![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Chancery Division) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Seaton & Ors v [2012] EWHC 735 (Ch) (23 March 2012) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2012/735.html Cite as: [2012] 1 WLR 3636, [2013] 1 All ER 29, [2012] EWHC 735 (Ch) |
[New search]
[Context]
[View without highlighting]
[Printable RTF version]
[Buy ICLR report: [2012] 1 WLR 3636]
[Help]
CHANCERY DIVISION
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
(1) DENNIS MICHAEL SEATON (2) MICHAEL GRANT (3) KELVIN GRANT (4) FREDERICK WAITE JUNIOR (aka JUNIOR WAITE) (by his litigation friend MS BRENDA DICKENS) (5) BRENDA DICKENS (as Personal Representative of the Estate of Patrick Wait (deceased)) |
Claimants |
|
- and - |
||
(1) ANTHONY SEDDON (2) PAUL WOOLF (3) ANTHONY PAUL CUNNINGHAM (4) DAVID PATRICK IRVING (5) MOHAMMED YUSEF (6) LLOYD FERGUSON (formerly of the musical group called ?The Mighty Diamonds?) (7) FITZROY SIMPSON (formerly of the musical group called ?The Mighty Diamonds?) (8) SPARTA FLORIDA MUSIC GROUP LIMITED (9) MUSIC SALES LIMITED (10) UNIVERSAL/ISLAND MUSIC LIMITED (formerly Island Music Limited) (11) RYDIM MUSIC LIMITED (12) EMI MELODIES LIMITED (formerly Leosong Copyright Service Limited) (13) G MINOR MUSIC (14) STRICTLY ROCKERS MUSIC (15) EATON MUSIC LIMITED |
Claimants |
____________________
____________________
____________________
Crown Copyright ©
Mr Justice Roth :
Introduction
The parties
Dennis Seaton - 2 March 1967
Michael Grant - 7 January 1969
Kelvin Grant - 9 July 1971
Fredrick Waite Jnr - 23 May 1967
Patrick Waite - 17 May 1968
Accordingly, all five were children (i.e. under 18) at the time of the events with which the claim is concerned.
The present applications
The factual chronology
"Musical Youth
This letter is to confirm our instructions to you on behalf of our sons to represent them in all dealings of a legal nature.
We confirm that you may take instructions on a day to day basis from the band's manager Mr. Tony Owens with regard to the boys' affairs. You are to keep us informed by correspondence to us on all matters of a major nature affecting the boys' careers."
In his evidence, Mr Seddon states that "it is quite common for a music industry solicitor representing a band or solo artist to deal on a day to day basis with the manager." And he adds: "It was almost inevitable in this case, where the Band's members were themselves so young."
"The Company hereby as beneficial owner sells transfers and assigns by way of sale transfer and assignment of copyright both present and future to the Publisher (subject to the terms hereof) all rights of whatsoever nature now known or which may hereafter come into existence (including without limiting the generality of the foregoing the so-called public lending right therein whether now existing or hereafter created) in and to each and every musical composition (including title words and music therof [sic]) to the extent of the Writer's authorship thereof (which are hereafter together called "the "Works") that Writer shall have written conceived arranged composed or originated heretofore (save only in respect of such existing works as the Company shall have notified the Publisher in writing prior to signature hereof) and that the Writer shall write conceive arrange compose or originate during the Term … whether alone or in collaboration with others and without prejudice to the generality of the foregoing the entire copyright throughout the Territory and the right to secure and renew and extend the copyright in the Works throughout the Territory in the name of the Publisher to hold the same unto the Publisher absolutely for a period of six years from the date of the expiration of the Term hereof in all parts of the Territory such period being referred to as the Exploitation Period."
"At the expiration of the Exploitation Period the copyright in the Works is hereby automatically reassigned to the Company."
The Sparta Florida Agreement
"As I recall, I was informed by Toney Owens soon after the single was released that a dispute had arisen as to who was entitled to be credited for "Pass the Dutchie". As I soon discovered, the issue revolved around who had the rights to Jackie Mittoo's compositions (was it Sparta Florida or a different company?); whether "Full Up" had in fact been written by Jackie Mittoo or by somebody else; and whether "Full Up" had in fact been used in the writing of "Pass the Kouchie" (which was disputed by The Mighty Diamonds). The position was complicated, but there appeared to be at least two possible scenarios in which it might turn out that "Pass the Dutchie" was an infringement of copyright (that is, if the statutory clearance process had not been gone through with the correct rights owners).
