This recent decision looks at limitation defences to professional negligence claims.

Facts

In 2004 Mr Consett applied to the lender Mortgage Express (“MEX”) for loans to finance the purchase of four properties. MEX later issued a Claim against Abensons, the original competing solicitors for recovery of its loss.

MEX pleaded breach of contract and negligence on the part of Abensons for failing to notify MEX of the true nature of the transaction, which MEX claimed had they known, would have led them not to make the loans.  Despite several requests, Abensons refrained from providing their account ledgers until MEX obtained an order for disclosure from the Court.

Upon receipt of the ledgers, MEX made an Application to amend their Particulars of Claim to plead an additional cause of action for breach of fiduciary duty and to allege additional factual matters.  The Application to amend was made after the expiry of the relevant limitation period.

Whilst rejecting MEX’s arguments that there had been “actual deliberate concealment” under Section 32 (1) (b) Limitation Act 1980 (“LA”), Master Price granted the Application, and relied on Section 32 (2) LA, to overcome the issue of limitation expiry.   Abensons appealed.

Appeal Judgment

The Appeal was successful, and the Chancery Division set aside the Master’s Order. In granting the Appeal, the Court considered whether the Master had wrongly deprived Abensons of an arguable limitation defence and further, whether MEX could rely in the alternative on actual deliberate concealment under Section 32 (1) (b) LA to uphold the Master’s Order.

In reaching its decision, the Court made the distinction between causes of action where deliberate conduct was and was not an essential element to liability, and between the pleaded claims of breach of duty of good faith and breach of the no conflict rule.

On the breach of duty of good faith, the Court applied the case of Cave v Robinson Jarvis & Rolf [2003] 1 AC 384 (“Cave”).  Cave established the principle that a Defendant was taken to have deliberately concealed facts, where, if at the time of the breach, they knew they were committing a breach, and this would not be discovered for some time.  These circumstances were sufficient for a Claimant to block a potential defence of limitation by relying on Section 32 (2) LA.

The Court held in this instance that MEX met thetestestablished by Cave, as to successfully plead breach of duty of good faith, they were required to show that despite being conscious of their obligations, Abensons felt inhibited to comply with them, simply by virtue of acting for Mr Consett.  Accordingly, the Master had not wrongfully deprived Abensons of a limitation defence, as MEX could block such a defence by reference to Section 32 (2) LA.

By contrast the Court held that because MEX could establish a breach of the no conflict rule without establishing that the breach was deliberate, they could not rely on Section 32 (2) LA for that amendment.  For this reason, the Court held the Master to have been wrong as, in permitting this amendment, Abensons were wrongly deprived of an arguable limitation defence.

On the issue of actual deliberate concealment under Section 32 (1) (b) LA the Court applied the decision in Williams v Fanshaw Porter and Hazelhurst [2004] 1 WLR 3185 (“Fanshaw”). It was held in Fanshaw that two things must be established to show actual deliberate concealment. First, that despite being aware of the obligation to disclose, a defendant failed to comply with such an obligation, and second, that what was being withheld was of relevance to a claim against them.

The Court held that these were issues for trial, and should not merely be assumed for the purposes of considering the Application.   Accordingly, MEX could not rely on Section 32 (1) (b) LA to uphold the Master’s decision as an alternative to s.32 (2) LA.

Comment

Although there is nothing ground breaking in this case, the Court has provided some useful commentary as to the Court’s interpretation of Section 32 Limitation Act 1980, and shows their reluctance to deprive a defendant of a limitation defence, even where there appears to be a clear breach of fiduciary duty.  The case should serve as a useful reminder to lenders of the potential barriers associated with limitation and encourage them to investigate their claims as early as possible to avoid such issues arising.

For further information please contact Georgina Squire or the Partner with whom you usually deal.