Giles v Rhind and another (No 2)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Sedley,Lord Justice Buxton |
| Judgment Date | 28 February 2008 |
| Neutral Citation | [2008] EWCA Civ 118 |
| Docket Number | Case No: A3/2007/0753 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 February 2008 |
[2008] EWCA Civ 118
Lord Justice Buxton
Lord Justice Sedley and
Lady Justice Arden
Case No: A3/2007/0753
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
DAVID RICHARDS J
Royal Courts of Justice
Strand, London, WC2A 2LL
Ms Georgia Bedworth (instructed by Messrs Hewitsons) for the Appellant
Mr Richard O'Dair (instructed by Direct Access Scheme) for the Respondent
Mr Rhind was not a party to this appeal.
Hearing date : 18 December 2007
Introduction
This appeal is brought by Mrs Caroline Rhind from the order of David Richards J ( [2007] 2 BCLC 531) giving permission to Mr Edward John Giles, the claimant in these proceedings, to amend his particulars of claim in this action, which concerns a transaction alleged to fall within s 423 of the Insolvency Act 1986 (Transactions defrauding creditors). (I refer to the Insolvency Act 1986 below as “the 1986 Act”). It raises a point of general importance about the postponement under s 32 of the Limitation Act 1980 (“the 1980 Act”) of the limitation period where the defendant has deliberately concealed relevant facts.
The application before the judge was an application for permission to amend. The relevant principles about the amendment of pleadings are not in doubt. A party should have permission to amend his pleadings so that all the issues between the parties can be effectively adjudicated upon, provided that any prejudice to any other party caused by the amendment can be compensated in costs and provided that the public interest in the efficient administration of justice is not significantly harmed: see per Peter Gibson LJ in Cobbold v Greenwich LBC [1999] EWCA Civ 2074 at [10]. Permission to amend should be refused if the claim, as amended, would fail to disclose a viable cause of action either because it is statute-barred or because the ingredients required for the relevant cause of action are not made out. On this appeal, Mrs Rhind contends that the amendments should have been refused on the ground that they were statute-barred. She also contends that the amendments would be unfairly prejudicial to her.
The respondent, Mr Giles, commenced these proceedings on 27 January 2006. The application to amend was made on 24 January 2007. The applicable limitation period for the claim in the original proceedings and that sought to be raised by amendment is twelve years. Unless some exception applies, that twelve year period must be calculated from the date on which the transaction sought to be impugned (“the new claim”) was entered into and in addition Mr Giles became a person who could bring a claim under s 423 of the 1986 Act in relation to it. Thus the new claim is statute-barred and leave to amend should not have been given unless (a) the cause of action arose on or after 24 January 1995, or (b) the start of the limitation period arose at some earlier date but was postponed until on or after that date by virtue of s 32 of the 1980 Act, or (c) s 35 of that Act applies. Ss 32 and 35 of the 1980 Act are set out below. The effect of the judge's order is that by virtue of s 32 of the 1980 Act the new claim can be added to the claims in the existing proceedings even though it arose before 24 January 1995.
The background in outline
Mr Giles is a judgment creditor of Mr Rhind, having obtained judgment for damages to be assessed in 2000. The circumstances leading to the claim which culminated in this judgment are described in the judgment of this court on a preliminary issue: see Giles v Rhind [2003] Ch 618. No purpose would be served by my setting out those circumstances in any detail. It is sufficient to say that Mr Giles and Mr Rhind were the principal shareholders and directors of a company called Surrey Hills Foods Ltd (“SHF”). By a shareholders' agreement dated 11 June 1990, Mr Rhind owed Mr Giles an express duty of confidence in relation to the affairs of SHF. In March 1993 Mr Rhind resigned as a director and sold his shares but as part of the termination agreement he agreed with Mr Giles personally not to breach his obligation of confidence set out in the shareholders' agreement. In breach of that obligation of confidence, Mr Rhind diverted business from SHF to a company which he owned between about 1993 and 1994.
By order dated 24 October 2003, damages were assessed at approximately £1.5 million. In 2004 Mr Giles obtained a charging order over Mr Rhind's home (“the Property”). The Property was subsequently sold and the proceeds of sale after the payment of a secured debt amounted to £628,437 of which £127,000 was paid to Mr Giles in reduction of his judgment debt.
In these proceedings, Mr Giles seeks to challenge the allocation of the proceeds of sale of the Property as between Mr Rhind and Mrs Rhind. This allocation is governed by a deed apparently dated 2 April 1992 (referred to below as “the deed”), which provided that Mr and Mrs Rhind owned the Property in the proportions of 20:80 respectively, rather than in equal shares. In his original claim Mr Giles alleges that the deed was executed in 1998. It is clear that, if the Property were owned in equal shares, Mr Giles would have received a large proportion of the proceeds of sale. Accordingly, in these proceedings Mr Giles contends that the deed is a sham, or alternatively it was a transaction in fraud of creditors to which s 423 of the Insolvency Act 1986 (“the 1986 Act”) applies. We are only concerned with the cause of action that Mr Giles asserts under s 423 of the 1986 Act. I propose to disregard the claim based on the allegation that the deed is a sham.
Mr Giles' original case was that the deed was in fact executed in 1998. By the amendment, he seeks to introduce a case that the deed was in fact executed in 1992 or 1994. As I have said, the date that it bears is 1992.
Introduction to the relevant statutory provisions
(i) ss 32 and 35 of the 1980 Act
S 32 of the 1980 Act as now in force provides:
“32 Postponement of limitation period in case of fraud, concealment or mistake
(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 purposes 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.
(3) Nothing in this section shall enable any action—
(a) to recover, or recover the value of, any property; or
(b) to enforce any charge against, or set aside any transaction affecting, any property;
to be brought against the purchaser of the property or any person claiming through him in any case where the property has been purchased for valuable consideration by an innocent third party since the fraud or concealment or (as the case may be) the transaction in which the mistake was made took place.
(4) A purchaser is an innocent third party for the purposes of this section—
(a) in the case of fraud or concealment of any fact relevant to the plaintiff's right of action, if he was not a party to the fraud or (as the case may be) to the concealment of that fact and did not at the time of the purchase know or have reason to believe that the fraud or concealment had taken place; and
(b) in the case of mistake, if he did not at the time of the purchase know or have reason to believe that the mistake had been made.
(4A) Subsection (1) above shall not apply in relation to the time limit prescribed by section 11A(3) of this Act or in relation to that time limit as applied by virtue of section 12(1) of this Act.
(5) Sections 14A and 14B of this Act shall not apply to any action to which subsection (1)(b) above applies (and accordingly the period of limitation referred to in that subsection, in any case to which either of those sections would otherwise apply, is the period applicable under section 2 of this Act).
Section 32(1) deals with the postponement of the limitation in a number of situations, including where the defendant or his agent has concealed relevant facts. The effect of s 32(2) is to enable a person to be treated as having concealed information. These circumstances can occur when, and only when, he has deliberately committed a breach of duty in circumstances where it is likely to remain undiscovered some time. For there to be a deliberate breach of duty for the purpose of s 32, the defendant must have known of his wrongdoing ( Cave v Robinson Jarvis & Rolf [2003] 1 AC 384.
S 35 of the 1980 Act as now in force provides:
“35 New claims in pending actions: rules of court
(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced—
(a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were...
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