My recollection is that Toney Owens was concerned that the existence of this dispute could be detrimental to the success of the record and could therefore prove a setback to the Band's nascent career. I believe we were both of the view that the situation needed to be sorted out, so as to remove any possible impediment to the future exploitation of the song.
The rights holders for "Pass the Kouchie" in Europe were two companies, called The Company of the Two P(i)eters B.V. and The Company of the Two P(i)eters Limited (for convenience I will refer to them together as "the Two P(i)eters"). I do not now recall precisely how I was put in contact with them, but it came about through Toney Owens and the upshot was that I agreed to represent the Two P(i)eters in proceedings against Sparta Florida and others, with a view to establishing that "Pass the Dutchie" should be credited solely to them. The proceedings were issued in November 1982, and eventually resulted in a settlement agreement dated 27 September 1984, …"
"(1) The parties hereto have been involved in a dispute arising from the success of a song entitled "Pass the Dutchie" (hereinafter called "Dutchie")
…
(3) The parties hereto agree that Dutchie is an adaptation of Kouchie"
"The copyright of Kouchie and Dutchie shall be treated as having derived from two equal contributions so that one half of each such copyright shall be deemed to have derived from [those claiming to be responsible for Dutchie] and the other half of each such copyright shall be deemed to have derived from those responsible for writing 'Full Up'."
i) Sparta Florida shall own the copyright in Dutchie and Kouchie for the world (save that for the Benelux countries the copyright shall until 31 December 1987 be owned jointly by Sparta Florida and Pieters BV), and to the extent necessary the other parties will assign such copyright in those works as they may own to Sparta Florida;
ii) the sums relating to Kouchie or Dutchie frozen or held in escrow were to be shared equally as between Sparta Florida and the Two Pieters;
iii) for the future, royalties were to be shared equally as between Sparta Florida and Pieters BV.
"In respect of all royalties having arisen in the United Kingdom and Eire one half shall be paid to Sparta Florida and one half shall be paid in the U.K. to Messrs Woolf Seddon the solicitors acting on behalf of Peters B.V. and Peters U.K. whose receipt shall be a full valid and binding discharge of Sparta Florida's obligations in respect of such sum."
"I spoke with Dennis Seaton shortly after the inspection of documents at Seddons' offices and told him that I had seen a copy of what is now referred to as the Sparta Florida Agreement. I told him that I felt that there might be the possibility of a claim for recovery of unpaid publishing income but that it would need to be investigated and proper advice taken in due course. We decided at the time to leave the consideration of whether the band had a possible publishing claim until we had dealt with the record company issue because we all felt it would be too much to take on at one time."
"we agreed that we would have to park the issue in relation to any possible claim for publishing royalties until we had dealt with the record sales issue. I told Michael and Kelvin [Grant] about this shortly after I spoke to David, and they agreed with the plan."
The Claim against Woolf Seddon
"At various material times, among other things:
(i) The First to Fifth Defendants (inclusive) permitted/countenanced/facilitated/suffered the exploitation of the Works in circumstances where they did not, or alternatively could not have honestly consider(ed) such exploitation to be for the benefit of their clients.
(ii) In consequence of the terms of the [Sparta Florida] Agreement and/or the Defendants' conduct associated with the [Sparta Florida] Agreement the Defendants:-
a. failed to account to the Claimants/Mr Waite/Mr Waite's Estate in respect of certain assets/property belonging to them; and/or
b. converted to their ownuse
such assets/property; and/or
c. deliberately concealed from the Claimants and Mr Waite/Mr Waite's Estate facts relevant to their right of action; and/or
d. infringed copyright in the Works."
The claim form goes on to refer to:
"the Defendants' unlawful conduct, variously grounding [sic] allegations of fraud / breach of fiduciary duty / breach of trust / breach of contract / inducing a breach of contract / unlawful interference / conversion..."
