(2011) EWCA Civ 547 www.bailii.org/ew/cases/EWCA/Civ/2011/547.html

The claimant’s attempt to rely on Law Society v Sephton to postpone the accrual of his cause of action against the defendant solicitors was unsuccessful. The claim was time-barred.  

The claimant was the brother and personal representative of Mrs Eason (the deceased) who died intestate in 1997. Under the intestacy, her estate was divisible between her two brothers (one third each) and one sixth each to the two children of her deceased sister.

The deceased had made a will in 1993 leaving her entire estate to Mrs Hannah but it had not been properly executed and was held to be invalid in 1999. The claimant then instructed the defendant solicitors to act for him in relation to the administration of the estate.  

Mrs Hannah asserted a right independent of the will based on a constructive trust or estoppel and sought a declaration that she was entitled to the whole estate. She was unable to pursue the proceedings when her legal aid was revoked in 1999.  

In 2001 the claimant made payments totalling £40,000 out of the estate to himself and his brother. Shortly afterwards Mrs Hannah issued proceedings claiming to be entitled to the whole estate. The deceased had given her house to her in 1993 subject to a licence giving the deceased the right to live there for the rest of her life. In order to obtain public funding for modifications to the house when the deceased became ill, Mrs Hannah agreed to transfer the property back to the deceased on the understanding that the entire estate would go to Mrs Hannah on her death. She obtained such an order in 2002 and the brothers were each ordered to pay Mrs Hannah £20,000.  

The claimant contended that the defendant firm should have warned him not to distribute any money to the beneficiaries given the claim which had been asserted by Mrs Hannah which had not been withdrawn at the time.

The defendant argued that the claim was time-barred since the cause of action accrued at the date when a payment was made out of the estate other than to Mrs Hannah, the true owner.  

The judge below held that the claim was time-barred because the limitation period began to run in February 2001 when the first payment was made out of the estate, more than six years before the issue of the claim form.

On appeal, the claimant argued that a claim by way of proprietary estoppel is inchoate until the court determines what remedy is appropriate. Even if Mrs Hannah had a strong case on the merits, her entitlement, if any, against the estate would not be known until the court made an order. He argued that such a claim was similar to a claim under the Inheritance (Provision for Family and Dependants) Act 1975 which would be fully contingent upon the court’s discretion exercised at the time of the hearing and would not be based on rights which had accrued before the death of the deceased.  

The Court of Appeal held that such an analysis was unnecessary since the court could reach the same conclusion as the judge without considering the nature of the third party claim of which the claimant had notice at the time of the distribution. Unlike the position in Law Society v Sephton where the Law Society had not made payments of its funds at any time relevant to limitation, the claimant’s act in releasing funds from the administration account was enough to constitute damage sufficient to made good his cause of action in tort against the defendant firm. The fact that Mrs Hannah had not yet proved her claim, which was based on facts which had already happened, was not a relevant contingency and time began to run when the claimant altered his legal position for the worse as a result of the distribution.  

Comment

This is the latest in a long line of decisions rejecting attempts to rely upon the House of Lords decision in Law Society v Sephton to argue that a cause of action in tort did not accrue at the date the act or omission of the negligent professional occurred. The stance taken by the court in the present case makes clear that a broad brush approach will be taken to this issue and claimants should not be encouraged to run complex arguments about the nature of contingent rights. Recent examples of the courts’ refusal to apply Sephton to other factual scenarios include Nouri v Marvi concerning a fraudulent transfer of property where the Court of Appeal rejected the claimant’s argument that he did not suffer damage until he ceased to be the registered proprietor of the property. Earlier this year, Edehomo v Bowling & Co Solicitors clarified a matter not addressed directly in Nouri, namely that the limitation period for a negligence claim against solicitors relating to a conveyance begins to run on exchange of contracts and not on completion of the sale of the property. There is, however, a question mark remaining over whether a solicitor could owe a continuing duty up to the date of completion to verify the identity of its clients.