4/06/2015
Junior lawyers’
professional indemnity
seminar
4 June 2015
Section 14A of the Limitation Act 1980 –
There’s No Limit?
Niamh O’Reilly
Extending the Limitation Period in
Professional Negligence Claims
• Section 14A of the Limitation Act 1980 – brought in by the Latent Damage
Act 1986
• Subject to 15 year longstop – section 14B
• Section 32 of the Limitation Act 1980 – time starts to run from when fraud,
deliberate concealment or mistake in respect of which relief sought was or
could by the exercise of reasonable diligence have been discovered
• No longstop for section 32
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Section 14A Limitation Act 1980
14A (1)This section applies to any action for damages for negligence,
other than one to which section 11 of this Act applies, where the
starting date for reckoning the period of limitation under subsection
(4)(b) below falls after the date on which the cause of action accrued.
(2)Section 2 of this Act shall not apply to an action to which this section
applies.
(3)An action to which this section applies shall not be brought after the
expiration of the period applicable in accordance with subsection (4)
below.
(4)That period is either—
(a)six years from the date on which the cause of action accrued; or
(b)three years from the starting date as defined by subsection (5)
below, if that period expires later than the period mentioned in
paragraph (a) above.
(5)For the purposes of this section, the starting date for reckoning the
period of limitation under subsection (4)(b) above is the earliest date on
which the plaintiff or any person in whom the cause of action was
vested before him first had both the knowledge required for bringing an
action for damages in respect of the relevant damage and a right to
bring such an action.
Section 14A Limitation Act 1980 (continued)
(7)For the purposes of subsection (6)(a) above,
the material facts about the damage are such
facts about the damage as would lead a
reasonable person who had suffered such
damage to consider it sufficiently serious to justify
his instituting proceedings for damages against a
defendant who did not dispute liability and was
able to satisfy a judgment.
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(8)The other facts referred to in subsection (6)(b) above are—
(a)that the damage was attributable in whole or in part to the act or
omission which is alleged to constitute negligence; and
(b)the identity of the defendant; and
(c)if it is alleged that the act or omission was that of a person other
than the defendant, the identity of that person and the additional facts
supporting the bringing of an action against the defendant.
(9)Knowledge that any acts or omissions did or did not, as a matter of
law, involve negligence is irrelevant for the purposes of subsection (5)
above.
Actual Knowledge – What is the Starting
Date?
The earliest date on which the claimant or any person in
whom the cause of action was vested before him first had
both a right to bring an action and knowledge:
i. of the material facts about the damage in respect of
which damages are claimed (being such facts about
the damage as would lead a reasonable person who
had suffered such damage to consider it sufficiently
serious to justify his instituting proceedings for
damages against a defendant who did not dispute
liability and was able to satisfy a judgment)
i. that the damage was attributable in whole or in
part to the act or omission which is alleged to
constitute negligence;
ii. of the identity of the defendant; and
iii. if it is alleged that the act or omission was that
of a person other than the defendant, the
identity of that person and the additional facts
supporting the bringing of an action against the
defendant and a right to bring such an action.
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What is Knowledge?
Haward v Fawcetts [2006] UKHL 9:
• Knowledge does not mean knowing for certain and beyond possibility
of contradiction.
• It means knowing with sufficient confidence to justify embarking on
the preliminaries to the issue of a writ. Per Lord Nicholls: “In other
words, the claimant must know enough for it to be reasonable to
begin to investigate further.” (at para 9)
Actual Knowledge – Material Facts About the Damage
• Section 14A(7): [T]he material facts about the damage are such facts
about the damage as would lead a reasonable person who had
suffered such damage to consider it sufficiently serious to justify his
instituting proceedings for damages against a defendant who did not
dispute liability and was able to satisfy a judgment.
• Relates entirely to the question of the damage suffered
• Need not be able to precisely quantify the damage for time to start
running
• Haward v Fawcetts [2006] UKHL 9: Knowledge of the “essential
thrust” of the damage required.
Actual Knowledge – Attributability of Damage
Haward v Fawcetts [2006] UKHL 9:
• Knowledge in broad terms of the facts on which the claimant's
complaint was based and of the defendant's acts or omissions and
knowing that there was a real possibility that those acts or omissions
had been a cause of the damage.
• For time to run “there needs to have been something which would
reasonably cause [the claimant] to start asking questions about the
advice he was given.” (per Lord Nicholls, para 21).