The original Particulars of Claim
i) breach of fiduciary duty or trust in that Woolf Seddon acted for the Two Pieters and assisted in the making of the Sparta Florida Agreement while acting for the members of MY, and received and distributed in accordance with the terms of that agreement publishing royalties derived from Dutchie that belonged to the band, and also earned fees, which profits they hold on trust for the band: paras 15-16; further, in para 17 it is alleged that these breaches were committed fraudulently;
ii) knowingly or recklessly making a false representation, whether expressly or by silence, that the band enjoyed no, or alternatively had no legitimate claim to any, rights in Dutchie with the intention that the band should act or rely on it or suffer in consequence: para 18;
iii) inflicting harm by unlawful means or unlawful interference with trade. Three allegations are pleaded under this head as follows at para 23:
"(i) In consequence of the herein aforesaid acts of the First to Fifth Defendants and/or of the Ninth and/or Tenth Defendants, under the terms of the Sparta Florida Agreement one or more of the Sixth to Eighth Defendants and the Eleventh to Sixteenth Defendants paid to the other monies that should have been paid by them to the Claimants/Patrick Waite (as the case may be).
(ii) The said acts were, or would be if they caused loss, actionable as against the First to Fifth Defendants and/or of the Ninth and/or the Tenth Defendants at the suit of one or more of the Sixth to Eighth Defendants and the Eleventh to Sixteenth Defendants.
(iii) The First to Fifth Defendants and/or [of] the Ninth and/or the Tenth Defendants thereby deliberately caused loss and damage to the Claimants/Patrick Waite (as the case may be) by interfering with the freedom of one or more of the Sixth to Eighth Defendants and the Eleventh to Sixteenth Defendants in a way that was unlawful as against the said parties with the intention of injuring the Claimants/Patrick Waite (as the case may be)."
The governing principles
(a) Pleading fraud
"2.8 In addition to the matters which PD 16 requires to be set out specifically in the particulars of claim, a party must set out in any statement of case:
(1) full particulars of any allegation of fraud, dishonesty, malice or illegality;
(2) where any inference of fraud or dishonesty is alleged, the facts on the basis of which the inference is alleged."
"The claimant must specifically set out the following matters in his particulars of claim where he wishes to rely on them in support of his claim:
any allegation of fraud,
the fact of any illegality,
details of any misrepresentation,
details of all breaches of trust,
notice or knowledge of a fact…"
"(1) … every pleading must contain the necessary particulars of any claim, defence or other matter pleaded including, without prejudice to the generality of the foregoing,
(a) particulars of any fraud, … on which the party pleading relies;
(b) where a party pleading alleges any condition of mind of any person, whether … any malice, fraudulent intention or other condition of mind except knowledge, particulars of facts on which the party relies; …"
"(1) Particulars of claim must include –
(a) a concise statement of the facts on which the claimant relies;
…
(e) such other matters as may be set out in a practice direction."
Sub-paragraph (e) accordingly imports the requirements of PD 16 set out above.
"On the other hand it is clear that as a general rule, the more serious the allegation of misconduct, the greater is the need for particulars to be given which explain the basis for the allegation. This is especially so where the allegation that is being made is of bad faith or dishonesty. The point is well established by authority in the case of fraud."
"Of course, the allegation of fraud, dishonesty or bad faith must be supported by particulars. The other party is entitled to notice of the particulars on which the allegation is based. If they are not capable of supporting the allegation, the allegation itself may be struck out. But it is not a proper ground for striking out the allegation that the particulars may be found, after trial, to amount not to fraud, dishonesty or bad faith but to negligence."
"… in the present case, … , the pleader does expressly allege bad faith because paragraph 37 pleads that "the motives of the Bank in acting as pleaded above were improper and unlawful and in the premises the Bank acted in bad faith" and the paragraph sets out particulars in support of that allegation. In my opinion those particulars are not consistent with mere negligence.
I further consider that if a plaintiff clearly alleges dishonesty or bad faith and gives particulars, the statement of claim cannot be struck out under rule 3.4(2)(a) because the facts he pleads as giving rise to an inference of dishonesty or bad faith may at the trial, after a full investigation of the circumstances, be held not to constitute proof of that state of mind. If a defendant applies to strike out an action on the ground that the plaintiff has no prospect of adducing evidence at the trial to establish the case which he pleads the application should be brought under rule 3.4(2)(b) or rule 24.2(a)(1)." [emphasis added].
(b) Summary judgment
"i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
"It is important that a judge in appropriate cases should makeuse
of the powers contained in Pt 24. In doing so he or she gives effect to the overriding objectives contained in Pt 1. It saves expense; it achieves expedition; it avoids the court's resources being used up on cases where this serves no purpose, and I would add, generally, that it is in the interests of justice. If a claimant has a case which is bound to fail, then it is in the claimant's interests to know as soon as possible that that is the position. Likewise, if a claim is bound to succeed, a claimant should know that as soon as possible."
