Denis Michael Seaton & Others v Anthony Seddon & Others



Judge: Roth J.

Citation: [2012] EWHC 735 (Ch)

Summary: In this matter Roth J had to consider a complex claim arising out of a dispute in relation to licencing rights over a song. The first four claimants, were members of a band, MY (“the MY claimants”). The fourth claimant, FW, is mentally ill and brought his action by his litigation friend, the corporate receiver of Birmingham City Council who had been appointed as his “receiver” by the Court of Protection.

In the 1980s, MY had a hit single, “Duchie”. In 1984 the MY claimants entered in to a contract (“the Sparta Florida Agreement”) which made provision for the licencing of rights to a song (“Kouchie”) on which the contract asserted MY’s hit single “Duchie” had been based. They were represented in the negotiations by the firm of Solicitors Woolf Seddon of which the First Defendant was a partner. The claim as framed before Roth J was not issued until 2010. It challenged the conduct of Woolf Seddon who had acted both for the MY claimants and for another party to the Sparta Florida Agreement (whose interests conflicted with those of the MY claimants). Woolf Seddon applied to the Court for summary judgment against the claimants by way of strike out on grounds that it amounted to an abuse of process. The claimants also applied for permission to amend their Particulars of Claim.

Rather than plead the claim in negligence or for breach of the solicitor’s contract of retainer, the claim had been pleaded on the grounds that Woolf Seddon stood in a fiduciary position in respect of the MY claimants. Roth J noted that the obvious reason for this was that any claim in negligence would be long out of time. The central issue was whether there was any basis on which the effect of the Limitation Act 1980 could be avoided.

The claim as pleaded effectively included allegations of fraud but such allegations had not been fully pleaded. Roth J summarised the principles applicable to a pleading of fraud at paragraphs 39 to 41 of the Judgment. He rejected a submission made on behalf of the claimants that the CPR had introduced more stringent requirements in this regard. On the facts, Roth J considered the allegations of fraud had no realistic prospect of success.

Roth J then considered the claimants’ claim that there had been a breach of fiduciary trust. Roth J set out a number of authorities on this issue including Paragon Finance plc v Thakerar & Co [1999] 1 All ER 400 and Cia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 WLR 112 in which the Court had drawn a distinction between class 1 and class 2 types of constructive trust. On the facts, he considered that any trust that was in place fell in to the second category to which the exception provided for in the Limitation Act 1980 would not apply.  Properly considered, the claims were claims in tort and subject to the application of s32 of the Limitation Act 1980 (which allows for the postponement of a limitation period) limitation would have expired after 6 years.

The Judge then turned to the issue of whether the particular circumstances of the fourth claimant could form a basis for prolonging or otherwise disapplying the limitation period. He noted that the relevant legislation had altered over the period in question and that s.28 of the Limitation Act had been amended to include a reference to the MCA 2005.

The fourth claimant was born on 23 May 1967. Accordingly, at the date of accrual of the causes of action he was under a disability by reason of his age (“the first disability”). He ceased to be under that disability on becoming 18 on 23 May 1985. Any disability arising as a result of the fourth claimant’s capacity was a “secondary disability.” The parties agreed that once time had started to run nothing could stop it: Purnell v Roche [1927] 2 Ch 142.

Two issues crystallised:

(i). If the second disability commenced before the termination of the first disability, did that extend the limitation period? More specifically, if the fourth claimant came to lack mental capacity before his 18th birthday, would that stop time from running?
(ii). Was the determination of whether or not the fourth claimant was of unsound mind or lacking in mental 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, was 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 lacked capacity within the meaning of the 2005 Act to conduct legal proceedings?

Subsequent overlapping disability
For the fourth claimant, it was submitted that so long as a claimant is continually under “disability”, time does not begin to run, even if the second, overlapping disability is of a different nature to the first disability. For Woolf Seddon, it was argued that time began to run on the fourth claimant attaining his majority regardless of whether he can establish that he was under the second disability as at that date.

The Judge preferred the fourth claimant’s submission and accepted that there was scope for a second overlapping disability:

