Walsh v Greystone Financial Services Ltd

A claimant cannot introduce a materially wider professional-negligence case at trial through an ambiguous pleading where the defendant reasonably understood the pleaded issue more narrowly and prepared its case accordingly. After expiry of limitation, an amendment adding a new breach of duty is permitted only if it arises from the same or substantially the same facts already in issue. Claims based on historic investment advice are subject to the primary limitation period unless fraud, deliberate concealment or deliberate breach of duty is proved. A criminal conviction is admissible in subsequent civil proceedings, but sentencing remarks are evidence only of facts on which the conviction was based and do not establish every factual or evaluative conclusion made by the sentencing judge. The claimant’s own knowing participation in misleading information supplied to HMRC defeated the remaining loss claims.

Mr Walsh claimed nearly £6m from Greystone, a regulated financial adviser, arising from his investment in film partnership tax schemes promoted by Mr Potter and recommended by Greystone’s employee, Mr Williams-Denton.

The claims alleged deceit and negligence in recommending the Zodiac, Aquarius and Edinburgh & Walsh schemes, and negligence and deceit in handling HMRC enquiries into the final scheme. Greystone relied on limitation and contended that Mr Walsh knew that false information was being provided to HMRC. During the trial, Mr Walsh also sought to advance a wider allegation that Greystone had failed to verify information in a recommendation letter.

The central issues were whether the wider allegation was within the pleadings or could be added out of time, whether the investment claims were statute-barred, and whether Mr Walsh knowingly participated in misleading HMRC.

1. Amendment and pleadings. The proposed failure-to-verify allegation was outside the scope of the existing pleading. The pleading had reasonably been understood as concerning failure to investigate whether the schemes were genuine. Permitting a broader case for the first time in opening submissions would create trial by ambush and require investigation, and potentially expert evidence, on matters not previously in issue.
2. Limitation. The proposed amendment added a new allegation of breach and therefore a new cause of action. Under Limitation Act 1980 s 35 and CPR r 17.4, the court had no power to permit it because it was arguably out of time and did not arise from the same or substantially the same facts. The claims concerning historic investment advice were complete when Mr Walsh invested and were outside the six-year period under s 2. Mr Williams-Denton had not deliberately concealed the risks or deliberately breached his duty, so s 32 did not postpone limitation. In any event, HMRC’s closure notices in October 2009 would have revealed the failure of the Zodiac tax planning to a claimant exercising reasonable diligence.
3. Investment claims. The deceit claims concerning the Zodiac, Aquarius and E&W schemes were not proved. Mr Williams-Denton’s recommendation that film partnerships could mitigate tax did not establish a deliberate falsehood or recklessness. The negligence claims concerning the investments were statute-barred. The court therefore dismissed all investment claims without deciding every issue of breach, reliance or loss.
4. Criminal conviction and sentencing remarks. Under Civil Evidence Act 1968 s 11, Mr Williams-Denton’s conviction was admissible and raised a rebuttable presumption that he committed the offence. The conviction established his involvement in the conspiracy to cheat HMRC through false diaries and related material. Sentencing remarks could assist in identifying the facts on which the conviction was based, but conclusions that went beyond those facts, including the sentencing judge’s wider view of when dishonesty began, were not admissible to establish the civil case.
5. HMRC enquiry claims. Mr Walsh knew that the 10-hour requirement was material, that the members had not genuinely carried out qualifying activities, and that Mr Potter was preparing misleading material to present to HMRC. He knowingly signed or supported false responses and accepted the submission of misleading activity records. That knowledge defeated his claims for criminal defence costs and loss of earnings. The action was dismissed in its entirety.