Case No. A2/2001/0575
Neutral Citation Number: [2002] EWCA Civ 272
IN THE SUPREME COURT OF JUDICATURE 
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(His Honour Judge Thompson QC
(sitting as a deputy High Court judge))
Royal Courts of Justice
Strand
London WC2
Thursday 24th January, 2002
B e f o r e:
LORD JUSTICE ALDOUS
LORD JUSTICE ROBERT WALKER
LADY JUSTICE ARDEN DBE
- - - - - -
	(1) VALENTINE CHARLES BIGGS 
(2) MOLLY ROSE BIGGS	
Claimants/Appellants	
	- v -		
	(1) SOTNICKS (A FIRM) 
(2) MICHAEL ABRAHAM PHILIP HARRIS 
(3) MICHAEL KENNETH PASCOE 
(4) MICHAEL DALTON 
(5) JOHN ANTHONY CONWAY 
(6) BRIAN LAURENCE PHILIPS 
(7) ALAN G FROUD	

Defendants/Respondents	
- - - - - -
(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 020 7421 4040
Official Shorthand Writers to the Court)
- - - - - -
MR B HURST (Instructed by Messrs Thomas Egger Church Adams, Worthing BN11 1SK) appeared on behalf of the Appellant
MISS S CARR (Instructed by Messrs Blake Lapthorn, Fareham) appeared on behalf of the 1st-6th Respondents
MR P PARKER (Instructed by Messrs Henmans) appeared on behalf of the 7th Respondent
- - - - - -
J U D G M E N T

1. LORD JUSTICE ALDOUS: I invite Lady Justice Arden to give the first judgment.

2. LADY JUSTICE ARDEN: This is an appeal (with permission granted by Sedley LJ and myself on 31st July 2001) against the order of His Honour Judge Thompson QC dated 22nd February 2001 dismissing the action on the grounds that it was statute-barred. The permission to appeal was limited to the deceit claim in the action.

3. Sadly, since the date of the previous hearing Mrs Biggs, one of the co-claimants in this action, has passed away. The court made an order today that Mr Biggs should represent her pursuant to CPR 19.6, leaving over any question that would arise in respect of the costs of this matter as a result of that order.

4. Likewise, since the last hearing in this matter four witness statements have been filed. They are by agreement of the parties admitted on this appeal, although Miss Carr, on behalf of the first to sixth respondents, has reserved her position with respect to any adverse inference that might be drawn from those witness statements; that is, an inference adverse to those parties whom she represents. I will refer to those witness statements later.

5. As respects the facts in this matter, I can take the facts from the judgment which I gave when permission to appeal was granted: 
“6. Mr Grimble, the son of the claimants applicants Mr. and Mrs Biggs, persuaded his elderly parents to part with possession of the title deeds to their home. This was in about 1986. He then used the deeds to borrow £40,000 from the Halifax Building Society. He falsely represented to the Halifax that he had bought the property for £50,000. Mr Froud, the seventh defendant, employed by Sotnicks solicitors, acted for the son and Mr Froud told the parents that he could act them too. He also led them to believe that he was a qualified solicitor, though nothing may turn on this.

7. The parents were induced to sign a transfer dated 29th May 1986 in favour of Mr Grimble. Mr Froud drew up a lease for five years and a promissory note for £40,000 to be signed by Mr Grimble. These documents were given to the parents to protect their interests. Mr Biggs in his statement refers to a meeting with Mr Froud in 1986. He knew that Mr Froud came from Sotnicks. Mr Grimble used the monies he raised from Halifax in his business. He has since gone bankrupt and there is no chance of getting any money back from him.

8. In 1989 the son remortgaged the property to the Nationwide Building Society. The first the parents knew about the remortgaging was when they received notice of possession proceedings from the Nationwide. The Nationwide now seek possession of their home. It was at this point in time, as I understand it, that the parents discovered for the first time the true nature of the documentation which they had been led to sign.”

6. The judge gave a long and thorough judgment, and I need only summarise the salient points for the purposes of this appeal. Since this present appeal is concerned only with the deceit claim, I need only deal with his holding with respect to the deceit claim. He held: 
“13. As to the claim in deceit, the judge held that all the pleaded allegations in fraud were made before the transaction was entered into in May 1986. Moreover, that there was nothing on the solicitor's conveyancing file, that was ultimately obtained in March 1987, that really added to or suggested there was anything further which came to the knowledge of the claimants which would suggest that their knowledge was not complete at an earlier point in time. I read the judge's judgment as meaning that the judge considered that their information was complete at June 1992 (see generally page 24, lines 18 to 22 of the transcript of the judge's judgment).

14. The judge referred to a letter which the claimants' solicitors had written to the Nationwide in June 1992, when they stated that they believed there had been a fraud on the claimants “certainly on the part of Mr Grimble” (see page 25 of the transcript).

