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||Neutral Citation Number:  EWHC 214 (Ch)
||Case No: HC-2011-000062
IN THE HIGH COURT OF JUSTICE
||Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
B e f o r e :
MRS JUSTICE PROUDMAN
|| (1) CAPITA ATL PENSION TRUSTEES LIMITED
(2) ROBERT GEORGE FINCH
(3) BRIAN ERNEST BENNETT
(4) JEAN EILEEN WOODBERRY
(5) JOHN RICHARD HATTON
||- and -
||(1) SEDGWICK FINANCIAL SERVICES LIMITED
(2) SEDGWICK NOBLE LOWNDES LIMITED
(3) MERCER LIMITED
Keith Rowley QC and Wendy Mathers (instructed by Wragge Lawrence Graham & Co LLP) for the claimants
Peter de Verneuil Smith and Andrew Mold (instructed by Maurice Turnor Gardner LLP) for the defendants
Hearing dates: 17, 18, and 19 November 2015
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mrs Justice Proudman :
- The first, second, fourth and fifth claimants are the current trustees ("the Trustees") of the Sea Containers 1983 Pension Scheme ("the Scheme"). The third claimant has retired as a trustee and can be disregarded for present purposes. The Scheme is a defined benefit occupational pension scheme established in 1983 to provide pensions and other benefits to employees of the Sea Containers Group of companies and their dependants.
- The defendants are all part of the Mercer Group of companies and provide professional advice and services to the trustees for the time being including the drafting of documentation.
- The claimants' claim in the action is for damages for professional negligence for services between December 1993 and December 2005, and it arises out of two sets of proposed amendments intended to be made to the Scheme's governing documentation with effect from 1 August 1994 ("the 1994 Changes") and 1 May 2002 ("the 2002 Changes") respectively. I am concerned only, in this application for summary judgment, with the 1994 Changes. Quantum is to be assessed at trial but is in the order of at least £8m.
- The defendants seek summary judgment (alternatively striking out) as to,
• Parts of the claim against the first defendant ("The Novation Issue") on the basis that the second defendant replaced the first defendant in providing services to the Trustees.
• The entirety of the claim against the second defendant ("the section 14A and 14B of the Limitation Act 1980 Issues").
- In the action the claimants claim that the defendants,
• Failed to advise the claimants that an amending deed or Board Resolution was required in order to implement the 1994 Changes (equalising the retirement ages for existing male and female members of the Scheme in 1994 after the case of Barber v Guardian Royal Exchange Assurance Group  1QB 344) and amending the Scheme's benefit accrual rate for all members to 1/50th of "Final Pensionable Salary" for each year of "Pensionable Service";
• Failed to advise them that an amending deed or Board Resolution was required to amend certain member contribution rates and accrual rates in order to implement the 2002 Changes;
• Failed to ensure that a consolidating deed was prepared shortly after the 1994 Changes and should have advised, as respects both the 1994 and the 2002 Changes and following their intended effective dates, that deeds of amendment or Board Resolutions were passed;
• Failed to bring the alleged equalisation and other inadequacies to the Trustees' attention at any time after the 1994 Changes and the 2002 Changes were purportedly effected.
- The claimants say that there are two broad limbs to the claim, namely,
"Negligence on the part of the relevant adviser at the time of the ineffective 1994 and 2002 Changes in failing to (i) advise as to the procedure that needed to be adopted so as validly to amend the Scheme's governing documentation and (ii) take reasonable care to ensure that this procedure was followed.
…Negligence on the part of the relevant adviser (which may or may not have been the adviser at the time the Changes should have taken effect) in later failing to observe and advise that the 1994 and 2002 Changes had not been validly effected."
- So the claim is (under Limb (i)) for the additional liabilities to which the Scheme has become subject and (under Limb (ii)) for a combination of (a) the loss of a chance of receiving damages in respect of any claims that may now be statute-barred and (b) the additional liabilities to which the Scheme has become subject had action been taken so as to effect the intended changes, belatedly but prior to December 2005.
- On 30 September 2006 the Scheme closed to further accrual of benefits. On 15 October 2006 the Principal Employer, Sea Containers Services Limited, and its parent, Sea Containers Limited, filed for Chapter 11 bankruptcy protection in the United States.
- On 5 February 2008 the Pensions Regulator issued a Financial Support Direction against Sea Containers Limited.
- On 28 February 2008 a standstill agreement was entered into between the claimants and the first and third defendants (but not the second defendant), which terminated on 31 August 2011. On 20 June 2008 the Principal Employer entered into a standstill agreement with all the defendants.
- On 19 September 2008 a Pension Schemes Settlement Agreement was entered into by various Sea Containers Group companies, the Trustees and the official committee of unsecured creditors of the Principal Employer which required the Principal Employer to make financial provision for liabilities arising under the Scheme in respect of equalisation.
