In this recent decision, which reaffirms important limitation rules, the Court gave consideration to the issue of limitation under s14A Limitation Act 1980 (“LA 1980”).
The Claimant was a privately owned property investment company, and the lessor of two properties, Flats 27 and 26. Agreements to enter into new leases were made in August 1999 and November 1999, respectively. The Defendant was instructed by the Claimant to consider the terms of the draft leases. The Defendant subsequently set out its advice by way of a letter dated 24 March 1999 approving them without the inclusion of indemnity provisions. As a result, the Claimant, who under the former lease terms had been able to recover a proportion of the ground rent payable under the head lease, was unable to do so under the new leases.
In August 2005, the Claimant issued a professional negligence claim. In October 2005, the parties agreed to extend time for service of the Claim Form generally. Proceedings were served in July 2011, after the Defendant’s solicitors called for service. In October 2011, the Defendant applied for summary judgment dismissing the claim on the basis that the primary limitation period for any claim in negligence had expired even before the Claim Form had been issued in 2005. The Defendant submitted that if they were in breach of their duty of care as alleged, then it was a single breach which occurred when they initially advised the Claimant in respect of the first Flat, 27.
At first instance, the Master dismissed the claim and held that the loss in respect of Flat 27 occurred on or before 2 August 1999. In respect of Flat 26, the loss flowed from the failure in June 1999 to include the indemnity provision and therefore the Master held that:
1. There was only one cause of action in respect of both flats;
2. Primary limitation of 6 years had expired before the issue of proceedings; and
3. The Claimant had no prospect of showing that its claim fell within the extended limitation period under s14A Limitation Act 1980 (“LA”).
The Master effectively found the claim to be time barred for both Flats 26 and 27. The Claimant appealed the Master’s decision that there was only one cause of action in respect of both flats.
The Court of Appeal confirmed that the objective test in s14A (7) LA should be applied, being that the level of knowledge required to bring an action for damages includes knowledge of the material facts of the damage. The material facts are those that would lead a reasonable person (who has suffered the damage) to consider it sufficiently serious to justify issuing proceedings against a defendant who did not dispute liability and was able to satisfy a judgment.
The Court held in favour of the Claimant, that there were separate causes of action in respect of each flat as the Defendant has been separately instructed in respect of each lease. It was held that the cause of action in respect of Flat 26 was not complete until November 1999. It was therefore held that the Claimant had a real prospect of showing that its claim for Flat 26 had been brought within the primary limitation period and the Appeal was allowed so far as it related to this aspect.
However, the Court dismissed the Appeal in respect of Flat 27 and upheld the Master’s view that there was no reasonable prospect of the Claimant establishing an extended limitation period. Specifically, it was held that the Claimant should have appreciated, at least, the possibility that the loss which it claimed was caused by the Defendant. The Court reasoned that, before August 2000, the Claimant had actual knowledge or the knowledge imputed to it by reason of s 14A(10) LA of: (i) the material facts as defined in s 14A, regarding the loss in respect of which it claimed damages; and (ii) the fact that the damage was attributable in whole or in part to acts or omissions of the Defendant, which were alleged to have been negligent. Accordingly, the Appeal Court upheld the Master’s decision in relation to Flat 27.
The Appeal Court confirmed that the relevant “degree of knowledge” is satisfied if the Claimant had known that the Defendant’s advice was flawed, but not necessarily negligent. The degree of knowledge has to be more than mere suspicion, although it need not be as much as certainty.
This provides a useful guide when considering when a cause of action may have accrued under S14A LA. In addition, this judgment warns claimants who intend to rely on the extended limitation period potentially afforded by LA to use all available resources when considering the question of loss and to take into account future developments, even if the exact date when these developments may occur is uncertain.
For further information, please contact Georgina Squire or the Partner with whom you usually deal.