Evans & Anor v Pricewaterhousecoopers LLP

At the strike-out or summary-judgment stage, a limitation defence should not dispose of a claim where the claimant has a realistic, non-fanciful argument on accrual or knowledge. A pure contingency is not ordinarily actionable damage, but actual damage may arise when a claimant acquires a materially defective package of rights or changes legal position. Whether a tax-advice scheme caused immediate damage or only a later loss may depend on whether tax liability was then inevitable or remained contingent on a future decision by revenue authorities. A court may permit correction of a mistaken defendant under CPR rule 19.5 where the mistake concerns the business entity intended to be sued, provided the statutory conditions are met and prejudice is limited.

The claimants sought damages in negligence and for breach of statutory duty arising from tax advice concerning a capital-gains tax avoidance scheme. The defendant applied under CPR rules 3.4(2) and 24.2 to strike out the claim or obtain summary judgment on the ground that it was statute-barred.

The court also considered the defendant’s application to amend its defence to plead that the LLP did not exist when the earliest advice was given, and the claimants’ application under CPR rule 19.5 to substitute the predecessor partnership as defendant. The central limitation issue was whether actionable damage arose when the scheme was completed in 2001 or only when the tax liability became a reality in 2013 or 2014.

1. Strike-out and summary judgment. The applications involved substantially the same question: whether the claimants had a realistic prospect of resisting the limitation defence. The claim could not be struck out where the limitation arguments were arguable and depended on facts and evidence to be tested at trial.
2. Long-stop limitation. Under Limitation Act 1980, section 14B, any breach occurring before 14 December 2001 was outside the 15-year long-stop. The claimants accepted that advice given before that date could not found a negligence claim.
3. Accrual of damage. The court accepted that it was clearly arguable that the relevant breach continued until the claimants were appointed trustees on 18 December 2001, because the scheme was not complete when the shares were sold and the defendant might have been under a duty to warn them not to complete it. It was also realistically arguable that the causes of action did not accrue until 17 December 2013, when the Canadian revenue authority indicated that the United Kingdom could tax the gain. Until then, the tax liability remained a risk dependent on a future agreement between revenue authorities. The court distinguished cases in which a claimant immediately acquired a defective asset or legal position: those cases involved actual, though not necessarily quantifiable, damage.
4. Knowledge-based extension. Alternatively, the negligence claim had a realistic prospect of being saved by section 14A. For the purposes of the application, the claimants’ evidence that they lacked knowledge of any possible tax liability until March 2014 had to be accepted. The adequacy of that evidence was a matter for trial.
5. Amendment and substitution. The defendant was granted permission to withdraw admissions and amend its defence to plead its incorporation date. The resulting prejudice was minor. The claimants were permitted to substitute the predecessor partnership under rule 19.5(3)(a), since they had intended to sue the business entity that supplied the advice and the mistake concerned the entity’s description rather than the underlying identity of the business.
6. The claimants’ proposed further amendments were refused or left for reconsideration after they elected whether to substitute the partnership. Further directions and a case-management conference were ordered.

Not stated in the judgment.