15. The judge held that certainly by the end of 1992, when applicants knew that their son was bankrupt, that their position was not protected and that the promissory note was worthless. The judge could not see anything which emerged from Sotnicks' conveyancing file, when it was later obtained, which added any matter relied upon (see the judge's judgment page 26 of the transcript). Accordingly all the material information was with them in June 1992.

16. I should go back and explain what had happened between the commencement of the possession proceedings by the Nationwide and service on the claimants and the commencement of the proceedings. The claimants sought legal advice from their solicitors in 1992. They instructed the same firm throughout. Their solicitors suspected fraud by the son. They wrote to Mr Froud's new firm, whom Mr Biggs had traced, and this new firm falsely told them that Mr Conway, a partner in the firm of Sotnicks, had acted for the Biggs, but the Biggs knew that this was not the case. The solicitors then tried to find the conveyancing file. They were led a merry dance in their search for this file, and in the end they eventually located it through approaching a successor firm to Sotnicks. The judge held that they should have approached the Law Society for assistance at a much earlier stage.

17. The only documents which turned up when the solicitors obtained the conveyancing file were essentially two memos between Mr Conway and Mr Froud, in the first of which Mr Conway told Mr Froud that the firm could not act in the transaction in question and in the second of which Mr Conway gives some views on the drafting of a tenancy agreement regarding the property in issue in these proceedings, a property known as 24 Khartoum Road.

18. There are a few other documents in the file. They are documents which concern the mortgaging of the property to the Halifax, but none of these documents show that the Halifax had the full nature of the transaction explained to them.

19. The claimants' case is that Mr Froud participated in falsely representing to the Halifax that the transaction was a sale, and the claimants submit that it is to be inferred that Mr Grimble kept the monies advanced by the Halifax. Mr Froud was known to have stood by while Mr Grimble misrepresented the effect of the promissory note and the lease to his parents. But initially the claimants thought that Mr Froud was negligent rather than fraudulent. The solicitors for the claimants were not sure who employed Mr Froud.

20. Another firm of solicitors told the claimants' solicitors that Mr Froud had been employed by Sotnicks at the time. In July 1992 they were also told that the parents had been represented by Mr Conway of Sotnicks at the time (see the correspondence to which I referred earlier).

21. So the claimants' solicitors took the view that they should see the conveyancing file to which I have referred before any proceedings were begun. They located Mr Froud, but he misled them as to who employed him and as to his role. Ultimately, as I have explained, the conveyancing file (such as it was) was obtained but not until March 1997. The claimants' solicitors did not ask the Law Society for help in locating the file, though as solicitors they would have known that this was a sensible enquiry to make. Indeed, they were reminded of that probability by the Nationwide in September 1993. The claimants say that they did not know they had a cause of action in deceit against any of the defendants until they obtained the conveyancing file in March 1997. The file is said to show that Mr Froud knew the transaction with the Halifax was for the purpose of raising money. As I have said, there is no document on the file which we have seen which shows that Mr Froud disclosed to the Halifax either the fact that the Biggs had not really agreed to a sale at all or, secondly, that the proceeds of sale were not to be handed over to Mr and Mrs Biggs but were to be kept by Mr Grimble and invested by him in his business.

22. At this point it may be convenient if I read the relevant paragraphs of the claimants' statement of case. 
`4. On or about a date which cannot be particularised in or about May 1986, Mr Grimble introduced his parents to Mr Froud as his solicitor. At all material times, Mr Froud was aware that the parents perceived him to be a practising solicitor engaged as a partner, servant or agent in the firm of solicitors acting on behalf of Mr Grimble. At all material times Mr Froud adopted, held out or represented himself as a solicitor by conducting himself in the transactions particularised as follows at all times knowing that the parents perceived him to be and were conducting themselves upon the basis that he was a solicitor in practice.

5. In order to assuage the concerns of the parents as to the risk inherent in the provision of the deeds of the residential property, to assist Mr Grimble the latter represented to the parents the following facts and matters:- 
(i) The business presently trading as Goodies Restaurant was a successful business venture likely to succeed in the future. 
(ii) Nothing was known to Mr Grimble which vitiated the holding out of his opinion as to the prospects of success of Goodies Restaurant. 
(iii) Any sum borrowed could be repaid from the sale of the restaurant trading as Goodies, and that the parents would be entitled to effect such a sale if this should become necessary. 
(iv) The parents would be protected by an arrangement to be entered into and to be effected or perfected by a commercial arrangement involving the lease of the property, the promissory note as notional loan as particularised below. 
(v) Mr Froud was to protect their interests by advising them as to the nature and effect of the transaction, and as to its effectiveness to protect their position. 
(vi) Mr Froud was to act in their interests in the transaction.

