A law firm based in London has been unsuccessful in dismissing a £1.3m claim of negligence, which is linked to a Discretionary Trust they established for a man who, according to a High Court Judge, has been “serially let down” by the legal profession.
Lonsdale & Ors v Wedlake Bell LLP & Ors [2024] EWHC 712 (KB)
Case background
The professional negligence claim brought by Mr James Lonsdale stems from the “admitted negligence” of Wedlake Bell, the successor law firm to Cumberland Ellis.
The Discretionary Trust was initially set up in 1987 with the idea to benefit Mr Lonsdale’s children, with his nieces and nephews as backstop beneficiaries. However, the Trust’s terms, which granted the beneficiaries the right to income upon reaching 25 years of age, gave all beneficiaries, whether his children or nieces/nephews, equal rights.
At this point, the Judge noted, the situation could have been rectified as the Trustees had the authority to modify the Trust before any beneficiary’s right became effective. In 2008, Mr Lonsdale raised a question about the Trust’s terms, but no action was taken at that time.
Soon before the oldest beneficiary, Leonora turned 25 in 2011, negligent advice was given which led to the Trustees losing the chance to modify the Trust to fulfil the Mr Lonsdale’s wishes. The negligent advice was not put right until 2018, and during that period, the rights of other beneficiaries crystalised once they turned 25.
The Judge, Mr Justice Martin Spencer, said:
“Realising that [14] June 2011 was a potentially critical day [when his eldest child turned 25], he again raised the issue, but was given advice which has been admitted to be negligent so that what had been salvageable became unsalvageable.
“When the error was realised, he was encouraged to wait before seeing alternative advice in circumstances where it is said that the three-year limitation period from his ‘date of knowledge’ was running.”
In his ruling, Spencer J stated that the professional negligence claim was filed by Mr Lonsdale, both personally as the settlor and as a trustee, along with the other trustees and his four children.
Cumberland Ellis’s professional liability insurer, QBE, is also a defendant and has also requested the dismissal of the case.
The Judge commented that regardless that the defendants argued the trustees did not suffer a loss, it was desirable that they should be claimants, alongside Mr Lonsdale’s four children, as this meant there would be “no arguable gap” in recoverability of losses claimed.
Contrary to their submissions, the Judge said the solicitors owed the children:
“…a direct duty of care in circumstances such as these, where the disposition was completed and where the effect of the solicitors’ negligence was to make the disposition irrevocable.”
There was no dispute that the children’s claims were barred by statute. Spencer J went on to say that “he did not consider that it is sufficiently clear, or indeed clear at all” that Mr Lonsdale had acquired enough knowledge prior to January 2019 – when Wedlake Bell provided him with an analysis of what had transpired and he then sought independent legal counsel – to start the limitation period running to justify dismissing the claims or granting summary judgment.
The Judge concluded that both the trustees and children had “viable” claims.
Comment
This decision highlights the complexity of the legal position as regards duties owed to third parties by solicitors when drafting/preparing a Trust and also the impact of limitation on those third parties.
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