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Haward v Fawcetts

Date: July 20, 2007

Expertise: Professional Negligence

HAWARD (JOHN HEDLEY) & ORS.  V  FAWCETTS (A FIRM) & ANOR.

Court of Appeal, 11th March 2004Limitation Act 1980 – section 14A – ‘Date of Knowledge’ in economic loss claim.

Sections 14 and 14A of the Limitation Act 1980 provide, in almost identical terms in the cases of personal injury and other negligence cases, that the limitation period is not triggered for practical purposes until the Claimant has acquired knowledge of various aspects of his cause of action. It was not until the early 1990’s that there were a number of cases (Nash v Eli Lilly[1993] 1 WLR 782 (CA); Broadley v Guy Clapham [1993] 4 Med. LR 328 (CA); and Dobbie v Medway Health Authority [1994] 1 WLR 1234 (CA)) in which the terms of section 14 were subjected to rigorous analysis.

Meanwhile, section 14A spawned a number of cases in ‘non personal injury’ actions, such as Hallam Eames v Merrett Syndicates [2001] Ll. LR 178 (CA) (but decided in 1995), HF Pension Trustees v Ellison [1999] Ll. Rep. PN (Jonathan Parker J.) and Fennon v Anthony Holdari [2001] Ll Rep PN 183 (CA).

The requirements laid down by sections 14 and   14A which have caused the Courts the most difficulty are: (1) the requirement that the Claimant should  have knowledge ‘that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence’ (section 14A(8)(a)); and (2) the stipulation that ‘knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, is irrelevant for the purpose of [establishing knowledge for the purposes of the section]’ (section 14A(9)).

The facts of the present case were these: the Defendants were accountants who had advised the Claimant on the purchase of a controlling interest in a trading company in December 1994. The investment comprising the original purchase was followed by further substantial investments during 1995 and subsequent years. Claims for negligence were commenced against the Defendants in December 2001, and it was alleged that there were a number of causes of action, co-inciding with the dates when investments were made. The Defendants contended that the causes of action based on investments made before December 1995 were statute barred, because they arose more than 6 years before the issue of proceedings. The question then arose whether the Claimant could rely upon section 14A of the Act to establish that he did not have the requisite knowledge until after December 1998 (3 years before the issue of proceedings).

The Judge at first instance (HHJ Playford Q.C.) held that the various tests for knowledge under section 14A were satisfied as soon as the causes of action arose. His reasoning was that the Claimant had knowledge that he had made the investments (which were defined as the damage by the Claimant’s own pleadings) at the moment he made them; he knew that he had made the investments in reliance upon the advice of the Defendants, and that therefore the damage was attributable to that advice; the advice was the essence of the act or omission upon which the Claimant now relied for his claim. The judge considered that the only thing the Claimant did not know was that the advice had been negligently given, but that was the very thing which was declared irrelevant by section 14A(9). In following this reasoning, the Judge appeared to be following to the letter the rules laid down in many of the Court of Appeal decisions referred to above.

The Court of Appeal recognised that the authorities had the appearance of being contradictory, and Parker LJ carried out a thorough and lengthy review of all of them (the judgment is 173 paragraphs long!). The submissions for the appellant Claimant concentrated upon whether the Claimant appreciated that what he had suffered was ‘damage’. The conclusions of the Court of Appeal, on the other hand, concentrated on whether the Claimant had knowledge that the ‘damage was attributable to the act or omission which is alleged to constitute negligence’ (section 14A(8)). In interpreting the words of  this subsection the Court of Appeal have interpolated the phrase ‘in a way which is causally relevant’ so that the subsection should now be requiring knowledge that ‘the damage was attributable (in a way which is causally relevant) to the act or omission which is alleged to constitute negligence’. These extra words were taken from the judgment of Hoffmann LJ in Hallam Eames, which the Court of Appeal considered applied a gloss to the Court’s earlier decision in Dobbie.

In applying the test under section 14A(8) as adjusted, the Court of Appeal considered that it was necessary for the Claimant to have more than merely the knowledge that he had acted to his detriment as a result of advice given or omitted to be given by the Defendants. It was not until the Claimant discovered that the Defendants’ preparation of that advice was at fault that he was held to have knowledge that the damage was attributable to the acts or omissions of the Defendants. In the event, therefore, the Court of Appeal required knowledge of grounds for alleging negligence to be established before the limitation period could be triggered. This seems to contravene the prohibition in section 14A(9) of the Act.

This highly controversial decision could have far reaching consequences in this area of the law, particularly in relation to pure economic cases such as those which arise in professional negligence claims.

The Court of Appeal certainly seemed to recognise both the difficulty of the problem they were set, and the controversial nature of the solution which they arrived at. Having considered with some care an application for leave to appeal to the House of Lords, the Court of Appeal refused it with the rider that they did not want in any way to discourage the losing party from applying to the House of Lords for leave, with the aim and purpose of the House finally throwing some definitive light on this perplexing area of the law.

Howard Palmer Q.C. and Neil Moody of 2 Temple Gardens were counsel for the Defendants, instructed by CMS Cameron McKenna, Bristol.

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