JJ Coughlan Ltd & Ors v Charterhouse (Accountants) LLP (Defendant) & Michael Sherry (Third Party) (2016)
In a negligence claim against accountants arising from the recommendation of tax-avoidance schemes in 2001 and 2003, it would not be appropriate, subject to one exception, to allow the claimants to amend the particulars of claim. The new allegations represented new claims and did not arise out of the same or substantially the same facts as had already been pleaded.
The claimants sought permission to re-amend their particulars of claim.
In the original particulars of claim, the claimants had alleged that the defendant accountants had acted negligently in recommending to them three tax-avoidance schemes, all of which were subsequently challenged by HMRC. The schemes in question were two funded unapproved retirement benefits schemes entered into in 2001, a film scheme investment made in 2001 and a bonus scheme, entered into in 2003, which minimised national insurance contributions and income tax. In the re-amended particulars of claim, the claimants made two main allegations, namely that the accountants should have informed them of a conflict of interest (it was said that the accountants had been involved in designing or creating the three tax-avoidance schemes) and that they should have advised them of the availability of alternatives to the three schemes.
The issues were whether, for the purposes of the Limitation Act 1980 s.35, the re-amendments added a new claim and, if they did, whether the new causes of action arose out of the same facts or substantially the same facts as had already been pleaded.
The allegations of conflict of interest did not seek to introduce a new duty but rather sought to add a further respect, based on new factual issues, in which the accountants had acted in breach of duty. The re-amendments did raise a new cause of action, because important and significant new facts had to be pleaded to support it. For the same reason, it did not arise out of the same or substantially the same facts as the currently pleaded claim. The re-amendments would not therefore be allowed. As to the allegations that the accountants should have advised the claimants of the availability of alternatives to the three schemes, it would be appropriate to allow the re-amendments insofar as they related to the film scheme. That was because the allegation had been made in the original particulars of claim; the claimants were merely seeking to add uncontroversial wording to their pleading. However, it would not be appropriate to allow the re-amendments insofar as they related to the other two tax-avoidance schemes. The claimants might be relying on the already pleaded duty of care, but they were introducing a significant new respect, based on wide-ranging new factual issues, in which the accountants had acted in breach of that duty. Further, the re-amendments also entailed a significant change to the way in which damages were claimed. It was now alleged that, as opposed to the previously pleaded case that they would have done nothing, the claimants would have entered into one of the alternative schemes. Nor did the new allegations arise out of the same or substantially the same facts as would be litigated under the existing pleading. It was obvious that the new claim raised a host of new factual issues and that it had led to a complete recasting of the claimants' damages claim (see paras 14, 18, 21-24, 26, 30-32 of judgment).