Integral Memory Plc v Watts

A contractual obligation is ordinarily breached when performance is due. A later failure to remedy that breach does not create a fresh breach or restart limitation. A continuing breach arises only where the contract properly construed imposes an obligation requiring repeated performance. In negligence, damage is suffered when an actual liability is incurred, even if the liability is disputed, may later be compromised, or is subsequently quantified by settlement. A power to remit or reduce an existing liability does not make that liability contingent. For extended limitation under section 14A of the Limitation Act 1980, the claimant needs knowledge of the material damage and the facts causally relevant to the alleged negligence. Knowledge that the conduct was legally negligent is unnecessary.

Integral Memory plc appealed against an order of Deputy Master Matthews dated 10 August 2011 granting the defendant summary judgment under CPR Part 24. The claim concerned tax advice given by an accountancy firm in relation to a discretionary bonus scheme intended to secure National Insurance savings.

The claimant alleged that the defendant had owed a continuing contractual and tortious duty to advise that the scheme had ceased to be effective following a change in the law. It claimed interest and court costs paid to HMRC in October 2009, together with the cost of later tax advice. The Deputy Master held that the contractual and tort claims were statute-barred and that the claimant had the requisite knowledge for section 14A of the Limitation Act 1980. The central issues were whether there had been continuing breaches, when damage was suffered, and when the claimant acquired the relevant knowledge.

1. The appeal was dismissed. The Deputy Master had correctly granted summary judgment because the claims were statute-barred and there was no other compelling reason for trial.
2. On the contract claim, the retainer did not impose a continuing obligation to advise whenever the scheme's legal viability changed. Clause 5.2 concerned amendments to the terms of the engagement where legislation or other changes affected the professional services to be provided. It did not require the defendant to give repeated advice on whether the scheme had failed.
3. Even assuming a continuing duty had existed, the pleaded case was that the defendant should have given the relevant advice in or about 2003. The breach therefore occurred when performance was due. The defendant's subsequent failure to remedy that breach was not a further breach. The distinction between a single breach and a continuing obligation depended on the true construction of the contract.
4. The tort claim was also time-barred. The claimant incurred an actual liability to pay interest on unpaid National Insurance contributions well before 11 May 2005. The fact that HMRC's claim was disputed, that proceedings might succeed or fail, or that the liability might be settled or reduced did not make it contingent. Settlement quantified and compromised an existing liability; it did not create the damage.
5. The later claim for tax counsel's fees and court costs arose from the same alleged negligence. A claimant could not avoid limitation by claiming only losses arising within the limitation period where actual damage from the same wrongful acts had already been suffered.
6. For section 14A of the Limitation Act 1980, the claimant knew the material facts about the damage and the facts causally relevant to the alleged negligence by 2003, or could reasonably have acquired them with appropriate expert advice. Knowledge that the advice was negligent as a matter of law was irrelevant under section 14A(9). The documents were sufficiently clear for the issue to be decided summarily.

• High Court (Chancery Division): Deputy Judge Richard Sheldon QC dismissed the appeal against the summary judgment order dated 10 August 2011.