Woolf Seddon's application: the existing Particulars of Claim
(a) The fraud allegation
"the precise amount of skill, labour, etc required to sustain a claim to originality cannot be defined, but must be a question of degree, to be determined on the facts of each case."
"Had I been conscious of any conflict, I would not have accepted instructions to act for the Two P(i)eters . I accepted those instructions because I believed that it was in the interests of the Band for the dispute[2] to be resolved and I did not perceive any conflict between them.
The fact is that there was no such conflict. "Pass the Dutchie" was an adaptation of a pre-existing song and as such the publishers royalties were properly payable to the rights holders of the pre-existing song. That was my understanding at that time, and I believe it was correct."
(b) Limitation
"… if on the date when any right of action accrued for which a period of limitation is prescribed by this Act, the person to whom it accrued was under a disability, the action may be brought at any time before the expiration of six years from the date when he ceased to be under a disability or died (whichever first occurred) notwithstanding that the period of limitation has expired."
The period of six years from the time the members of MY attained their majority expired long before the issue of the claim form in 2010. Accordingly, the fact that they were under a disability by reason of their infancy when the causes of action accrued does not overcome any limitation defence. A distinct issue arises under section 28(1) as regards the fourth claimant, because of hismental
illness. I shall address that separately below.
(i) Breach of trust/fiduciary duty
"1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action -
(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to hisuse
.
….
(3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued. …"
"The plaintiffs' case is that the defendants obtained the mortgage advance dishonestly by statements (in the report on title) which they knew to be untrue and consequently held the money on a constructive trust to return it to the plaintiffs immediately on receipt. Payment of the money to or by the direction of the borrower on completion of the sub-purchase instead of to the plaintiffs was a breach of this constructive trust. As counsel for the plaintiffs acknowledged, it was not a breach of the trust which would have arisen in the ordinary way from the receipt of the advance money for payment of the amount due on completion. That trust was discharged according to its terms, but its existence assumes that the defendants acted honestly; on the plaintiffs' case it never came into being but was displaced ab initio by the constructive trust in their favour."
"Regrettably, however, the expressions 'constructive trust' and 'constructive trustee' have been used by equity lawyers to describe two entirely different situations. The first covers those cases already mentioned, where the defendant, though not expressly appointed as trustee, has assumed the duties of a trustee by a lawful transaction which was independent of and preceded the breach of trust and is not impeached by the plaintiff. The second covers those cases where the trust obligation arises as a direct consequence of the unlawful transaction which is impeached by the plaintiff."
A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another. In the first class of case, however, the constructive trustee really is a trustee. He does not receive the trust property in his own right but by a transaction by which both parties intend to create a trust from the outset and which is not impugned by the plaintiff. His possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the property to his ownuse
is a breach of that trust. Well-known examples of such a constructive trust are McCormick v Grogan (1869) LR 4 HL 82 (a case of a secret trust) and Rochefoucald v Boustead [1897] 1 Ch 196 (where the defendant agreed to buy property for the plaintiff but the trust was imperfectly recorded). Pallant v Morgan [1952] 2 All ER 951, [1953] Ch 43 (where the defendant sought to keep for himself property which the plaintiff trusted him to buy for both parties) is another. In these cases the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property.
The second class of case is different. It arises when the defendant is implicated in a fraud. Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. In such a case he is traditionally though I think unfortunately described as a constructive trustee and said to be 'liable to account as constructive trustee'. Such a person is not in fact a trustee at all, even though he may be liable to account as if he were. He never assumes the position of a trustee, and if he receives the trust property at all it is adversely to the plaintiff by an unlawful transaction which is impugned by the plaintiff. In such a case the expressions 'constructive trust' and 'constructive trustee' are misleading, for there is no trust and usually no possibility of a proprietary remedy; they are 'nothing more than a formula for equitable relief ': Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073 at 1097, [1968] 1 WLR 1555 at 1582 per Ungoed-Thomas J.
The constructive trust on which the plaintiffs seek to rely is of the second kind. The defendants were fiduciaries, and held the plaintiffs' money on a resulting trust for them pending completion of the sub-purchase. But the plaintiffs cannot establish and do not rely upon a breach of this trust. They allege that the money which was obtained from them and which would otherwise have been subject to it was obtained by fraud and they seek to raise a constructive trust in their own favour in its place.
"We do not have to decide this question, because it is sufficient that the plaintiffs cannot show that the defendants have no reasonably arguable limitation defence. In my judgment we should treat the defendants as having an arguable limitation defence of which they should not be deprived by amendment."
