The Background

A company connected to the Claimant had used its brokers “Clarkson” for financial advice when entering into a buyback agreement with some property buyers. The brokers had structured the transaction so that the Claimant was personally liable for losses. Initially the Claimant disputed this personal liability with the property buyers but by 2015 the court had ruled against the Claimant.

When this occurred, the Claimant turned to his brokers, Clarkson and in November 2015, he issued proceedings against the brokers in which he alleged, amongst other things, that the brokers’ authority was limited to brokering an agreement only with his connected company, and had acted in breach of its warranty of authority by negotiating a contract that bound the Claimant personally.

This claim was time-barred under contract law, as more than six years had elapsed since the cause of action accrued on 7 July 2008. As such, the Claimant’s claim could only proceed if he could rely on section 14A of the Limitation Act 1980. This provides Claimants with a three year extension period in claims for negligence, commencing from the date of knowledge. The section attempts to clarify when limitation starts to run and defines it as the earliest date when a Claimant “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.”

Held

The Claimant argued that he did not have the relevant knowledge for the purposes of Section 14A until November 2014, when the trial judge gave his judgment. The Claimant argued that until that judgment, there had been considerable uncertainty surrounding the question of whether he would be found to be personally liable for the contract. For example, the contract had been agreed orally; the contemporaneous documents did not suggest that the Claimant was himself a party to the contract; and his lawyers had "indicated" to him that they did not expect the court to find him personally liable.

The Court of Appeal highlighted four key features on the application of Section 14A which had a bearing on the appeal:

• It applies only to actions of negligence and provides no assistance to a Claimant's claims for breach of contract.
• It permits a claim to be brought within either:
  • six years from the accrual of the cause of action; or (if later)
  • three years from the earliest date on which the Claimant (or any person in whom the cause of action was vested before them) first had both the knowledge required for bringing the action for damages in respect of the relevant damage and the right to bring such an action.
• The knowledge required for bringing an action for damages in respect of the relevant damage means knowledge:
  • of such facts about the damage in respect of which damages are claimed as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify their instituting proceedings for damages against a defendant who did not dispute liability and who was able to satisfy judgment (by subsections (5), (6) and (7)); and
  • that the damage was attributable to the act or omission which is alleged to constitute negligence and the identity of the defendant.
• A person's knowledge in this context includes knowledge which they might reasonably have been expected to acquire from facts observable or ascertainable by them, or from facts ascertainable by them with the help of appropriate expert advice which it was reasonable for them to seek.

The Court of Appeal judgment also:

1. Cited the authority in Haward v Fawcetts ([2006] UKHL9), in which the decision emphasised that 'knowledge' does not mean knowing for certain and beyond possibility of contradiction; rather, it means knowing enough with sufficient confidence to justify embarking on preliminaries to the issue of a claim by beginning to investigate further, taking advice and collating evidence. The Court of Appeal rejected the argument on a fundamental misapprehension about the knowledge requirements for Section 14A.

2. Emphasised that while it would require more than mere suspicion of the facts about the damage, it would be sufficient if the Claimant knew enough for it to be reasonable to begin further investigation.

3. Accepted the defendants' position that the damage in this case was that the Claimant had been bound personally to the contract, for which he could therefore incur personal liability. However by the end of July 2012, it was noted in the particulars of claim, and two High Court judges had concluded there was a good arguable case that he was personally liable and granted a freezing order against him personally on that basis.

4. Accepted that by 2012 he knew enough for it to be reasonable to investigate further, start asking questions to investigate the possibility that he was indeed personally bound and liable for the contract, and therefore appreciate that he had a claim against the broker.

Comment

It is important for Claimants to appreciate the need to initiate steps and investigate potential claims rather than waiting for certainty, which may cause their claim to be time barred – even with the benefit of the Section 14A special time period.

https://www.bailii.org/ew/cases/EWHC/Comm/2017/337.html

< Back to case list