- On 30 July 2009 the Trustees issued Part 8 proceedings against the Principal Employer and Sea Containers Limited in order to determine the equalisation and other liabilities. Arnold J decided on 24 November 2010 that there was no equalisation for new joiners until 1 March 1993 (the operative date of a Deed of Amendment). Then the remaining issues in the proceedings were compromised on terms approved by the Court (Sir Andrew Morritt C) on 21 December 2010, reflecting the agreement between the parties that it was more likely than not that none of the 1994 Changes or the 2002 Changes was effective as intended.
- The effect of the compromise was that the Scheme became subject to substantial additional liabilities to members.
- The Principal Employer brought a claim against the defendants in 2011 which was compromised in April 2013. I have no details about this claim.
- On 31 December 2011 the Scheme entered into winding up.
The law as to summary judgment/striking out
- The application is brought under CPR 3.4 alternatively CPR 24. It is common ground that in most cases the former adds little to the latter (AL Challis Limited v. British Gas Trading Limited  EWHC 141 (Comm) at ) and I proceed to deal only with summary judgment. The applicable principles for the purposes of Part 24 were summarised by Lewison LJ in Mellor v. Partridge  EWCA Civ 477 at  (citing his own judgment in Easyair Limited v. Opal Telecom Limited  EWHC 339 (Ch) at ), approved by Etherton LJ in AC Ward & Sons Limited v. Catlin (Five) Limited  EWCA Civ 1098 at ,
"The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman  2 All ER 91 [sic] (but corrected in the Court of Appeal));
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  EWCA Civ 472 at 
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman [a point recently emphasised by the Court of Appeal in Blakemores LDP (in administration) v. Scott  EWCA Civ 999 per Vos LJ at ];
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 
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)  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  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  EWCA Civ 725."
The Novation Issue
- For the defendants' application to succeed it is sufficient, say the defendants, to show that the first defendant's retainer was terminated so that it is unnecessary to show that the Trustees agreed to that termination. However, it was not just a question of termination but one of termination and replacement, for which a novation was required. At all events, the matter was argued before me on the basis of novation (as well as termination) so I proceed on that basis.
- I have been referred to Chitty on Contracts, 31st Ed, Vol 1 at 19-086, as follows,
"There is no doubt that with the consent of both contracting parties all contracts of any kind may be transferred, and the term 'novation' has been introduced from Roman law to describe this species of transfer. Novation takes place where two contracting parties agree that a third, who also agrees, shall stand in the relation of either of them to the other. There is a new contract and it is therefore essential that the consent of all parties shall be obtained."
- I have also been referred to Carr J's summary of the principles in Seakom Limited v. Knowledgepool Group Limited  EWHC 4007 (Ch) at -,
"145 Rights and obligations under a contract may be transferred to a third party by novation. On novation, pre-existing rights and obligations are extinguished and new rights and obligations created in their stead.
146 With the consent of both contracting parties, all contracts of any kind may be transferred. Both the original parties and the new parties must agree: see for example Rasbora Ltd v JCL Marine Ltd  1 Lloyd's Rep 645; The Blankenstein  1 WLR 435; The Aktion  1 Lloyd Rep 283.
147 The necessary agreement may be express or may be inferred from conduct. Sufficient evidence of novation by conduct has been found where the third party makes payment in respect of a liability of one of the original contracting parties – see Re Head  2 Ch 236."
- Whether there has been a novation is judged objectively: Evans v. SMG Television Limited  EWHC 1423 (Ch) so that one can be effected (see per Lightman J at ),
"whether or not there was any understanding on the part of those involved that what was being effected was what the law calls a novation".
- Moreover evidence of subsequent actions is admissible to establish whether there has been a novation by conduct: Chitty at 12-26.
- The issue is whether the retained adviser remained the first defendant or became the second defendant. The crucial period is the period from 1 January 1994 to 1 August 1994, which latter date is the one on which the 1994 Changes were intended to take effect.
- I observe that the events in question occurred (or at any rate started) 21 years ago and unsurprisingly there is little relevant evidence that the claimants' witnesses can remember. Thus the case turns mainly on documentary evidence.
- By an agreement ("the 1990 Retainer") effective from 1 July 1990 and made between (1) the Trustees, (2) the Principal Employer, (3) the first defendant's Benefits Consulting Division and (4) Sedgwick Actuarial Services Limited ("SASL"), the first defendant and SASL (which dropped out of the picture in the circumstances hereafter referred to) agreed to provide specified consultancy, documentation, actuarial and administration services to the Trustees and the Principal Employer. The 1990 Retainer contained a termination clause as follows,
"2. Duration of this agreement
This agreement is effective from 01/07/90 and it will remain in force until:-
(a) Written notice is received from the Trustees and the Company [the Principal Employer] of their intention to terminate the agreement. Such termination will be from the date of receipt of the notice or such other date as may be agreed, or
(b) This agreement is by mutual consent superseded by another of a later date, or
(c) [The first defendant/SASL] gives written notice to the Trustees and the Company of their wish to terminate the agreement. Such termination will be from the date of receipt of the notice or such other date as may be agreed."