• C believed that losses were to be explained by a variety of damaging
economic factors, rather than the bad advice of his advisers.
Nonetheless, the attributability criterion was satisfied.
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• Haward v Fawcetts [2006] UKHL 9
What the claimant must know to set time running is the essence of the act or
omission to which his damage is attributable, the substance of what ultimately
comes to be pleaded as his case in negligence. That essence or substance here
could no doubt be characterised in either of two ways: either as the act of
recommending investment in the company (or omitting to caution against iton the particular parts of this case these are two sides of the same coin), or,
with greater particularity, the act of recommending investment without first
carrying out the investigations necessary to justify such positive advice. Having
at first preferred the latter characterisation, I have come to prefer the former.
True, under the former the claimant knows nothing beyond the fact that his
advisers led him into what turned out to be a bad investment; he does not
know, as under the latter characterisation he would, that he has a justifiable
complaint against his advisers. But he surely knows enough (constructive
knowledge aside) to realise that there is a real possibility of his damage having
been caused by some flaw or inadequacy in his advisers' investment advice,
and enough therefore to start an investigation into that possibility, which
section 14A then gives him three years to complete. (Per Lord Brown at 90)
Actual Knowledge – Attributability of Damage
• C’s awareness of potential claim against D is entirely irrelevant
(Haward v Fawcetts [2006] UKHL 9; see also section 14A(9))
• Chinnock v Veale Wasbrough [2015] EWCA Civ 441
Constructive Knowledge under Section 14A
14A (10)For the purposes of this section a person’s knowledge includes knowledge
which he might reasonably have been expected to acquire—
(a)from facts observable or ascertainable by him; or
(b)from facts ascertainable by him with the help of appropriate expert advice which
it is reasonable for him to seek;
but a person shall not be taken by virtue of this subsection to have knowledge of a
fact ascertainable only with the help of expert advice so long as he has taken all
reasonable steps to obtain (and, where appropriate, to act on) that advice.
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Constructive Knowledge under Section 14A
• Chinnock v Veale Wasbrough [2015] EWCA Civ 441
• Forbes v Wandsworth Health Authority [1997] QB 402 (per Stuart-Smith
LJ at 412 D-F):
The real question is whether it was reasonable for him to seek that advice. If
it was, he took no steps at all to do so. One of the problems with the
language of section 14(3) (b) [the constructive knowledge provision as it
then was] is that two alternative courses of action may be perfectly
reasonable. Thus, it may be perfectly reasonable for a person who is not
cured when he hoped to be to say, “Oh well, it is just one of those things. I
expect the doctors did their best.” Alternatively, the explanation for the lack
of success may be due to want of care on the part of those in whose charge
he was, in which case it would be perfectly reasonable to take a second
opinion. And I do not think that the person who adopts the first alternative
can necessarily be said to be acting unreasonably. But he is in effect making
a choice, either consciously by deciding to do nothing, or unconsciously by in
fact doing nothing. Can a person who has effectively made this choice,
many years later, and without any alteration of circumstances, change his
mind and then seek advice which reveals that all along he had a claim? I
think not.
Constructive Knowledge under Section 14A
• Oakes v Hopcroft [2000] Lloyd's Rep PN 946
• Chinnock v Veale Wasbrough [2015] EWCA Civ 441
Per Jackson LJ:
90 This case is conceptually similar to Forbes . Ms Chinnock was deeply
unhappy with the legal advice which she received in 2001. According to her
evidence she was dumbfounded. She therefore had a choice. She could
either consult other lawyers or she could let matters rest. …
91 I do not think that it was open to Ms Chinnock to abstain from further
inquiries for more than six years (in this case eight years) and then to seek
legal advice. It is true that during 2009 a firm of solicitors acting in the
divorce proceedings happened to ask the husband if advice was required on
any other matter. That, however, is not a justification for waiting eight years
before taking legal advice.
• Jacobs v Sesame Ltd [2014] EWCA Civ 1410
The Burden is on the Claimant
• C must plead and prove entitlement to rely on section 14A – potential
for slip-ups
• Haward v Fawcetts [2006] UKHL 9
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4/06/2015
Causation and Remoteness
Nicholas Pilsbury
Introduction
“… the courts have moved away from characterising questions as to the
measure of damages for the tort of negligence as questions of
causation and remoteness… The courts now analyse such questions by
enquiring whether the duty which the tortfeasor owed was a duty in
respect of the kind of loss of which the victim complains … The same
test applies whether the duty of care is contractual or tortious.”
