A negligence claim over inheritance tax advice provided by City law firm Charles Russell Speechlys (CRS) is to go ahead after the High Court held that it is not time-barred.
Ms Clare Ambrose, sitting as a deputy High Court judge, ruled that Stephane Etroy acquired knowledge of a possible claim in 2018, less than three years before he issued proceedings, even though the advice dates back to 2009.
She said the law firm accepted that it was in breach of its duty to Mr Etroy in failing to appreciate at the time that there were UK assets being transferred from one discretionary trust to another and in failing to mitigate the inheritance tax charges that resulted.
There is an outstanding issue as to whether the law firm owed a duty of care to the second claimant – RBC Trust Company (Jersey) Ltd, a professional provider of trusts services based in Jersey – but limitation was dealt with first as a preliminary issue.
Mr Etroy, a senior private equity professional, claims losses of £1.5m, of which just over £1m was the tax charged on the transfer of the assets.
He set up a trust in 2002 to hold interests from his work. Following advice from the pre-merger Speechly Bircham in 2009, he transferred assets in that trust to the new trust the following year, of which RBC was the trustee.
In 2017, Mr Etroy sought tax advice from PwC in relation to the trust, and PwC raised inheritance tax issues, advising him in September 2018 to register a disclosure covering his liabilities to HM Revenue & Customs. He issued proceedings in May 2021.
CRS maintained that the claims were statute-barred because the alleged tort arose more than six years earlier.
The claimants said it was not because the earliest date on which they acquired the knowledge required for bringing their action was on 28 September 2018 – less than the three years set out in section 14A of the Limitation Act 1980.
CRS argued that the claimants’ complaint was “a very simple one that could have been shortly answered at the outset of the communications with PwC in 2017”.
But Judge Ambrose did not agree. It was only in September 2018 that PwC “firmly indicated that there was likely to be a significant entry charge that was attributable to the defendant’s advice”.
It was telling, she said, that Mr Etroy sought legal advice within a couple of months of this and sent a letter before action in February 2019.
“PwC’s telephone conference with Mr Etroy on 28 September 2018 first gave Mr Etroy actual knowledge that liability for the entry charge was a real possibility whereas previously PwC had been tentative and maintaining that further information was required.”
He held that the claims were commenced within the time permitted by section 14A and were not time-barred.