- The claimants say the relevant adviser was the first defendant, on the basis that the 1990 Retainer subsisted until 6 April 1997. The defendants however say that the 1990 Retainer was terminated with effect from 1 January 1994 and from that date the second defendant was substituted in the first defendant's place by a novation.
- They say that there was a novation of the retainer from the first to the second defendant, either by way of express novation or to be inferred from the parties' conduct between January 1994 and March 1997.
- For express novation the defendants rely on a letter (with the first defendant's standard letter head) dated 22 December 1993, from a Mr Edmonds, a Regional Director of the first defendant, to a Mr O'Sullivan, who was at that time both a trustee and the Chief Financial Officer of the Principal Employer. However, the letter is addressed to him merely at the Principal Employer's address. It reads,
"CUSTOMER FEE AGREEMENT
With effect from 1 January 1994, services which had, up until then, been provided by Sedgwick Consulting Group, will now be provided by Sedgwick Noble Lowndes Limited, under the same terms and conditions as previously applied."
- The defendants say this letter evinced an unequivocal intention, binding on the first and second defendants, the Principal Employer and the Trustees, that the first defendant would not be providing services under the 1990 Retainer so that from 1 January 1994 the first defendant ceased to be liable to the Trustees thereunder. The claimants say that the letter was merely to the Principal Employer as such. In any event, however, there was not a termination, but a novation, substituting the second defendant for the first defendant.
- There was an earlier letter dated 27 August 1992 from a Mr Gately, of the first defendant, to Mr O'Sullivan in the following terms,
"I am pleased to confirm that, with effect from 1 September 1992, Sedgwick Financial Services will become Sedgwick Consulting Group. The new name more accurately reflects our range of trading activities…
The change in name presents an opportunity for us to modify our existing organisational structure…
My own position is to change to that of Managing Director of the Consulting and Actuarial Division responsible for providing Actuarial, Consultancy and Administration Services. In view of our existing relationship I will remain as Actuary and maintain the overall responsibility for your arrangements.
The consultant to the Scheme will continue to be Lynn Collins…
As a result of this reorganisation those services previously provided by Sedgwick Financial Services Limited will, as from 1 September, be provided by Sedgwick Consulting Group Limited. While the terms and conditions upon which services will be provided will remain unaltered a new client agreement will be issued in due course. [There was no new agreement until 1997.] All services provided prior to 1 September will be provided under the terms of the existing agreement."
- This was a true change of name. Moreover, the first defendant changed its name again twice. First it did so on 22 December 1993 when it became Sedgwick Noble Lowndes Financial Consultants Limited and then shortly afterwards on 31 December 1993 when it reverted to its former name of Sedgwick Financial Services Limited.
- The claimants say that, while prima facie the letter of 22 December 1993 was capable of constituting a notice to the Principal Employer terminating the 1990 Retainer, if it were taken to satisfy the CPR Part 24 test the Court would fall into the trap of conducting a mini-trial. There is before the Court no explanation for the letter's provenance and no evidence of its receipt. The claimants draw attention to the following,
• There is no mention of the letter in the Defence or the Further Information of 2 February 2015. It is simply not pleaded, nor is it mentioned in the defendant's detailed letter of response dated 17 August 2012.
• There is no copy of the letter in the claimants' possession, nor did Miss Clarke (a former trustee) see it, nor did its addressee Mr O'Sullivan tell her that he had received it.
• There was apparently no reply to, or acknowledgement of, the letter.
• The Minutes of the Trustee meetings do not mention the letter (specifically) or any novation (in general).
• The claimants say they have no knowledge of Mr Edmonds and apart from this one letter he does not feature in the correspondence. He has not provided any evidence and the defendants apparently do not intend to call him.
• The letter is addressed to the Principal Employer only. It is not described as notice to the Trustees.
• There is nothing in the claimants' or the defendants' disclosure suggesting that any documentation, let alone the "full documentation" promised in the letter, followed.
• The Defence said that novation, alternatively termination and replacement, was effected by way of written document between the first defendant, the second defendant and the Trustees, "which would have accorded with the usual practice" of the first and second defendants. In the Further Information, in answer to a question about this usual practice, the defendants said that it was the usual practice of the first and second defendants "to effect a novation (or termination and replacement) of a retainer by way of written document." The claimants' case was that the letter of 22 December 1993 did not accord with this practice. A novation letter of the kind actually sent on 4 March 1997 was therefore to be expected.
• The claimants also mention that commonly communication was by facsimile and there was no transmission report. However, this letter does not on the face of it appear to have been sent by fax.
- Mr Rowley QC referred me to The Tychi (No 2) EWCA Civ 1198;  2 Ll Rep 403 at , -,  and  for the proposition that where there is a contract in existence clear evidence of intention to produce a novation is necessary and in the present case there are various confusing factors which make it unlikely that a novation was intended.