"The expression 'fiduciary duty' is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties. Unless the expression is so limited it is lacking in practical utility. In this sense it is obvious that not every breach of duty by a fiduciary is a breach of fiduciary duty …."
"This leaves those duties which are special to fiduciaries and which attract those remedies which are peculiar to the equitable jurisdiction and are primarily restitutionary or restorative rather than compensatory. A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations …."
"1) The following time limits under this Act, that is to say—
(a) the time limit under section 2 for actions founded on tort;
….
(b) the time limit under section 5 for actions founded on simple contract;
….
shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before 1st July 1940."
"In my view, it is fundamentally to misunderstand the judgment of Millett LJ to suggest that he would have approved the view that a claim for damages brought against a fiduciary, even alleging a dishonest breach of that duty, would be free from limitation altogether. In my view, Millett LJ's treatment of Nelson v Rye [1996] 1 WLR 1378 demonstrates that point and demonstrates beyond peradventure that the question whether equity was exercising its exclusive as opposed to its concurrent jurisdiction does not supply the definitive answer as to whether equity applied the statute by analogy."
"In the light of those cases, in our view, it is possible to simplify the court's task when considering the application of the 1980 Act to claims against fiduciaries. The starting assumption should be that a six-year limitation period will apply – under one or other provision of the Act, applied directly or by analogy – unless it is specifically excluded by the Act or established case law. Personal claims against fiduciaries will normally be subject to limits by analogy with claims in tort or contract (1980 Act, ss 2, 5; see the Seguros case [2001] 1 WLR 112). By contrast, claims for breach of fiduciary duty, in the special sense explained in Mothew's case, will normally be covered by s 21. The six-year time limit under s 21(3) will apply, directly or by analogy, unless excluded by s 21(1)(a) (fraud) or (b) (class 1 trust)."
"Section 21(1) provides an exception to the ordinary limitation rule that civil actions are barred after six years. Such an exception needs to be clearly justified by reference to the statutory language and the policy behind it. It is important therefore to keep in mind the reasoning behind the exception. It is not about culpability as such; fraud may not be sufficient to avoid the ordinary rule.(1) It is about deemed possession: the fiction that the possession of a property by a trustee is treated from the outset as that of the beneficiary. In the words of Millett LJ, the possession of the trustee is "taken from the first for and on behalf of the beneficiaries" and is "consequently treated as the possession of the beneficiaries". An action by the beneficiary to recover that property is not time-barred, because in legal theory it has been in his possession throughout.
1. See Paragon at p 411b, Clarkson v Davies [1923] AC 100. I should note that, although the judgment in Gwembe (to which I was a party) proceeded on the premise that fraud was sufficient to bring the case within section 21(1)(a)) (para [120]), the ultimate decision may be better explained by reference to the alternative ground of fraudulent concealment: s 32.
The Chancellor and Tuckey LJ agreed with this judgment. See also per Newey J in Kleanthous v Paphitis [2011] EWHC 2287 (Ch) at [60].
(ii) Misrepresentation/unlawful means
(iii) Postponement of the limitation period
"(1)… , 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."
"The question is not whether the Plaintiffs should have discovered the fraud sooner, but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take…the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency."
The fourth claimant
"(2) For the purposes of this Act a person shall be treated as under a disability while he is an infant, or of unsound mind.
(3) For the purposes of subsection (2) above a person is of unsound mind if he is a person who by reason ofmental
disorder within the meaning of the
Mental
Health Act 1983, is incapable of managing or administering his property and affairs.
(4) Without prejudice to the generality of subsection (3) above, a person shall be conclusively presumed for the purposes of subsection (2) above to be of unsound mind -
(a) while he is liable to be detained or subject to guardianship under theMental
Health Act 1983 (otherwise than by virtue of section 35 or 89); and
(b) while he is receiving treatment as an in-patient in any hospital within the meaning of theMental
Health Act 1983 or
mental
nursing home within the meaning of the Nursing Homes Act 1975 without being liable to be detained under the said Act of 1983 (otherwise than by virtue of section 35 or 89), being treatment which follows without any interval a period during which he was liable to be detained or subject to guardianship under the
Mental
Health Act 1959, or the said Act of 1983 (otherwise than by virtue of section 35 or 89) or by virtue of any enactment repealed or excluded by the
Mental
Health Act 1959."