6. At all material times, Mr Froud knew that these representations had been made by Mr Grimble and, further, Mr Froud adopted the same by conduct, inter alia by carrying on in the transaction having been present when the statements and representations above were made to the parents by Mr Grimble.

7. In the premises, Mr Froud and Sotnicks did or purported to act as solicitors representing the interests of both Mr Grimble and the parents in the proposed transaction by which the parents provided to Mr Grimble the deeds of a residential property for the purposes of raising a loan in the sum of and limited to £40,000.'

23. The statement of case then goes into the various documents that were executed and then: 
`9. Notwithstanding the assurances representations and warranties made by Mr Grimble and/or Mr Froud, the purported arrangement was incapable at any material time of providing any or any adequate protection to the parents to secure their interest in the residential property or to protect them from the adverse financial consequences of business failure on the part of Mr Grimble or his partners and in particular to protect the parents from the taking of possession or sale of the said property by any mortgagee or chargee of the residential property.

10. By purporting to act on behalf of the parents and by the advice statements and representations or warranties made by Mr Froud (at all material times in order to induce the parents to enter into the transaction to assist Mr Grimble) the parents will say at trial:- 
(i) Mr Froud was negligent. 
(ii) The statements and representations were made by Mr Froud in the knowledge that they were not true or alternatively were made recklessly indifferent as to whether the statements were true or false. 
In support of the averment that Mr Froud knew that the statements were not true or materially inaccurate, the parents will rely on the content and terms of correspondence between Mr Froud and solicitors instructed on behalf of the parents in which Mr Froud falsely stated that the interests of the parents were represented by one John Conway, then a partner, servant or agent of Sotnicks and that he himself took no part in the giving of any advice or making of any representations to the parents other than those which were ratified by Mr Conway.'“

7. In that description of the events in this case, I have referred to a “merry dance” that the appellants' solicitors were led in seeking the conveyancing file of Mr Froud with respect to the transactions of which they complain. I will deal with that shortly.

8. The position is that Mr Biggs already knew by 1992 that the conveyancing executive, Mr Froud, was no longer with Sotnicks, his firm at the date of the transaction, but had moved to another firm, subsequently found to be Daltons. On 6th July 1992, in response to a letter from the appellants' then new solicitors, Daltons respond that: 
“The writer [that is Mr Froud] most certainly recalls acting [on the transactions in question] although not as you described for both parties as Mr and Mrs Biggs were advised separately by a Mr J Conway, a former employee of Messrs Sotnicks.”

9. I need not refer to the rest of the letter. This particular letter is referred to in paragraph 10 of the statement of case. The significance there attached to the letter is that it was a false statement on Mr Froud's part and therefore was a matter which put the appellants on the track of a claim in deceit.

10. So far as the question whether Mr Conway was thought to have acted for Mr and Mrs Biggs was concerned, Mr Hurst, for the appellants, accepts that Mr and Mrs Biggs were clear in their instructions to their solicitors that they had been advised by Mr Froud, not Mr Conway. So that the letter was not relevant for that purpose.

11. On 9th July 1992 the appellants' solicitors wrote again to Daltons, and in that letter they state: 
“Our instructions are that Mr A G Froud did indeed see Mr & Mrs Biggs and advised them with regard to financial arrangements concerning Mr Grimble, the mortgaging as regards the property and their security as regards tenants.”

12. That particular letter has been relied upon by Mr Parker, for the seventh respondent, as showing that the appellants well knew that it was Mr Froud who had given them advice that they were protected by the transactions.

13. Moving on to a letter dated 21st January 1993 from the appellants' solicitors to Harris Pascoe, we see that there is a request addressed to “The Office Manager” of Harris Pascoe that that firm should look for the file relating to the transaction; Harris Pascoe being the firm to which it was thought that the partners of Sotnicks had moved. The letter says: 
“The matter was dealt with by Mr A G Froud who is a Conveyancing Executive with Messrs Daltons. We enclose a copy of Daltons' letters to us of the 22 December 1992 which, as you will see, suggests that we contact you with a view to trying to trace this file and we wonder if you can assist us.”

14. On 21st July 1993 Daltons replied to the appellants' solicitors. Within that letter they state that they note that Mr Froud has already written to Messrs Harris Pascoe asking about the whereabouts of this file, although it appears that he has not received a reply and that they would therefore be writing to ask them to search their records.

15. On 29th July 1993 Daltons wrote to the appellants' solicitors, again saying that they had still not received a reply from Messrs Harris Pascoe, and that unless the file could be produced they regretted that they could not help further. It is to be noted that the request to Harris Pascoe is at this stage from Daltons. The only letter which goes direct from the appellants to Harris Pascoe at this point in time is that to which I have referred to “The Office Manager”.

16. On 8th December 1993 Daltons again write to the appellants' solicitors, stating that Sotnicks had closed in September 1997 and that, so far as the writer was aware, all the files had then been put into the dead filing system by that firm who subsequently changed their name to Harris Pascoe, and recording that the writer had written to Harris Pascoe asking for a reply to the letters which had been written to them about the file.

