Hughes & Ors v Richards (t/a Colin Richards & Co)

On a summary application, a claim may be struck out only where the court is certain that it is bound to fail. Where the law governing a professional adviser’s duty to an intended third-party beneficiary is uncertain and developing, the issue should ordinarily be decided after findings of fact at trial.

A professional adviser normally owes duties to the client, but limited exceptions may arise. The observations in White v Jones [1995] 2 AC 207 concerning inter vivos gifts did not plainly resolve a claim arising from an effective trust arrangement whose loss emerged only later. The pleaded claims of the parents and children, advanced in the alternative, could therefore proceed, subject to the rule against double recovery.

The parents retained the defendant accountant to establish and later monitor an offshore trust and Swiss company intended to fund their children’s education. The children were beneficiaries of the trust. The pleaded case alleged that unsuitable investment and tax advice, and later failures to monitor and advise on winding up the arrangements, caused the fund to be exhausted.

The parents and children brought alternative claims. The defendant applied to strike out or obtain summary judgment against the children under CPR 3.4 and Part 24. His Honour Judge Norris QC, sitting as a High Court judge, refused the application on 30 July 2003. The defendant appealed. The central issue was whether the children’s claim in tort against their parents’ professional adviser was bound to fail.

1. Appeal dismissed. Peter Gibson LJ, with whom Jacob LJ and Sir William Aldous agreed, held that the judge had been entitled to refuse summary disposal. The governing question was whether the children’s claim was bound to fail. It was not.
2. A professional adviser ordinarily owes a duty only to the client. The law recognises limited exceptions, including the tortious duty to intended testamentary beneficiaries identified in White v Jones [1995] 2 AC 207. The scope of any analogous duty to beneficiaries of an inter vivos arrangement remained uncertain and fact-sensitive.
3. The observations in White v Jones that an intended donee of an imperfect or misdirected inter vivos gift would have no claim where the donor could remedy matters were obiter. They did not obviously cover an effective trust arrangement in which the alleged loss of investment emerged years later. The availability and scope of a remedy for the parents, and the nature of the retainers, required factual findings.
4. Dean v Allin & Watts [2001] PNLR 921 and Woodward v Wolferstans did not provide a firm foundation for the children’s monitoring claim. They were factually distinguishable because they concerned situations in which the client had suffered no loss or could not sue. They nevertheless did not establish that the present claim must fail.
5. The parents’ claim would in any event proceed on substantially the same issues. The claims were expressly pleaded in the alternative, so there could be no double recovery. Public funding for the children was irrelevant and could not properly count against them under the Legal Aid Act 1988.

Jacob LJ also identified a narrower arguable basis: the parents may arguably have acted for the children as well as for themselves, so that the defendant may have owed the children a direct contractual duty rather than an extended duty to a third party.

• Court of Appeal (Civil Division) — dismissed the defendant’s appeal: [2004] EWCA Civ 266.
• High Court of Justice, Chancery Division, Birmingham District Registry — His Honour Judge Norris QC, sitting as a High Court judge, refused on 30 July 2003 to strike out or summarily dismiss the children’s claim.