- The defendants make the following points. I am told (on instructions only) that the reason the letter was not pleaded was simply that until the defendants' disclosure the defendants' lawyers did not see it. Secondly, Miss Clarke, the claimants' witness, said that Mr O'Sullivan was the regular point of contact between the first and second defendants and the Trustees. It was therefore right to send the letter to him qua trustee. Mr Edmonds was the Regional Director of Sedgwick Noble Lowndes's Actuarial Division and the proper person to send it. He is mentioned in another letter, that of 13 December 1993 from Mr Gately, then the Managing Director of Sedgwick Noble Lowndes's Consulting and Actuarial Division, as the point of contact: "…if you have any questions please contact Paul Edmonds". The fact that the letter was not in the claimants' possession (that is to say, that they did not retain it, or retain a copy) was nothing to the point because their then solicitors, Sackers, said in a letter of 4 December 2012,
"…nearly all the employment and pension records held at Sea Containers House had either been destroyed or archived…This is why the records held by [the defendants] were such an important source of information."
- There is thus an issue whether the letter was sent and the contract terminated according to its terms, although this begs the question of what the defendants were doing thereafter. The original of the letter on file is a photocopy of the letter which was signed by Mr Edmonds, and, say the defendants, there is no evidence that the letter was not sent. Mr Rowley for the claimants says that he would wish to cross-examine the defendants' witnesses. The defendants say that this is merely a fishing expedition, a hope that something may turn up at trial within ICI Chemicals, and summary judgment should therefore be allowed.
- It was decided in ICI Chemicals that if the Court is satisfied that it has before it all the evidence necessary for the proper determination of a question of law and that the parties have an adequate opportunity to address it in argument, it should decide the point. Where it was possible to show that other evidence was likely to exist that would put documents in another light at trial it would be wrong to grant summary judgment. However, the judge should not allow a case to go forward on the basis that there was a possibility of some other evidence arising. In that case the issue was a dispute over the construction of an agreement, and moreover one which lay "in a very small compass", see  of the judgment of Moore-Bick LJ. Thus the issue was primarily one of law, whereas the issue in the present case is primarily one of fact, namely whether a letter was sent.
- I accept that there is no evidence to the effect that the letter was not sent other than the mere queries of the claimants. Mr O'Sullivan has not been called as a witness to say that he did not receive the letter, although Mr Rowley has told me (again on instructions only) that this is because of a dispute with Mr O'Sullivan which may be resolved by the time of trial.
- Moreover the day after the letter was sent Ms Collins of the first defendant wrote to Miss Clarke's assistant Ms White saying that if the accounts were to be signed off before the end of 1993 then the references to the first defendant could remain. She said,
"…There are various references to Sedgwick Consulting Group Limited. We are, now, Sedgwick Noble Lowndes. This only really causes a problem in relation to the Actuarial Statement if it is to be dated after 31 December 1993. If a signature is not required and the accounts are to be signed off before the end of 1993 the references to Sedgwick Consulting Group can remain…
Looking at the Actuarial Disclosure Statement on pages 5 and 6, recent changes to disclosure require some additions to the statement as follows.
…The address at the bottom of page 6 should have Sedgwick Consulting Group Limited replaced by Sedgwick Noble Lowndes Limited depending on comments above. "
- This letter contains a draft resolution that,
"It was resolved that the mandate previously signed by the Trustees of the Sea Containers 1983 Pension Scheme be amended to replace Sedgwick Consulting Group Limited with Sedgwick Noble Lowndes Limited"
- The obvious interpretation of this letter is that it addressed the imminent 'replacement' of the first defendant by the second defendant. However, the fax is said to be,
Sedgwick Noble Lowndes
Sedgwick Consulting Group Limited"
and the claimants argue that the passages relied on by the defendants were intended to do no more than inform Ms White of a change of name of the first defendant. They rely on a letter to Miss Clarke from Sedgwick Noble Lowndes which is headed "Trustee Bank Account Resolutions- Change of Company Name" and refers to "the recent merger of Sedgwick Consulting Group with Noble Lowndes".
- I now turn to novation by conduct. While the Scheme Report and Financial Statements for the year ended 31 December 1992 recorded the first defendant as being the Scheme's Administrator (with an actuarial statement signed by Paul Gately, then of the first defendant), the Scheme Report and Financial Statements for the year ended 31 December 1993 (with an actuarial statement signed by Mr Gately) stated that the second defendant was the Scheme's Administrator. Although the Report and Statements were signed on behalf of the Trustees on 30 April 1995, in the year ended 31 December 1993 the first defendant and not the second was the Administrator.
- Again, the Scheme's formal Actuarial Valuation as at 1 January 1993 (but not produced until October 1994) also recorded a change from the first to the second defendant. This was prepared by the second defendant and signed by Mr Gately.