17. On 31st May 1994 - that is a delay of some five months since the previous letter - Daltons write again to the appellants saying that they had written to Harris Pascoe and had written a further reminder asking for a reply.

18. Then on 21st October 1994 Daltons wrote again to the appellants' solicitors, thanking them for their letter of 20th October and advising that they had now written on at least two occasions to Harris Pascoe in connection with the file, and they say: 
“Unfortunately they have chosen to totally ignore our letters and Mr Froud no longer works for us, having left this Firm's employment in May 1994.”

19. I can then move forward to 12th August 1996, when the appellants' solicitors wrote to Adams Blair Cox. They had received the name of that firm from the Pascoe Practice, the successors to Harris Pascoe, on 8th July 1996, because Adams Blair Cox were the firm who employed the second partner of Harris Pascoe, who was a Mr Harris, and who was then an assistant solicitor with Adams Blair Cox.

20. The letter of 12th August 1996 contains a request that Mr Harris should find the relevant file. There was a reminder on 29th August 1996.

21. The Pascoe Practice, on the other hand, replied to requests from the appellants' solicitors on 7th January 1997 explaining that the writer of the letter had spent a considerable amount of time going through the storage facility held by Harris Pascoe to find the file but that it could not be found, and assuring the appellants' solicitors that steps would continue to be taken to look in every other possible place where the file may have been placed.

22. On 8th January 1997 there was a letter written in hand by Adams Blair Cox to the appellants' solicitors referring to a letter of 3rd January, explaining that the letter of 12th and 29th August 1996 had not been received, and stating that if copies could be supplied that firm, Adams Blair Cox, would endeavour to assist to find the file, although it was stated it was unlikely that they did hold any file relating to the former practice of Sotnicks.

23. There is a reminder on 4th February 1997, when Adams Blair Cox write again asking for copies of the letters. On 27th February 1997 there is a letter from the appellants' solicitors to the Pascoe Practice asking whether the continued searches that that firm was to make had proved successful.

24. Adams Blair Cox wrote on 4th March 1997 explaining that they had identified a file and would cause further enquiries to be made. Ultimately, on 11th March 1997, it was the Pascoe Practice which sent a limited number of documents to the appellants' solicitors. Those documents have been referred to in this appeal as the conveyancing file. So it can be seen that it took a very long time indeed to locate those documents.

25. So far as the documents actually located are concerned, the material documents are as follows. There is a file note said to have been compiled by Mr Froud, at page 303 of the bundle, which says: 
“24 Khartoum Road.
Attending Steve Grimble at 1.28pm on the 5th March when we discussed the above transaction. 
He is in effect `purchasing' the property from Mr and Mrs Biggs (Vel and Molly) for £50,000 and is taking out a mortgage of £40,000 from the Halifax B.S. 
The conveyance from Mr and Mrs Biggs to Steve will show a consideration of £50,000. 
He will then borrow from Mr and Mrs Biggs the sum of £50,000 secured only by a promissory note in that sum repayable five years hence. 
In consideration of same he will grant to Mr and Mrs Biggs a tenancy agreement (weighed in the favour of the tenants) without payment of rent and will simultaneously grant them an option to repurchase the property in five years time at exactly the same price of £50,000. 
He would also be making a new will in their favour leaving them the property free of any mortgage.”

26. Mr Hurst, for the appellants, has particularly relied on that document, since it makes clear that Mr Froud knew of the material features of the transaction and that he recorded it as a “purchase” and a purchase in effect, rather than a true purchase. Likewise, Mr Hurst has relied upon the words that state that the conveyance is to “show” a consideration of £50,000, thus confirming that that transaction was, as Mr Hurst described it, window dressing.

27. There is then a memorandum of 12th May 1986 from Mr Froud to Mr Conway, the partner who was supervising him, stating as follows: 
“You remember the matter your raised a few weeks ago concerning a tenancy agreement and some complicated arrangement with regard to a property which I thought was of a very dubious nature. I certainly think that we ought to tell Mr Grimble that we cannot do anything for him along the lines he proposed and perhaps you would let him know if you have not done so already.”

28. That was a memorandum from Mr Conway to Mr Froud, and Mr Hurst has particularly relied on that document as showing that Mr Froud was acting in disobedience to his instructions.

29. Mr Hurst has also relied on a statement of account in the conveyancing file which is headed “Grimble and Biggs”. Mr Hurst submits on the basis of that document that the solicitors, Sotnicks, regarded their clients not only as Steve Grimble, but as including Mr and Mrs Biggs as well.

30. So those were the conveyancing documents which were ultimately, as a result of this long search, produced by the enquiries made by the appellants' solicitors.

