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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Biggs & Anor v Sotnicks (A Firm) & Ors [2001] EWCA Civ 1356 (31 July, 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1356.html Cite as: [2001] EWCA Civ 1356

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SOUTHAMPTON DISTRICT REGISTRY
(His Honour Judge Anthony Thompson QC
(sitting as a deputy High Court judge))

		Royal Courts of Justice Strand London WC2 Tuesday 31st July, 2001

1. LORD JUSTICE SEDLEY: Lady Justice Arden will give the first judgment.
2. LADY JUSTICE ARDEN: This is a renewed application by the claimants for permission to appeal against the order of His Honour Judge Anthony Thompson QC dated 22nd February 2001. By his order the judge gave judgment for the defendants and dismissed the action with costs on the ground that the action was statute-barred.
3. I need to say a little about the circumstances in which the claim was made in these proceedings. The first six defendants are a former firm of solicitors and its partners. The firm no longer exists. The seventh defendant is a former employee of the solicitors. He is a conveyancing executive, and so far as the court is aware he was a conveyancing executive at the material time.
4. Basically the ground of appeal is that the judge should have held that time did not begin to run in this case until a date within six years of the commencement of proceedings on 20th April 1999 so far as a deceit claim is concerned, and so far also as a negligence claim is concerned.
5. I can take the facts from the summary which the applicants have provided in their skeleton argument, inserting dates from the appeal bundle.
6. Mr Grimble, the son of the claimants applicants Mr. and Mrs Biggs, persuaded his elderly parents to part with possession of the title deeds to their home. This was in about 1986. He then used the deeds to borrow £40,000 from the Halifax Building Society. He falsely represented to the Halifax that he had bought the property for £50,000. Mr Froud, the seventh defendant, employed by Sotnicks solicitors, acted for the son and Mr Froud told the parents that he could act them too. He also led them to believe that he was a qualified solicitor, though nothing may turn on this.
7. The parents were induced to sign a transfer dated 29th May 1986 in favour of Mr Grmble. Mr Froud drew up a lease for five years and a promissory note for £40,000 to be signed by Mr Grimble. These documents were given to the parents to protect their interests. Mr Biggs in his statement refers to a meeting with Mr Froud in 1986. He knew that Mr Froud came from Sotnicks. Mr Grimble used the monies he raised from Halifax in his business. He has since gone bankrupt and there is no chance of getting any money back from him.
8. In 1989 the son remortgaged the property to the Nationwide Building Society. The first the parents knew about the remortgaging was when they received notice of possession proceedings from the Nationwide. The Nationwide now seek possession of their home. It was at this point in time, as I understand it, that the parents discovered for the first time the true nature of the documentation which they had been led to sign.
9. His Honour Judge Anthony Thompson QC gave a long and thorough judgment. I will endeavour to summarise the salient points for the purposes of this permission application.
10. The judge held that the primary limitation period for the negligence claim against Sotnicks commenced on 29th May 1986. Mr Brian Hurst, who appears for the claimants on this application, does not seek to challenge that date.
11. Secondly, the judge dealt with section 14A of the Limitation Act 1980, with which we are not now concerned on this application. The judge concluded that the claimants, that is Mr and Mrs Biggs, had sufficient knowledge in June 1992 to commence proceedings.
12. The judge went on to hold that if he was wrong about that, there was no way in which it could be said that the limitation period did not start to run until April 1996, that was the last date for the start of the limitation period given that the proceedings were not commenced until 20th April 1999 (see section 14A of the Limitation Act 1980).
13. As to the claim in deceit, the judge held that all the pleaded allegations in fraud were made before the transaction was entered into in May 1986. Moreover, that there was nothing on the solicitor's conveyancing file, that was ultimately obtained in March 1987, that really added to or suggested there was anything further which came to the knowledge of the claimants which would suggest that their knowledge was not complete at an earlier point in time. I read the judge's judgment as meaning that the judge considered that their information was complete at June 1992 (see generally page 24, lines 18 to 22 of the transcript of the judge's judgment).
14. The judge referred to a letter which the claimants' solicitors had written to the Nationwide in June 1992, when they stated that they believed there had been a fraud on the claimants "certainly on the part of Mr Grimble" (see page 25 of the transcript).
15. The judge held that certainly by the end of 1992 whthe applicants knew that their son was bankrupt, that their position was not protected and that the promissory note was worthless. The judge could not see anything which emerged from Sotnicks' conveyancing file, when it was later obtained, which added any matter relied upon (see the judge's judgment page 26 of the transcript). Accordingly all the material information was with them in June 1992.
16. I should go back and explain what had happened between the commencement of the possession proceedings by the Nationwide and service on the claimants and the commencement of the proceedings. The claimants sought legal advice from their solicitors in 1992. They instructed the same firm throughout. Their solicitors suspected fraud by the son. They wrote to Mr Froud's new firm, whom Mr Biggs had traced, and this new firm falsely told them that Mr Conway, a partner in the firm of Sotnicks, had acted for the Biggs, but the Biggs knew that this was not the case. The solicitors then tried to find the conveyancing file. They were led a merry dance in their search for this file, and in the end they eventually located it through approaching a successor firm to Sotnicks. The judge held that they should have approached the Law Society for assistance at a much earlier stage.
17. The only documents which turned up when the solicitors obtained the conveyancing file were essentially two memos between Mr Conway and Mr Froud, in the first of which Mr Conway told Mr Froud that the firm could not act in the transaction in question and in the second of which Mr Conway gives some views on the drafting of a tenancy agreement regarding the property in issue in these proceedings, a property known as 24 Khartoum Road.
18. There are a few other documents in the file. They are documents which concern the mortgaging of the property to the Halifax, but none of these documents show that the Halifax had the full nature of the transaction explained to them.
19. The claimants' case is that Mr Froud participated in falsely representing to the Halifax that the transaction was a sale, and the claimants submit that it is to be inferred that Mr Grimble kept the monies advanced by the Halifax. Mr Froud was known to have stood by while Mr Grimble misrepresented the effect of the promissory note and the lease to his parents. But initially the claimants thought that Mr Froud was negligent rather than fraudulent. The solicitors for the claimants were not sure who employed Mr Froud.
20. Another firm of solicitors told the claimants' solicitors that Mr Froud had been employed by Sotnicks at the time. In July 1992 they were also told that the parents had been represented by Mr Conway of Sotnicks at the time (see the correspondence to which I referred earlier).
21. So the claimants' solicitors took the view that they should see the conveyancing file to which I have referred before any proceedings were begun. They located Mr Froud, but he misled them as to who employed him and as to his role. Ultimately, as I have explained, the conveyancing file (such as it was) was obtained but not until March 1997. The claimants' solicitors did not ask the Law Society for help in locating the file, though as solicitors they would have known that this was a sensible enquiry to make. Indeed, they were reminded of that probability by the Nationwide in September 1993. The claimants say that they did not know they had a cause of action in deceit against any of the defendants until they obtained the conveyancing file in March 1997. The file is said to show that Mr Froud knew the transaction with the Halifax was for the purpose of raising money. As I have said, there is no document on the file which we have seen which shows that Mr Froud disclosed to the Halifax either the fact that the Biggs had not really agreed to a sale at all or, secondly, that the proceeds of sale were not to be handed over to Mr and Mrs Biggs but were to be kept by Mr Grimble and invested by him in his business.
22. At this point it may be convenient if I read the relevant paragraphs of the claimants' statement of case.