- On the other hand, the Scheme Report and Financial Statements for the years ending 31 December 1994 and 1995 described the second defendant as the Scheme's Administrator.
- These documents were produced pursuant to duties upon the Trustees to record the state of affairs of the Scheme accurately.
- Thus after 1 January 1994 the Trustee Reports identify the second defendant as the Scheme's Administrator and as the employer of the Scheme's actuary.
- Then there are the invoices sent in relation to the services provided under the Scheme. There are no invoices in which the first defendant invoiced the Trustees for services rendered after 1 January 1994. The defendants say that novation is demonstrated by the invoices as follows:
- An invoice dated 23 December 1993 for fees due as at 13 December 1993 was submitted by the first defendant and showed the first defendant's company name and number.
I have some sympathy with the claimants' submission that following the acquisition by the Sedgwick Group of the Noble Lowndes Group the businesses were rebranded under the generic name "Sedgwick Noble Lowndes", which appears on the invoices in large typescript, whereas the identification of the first and second defendants respectively is only in small letters and the companies' numbers are very small. If one looks at the Minutes of the Trustee Meetings of 17 November 1993 and of 1 June 1994 one sees that both meetings were attended by Ms Collins, who is described as representing "Sedgwick Noble Lowndes" and there is nothing in either document (both of which were Sedgwick Noble Lowndes documents) suggesting that she was attending the first meeting on behalf of the first defendant and the second on behalf of the second defendant.
- However, an invoice dated 15 December 1994 for fees due as at 9 December 1994 was submitted by the second defendant and showed the second defendant's company name and number.
Two letters were written to Barclays Bank by Sedgwick Noble Lowndes. In the first, dated 6 January 1994, it was said that the first defendant "will become" the second defendant as of 1 January 1994. The second, dated 2 March 1994, is headed "Change of Company Name" and goes on to say,
"Following the recent merger of Sedgwick Consulting Group with Noble Lowndes it is now necessary to notify this change to the Bank responsible for handling the Pension Scheme Account(s)."
Miss Clarke assumes in  of her witness statement that she may have received the letter, although she does not recall receiving it. As neither of the above letters was sent to the Trustees, I do not consider that they support either the claimants' or the defendants' case.
However, Mr Rowley submitted (assuming –as I understand- that Miss Clarke did not receive the letter) that as the defendants' own employees were unable to explain the position accurately to their bankers it is ridiculous to suppose that the claimants should understand that they were being asked to agree to the novation of their contractual arrangements as opposed to a mere change of name. He also points out that the defendants do not offer any explanation why, if the second defendant had succeeded to the first defendant's business from 1 January 1993, the first defendant continued to ask its bankers to add signatories to the Scheme's bank account.
Yet more important is the fact that the first defendant's stationery continued to be used until mid-March 1994. Thus although correspondence was received from the second defendant in the period 1 January 1994 to 1 August 1994 there was also a number of items received in that period by the Trustees from the first defendant, namely,
- A compliments slip (signed by a Mr Channell, Actuarial Assistant at the Employee Benefits Division at Sedgwick Noble Lowndes) dated 3 February 1994,
- A fax dated 10 February 1994 from Mr Channell to Ms Collins c/o Miss Clarke,
- A fax dated 28 February 1994 from Mr Channell to Mr O'Sullivan,
- A fax attaching a draft announcement to members dated 2 March 1994,
- A fax dated 16 March 1994 from Mr Channell to Mr O'Sullivan, and
Further there were other faxes bearing the name of another entity, Sedgwick Financial Insurance Services Limited, which were written on the second defendant's business stationery,
- A fax dated 17 March 1994 from Mr Channell to Ms Collins c/o Mr O'Sullivan.
- A fax dated 18 February 1994 from Ms Collins to Mr O'Sullivan,
- A fax dated 3 March 1994 from Ms Collins to Miss Clarke,
There was also a tendency for documents to refer to "Sedgwick Noble Lowndes" without the word "Limited" in 1993 onwards. Similarly, the Trustees and the Principal Employer's staff also used the name Sedgwick Noble Lowndes indiscriminately.
- A fax dated 4 March 1994 from Ms Collins to Mr O'Sullivan.
The claimants say that as it was the same personnel with whom the Trustees dealt, irrespective of whether they dealt with the first or second defendant, nothing was done to put the Trustees on notice of any change and novation is not to be inferred from conduct without the consent of both contracting parties, normally manifested by a distinct request: see Chitty on Contracts at 19-087 to 19-089.
It is not surprising that documents headed Sedgwick Noble Lowndes Limited were taken to refer to Sedgwick Noble Lowndes rather than the second defendant as such. The only reason why it could have been appreciated that a separate company was involved was the fact that the company had a different company number, but that, as I have said, was included in very small type.