31. I now turn to the submissions that have been made in this case. I start by reading section 32(1) of the Limitation Act: 
“Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either- 
(a) the action is based upon the fraud of the defendant; or 
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake, 
the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it. 
References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.”

32. It is common ground between the parties that time only begins to run from the time when the Biggs could with reasonable diligence have discovered the fraud as regards themselves, that is the fraud of Mr Grimble and the deceit of Mr Froud as respects themselves, and that that is the fraud that is in question for the purposes of the concluding words of the first sentence of subsection (1).

33. Mr Hurst appears for the appellants on this appeal. The claim on which his clients rely is a claim in deceit. Mr Hurst has directed us to a number of authorities, including Bradford Third Equitable Benefit Building Society v Borders. This is a decision of the House of Lords, and there is a convenient summary of the ingredients of deceit - though, it is stated, not a comprehensive summary of the statement of the law - in the speech of Viscount Maugham at page 211. He points out that there must be a representation of fact made by words or conduct, and that that phrase will include a case where the defendant has manifestly approved and adopted a representation by a third person. Secondly, the representation must have been made with a knowledge that it is false. Viscount Maugham says it must be wilfully false or at least made in the absence of any genuine belief that it is true: Derry v Peek and Nocton v Ashburton (Lord). Third, the representation must be made with the intention that it should be acted upon by the claimant. Fourth, it must be proved that the plaintiff has acted on the false statement and has sustained damage by so doing.

34. In this particular case, the appellants' case is that the representation made by Mr Grimble was adopted by Mr Froud, or there was a joint adventure between Mr Grimble and Mr Froud so that the deceit is established in that way.

35. I now turn to Mr Hurst's further submissions. He submitted, first, that there must have been uncertainty as to whether Mr Froud was acting within the scope of his authority. But as Miss Carr, for the first six respondents has submitted, that matter was dealt with on the permission to appeal application. For my own part, I do not think it is an issue which can be raised on this appeal for it was not an issue in respect of which permission was given.

36. Mr Hurst's main submission, however, is with respect to the discovery of dishonesty by Mr Froud. Mr Hurst submits that the solicitors acting for the appellants did not know what Mr Grimble had told Mr Froud, and they did not know what Mr Froud knew of the profitability of the restaurant, Goodies. They did not know Mr Froud's precise job or his experience or his competence, and they were uncertain whether Mr Froud knew of the limited protection which the appellants would derive from the promissory note and the lease, or the limited nature of their rights under subsections (1)(g) and (k) of the Land Registration Act 1925. Likewise, they were uncertain where the lease and the promissory note had come from, and that they were uncertain whether Mr Froud would have known of the solicitors' practice rule, then Practice Rule 6, that the solicitors could not act for Mr and Mrs Biggs and also Mr Grimble if there was a conflict of interest between them. In other words, while they might have known that there was a serious case of negligence, they would not necessarily know that there was a case of fraud against Mr Froud.

37. Mr Hurst submits that it was reasonable for them to seek the conveyancing file. The documents in the conveyancing file, though meagre, just turned the corner. The file showed that it had never been disclosed to the Halifax Building Society that the transaction was anything other than a conveyance on sale. The file note had stated that Mr Grimble was “in effect” purchasing the property, and Mr Hurst submits that the file note must have been Mr Froud's. The conveyancing file also showed that Mr Conway was aware that Mr Froud was giving advice with respect to some kind of lease back transaction, and Mr Froud was prohibited from going further into the transaction by Mr Conway's memorandum of 12th May 1986.

38. On the basis of those matters, Mr Hurst submits that it is was not possible to plead this case until the conveyancing file had been obtained. He submits that it was reasonable to obtain that file. The judge was wrong to conclude that the Law Society letter helped. The Law Society in 1996 had written giving the names of Harris Pascoe and Adams Blair Cox as successors to Sotnicks. He also submitted that the judge was wrong in concluding that if the Law Society had been contacted earlier, files could have been prised out earlier. He submitted that the judge misunderstood the position that the appellants simply needed sufficient evidence of the material facts, and that he misunderstood the position by concluding that the knowledge of Mr Grimble was enough. The appellants would have to go on and show that Mr Froud was implicated. The judge, on Mr Hurst's submission, misunderstood the significance of the non-disclosure to the Halifax Building Society. This was an evidential matter, that it would then indicate and be some form of similar fact evidence, rather than direct evidence of a fraud vis-à-vis Mr and Mrs Biggs.

39. Mr Hurst also submitted that the respondents were wrong in saying that it would have assisted or been appropriate to enquire earlier of the Law Society. The Law Society did not help because by the stage when they were in fact contacted in 1996, the appellants already had the names and addresses of the two firms, Harris Pascoe and Adams Blair Cox. They would have gained no assistance by chasing up the Halifax Building Society, as suggested, since the Halifax were not acting for Mr and Mrs Biggs and had no relationship with them.

