Scion litigation: High Court dismisses defendant’s limitation application
On 30 April 2020, the High Court in Andrew Cole & Ors v Scion Limited & Ors dismissed an application for summary judgment brought by Carpenter Rees Limited, the Third Defendant, on the grounds that the Claimants had demonstrated reasonable prospects of success in proving that their claims were not statute-barred.
The judgment, available here, offers a helpful example of the mechanics of the latent damage provisions of the Limitation Act 1980.
Between 2005 and 2007, the Claimants (most of whom are former professional footballers) invested in tax-leveraged film schemes promoted by “Scion” corporate entities, on the advice of Formation Asset Management Limited (“Formation”). At that time, Formation was the appointed representative of Carpenter Rees Limited (“Carpenter Rees”). The schemes resulted in losses for the Claimants, who bring claims in negligence against Carpenter Rees.
Carpenter Rees alleged that letters providing updates on the investments and purportedly sent to the Claimants on 31 October 2012 and 1 November 2012 (“Letters”) fixed the Claimants with constructive knowledge of their claims, such that the claim form (which was issued on 6 November 2015) was brought a few days after the three-year period afforded under the latent damage provisions of the Limitation Act 1980.
The Court considered three issues in applying the Limitation Act 1980:
(1) Could the Claimants be fixed with constructive knowledge if they did not, in fact, receive the Letters by 5 November 2012?
(2) Were the Letters sufficient to fix the Claimants with constructive knowledge that they had suffered damage?
(3) Were the letters sufficient to fix the Claimants with constructive knowledge of the identity of Carpenter Rees?
The Court held in favour of the Claimants on all three issues identified. In reaching its conclusion, the Court made three observations:
(1) To be fixed with constructive knowledge of damage, a claimant would need to know that he was in a worse position as a result of the investment, rather than the investment simply had not worked as expected.
(2) In response to any given trigger, this analysis can be characterised by two different reactions by the claimant, either “Do I have a problem?” or “This is a problem – how bad is it?”.
(3) Subsection 14A(10) is unlikely to properly be interpreted as fixing a claimant with knowledge that he could have derived from facts that would have been ascertainable by him had he acted reasonably.
The Claimants are represented by a team led by Jonathan Tickner, Paul Johnson and David Fitzpatrick of Peters & Peters Solicitors LLP. Counsel instructed at the hearing were Graham Chapman QC (4 New Square) and Mark Vinall (Blackstone Chambers)