In Stephane Etroy & RBC Trust Company v Speechly Bircham LLP [2023] EWHC 386, the High Court (HC) found a claim arising from negligent advice was not time-barred despite it being brought 12 years after the advice was given.
- Speechly Bircham LLP (Speechly) gave Inheritance tax advice to a UK resident, Non-domiciled Individual, Stephane Etroy.
- That advice, given in 2009, was implemented by RBC Trust Company (RBC) to establish a Non-resident trust.
- PWC identified a potential problem with the trust structure in 2017 and investigated with RBC over the next 18 months.
- In September 2018 after the investigation, the Speechly advice was found to be ineffective and led to additional liabilities of over £1m being incurred. These liabilities resulted from missed entry and 10-year charges for the trust.
- Mr Etroy instructed lawyers to investigate a claim in December 2018.
- The claimants issued a claim against Speechly Bircham in May 2021.
- It was agreed that the advice was defective but the defendants stated the claim was time-barred as the advice was provided more than six years before the claim was made.
- The claim was lodged with the High Court.
The High Court found that:
- While the ordinary limitation period is six years, there is a further three-year period starting when the claimant obtains the required knowledge to bring a claim for negligence.
- This three-year period starts when the claimant obtains both the knowledge of the material facts of the damage and the knowledge that the damage was attributable to the negligence.
- Where negligent tax advice leads to a tax liability, these two elements of knowledge should be viewed together. Knowledge of the damage would not arise until the claimant had received further specialist tax advice.
- The claimants had the required knowledge to instigate a claim in September 2018 as:
- This was when PWC reported the findings of their 18-month investigation to Mr Etroy.
- Investigations by PWC started in 2017 and it took 18 months to identify that there was an issue and that the issue was a result of negligent advice. The matter was highly technical and uncertain.
- While Mr Etroy was alerted to the possibility of further tax charges in 2017, PWC made it clear that it was uncertain and a full fact-finding was required to advise.
- Investigations to find out whether a claim is serious enough to pursue do not give the required knowledge to start the clock.
- The claimants had not known something had gone wrong with the advice until the PWC investigation had finished.
As the three-year clock started in September 2018, the claim, raised in May 2021 was in time and not statute-barred.
Useful guides on this topic
SRT: Statutory Residence Test
What is the statutory residency test? Why is it important and how does it work?
Non-domicile status, deemed domicile & tax
Who is non-UK domiciled? What does this mean for UK Income Tax, Capital Gains Tax and Inheritance Tax? What reliefs are available to non-doms?
Non-resident trusts
When is a trust non-resident? What are the UK tax implications of a non-resident trust? What are the UK tax implications for any beneficiaries? What are the UK administrative requirements for a non-resident trust?
External links
Stephane Etroy & RBC Trust Company v Speechly Bircham LLP [2023] EWHC 386
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