4. "On or about a date which cannot be particularised in or about May 1986, Mr Grimble introduced his parents to Mr Froud as his solicitor. At all material times, Mr Froud was aware that the parents perceived him to be a practising solicitor engaged as a partner, servant or agent in the firm of solicitors acting on behalf of Mr Grimble. At all material times Mr Froud adopted, held out or represented himself as a solicitor by conducting himself in the transactions particularised as follows at all times knowing that the parents perceived him to be and were conducting themselves upon the basis that he was a solicitor in practice.

5. In order to assuage the concerns of the parents as to the risk inherent in the provision of the deeds of the residential property, to assist Mr Grimble the latter represented to the parents the following facts and matters:-

(i) The business presently trading as Goodies Restaurant was a successful business venture likely to succeed in the future.

(ii) Nothing was known to Mr Grimble which vitiated the holding out of his opinion as to the prospects of success of Goodies Restaurant.

(iii) Any sum borrowed could be repaid from the sale of the restaurant trading as Goodies, and that the parents would be entitled to effect such a sale if this should become necessary.

(iv) The parents would be protected by an arrangement to be entered into and to be effected or perfected by a commercial arrangement involving the lease of the property, the promissory note as notional loan as particularised below.

(v) Mr Froud was to protect their interests by advising them as to the nature and effect of the transaction, and as to its effectiveness to protect their position.

(vi) Mr Froud was to act in their interests in the transaction.

6. At all material times, Mr Froud knew that these representations had been made by Mr Grimble and, further, Mr Froud adopted the same by conduct, inter alia by carrying on in the transaction having been present when the statements and representations above were made to the parents by Mr Grimble.