40. So far as the Land Registry were concerned, that would only have shown the formal documents. The Land Registry documents would not have assisted on the issue of Mr Froud's dishonesty. The appellants might have approached Mr Grimble himself, but of course he was the fraudster and there was limited weight which could be placed on his evidence. They could also have approached Mr Conway, but they knew that all he would have been able to say is he had not authorised Mr Froud, and he would have been likely to have needed the file.

41. So far as the start date is concerned, Mr Hurst submits that the date when the limitation period started to run was 6th July 1992 when Mr Froud falsely stated that he did not act. That is a matter which gave rise to a suspicion of fraud, and it was then that the statutory period of limitation would start to run. He also submits - and this is an important point - that Harris Pascoe only unearthed the relevant file as a result of accumulated badgering; that they would not have done so within any shorter period.

42. That leads to the important submission that if the appellants' solicitors had approached the Law Society direct in February 1991, then it would still have taken more than 26 months to obtain the relevant documents.

43. That reference to February 1991 takes me to the witness statements which have been filed on this appeal and which were not available to the judge. They comprise a witness statement of Margaret Elizabeth Windram, who is a solicitor and speaks to the recording systems of the appellants' solicitors. I need not quote from her witness statement. There is a further witness statement from Mr Gleeson, who deals with the searches made by his firm for their files. There is then a long witness statement from Mr James Morgan Harris, a partner in the appellants' solicitors, who deals with the contents of a file which was discovered as a result of further searches to which Mr Gleeson and Margaret Windram refer.

44. The position is that the appellants have sought to preserve privilege in respect of the documents on the file, so the court does not have the documents themselves but simply a description of the position as respects Mr and Mrs Biggs shown by this file. What Mr Morgan Harris says is this: 
“The file was opened on 3 January 1991 and shows that Mr Biggs was seeking advice from me about his and his wife's position in relation to the property. [That is 26 Khartoum Road.] It is not clear from the first attendance note on the file but I believe this was against the background of financial problems with the restaurant that Stephen Grimble was running.

3. Mr & Mrs Biggs were wanting to know what their position was. Their instructions were that they had let Stephen Grimble have the deeds of the property but they had not conveyed the property to him. They had not signed any mortgage, security or guarantee forms.

4. I asked for details of anything they could remember about the transaction and suggested that they could raise the matter with Stephen Grimble to see if he could shed any light upon the position.

5. In response to those enquiries Stephen said that in June 1986 he had `in practice' purchased the property from them for £40,000 by taking out a mortgage but Mr & Mrs Biggs had then loaned the money back to Mr Grimble. Thereafter the mortgage had been increased to £60,000 although with interest etc its value by then was approximately £70,000-80,000. He said that the bank had the residue as security and were aware that Mr & Mrs Biggs resided there but had omitted to contact them or ask them to sign anything.

6. Mr Biggs confirmed on behalf of himself and Mrs Biggs that they could not remember having the property conveyed. Mr Biggs said that Alan Froud had assured them that their position with regard to the property was secure and had described the position as `airtight'.

7. Our file shows that it was thought that Alan Froud had been at Daltons solicitors when he acted for them.

8. Mr Biggs confirmed that neither he nor Mrs Biggs met Alan Froud in his office and they were never advised to see another solicitor. They said that all the legal work was conducted by Alan Froud and Stephen Grimble.”

45. There is a further witness statement by Mr Morgan Harris, though it deals with the separate matter with which I need not deal. Obviously explanations have been given as to why this file has only just been found, but I can leave those matters aside at this stage.

46. The significance is that, far from it being the case, as thought previously, that Mr and Mrs Biggs consulted solicitors in the middle of 1992, they had in fact consulted the appellants' solicitors in January 1991, and that the solicitors had made enquiries on their behalf and that those enquiries were effectively complete by 26th February 1991. That date appears in paragraph 9 of Mr Morgan Harris' first witness statement because he says that on that date he wrote to Mr and Mrs Biggs asking them to come back to the appellants' solicitors, but that nothing further was heard from them until May 1992.

47. So what is clear is that Mr and Mrs Biggs were aware that they had a problem about their property and the ownership of it as far back as January 1991. Mr Hurst submits that the relevant date cannot be before 26th February 1991. So far as searching for the conveyancing file is concerned, if it is relevant to go back to this instruction of the appellants' solicitors, then in his submission the start date could not be before 26th February 1991, when the solicitors had sensibly made some enquiries from persons other than their clients to ascertain precisely what had happened. But it is also clear that by that date the appellants' solicitors knew that Mr Grimble had purchased the property from his parents and that mortgage money had been lent back to him. They also knew that that was not the transaction as Mr and Mrs Biggs had understood it to be.