On 7 August 1995 the Trustees and the second defendant entered into a Terms of Business agreement, and the defendants rely on it as demonstrating that a novation had already taken place. However, say the claimants, the agreement was only made between the Trustees and the second defendant and did not include the Principal Employer, the subject matter of the terms of business differed from that of the 1990 Retainer and neither the Terms of Business nor Ms Collins' covering letter referred to any novation of the 1990 Retainer.
In 1997 there was a further retainer between the second defendant and the Trustees and also a retainer with the Principal Employer. The claimants do not dispute that the second defendant became the Trustees' retained adviser in March 1997 but say that the 1990 Retainer subsisted until then. The author of a letter, Mr Pinkham, a senior consultant at the second defendant, said in his letter of 4 March 1997,
"Our previous agreement was made with both the trustees and the company as parties. [It was not, say the claimants, as it was only addressed to Miss Clarke as "The Trustees of the Sea Containers 1983 and 1990 Pension Schemes.] Because of the Pensions Act 1995 Sedgwick Noble Lowndes (SNL) must have concurrent, but exclusive, agreements with you and Sea Containers Services Ltd from 6 April 1997."
By a letter of the same date he also said,
"Given that currently we operate under a tripartite agreement involving SNL, you (the trustees) and the sponsoring company of your scheme, we are obliged (because of the Act) to make a number of changes to our existing contractual arrangements.
I enclose a short form of Agreement which will be the ongoing Agreement that I propose SNL will have with you, the trustees, from 6 April 1997 onwards. A corresponding, and very similar, Agreement is being sent to the company and the overall effect is intended to be that we split the current Agreement into two separate Agreements, the first involving SNL and the trustees, the second involving SNL and Sea Containers Services Ltd."
Mr Rowley says that Mr Pinkham may have written the letters in the belief that the contractual arrangements that existed were between the Trustees, the Principal Employer and the second defendants. However, his belief is neither here nor there as the issue is one of law and the Court does not have any evidence before it from Mr Pinkham. In any event, the letters are written after the effective date of the 1994 Changes. The suggestion, says Mr Rowley, that the wording of the 1997 Retainer demonstrates that the Trustees were notified of a proposed novation of the existing retainer, and by their conduct agreed to the same with effect from 1 January 1994, is simply wrong.
There is no evidence to say that the letter of 22 December 1993 was not sent and received and despite the fact that it does seem to me that Mr Rowley is relying on a hope that something may turn up at trial rather than any concrete evidence that it was not, I am not prepared to decide what is a question of fact without full oral evidence tested in cross-examination. I adopt what Lewison J said in Mellor v. Partridge that 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. All judges know of cases where the factual situation seemed hopeless for one party but the case is turned on its head during the course of trial.
The claimants also say that it was reasonable to suppose that the second defendant was acting purely as the agent of the first defendant, thus explaining away the different company numbers of the two defendants. There was no actual agency by consent (see Garnac Grain Co Inc v. HMF Faure & Fairclough Limited  AC 1130) so the claimants must show that (a) the Trustees reasonably understood that the second defendant was acting as the first defendant's agent and (b) the Trustees relied on this being the case. However there is no contemporaneous evidence to support any understanding or reliance at all. The only witness who could provide relevant evidence in support of agency, Miss Clarke, does not mention agency at all. I find that the second defendant was therefore in fact acting as principal, not as agent.
The defendants also rely on The Tychi No 2, saying that the factors that the Court took into account in that case were similar to those in the present case. They rely particularly on  as follows,
"It seems to us that this part of the story demonstrates that POL-A [who it was said replaced POL by novation] was taking over the operation of the transatlantic service in their own right, and not merely on behalf of POL. Mr Kendrick sought to counter this evidence by drawing our attention to the fact that the American attorney, who applied on behalf of POL-A for the approval of the FMC to the substitution, described this as a "change of name". We do not know how or why he came to do this. It cannot be suggested, however, that MSC were led to believe that POL-A's intervention was no more than a change of name."
However it seems to me that The Tychi was an entirely different case and I am not prepared to grant summary judgment on the novation issue.
Accordingly I decide that the claimants have a realistic and not merely fanciful prospect of success on the issue of novation.
The s.14A and 14B Issues only apply to the second defendant. As to the s.14A Issue, it is crucial to decide the date on which the Trustees first had the knowledge required for bringing an action for damages against the second defendant.
The first question I have to decide is whether the Trustees from time to time can be lumped together for the purposes of s. 14A, namely whether one has to look at the current Trustees, the parties to the action, as individuals.
I do not think the answer to this question is as important as the claimants assert since the current Trustees have a duty to obtain all relevant papers from their predecessors and in any event, s.14A (5) provides (my emphasis) that,
"For the purposes of this section, the starting date for reckoning the period of limitation…is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action."
The claimants say that as none of the claimants was a trustee at the operative date of the 1994 Changes (1 August 1994) none would have first-hand knowledge of the identity of the retained Scheme adviser at that time. Moreover none had any knowledge of the letter dated 22 December 1993 or the fax dated 23 December 1993. Accordingly, say the claimants, the only basis on which the defendants can succeed is by way of constructive rather than actual knowledge. The problem with this submission is that it ignores the words emphasised above in s. 14A (5).