"For the purposes of this Act a person shall be treated as under a disability while he is an infant, or lackscapacity
(within the meaning of the
Mental Capacity
Act 2005) to conduct legal proceedings."
"1. The principles
(1) The following principles apply for the purposes of this Act.
(2) A person must be assumed to havecapacity
unless it is established that he lacks
capacity
.
(3) A person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success.
(4) A person is not to be treated as unable to make a decision merely because he makes an unwise decision.
2. People who lackcapacity
(1) For the purposes of this Act, a person lackscapacity
in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain.
(2) It does not matter whether the impairment or disturbance is permanent or temporary.
(3) A lack ofcapacity
cannot be established merely by reference to
(a) a person's age or appearance, or
(b) a condition of his, or an aspect of his behaviour, which might lead others to make unjustified assumptions about hiscapacity
.
(4) In proceedings under this Act or any other enactment, any question whether a person lackscapacity
within the meaning of this Act must be decided on the balance of probabilities.
3. Inability to make decisions
(1) For the purposes of section 2, a person is unable to make a decision for himself if he is unable—
(a) to understand the information relevant to the decision,
(b) to retain that information,
(c) touse
or
weigh
that information as part of the process of making the decision, or
(d) to communicate his decision (whether by talking, using sign language or any other means).
(2) A person is not to be regarded as unable to understand the information relevant to a decision if he is able to understand an explanation of it given to him in a way that is appropriate to his circumstances (using simple language, visual aids or any other means).
(3) The fact that a person is able to retain the information relevant to a decision for a short period only does not prevent him from being regarded as able to make the decision.
(4) The information relevant to a decision includes information about the reasonably foreseeable consequences of—
(a) deciding one way or another, or
(b) failing to make the decision."
"If it appears to a court or tribunal conducting any … civil proceedings that—
(a) a provision of a code,
…..
is relevant to a question arising in the proceedings, the provision … must be taken into account in deciding the question."
"If the Plaintiff is of unsound mind when the cause of action accrues, the limitation period is extended. But there is no extension if he becomes of unsound mind during the running of the limitation period".
i) If the second disability commenced before the termination of the first disability, does that extend the limitation period? More specifically, if the fourth claimant came to lackmental capacity
before his 18th birthday, would that stop time from running?
ii) Is the determination of whether or not the fourth claimant was of unsound mind or lacking inmental capacity
to be made pursuant to the 1980 Act as it was at the time of the facts being considered or in its amended form? More specifically, is the relevant test whether the fourth claimant was incapable of managing and administering his property and affairs by reason of a
mental
disorder under the terms of the
Mental
Health Act 1983 ("the 1983 Act"), or whether he lacks
capacity
within the meaning of the 2005 Act to conduct legal proceedings?
(i) Subsequent overlapping disability
"(1) Subject to the following provisions of this section, if on the date when any right of action accrued for which a period of limitation is prescribed by this Act, the person to whom it accrued was under a disability, the action may be brought at any time before the expiration of six years from the date when he ceased to be under a disability or died (whichever first occurred) notwithstanding that the period of limitation has expired.
….
(3) When a right of action which has accrued to a person under a disability accrues, on the death of that person while still under a disability, to another person under a disability, no further extension of time shall be allowed by reason of the disability of the second person."
(ii) The relevant statutory test
Application to the facts
"What, however, does seem to me to be of some importance is the issue-specific nature of the test; that is to say the requirement to consider the question ofcapacity
in relation to the particular transaction (its nature and complexity) in respect of which the decisions as to
capacity
fall to be made. It is not difficult to envisage plaintiffs in personal injury actions with
capacity
to deal with all matters and take all "lay client" decisions related to their actions up to and including a decision whether or not to settle, but lacking
capacity
to decide (even with advice) how to administer a large award. In such a case I see no justification for the assertion that the plaintiff is to be regarded as a patient from the commencement of proceedings. Of course, as Boreham J said in White's case (12 November 1987),
capacity
must be approached in a common sense way, not by reference to each step in the process of litigation, but bearing in mind the basic right of any person to manage his property and affairs for himself, a right with which no lawyer and no court should rush to interfere. "
"First, that themental capacity
required by the law is
capacity
in relation to the transaction which is to be effected. Second, that what is required is the
capacity
to understand the nature of that transaction when it is explained."