48. I should say that the parts of the witness statement which I have not read do not explain why enquiries were not thereupon made to ascertain where the conveyancing file for the transactions in 1996 might be. That is a matter to which Miss Carr has drawn the court's attention.

49. I now turn to Miss Carr's submissions. Miss Carr is for the first to sixth respondents. She submits that the sole issue is in fact whether the necessary facts relating to Mr Froud's dishonesty could have been discovered with reasonable diligence prior to April 1993. She submits that the onus is on the appellants. She refers the court to the judgment of Millett LJ in Paragon Finance v Thakerar [1999] 1 All ER 400, at 418. She uses this judgment for two purposes. First, Millett LJ observed that as the party who in that case had not filed evidence on which steps they had taken to discover the facts: 
“It is difficult to see how they can have discharged the burden of showing that they come within the section.”

50. There is then, at page 418, the classic statement of what section 32(1) requires. Millett LJ says this: 
“The question is not whether the plaintiffs should have discovered the fraud sooner; but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable period of limitation is irrelevant. In the course of argument May LJ observed that reasonable diligence must be measured against some standard, but that the six-year limitation period did not provide the relevant standard. He suggested that the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency. I respectfully agree.”

51. In a recent case, UCB Home Loans v Carr [2000] Lloyd's PNLR 754, Crane J has suggested at paragraph 19 that the word “exceptional” should be omitted from the passage from the judgment of Millett LJ to which I have referred.

52. So Miss Carr submits on the basis of that that because there is no evidence as to what steps the appellants' solicitors took in February 1991 and before April 1994, they could not discharge the onus of showing that they had acted with reasonable diligence. She submits that the attitude of courts to this sort of issue is robust. In that regard she refers to paragraph 21 of Crane J's judgment in UCB Home Loans v Carr. She submits that even if Sotnicks' conveyancing file was necessary, it was unarguable that it could not have been obtained with reasonable diligence before April 1993. She points out that when Mr Gleeson, a partner in the appellants' solicitors, took over the case in July 1996, it took him less than nine months to obtain the file and it could probably have been obtained at an earlier point in time.

53. She submits that reliance on the conveyancing file is wholly artificial. The real question in this case is whether Mr Froud made the representations to Mr and Mrs Biggs, or associated himself with them, in a way which renders him liable in deceit. In assessing whether the necessary information was available to the appellants to plead their case, the court should look at the case which they have actually pleaded and go no further than that, and ask whether the pleaded allegations needed further information which the appellants' solicitors did not then have.

54. Miss Carr also submits that in exercising reasonable diligence, the solicitors would not simply have sought the conveyancing file, which might after all have not been available to them, but would have made other enquiries with Mr Grimble, who was then living with Mr and Mrs Biggs (he was, after all, their son), made further enquiries with the Land Registry and with other parties, in order to assemble a complete picture from which they could plead their case. Contrary to what might have been expected, she refers to the correspondence which actually took place. In particular that before April 1993 was, on her submission, sparse. Their only letter to Harris Pascoe, the successors to Sotnicks, was a letter addressed to “The Office Manager” of 21st January 1993. There was no other letter in that period.

55. She points to other matters, such as the fact there was no approach to the Law Society, or to Mr Conway, or to Mr Grimble, or to the Halifax Building Society, and that in some cases there were long delays between letters. She submits that this is all the more culpable, given that the appellants' solicitors knew that Mr and Mrs Biggs' case was that they were victims of a fraud. Moreover, that the solicitors must have known that they were on the cusp of the expiration of a six-year period from the transactions. She says the same pattern occurs in the correspondence between April 1993 and July 1996.

56. She then turns to the correspondence in the period July 1996 to March 1997. This is when Mr Gleeson obtains the file and, by contrast with what had previously happened, he elicits the relevant file in nine months.

57. She submits that it was a reasonable inference that all that the appellants needed was material from which a reasonable inference could be drawn that Mr Froud was dishonest or reckless, in the sense required for a deceit claim. She submits that he could not honestly have represented himself as a solicitor if he was not. There was simply no way in which that sort of representation could honestly be made. It must have been obvious to him from a simple inspection of the documents that Mr and Mrs Biggs' position was not a protected position. She draws the court's attention to the fact that Mr and Mrs Biggs told their solicitors that Mr Froud had said that the position was “airtight”.

58. So she submits that all the necessary ingredients to the pleaded case on deceit were available to the appellants prior to April 1993. In particular, she submits that the memoranda in the conveyancing file, on which Mr Hurst has particularly relied, are simply not relevant. They only show at most that there was a possible fraud on the Halifax, but that is not the pleaded fraud. In any event, those memoranda are not referred to in the statement of case. She points out that the other enquiries to Mr Grimble could have elicited his consent to go to the Halifax. The Halifax, Mr Conway, the Law Society and the Land Registry could all have produced relevant documents.