The knowledge required for bringing an action against the second defendant for the purposes of s.14A is,
- Knowledge of the material facts about the damage (that is to say, that the 1994 Changes were ineffective) in respect of which the damages are claimed (see s.14A (6)),
- That the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence (see s.14A (8)(a)), and
S.14A (10) provides,
- The identity of the defendant (see s. 14A (8)(b)).
"For the purposes of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire-
(a) from facts observable or ascertainable by him; or
(b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek;
but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and where appropriate act on) that advice."
In Haward and others v. Fawcetts (a Firm) and another  UKHL 9;  1 WLR 682 Lord Nicholls of Birkenhead drew a distinction between knowledge of an act by the relevant defendant and knowledge that such an act constituted negligence, in the following terms (at ),
"Difficulties may sometimes arise over the interaction of these "knowledge" provisions and the statutory provision rendering "irrelevant" knowledge that, as a matter of law, an act or omission did, or did not, amount to negligence: section 14A(9). By the latter provision Parliament has drawn a distinction between facts said to constitute negligence and the legal consequence of those facts. Knowledge of the former (the facts) is needed before time begins to run, knowledge of the latter (the legal consequence of the facts) is irrelevant. As Sir Thomas Bingham MR said in the clinical negligence case of Dobbie v Medway Health Authority  1 WLR 1234, 1242, knowledge of fault or negligence is not necessary to set time running. A claimant need not know he has a worthwhile cause of action."
He went on to say at ,
"The relevant date was not when Mr Haward first knew he might have a claim for damages. The relevant date was an earlier date, namely, when Mr Haward first knew enough to justify setting about investigating the possibility that Mr Austreng's advice was defective. Mr Haward had the burden of proving that this date was after 6 December 1998. Mr Haward, it seems, did not attempt to discharge this burden. His evidence was not directed at this anterior issue. His evidence was directed at the date when he first knew he might have a claim for damages."
The claimants conflate the two concepts in their answer to the Part 18 Request where they say (at Q 3),
"It was not until 8 August 2011 that privileged advice was received by the Claimants (being then also the Trustees) from Sackers concerning the potential claim against SNL."
In order for s. 14A(5) to be satisfied the claimants must know enough to justify investigating the possibility that: there was an obligation to equalise, equalisation had not been effective, equalisation would not be retrospective and those matters could be attributable to the second defendant.
The claimants and their predecessors actually knew these matters on 12 June 2007. Kirkland & Ellis International LLP ("K&E"), acting for the Principal Employer, and various members of the Sea Containers Group, sent a letter dated 11 June 2007 to the claimants' then solicitors, Sackers, (read by Mrs Fryer on behalf of the claimants) casting doubt on whether equalisation had been effected in 1994: see Mrs Fryer's witness statement and what Sackers said in a letter dated 6 July 2007 to the Trustees' insurers, namely,
"The Trustees have now recently been informed that the companies consider that the Scheme was not properly equalised in 1994. If correct, that would increase the liabilities of the Scheme substantially. It would also raise questions about the actions taken in 1994 and the position of the Trustees who have administered the Scheme on the basis of the 1994 arrangements."
On 4 March 1997 the second defendant sent Terms of Business to the Trustees under which administration services were provided. Thus the Trustees knew that the second defendant may have been responsible for the defective equalisation amendments. Those terms could not be construed as the second defendant acting on behalf of the first defendant or acting as part of the Sedgwick Noble Lowndes Group.
The claimants also had constructive knowledge of the relevant facts. A professional trustee acting reasonably (and the claimant company became a trustee on 13 June 2006) would have read the letter from K&E and realised that equalisation could have been defective so that the Scheme could suffer loss. That is not seriously disputed. What is disputed is that the Trustees did not realise that the second defendant was the appropriate defendant. As Rix LJ said in Cressey v. Timm  EWCA Civ 763;  1 WLR 3926 at ,
"The essential issue, therefore, is whether the date of knowledge when Mr Cressey first had knowledge of the identity of his defendant was, as Holdings submit, 2 December 2000, the date of the accident, or, as Mr Cressey submits, 30 April 2001, when he first learned of the existence of Holdings. If it is the former, the claim is out of time; if the date of knowledge is the latter, the three years still had one month left to run."
What is said by the claimants is that the Trustees relied upon Sackers, solicitors, correctly to identify the relevant parties to any claim and therefore to draft a standstill agreement accordingly.
As Colman J said in Goode v. Martin  3 All ER 562 at  (see also the appeal at  1 WLR 1828) referring to s.14(3) which is materially the same as s.14A(10) for present purposes,
"There is clear authority that…if facts are reasonably ascertainable by a solicitor acting with reasonable diligence and the solicitor acts in a dilatory manner in obtaining that information, knowledge of that information will be imputed to the claimant, and he will not be entitled to the protection of the proviso at the end of s. 14(3) unless perhaps it can be shown that in obtaining the particular facts, the solicitor could be said to be providing expert advice".
