vendor sold a house to a purchaser as an example. If, in order to induce the sale, the vendor told the purchaser two distinct and unconnected lies, they gave rise to different causes of action. In such a case, the purchaser would have six years from when he discovered (or could with reasonable diligence have discovered) the second statement to be untrue, even if his right of action on the first deceit was statute-barred. If both lies, although different in detail, were designed to conceal from the purchaser the same thing, the second lie would not give rise to a separate cause of action.
(3) Applying that principle to the facts, when the appellant told the first respondent that the source of the funds to purchase the house was a loan from him that could in due course be repaid, that was not a separate and distinct deceit from agreeing with the first defendant that he would be the sole owner. It was all part of the same deceit, designed to conceal S’s involvement in the purchase. The first respondent knew enough in 2009 to know that the appellant had deceived him into buying the property. The fact that he did not know all the details of the lies the appellant told him as part of that fraud did not matter: time started running in 2009 and his claim for the tort of deceit was statute-barred before it was brought.
(4) However, the judge’s order should be upheld on the basis of the appellant’s failure to disclose to the first respondent his personal interest in the transaction. A solicitor, being a fiduciary, owed a duty to his client to fully disclose any personal interest of his own in the transaction in which he was acting for the client. The judge was plainly correct to conclude that, on his findings, the appellant was in gross breach of that duty, which could not have been discovered from the 2009 correspondence and consequently was not statute-barred. Had the appellant fully disclosed his interest in the transaction, the first respondent would never have entered into it, and would never have come under any liability to S. That was enough to entitle the first respondent to an indemnity from the appellant.
Joshua Munro (instructed by Caytons Law LLP) appeared for the appellant; Faisal Saifee (instructed by TKD Solicitors) appeared for the respondents
Eileen O’Grady, barrister
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