59. Mr Parker has made submissions on behalf of the seventh defendant. He adopts Miss Carr's submissions, so that I can deal with his points, if I may do so, without intending any discourtesy, quite briefly. He again has gone through the documents to show that there was sufficient material to plead the case that was ultimately pleaded known to the appellants' solicitors before April 1993.

60. So far as the matters which were relied upon by Mr Hurst in his submissions as being matters of which his solicitors did not know, he submits in the main that all those matters were irrelevant to the pleaded case. They did not plead those matters as being matters from which the inference of fraud should be drawn.

61. Having set out counsel's submissions and the fact of this case and the pleadings at some length, I propose to set out my conclusions quite briefly. There are, as I see it, really three main matters.

62. In my judgment, the correct date when the appellants' solicitors had sufficient information in their hands for the purposes of this deceit claim was on 26th February 1991. They had taken instructions from their clients and they had consulted Mr Grimble. They knew the essential case of their clients, which is that Mr Froud had held himself out to be a solicitor, that he had held himself out as acting for them. Indeed, he had not simply adopted what Mr Grimble had represented to them, he had gone further and told them that the protection for them was “airtight”. Those are, as I see it, really the essential matters. They could also have obtained any office copy entries or formal documents of transfer from the Land Registry if they were not made available to them by their own clients, or indeed they could have obtained the lease. Their own clients would have had the promissory note and that, like the transfer, had been executed at the offices of Sotnicks.

63. So far as the case on deceit is concerned, for the purposes of the question whether reasonable diligence was exercised in bringing the claim, it seems to me that I should look no further than the pleaded case. The appellants' case was that their pleaded case is a sufficiently pleaded case, a properly pleaded case, of deceit. Mr Parker has sought to challenge that, but proceeding on the appellants' case, it seems to me that I need go no further than ask whether or not the appellants had taken sufficient diligence to bring these proceedings, bearing in mind that which they themselves pleaded. It is of significance that the only particular from which the inference of fraud can be drawn is that in paragraph 10 which, as I have explained, is the letter of 6th July 1992. That is a letter which they received well before April 1993.

64. So as I see it, the appellants were in a position to plead their own case as they set it out and seek to establish it by April 1993. I therefore accept Miss Carr's submission that it was not necessary to seek the conveyancing file on their own case.

65. So far as that file is concerned, if it was appropriate to obtain it, then it seems to me that exercising reasonable diligence the solicitors would have sought to obtain it in February 1991. It can be said that they had not at that stage received the letter of 7th July 1992 containing Mr Froud's false statement which put them on the tracks of dishonesty. But the position is that they were considering a negligence claim. It seems to me that acting with reasonable diligence, solicitors acting for Mr and Mrs Biggs in this situation would have sought to obtain the conveyancing file for the purposes of that claim, even if it was only a negligence claim.

66. Moreover, exercising reasonable diligence, given that Sotnicks was no longer a firm practising as such, it seems to me that they would have written to the Law Society, or could exercising reasonable diligence have written to the Law Society, and the Law Society would have given them accurate information as to the current whereabouts of the partners of Sotnicks.

67. Mr Hurst's submission is that it would still have taken over 26 months to obtain the file. He has submitted that it was only the repeated badgering of Harris Pascoe which ultimately obtained the file. I do not accept that submission. It seems to me that exercising reasonable diligence the appellants' solicitors would, if they did not get a reply within an appropriate period of months not years, would have suggested to Harris Pascoe that if they were not prepared to reply promptly, they would take the matter further with the Law Society, as the professional body, or that they would have taken other steps to ensure that the file was searched for and found. In those circumstances, it seems to me that on this footing also the appeal must fail.

68. In the circumstances - and this is really my third point - I need not deal with Mr Parker's written submissions, which he has not amplified in court, as to whether there was indeed a properly pleaded case in deceit. It is not a matter with which the learned judge dealt and, while I appreciate that Mr Parker has put in some careful submissions on this point, as I see it it is not necessary to address them.

69. In the circumstances, I would dismiss this appeal.

70. LORD JUSTICE ROBERT WALKER: I agree.

71. I only wish to add that I would not adopt Crane J's suggested amendment of what Millett LJ said in Paragon Finance v Thakerar & Co [1999] 1 All ER 400, at 418 (see UCB Home Loans v Carr [2000] Lloyd's PNLR 754, at 757). Crane J may possibly have overlooked that Millett LJ's observation about exceptional measures was, in substance, a double negative. Whether that is the correct explanation or not, I would not agree with what Crane J said.

72. LORD JUSTICE ALDOUS: I agree with both judgments. ORDER: Appeal dismissed with costs, the determination of the claimants' liability to pay the respondents' costs be postponed generally with permission to apply for determination, and in the meantime payment of the said costs be suspended until further order; detailed assessment of the Appellants' Community Legal Services Funding. 
(Order not part of approved judgment)