7. In the premises, Mr Froud and Sotnicks did or purported to act as solicitors representing the interests of both Mr Grimble and the parents in the proposed transaction by which the parents provided to Mr Grimble the deeds of a residential property for the purposes of raising a loan in the sum of and limited to £40,000."

23. The statement of case then goes into the various documents that were executed and then:

"9. Notwithstanding the assurances representations and warranties made by Mr Grimble and/or Mr Froud, the purported arrangement was incapable at any material time of providing any or any adequate protection to the parents to secure their interest in the residential property or to protect them from the adverse financial consequences of business failure on the part of Mr Grimble or his partners and in particular to protect the parents from the taking of possession or sale of the said property by any mortgagee or chargee of the residential property.

10. By purporting to act on behalf of the parents and by the advice statements and representations or warranties made by Mr Froud (at all material times in order to induce the parents to enter into the transaction to assist Mr Grimble) the parents will say at trial:-

(i) Mr Froud was negligent.

(ii) The statements and representations were made by Mr Froud in the knowledge that they were not true or alternatively were made recklessly indifferent as to whether the statements were true or false.

In support of the averment that Mr Froud knew that the statements were not true or materially inaccurate, the parents will rely on the content and terms of correspondence between Mr Froud and solicitors instructed on behalf of the parents in which Mr Froud falsely stated that the interests of the parents were represented by one John Conway, then a partner, servant or agent of Sotnicks and that he himself took no part in the giving of any advice or making of any representations to the parents other than those which were ratified by Mr Conway."

24. I turn now to the appellants' submissions.
25. The appellants rely on sections 32(1) and (2) of the Limitation Act 1980 which I will read:

"(1) Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either-

(a) the action is based upon the fraud of the defendant; or

(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or

(c) the action is for relief from the consequences of a mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.

(2) For the purpose of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty."

26. The appellants submit with respect to section 32(1)(a) that it was not until March 1997 that they knew or could with reasonable diligence have discovered the fraud on the part of Mr Froud. They did not know his role, his honesty was not suspected and there was no evidence of any holding out of authority. The appellants submit that the claimants needed to know the scope of Mr Froud's authority. They say that there was no correspondence on Sotnicks' notepaper to Mr and Mrs Biggs and Mr and Mrs Biggs never saw Mr Froud at Sotnicks' offices. They submit that it was not the approach of the Law Society that helped them recover the conveyancing file. They say that it was only after repeated badgering of the solicitor in the successor firm that the file was ultimately extracted. They say that they knew at all material times where the relevant partners had gone and where Mr Froud was to be found. They submit that constructive knowledge is not relevant because the new solicitors could not discover the causes of action unless and until they had obtained the conveyancing file.
27. As regards section 32(2), the applicants rely on the concealment by Mr Froud in July 1992 on the fact that he was acting on behalf of Mr and Mrs Biggs by suggesting that it was Mr Conway not Mr Froud who had acted for the Biggs. This lead to the concealment by Mr Froud of the fact that in so acting whether he was acting within the scope of his authority. On the other hand, the Biggs knew that it was not true that Mr Conway had acted for them.
28. The applicants say that the six-year limitation period in which to bring a claim in negligence was also postponed and did not begin until July 1992 because of this correspondence and false response by Mr Froud when asked about the transaction back in 1986 by the claimants' solicitors.
29. Mr Hurst has shown the court an opinion which he has recently written for, as I understand it, the purposes of public funding. He states that the judge may not have applied the right test. He submits that if it is possible that the files or the dishonesty of Mr Froud might not have come to light before 20th April 1993, then the proceedings were not statute-barred. He submits that the files show that Mr Froud was dishonest in his dealings with the parents and that Mr Froud was concealing the scope of his authority.
30. I turn now to my conclusions. This is an application only for permission to appeal and thus the question is whether or not there is a real prospect of success. If permission is granted it does not by any means follow that the appeal will be allowed, that is a matter for another day. One of the functions of an application such as this is to enable the court to filter out any appeal which is bound to fail.
31. In my judgment, the argument that by virtue of section 32(2) the claim in negligence was resuscitated in July 1992 and that the six-year period only then began to run is, in my judgment, bound to fail. Mr Hurst properly accepts that the limitation period of negligence began on 28th May 1996 when the Biggs signed the transfer. Six years from that date takes one to 29th May 1992, and it was only after that date that Mr Froud wrote the letter which misled the claimants' solicitors. It is not possible, in my judgment, to use section 32 to resuscitate a claim which has already become time-barred.
32. That takes me to the deceit claim. The deceit claim is a claim based on Mr Froud's participation in the early negotiations with the Biggs, and it is said that the other defendants are vicariously responsible for his deceit. It is clear that this is a claim which has difficulties. It is clear that the efforts to obtain the conveyancing file, which were ultimately made in 1997, could have been made earlier so that the papers that became available, such as they were, would have been available earlier. However, it is arguable that that file would not have been obtained by April 1993, which is the last date when the cause of action in deceit could arise. As I see it, there is no finding on that point which has been made by the judge.
33. However, I do not myself think that the absence of the file was an inhibition on starting proceedings if adequate evidence existed by then of Mr Froud's dishonesty. Mr Froud was a conveyancing executive. The name of Sotnicks firm appears on the transfer document which was registered at the Land Registry and which was available for inspection as from April 1987, and would certainly have been available to the claimants' solicitors in 1992.
34. Mr Hurst has argued before us, and it is his submission, that it was not clear that Mr Froud was acting within the scope of his authority. He submits, as a technical matter, that it was only Sotnicks as a firm who could hold out Mr Froud. It was not possible for them simply to rely upon the representation by Mr Froud as to his authority. In that connection Mr Hurst relies on Armagas Ltd v Mundogas SA (The Ocean Frost) [1986] AC 717. That is cited in support of article 77 in Bowstead and Reynolds on Agency, 16th ed (1996), at page 405 which states:

