Duty of care

Hughes v Colin Richards & Co [2004] EWCA Civ 266

The defendant chartered accountants acted for the claimants in setting up, administering and monitoring a trust for the benefit of the claimants’ children. On the defendant’s recommendation a Swiss trading company was set up, the shares in which to be held by the trust, into which the parents transferred £30,000. No sums were ever paid out of the trust for the benefit of the children and eventually the trading company was put into liquidation and the trust was struck off the register. The money paid by the parents was absorbed by the setting-up costs, trustees’ and directors’ fees, administrative charges, accounting fees, bank charges and taxation liabilities. The parents and the children brought actions against the defendant who applied to strike out the children’s claim, or for summary judgment, on the grounds that they owed a duty of care only to the client in both contract and tort and not to the beneficiaries of the trust. In upholding the judge’s refusal of the application, the Court of Appeal held that in developing areas of law it is important that such development is on the basis of actual facts found at trial and not hypothetical assumed facts. Although in the light of authorities the defendant had a strongly arguable case that he owed no duty of care to the children in respect of the investment claim, it could not be said that it was certain that the children’s claim would fail in the particular circumstances of the case. The Court could not interfere with the judge’s discretion refusing to strike out or dismiss the action unless the judge had erred in law or taken into account irrelevant matters or left out of account relevant matters or otherwise had gone plainly wrong. It was not apparent that the judge had done any such thing; on the contrary, in the particular circumstances he had been correct to allow the children’s action to go to trial.