"… the test to be applied, as it seems to me, is whether the party to legal proceedings is capable of understanding, with the assistance of such proper explanation from legal advisers and experts in other disciplines as the case may require, the issues on which his consent or decision is likely to be necessary in the course of those proceedings. If he hascapacity
to understand that which he needs to understand in order to pursue or defend a claim, I can see no reason why the law whether substantive or procedural should require the interposition of a next friend or guardian ad litem (or, as such a person is now described in the CPR, a litigation friend)."
"In that case, also, it was necessary to decide whether the plaintiff had been incapable of managing her property and affairs in the context of a Limitation Act defence. The judge identified three features to which he thought it appropriate to have regard. First, the need for the plaintiff to have "insight and understanding of the fact that she has a problem in respect of which she needs advice". Second, the need to be able to instruct an appropriate adviser "with sufficient clarity to enable him to understand the problem and advise her appropriately". Third, the need "to understand and make decisions based upon, or otherwise give effect to, such advice as she may receive". Boreham J accepted that the plaintiff was "now quite incapable of managing unaided a large sum of money such as the sort of sum that would be appropriate compensation for her injuries". Further, he accepted that, if she succeeded in her claim for compensation "as almost inevitably she will", she would need to "take, consider and act upon appropriate advice"; but that she might choose not to take advice. He accepted that "she may not understand all the intricacies of litigation, or of a settlement, or of a wise investment policy". But he was satisfied that, nevertheless, the plaintiff had not been shown to be incapable of managing her affairs. She had had the necessary understanding to take the decisions which she needed to take in relation to a claim for compensation."
The claimants' application: the proposed Amended Particulars of Claim
i) As regards fraudulent breach of trust or fiduciary duty, the particulars are considerably expanded, including with quotations from Mr Seddon's witness statement: paras 14-16.
ii) As regards misrepresentation, the allegations under para 17 of the various matters that Woolf Seddon "knew or ought to have known" are now pleaded as matters that Woolf Seddon "knew", including that they:
a) "knew that the members of the band had a legitimate claim to be the owners of, or alternatively the owners of a share of, copyright subsisting in the Works and did not communicate such facts and matters to them"; and
b) "knew that the nature and effect of the terms of the Sparta Florida Agreement were entirely contrary to the interests of the members of the band;"
I think the various amendments under this head clearly amount to a claim of fraudulent misrepresentation.
iii) To the unlawful means and interference with trade claim there is added a new claim of conspiracy. I set out the amended paras 20-21 in an Appendix to this judgment.
iv) A new claim is introduced as against all defendants of knowing receipt or dishonest assistance to the knowing receipt by others of property of the members of MY, with a claim to an account of consequent profits: para 22. That includes the allegation under the "Particulars of Knowledge/Dishonesty" at sub-para (iii) that:
"The fact that the Sparta Florida Agreement on its face betrays a calculated and profound concealment of material facts and matters from the members of the band by [Woolf Seddon] contrary to the band's interests."
"The test to be applied is thus, whether, even if a new claim is being made, the new claim arises out of "the same facts already in issue". The question is whether the factual issues under the old pleading were going to be litigated between the parties; if they were, then the court should take the view that section 35 had it in mind that the parties should be able to rely on a cause of action which substantially arises from those facts."
"In my judgment it is incontrovertible that an amendment to make a new allegation of intentional wrongdoing by pleading fraud, conspiracy to defraud, fraudulent breach of trust or intentional breach of fiduciary duty where previously no intentional wrongdoing has been alleged constitutes the introduction of a new cause of action".
In a later passage in his judgment, he said (at 418):
"In the Thakerar case, Chadwick J observed that it would be "contrary to common sense" to hold that a claim based on allegations of negligence and incompetence on the part of a solicitor involved substantially the same facts as a claim based on allegations of fraud and dishonesty. I respectfully agree. In all our jurisprudence there is no sharper dividing line than that which separates cases of fraud and dishonesty from cases of negligence and incompetence."
"It follows from this that the introduction of a claim based on dishonesty, where none existed before, is a new claim which does not arise out of the same facts as the previous claim or claims".