“The thrust of section 28(1) is that so long as a person is under a disability, the limitation period should not start to run so that he is not potentially compelled to commence proceedings. Since that applies to a child until he reaches the age of 18, if on his eighteenth birthday he is still under a disability, albeit a different disability from that which applied when the cause of action accrued, it would be inconsistent with the statutory purpose for the running of the limitation period to commence nonetheless. As I have already mentioned, the rule that a second disability which starts only after the cessation of the first disability will not cause an extension or suspension of the limitation period is capable of harshness. For a cause of action which accrues to a child, the limitation period will run from his eighteenth birthday even if he is involved in an accident the next day that causes brain damage such that he thereafter lacks mental capacity. But I see no reason to interpret section 28(1) so as to increase its potential harshness by imposing the same result if he developed a mental illness before – and possibly long before – his eighteenth birthday. The fact that mental incapacity can be long-lasting and that therefore time may not run for a long time is inherent in the existing statutory scheme and not the result of this construction. I note that the Law Commission’s recommendation that there should be a long-stop limitation period, but also that if a claimant develops lack of capacity after a limitation period has commenced then the running of time should be suspended, has so far not been adopted: Limitation of Actions (Law Com no. 270, 2001), paras 3.126-3.133…”

Applicable law
As to the second issue, Roth J concluded that the appropriate law to apply was that applicable at the time of the accrual of the cause of action (1984). He therefore proceeded to consider whether the fourth claimant was by reason of mental disorder within the meaning of the Mental Health Act 1983 “incapable of managing or administering his property and affairs”: s.38(3).

The evidence before the Court was that, by 1987, the fourth claimant was suffering from acute schizophrenia. However, the Judge noted that this was a progressive illness and could provide evidence as to his mental state at the relevant time (some 2 years earlier). There was, however, additional evidence from the claimant’s GP dating to 1985. The Judge was satisfied on this basis that the claimant was suffering from a relevant mental disorder at the material time. However, in line with the decision in Masterman-Lister v Brutton & Co [2002] EWCA Civ 1889, [2003] 1 WLR 1511, the question of capacity is issue specific. The claimant was required to show that he would not have been able to understand, with an appropriate explanation, that he may have a claim against MY’s solicitors related to a failure to get the band publishing royalties for Kouchie, and to decide whether to make such a claim. The evidence fell short of establishing this. Further and in any event, the evidence was insufficient to show that the fourth claimant had been under a continuous disability until 2004.

Notwithstanding his finding that the relevant law to be applied was that applicable in 1984, Roth J went on to consider the alternative scenario where the applicable law was that in 2010 (at the date of issue) and by which time the Limitation Act 1980 had been amended to refer to the MCA 2005. Roth J noted that under the MCA 2005 capacity is issue specific and that, in accordance with the statutory guidance, it is expressly recognised that capacity may fluctuate and it is to be assessed at the relevant time. Accordingly, for the purposes of preventing the limitation period from running, the fourth claimant would still have to show that his lack of capacity had been continuous from the 1980s until 2004. Roth J that the claimant could not establish this so as to avoid the application of the Limitation Act. He further held:

“In my judgment, it is not adequate for the fourth claimant to say that his mental capacity is a matter for expert evidence which he would wish to call at trial. Where he seeks to rely on his incapacity to rebut an obvious limitation defence and the case comes before the court on a summary judgment application, particularly where that application was issued on 8 October 2010 and, for various reasons, came on for full argument over a year later, it is incumbent upon the fourth claimant to place before the court sufficient evidence to support his claim of mental incapacity. This is obviously not an issue that will be affected by disclosure from the defendants. I consider that it would be wholly wrong to permit the fourth claimant’s claim to go to trial on all the substantive issues that are otherwise statute barred, on the speculative basis that he might by then be in a better position to establish his own mental incapacity that would overcome the limitation defence.”

The application for summary judgment succeeded. The claimants were refused permission to amend the Particulars of Claim as against Woolf Seddon.

Comment: This decision effectively establishes that for the purposes of preventing a limitation period from running, claimants will have to establish both that they lacked capacity at the time at which the cause of action should have accrued and that they suffered a continuous lack of relevant capacity throughout the period in which they contend limitation should not run.

For those who have fluctuating capacity, such as the fourth claimant in this case, this is potentially an extremely difficult burden to meet. In this specific context, the decision illustrates the harshness of the rule that once limitation has started to run, it cannot be stopped and raises the question as to whether section 28 of the Limitation Act 1980 offers individuals with fluctuating capacity adequate protection.

It is also interesting that Roth J concluded that both the MCA 2005 and the Mental Health Act 1983 would have yielded the same result. In effect, his decision was that because the claimant had failed to satisfy the evidential burden under the MHA 1983, he could not meet the evidential burden under the MCA 2005.

Practitioners will note the Judge’s finding as to when the fourth claimant should have produced the expert evidence (at the summary judgment hearing). Admittedly, on the facts, there was more than a year between the application for summary judgment and the hearing. However, in other cases, time frames could be considerably more compressed. Claimants who intend to rely on a lack of capacity to defeat a limitation point may wish to ensure that they have expert evidence available prior to or shortly after the issue of proceedings.

CategoryMental capacity - Assessing capacity, Mental Health Act 1983 - Interface with MCA Date

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