Davenhall & Anor v Blackstone Franks & Co & Anor

On a Civil Procedure Rules 1998, Part 24 application, the court asks whether the claim has a real or reasonable prospect of success at trial. The application is not a trial, even where trial preparations are advanced. In a professional-negligence claim involving loss of a tax-relief opportunity, breach may be assumed for the application. The claimant must show a real prospect of proving that, if properly advised, they would have adopted an alternative transaction and invested funds. Where that transaction depended on finance, the claimant must also show a real or more than speculative chance of obtaining the necessary funds. A defective or re-focused case may proceed where it remains coherent with the pleaded case and is supported by existing evidence. Its ultimate success is a matter for trial.

The appellants alleged that their accountants negligently failed to advise them that an investment in Finecare was unsuitable for capital-gains-tax roll-over relief and failed to advise them about alternative investment structures.

The High Court, on an application under Part 24, concluded that the appellants could not prove loss because they had been unable to finance an alternative structure before the statutory deadline. The appellants sought permission to appeal and relied on new points concerning the possible sale or charging of their home and the possibility of obtaining partial relief.

The central issue was whether the existing material disclosed a real or reasonable prospect that the appellants could prove loss at trial.

1. Appeal allowed. The application for permission to appeal was granted, the appeal was allowed, the relevant paragraphs of the order below were set aside, and repayment of £1,000, or the agreed figure, with interest was ordered. Costs below were awarded to the defendants in the case, and appeal costs to the claimants in the case.
2. Per Lord Justice Rix, a Part 24 hearing determines whether the claimant has a real or reasonable prospect of success at trial. It is not a trial, even where pleadings, witness statements and expert reports have been prepared. Breach of duty was assumed for the purpose of the application.
3. The appellants had to show that, on the balance of probabilities at trial, they would have spent money on an alternative roll-over-relief structure. If that structure required additional finance, they also had to show a real or more than speculative chance of obtaining the necessary funds, applying the principle in Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 1602.
4. The evidence, including evidence generated outside the litigation indicating willingness to consider selling the family home, was sufficient to disclose a real prospect that the appellants might have invested a substantial sum, even if they could not have obtained complete relief. Their failure to proceed in 1998 raised substantial issues for cross-examination but did not conclusively determine what they would have done earlier.
5. The court distinguished Aylwen v Taylor Joynson Garrett [2002] PNLR 1. That case concerned fresh evidence and a new case on appeal. Here, the appellants relied on evidence already before the court, and their alternative case was not incoherently inconsistent with the original pleading. The ultimate assessment was for trial on witness evidence, not on affidavits hurriedly prepared for the Part 24 application. Lord Justice Dyson agreed with Lord Justice Rix.

• Court of Appeal (Civil Division): appeal from the judgment of Sir Oliver Popplewell in the High Court, Queen’s Bench Division, dated 31 May 2002. Permission to appeal granted and appeal allowed.