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Published 1 March 2016
To get around limitation problems, claimants may argue that a professional was under a continuing duty to correct an error until the point of rectification, so that the 6 year period for bringing claims runs from this later point in time. However, the recent Court of Appeal decision in Capital (Banstead 2011) Limited & ANOR v RFIB Group Limited  EWCA Civ 1310 has usefully narrowed the circumstances in which claimants can run such arguments.
Capita Hartshead Benefit Consultants (“CHBC”) provided services and advice to a pension scheme, the Queen Elizabeth Foundation Scheme ("QEF Scheme") from 1995. On 30 April 2004, the Defendant sold CHBC to the Claimant and agreed to indemnify the Claimant for losses arising from advice/services provided by CHBC before the transfer date (“the Indemnity”). In fact, CHBC had been negligent in the services provided to the QEF Scheme. Changes to the QEF Scheme in April 2000, July 2001 and April 2004 had not been formalised by amendment of the scheme rules, causing losses exceeding £4m. Even after CHBC subsequently realised that formal amendments were required, it (wrongly) represented that they were in place. The QEF Scheme's claim against CHBC was settled, following which the Claimant pursued the Defendant under the Indemnity.
At first instance, Popplewell J found that CHBC had been in breach of duty to QEF for failing to ensure formal amendment to the scheme rules in April 2000, July 2001 and April 2004, and that these breaches continued until December 2007. CHBC was also in breach in making representations after the transfer date, that the amendments had been made. Responsibility was apportioned 50/50 between the Claimant and the Defendant on the basis that losses had been incurred both before and after the transfer date.
On the continuing duty point, Popplewell J reviewed the authorities, including:
In finding a continuing duty, CHBC's retainer and error was put on the Midland Bank side of the fence.
On appeal, Longmore LJ found there was no distinction in principle between Bell and Midland Bank, and that Bell was the preferred approach. He said: "The obtaining and receiving of advice after a mistake has been made (even if a mistake can be easily rectified) cannot mean to my mind that an obligation to correct one's mistake, or negligence continues to accrue and give a fresh cause of action every day after the mistake has been made." Accordingly, CHBC's original acts of negligence occurred before the transfer date, and its continuing retainer did not mean that fresh causes of action accrued every day that the scheme rules remained unamended.
However, the misrepresentations that the amendments had been made occurred after the transfer date, and slightly adjusting the 50/50 apportionment, Longmore LJ found the defendant liable under the indemnity for all losses up to 31 December 2004.
The decision is fact specific, but provides useful commentary on whether professionals are subject to a continuing duty of care to rectify mistakes made previously. The Court of Appeal's preference to follow Bell suggests that a professional’s failure to rectify mistakes will not in itself constitute a further breach of duty. This may assist in defeating a claimant's attempts to get around limitation by arguing there was a continuing duty (unless there are special circumstances to support a continuing duty). The decision highlights the importance of carefully analysing what a professional has been retained to do and not to do. Such analysis is often vital to the successful defence of a liability claim.