Arden LJ in Johnson v Gore Wood [2003] EWCA Civ 1728
SAAMCo (1)
• Scope of Duty
• “It is never sufficient to ask simply whether A owes B a duty of care. It is
always necessary to determine the scope of the duty by reference to the kind
of damage from which A must take care to hold B harmless” (Caparo v
Dickman)
• A value judgment? (Kuwait Airways v Iraqi Airways (No 6) [2002] 2 AC 883)
• Or “an intensively fact an sensitive exercise”? (Johnson v Gore Wood [2003]
EWCA Civ 1728)
• E.g. Pearson v Sanders Witherspoon [2000] PNLR 110
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SAAMCo (2)
• The loss is not attributable to the information given by the
Defendant being wrong
• Advice vs information cases
• The mountaineer’s knee
• E.g. Andrews v Barnett Waddingham LLP [2006] PNLR 24
SAAMCo and remoteness
• Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2009]
1 AC 61
• Rubenstein v HSBC Bank Plc [2013] PNLR 9
• Henderson v Wotherspoon [2013] CSOH 113
• John Grimes v Gubbins [2013] PNLR 17
Test of remoteness
• Contract:
• “Not unlikely” to arise from the breach (Hadley v
Baxendale; Victoria Laundry v Newman [1949] 2 KB 528;
The Heron II [1969] 1 AC 350)
• Type of loss: normal vs exceptional profits (Victoria
Laundry)
• Date of contract
• Tort:
• “Foreseeable”: Wagon Mound (No 2) [1967] 1 AC 617
• Eggshell skull (Smith v Leech Brain [1962] 2 QB 405
• Type of damage (Hughes v Lord Advocate [1963] AC 837;
Page v Smith [1996] AC 155)
• Date of breach
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The right answer?
• Paradigm case: contractual / quasi contractual, e.g. “assumption of
responsibility” (Hedley Byrne / Henderson v Merrett )
• Cf. choice of limitation periods
• Wellesley Partners LLP v Withers [2014] PNLR 22
Recent cases
Alicia Tew
Fraudulent device
The principle:
• where an insured knowingly or recklessly mad an
untrue statement
• in support of a claim which he honestly believed
was good (“a fraudulent device”)
• the whole claim would be forfeited
Versloot Dredging BV v HDI Gerling Indutsrie
Versicherung AG [2014] EWCA Civ 1349
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Settlement on basis of fraudulent
representations
• EL: Insurer suspected fraud
• Parties entered into settlement agreement in full and
final settlement of the claim
• Two years later, employee’s neighbours alleged
employee’s statement about injuries was dishonest
• Insurers pursued damages for deceit/ rescission
Hayward v Zurich [2015] EWCA Civ 327
Are Third Party Funder loans
covered by Minimum Terms?
“part and parcel” of obligations incurred by a
solicitor in respect of his professional duties to
the client
not excluded by clause 6.6 of Min Terms
Impact Funding Solutions Limited v Barrington Support Services Limited [2015] EWCA Civ 31
..but aren’t TPF loans trading debts?
Core risk insured: claims from clients
TPF loans “do not arise out of claims made
against him in his professional capacity”
“trading or personal debt”
 clause 6.6 excludes or limits liability
Sutherland Professional Funding Limited v Bakewells (a firm) [2011] EWHC 2658
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BREACH OF TRUST: DAMAGES
Target Holdings v Redfern [1996] AC 421
“…I have no doubt that, until the underlying
commercial transaction has been completed,
the solicitor can be required to restore to
client account monies wrongly paid away. But
to import into such trust an obligation to
restore the trust fund once the transaction has
been completed would be entirely artificial.”
BREACH OF TRUST: DAMAGES
AIB v Redler [2014] UKSC 58
[62] “…it would not in my opinion be right to
impose or maintain a rule that gives redress to a
beneficiary for loss which would have been
suffered if the trustee had properly performed its
duties.”
 Same result as tort and contract measure of
loss
Greek drama
• Findings of fact and inferences may only be challenged where “plainly
wrong”
• Causation: even if the Greek lawyer had included further protection /
given further advice on use of existing protections in clauses, the client
would have acted in the same way
Watson Farley and Williams (a firm) v Itzhak Ostrovizky [2015] EWCA Civ
457
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Questions?
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