Continuing arguments about continuing obligations

In an appeal from the Court of Appeal in Trinidad, Maharaj v Johnson, the Privy Council dealt with the vexed limitation questions of the date on which loss accrues and a solicitor’s continuing duties.

The facts

The assumed facts are relatively simple:

• In 1986 the defendant solicitors acted for the claimants on the purchase of land in Trinidad for $170,000. The purchase was completed and registered.
• In 2008, 22 years later, the claimants tried to mortgage the land but the lender’s solicitors asserted that the claimants did not have good title because of a defect in the 1986 transfer.
• Also in 2008, the claimants contracted to sell the land for $20 million but were unable to complete the sale on account of the defect in their title.
• The claimants issued proceedings against the defendants in 2012 (just within the Trinidadian four year limitation period if it ran from 2008) claiming that the land was now only worth $4 million.

There is no equivalent of the secondary limitation period (s.14A Limitation Act 1980) in Trinidad so the claimants’ had to establish either that they had suffered no loss until the failure of their 2008 sale or that the defendants were under a continuing duty to obtain good title until 2008. In fact, they were able to obtain good title but only after the sale had been lost.

The Privy Council affirmed the conclusion of the Trinidadian courts that the claimants had suffered a loss in 1986. The majority contrasted “no transaction” cases where the transaction would not have taken place if the solicitors had complied with their duty with “defective transaction” cases where the transaction would have proceeded but in a different form if the solicitors had complied with their duty. This case fell firmly in the second category and an immediate loss had been suffered in 1986.

The more problematic question was whether the defendants were under a continuing duty to secure good title for their clients from 1986 onwards. The majority of the Privy Council concluded that the solicitors had discharged their duty when they completed the claimants’ purchase in 1986, were paid their fees and closed their file. But a dissenting judgment by Lord Clarke disagreed on that point.

Discussion

The question of continuing breach involves consideration of two long standing English decisions. In Midland Bank v Hett Stubbs & Kemp, Oliver J held that the defendant solicitors’ failure to register an option agreement was a continuing breach of duty. By contrast, in Bell v Peter Browne & Co, the Court of Appeal held that the defendant solicitors’ failure to secure a deed of trust protecting his interest in the matrimonial home following a divorce was a breach which crystallised on the transfer of the house to the wife (she subsequently sold the house and pocketed the proceeds of sale).

The distinction between the two cases seems to be that in Midland Bank the solicitors and the other parties treated the option agreement as valid whereas in Bell it became impossible to remedy the solicitors’ failure once the house had been transferred to the wife.

It remains difficult to reconcile the two decisions. It seems odd that the question whether the solicitors owed a continuing duty depends on how they perceived their position – a point made trenchantly by Lord Clarke.

Implications

The argument will not end here but it is slightly unusual for limitation cases to reach the Privy Council or the Supreme Court so the decision is of interest. The majority decision seems to doubt the Midland Bank approach but it is clear that a category of cases survives where there may be a continuing duty. It is a fact sensitive issue whether there is such a duty but it will only arise in rather unusual circumstances.