"A disclosed principal is not bound by an act of his agent which is outside the scope of the agent's implied or apparent authority, unless the principal in fact authorised the agent to do the particular act or ratified it. This article is subject to the provisions of articles 86 to article 89."

35. It is clear that this principle is not unqualified, see for example First Energy (UK) v Hungarian International Bank [1993] 2 Lloyd's Rep 194. ButSo what Mr Hurst submits is that this was such an unusual situation, to find a conveyancing clerk acting for both buyer and seller of a property, that there was no ostensible authority here and therefore the claimants' solicitors simply had to see the file before they could start proceedings based on the deceit, or indeed of the negligence of the seventh defendant.
36. To make that submission good he says that it would be axiomatic that a solicitors' firm could not act for both sides in a conveyancing transaction. However, that submission has not been backed up by any professional guidance applicable in 1986. The submission was not made in the skeleton argument or in the opinion. I have only had the opportunity of looking at the current edition of Cordery on Solicitors (10ed) (2001) and this only sets out the Solicitors' Practice Rules 1990. While the matter is not utterly clear, these rules suggest that a solicitor can act for buyer and seller with the written consent of both parties (see page 3/291B which sets out Rule 6 of the Solicitors Practice Rules). There is no basis for thinking that there was any more stringent rule in 1986 and the narrative in this case suggests that Mr and Mrs Biggs were indeed invited to and did indeed consent to Mr Froud acting for them as well as for their son Mr Grimble, albeit on their case on false representations.
37. So as I see Mr Hurst has not on this application made good his submission that the conveyancing transaction was one outside the ostensible authority of a conveyancing clerk. On that basis, the court must ask itself whether the vicarious liability of the partners could have been asserted in 1992 prior to receiving the actual conveyancing file. As I see it, there would be no real prospect of success in arguing on appeal that they did not have sufficient information at that stage to plead a claim if sufficient evidence of Mr Froud's dishonesty existed, because they knew from the transfer itself that Sotnicks' name had been put on to the transfer document and, moreover, they knew from their own clients that Mr Froud had invited them to instruct him, which they had accepted.
38. So that takes me to the last of the points. This point is that it is Mr Hurst's submission that there was insufficient information as to Mr Froud's dishonesty in 1992, or at any point prior to April 1993, to enable proceedings to be begun. I would observe that the pleading which I have set out already does not rely upon anything that is the subsequently found on the conveyancing file. However, the way Mr Hurst seeks to put the point is that the file confirmed what the claimants did no more than suspect, because it demonstrated that there was an absence of proper disclosure to the Halifax Building Society of the true nature of the transaction.
39. There are obviously difficulties in this argument. The court has seen a statement by Mr Gleeson of the claimants' solicitors that the conveyancing file does not dislose exactly what the solicitors knew or did not know back in 1992, and there is the sorry history of the correspondence from 1992 to 1997 which the judge sets out in his judgment and which I have not set out in this judgment.
40. However, in my judgment, despite that, there is a sufficiently arguable point that the claimants did not, either themselves or through their solicitors, have sufficient knowledge of Mr Froud's dishonesty prior to 1993 to start the limitation period running, notwithstanding section 32(1), and that on that basis the claim against all the defendants would be in time.
41. Accordingly, on the deceit claim, but on the deceit claim only, I would give permission to appeal against the judge's judgment.
42. LORD JUSTICE SEDLEY: I agree.
ORDER: Application for permission to appeal granted. (Order not form of approved judgment)