Thus a claimant will be fixed with constructive knowledge despite the fact that it was reasonable for the claimant to instruct a solicitor if a reasonably competent solicitor would have acquired knowledge of facts without using legal expertise.
The question is therefore whether the fact that the second defendant could be liable was only ascertainable with the help of expert advice, and whether the Trustees took all reasonable steps to obtain that advice, within s.14A (10).
The defendants say that, especially bearing in mind the question asked of the claimant company on 1 November 2006 by a member of the scheme,
"The Trustees' letter refers to normal retirement age as being 65 presumably this would be 60 for female members where appropriate. Please confirm"
the claimant company ought to have investigated equalisation, ought to have investigated who had advised the Trustees in respect of the 1994 amendment and should have read the Annual Reports and Financial Statements. In particular, Mr de Verneuil Smith and Mr Mold say that it was imperative for any professional trustee to investigate how equalisation had taken place and to have discovered the second defendant's role. It was at least arguable that the second defendant might be liable to the Trustees, and the reasonable person would have read the Annual Reports and Financial Statements, particularly as the first claimant was appointed as an independent professional trustee on 13 June 2006, and the first claimant received the previously referred to question from a member of the Scheme on 1 November 2006. As the independent trustee it would not have been reasonable to allow Mercer to draft the response without the first claimant confirming for itself that Mercer was correct.
I agree with the defendants that the last part of s. 14A (10) only applies where the relevant fact (in this case the potential liability of the second defendant) is ascertainable only with the help of expert advice: see Seton House Group Limited and another v. Mercer Limited  EWHC 4234 (Ch) at . It is notable that the Principal Employer did realise that there might be a cause of action against the second defendant as the Principal Employer entered into a standstill agreement with the second defendant on 20 June 2008.
The defendants say that even if the last part of s. 14A (10) does apply, it was reasonable to take a second opinion from a specialist pensions solicitor in this case so that the Trustees were fixed with constructive knowledge of the advice they would have obtained had they done so: see Gravgaard v. Aldridge & Brownlee (A Firm)  EWCA Civ 1529;  PNLR 19. Again, they rely on the fact that the Principal Employer realised the potential liability of the second defendant, as a result of their solicitors' investigations.
I would grant summary judgment in favour of the defendants so that ,  and  of the Particulars of Claim are struck out in so far as they concern the second defendant. The proceedings against the second defendant are therefore dismissed.
In case I am wrong about the s.14A Issue, I go on to consider the s.14B Issue. For this, the date from which the 15 years run is vital. The claimants say the time runs from 12 May 1999, saying that the language of s.14B requires the court to identify the latest negligent act or omission in order to ascertain the point at which time starts running for the purposes of the section; the date of the last act of negligence is conceptually different from the date on which the cause of action accrues, since there is no cause of action until there is damage as well as duty and breach.
S.14B (1) provides,
"An action for damages for negligence…shall not be brought after the expiration of fifteen years from the date (or, if more than one, from the last of the dates) on which there occurred any act or omission-
(a) which is alleged to constitute negligence; and
(b) to which the damage in respect of which damages are claimed is alleged to be attributable (in whole or in part)."
I agree with the defendants that all causes of action accruing before 23 August 1996 are time-barred, the claim form having been issued on 23 August 2011. Although at first Mr Rowley disputed this, he did not (at least to my mind) do so vigorously, because of Laws & Ors v The Society of Lloyd's  EWCA Civ 1887; 2003 WL 23014770, which is binding on me. In that case Waller LJ, giving the judgment of the Court of Appeal, said at -,
"…the judge identified the latest date upon which a [Lloyd's] name must be able to identify a negligent act or omission as 11 October 1981 As we understand it, he took that date because the earliest date on which a relevant action was brought by Lloyd's was 10 October 1996…
 We read section 14B in this way… A name must be able to identify a negligent act or omission on or after 11 October 1981…If he or she can do so, he or she can in principle recover any loss flowing from the particular act or omission complained of…
 However, as we see it, only losses flowing from such a negligent act or omission within the period can be recoverable, assuming them otherwise to be recoverable. Contrary to a submission advanced by Mrs Mackenzie Smith, [a Name in person] we cannot see how a name could recover losses sustained before the beginning of the fifteen year period by relying on an act or omission after it began. We can see no possible use of s.14B, or indeed any other principle of law, which could entitle a name to recover historical loss of that kind incurred before the act or omission complained of. "
Accordingly, even if I am wrong as to the effect of s.14A, all causes of action accruing against the second defendant before 23 August 1996 are dismissed in any event.
However, as I have decided that I will not grant summary judgment on the novation or termination issues, all the claims against the first defendant remain.
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