Conclusion
i) Woolf Seddon are entitled to summary judgment on the claim against them as it stands. I consider that these proceedings are an attempt to turn a claim for professional negligence into a claim for fraud or dishonest breach of trust in order to overcome the obvious problems of limitation, and I regard the claim as wholly without merit.
ii) The claimants' application for permission to amend the Particulars of Claim as regards Woolf Seddon is refused.
i) The sixth, seventh, thirteenth and fourteenth defendants were not served with the application. The claimants accordingly accept that no order can be made as regards them. Reference to "the tenth to fifteenth defendants" below should be read as excluding the thirteenth and fourteenth defendants.
ii) The remaining defendants were served and did not consent to the amendments but chose to take no part in the hearing of the application. However, the restriction under CPR rule 17.4 on permitting an amendment is mandatory. It therefore applies in their case as much as it does as regards Woolf Seddon, even though the claimants did not present any argument to the court as regards those other defendants. Accordingly:
a) The original claim for unlawful means/ unlawful interference with trade was pleaded against Woolf Seddon, Sparta Florida and the then tenth defendant (now the ninth defendant). The amendment in para 21 of the draft extends this allegation to what are now the tenth to fifteenth defendants. It is therefore a new claim as against the latter and as these allegations were not previously made against them, I consider that it does not arise out of substantially the same facts as the existing pleading. Since it would deprive them of a limitation defence, permission to make this amendment is refused.
b) I have held that on balance the new claim of conspiracy as against Woolf Seddon does not arise out of substantially the same facts as in the original pleading. I reach the same view as regards that claim against Spa Florida. That conclusion is all the stronger as regards what are now the tenth to fifteenth defendants who were not the subject of any allegation of an intention to injure in the original Particulars of Claim and against whom the facts alleged are clearly new. Permission to introduce this claim by amendment is accordingly refused.
c) The new trust claim and remedies for knowing receipt/ dishonest assistance are alleged against all the defendants and all (except the ninth defendant) ("Music Sales") are alleged to have acted dishonestly. No allegations of dishonesty were previously alleged against anyone other than Woolf Seddon. As regards all defendants other than Woolf Seddon and Music Sales, this is accordingly a claim that does not arise out of substantially the same facts and permission to introduce it is therefore refused. The difficulty in determining whether this claim as against Music Sales arises out of substantially the same facts arises because of the lack of particularisation in para 23 of the original pleading. However, the allegation of knowledge on the part of Music Sales in para (v) of the particulars under the proposed para 22 of the Amended Particulars of Claim is new, and on balance I find that this claim against Music Sales also does not arise out of substantially the same facts. Since the allegation is of a class 2 trust, the claim was statute barred in April 2011 and permission to amend is accordingly refused.
d) In all other respects, the application for permission to amend concerning the defendants, other than the sixth, seventh, thirteenth and fourteenth defendants, is granted. That of course does not preclude any of those defendants from issuing an application for summary judgment.
"Inflicting harm by unlawful means/unlawful interference with trade/conspiracy
20.1 Under the terms of the Sparta Florida Agreement the Sixth to Eighth Defendants and the Tenth to Fifteenth Defendants and each of them purported to determine ownership of and/or authorise the exploitation of and/or be authorised the exploitation of and/or entitled to exploit copyright in Pass the Dutchie and distributed, or authorised the distribution of, monies that should have been paid by one or more of them and/or by a third party or third parties to the Claimants/Patrick Waite (as the case may be).
20.2 The First to Fifth Defendants (through the First Defendant) assisted and/or procured the Sixth to Eighth and the Tenth to Fifteenth Defendants to enter into the Sparta Florida Agreement with, and in the knowledge that, its terms and effect were unlawful.
20.3 The First to Eighth and Tenth to Fifteenth Defendants and each of them thereby deliberately combined together and/or intended to cause and/or knew that one or more of the other parties to the Sparta Florida Agreement intended to cause loss and damage to the Claimants/Patrick Waite (as the case may be) and furthermore intended touse
unlawful means (namely infringement of copyright) in doing so.
20.4 The aforesaid conduct of each of the First to Eight and Tenth to Fifteenth Defendants was, or would be if it caused loss, (notionally) actionable as against each of the said Defendant at the suit of any one or more of the Sixth to Eighth and Tenth to Fifteenth Defendants (and also on behalf of the Claimants).
21.1 conspired with the other in the herein aforesaid combination or common design to injure and/or touse unlawful means; and
21.2 inflicted the said harm by the said unlawful means; and
21.3 intended to injure or injure the Claimants/Patrick Waite (as the case may be)."
Note 1 ‘Kouchie’ is Jamaican slang for a pot in which marijuana is kept; ‘Dutchie’ is a Dutch stewing pot in the same patois. [Back] Note 2 i.e. as to who was entitled to be credited for Dutchie: see para 20 above [Back]