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The
Court of Appeal considered what was required in order to trigger the
extended limitation period under Sections 14A Limitation Act 1980.
This provides that;
(i) 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" (s.14A(8)(a)); and
(ii) 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]" (s.14A(9)).
The Court
of Appeal held 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. The Court
of Appeal therefore required that knowledge of grounds for alleging
negligence should be established before the limitation period could
be triggered. The crucial point is whether this conclusion contravenes
the prohibition in s.14A(9) of the Act.
Background
The defendants,
Fawcetts, were accountants who had advised the claimant, Haward, 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 there were a number of causes of action, coinciding
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, as they arose more than six years before the
issue of proceedings. The question before the court was therefore 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, three
years before the issue of proceedings.
At first
instance, the Judge 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
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
declared irrelevant by Section 14A(9).
The
legal debate
The Court
of Appeal recognised that the authorities on this point seemed to be
contradictory and Parker LJ carried out a thorough and lengthy review
of all of them (paras 87 - 130). At the heart of the case is the question
of whether, before December 1998, Haward had actual or constructive
knowledge that the damage was attributable in whole or in part to the
act or omission alleged to constitute negligence (s.14A(8)(a)). It was
held that attributability included an element of causal relevance.
On the evidence there were several possible causes for the investment's
failure apart from Fawcetts' advice; but it could not be said that in
1998 Haward knew that all or part of the damage was capable of being
attributable to the advice or lack of it. The Judge at first instance
had failed to recognise that Section 14A(8)(a) required that the act
or omission of which the Claimant had to have knowledge had to be causally
relevant for the purposes of an allegation of negligence (as per Hallam-Eames
& Ors v Merrett Syndicates & Ors (1996) 7 Med LR 122). The evidence
was consistent only with a finding that it was not until May 1999 that
Haward acquired the knowledge of acts or omissions by Fawcetts that
were causally relevant for the purposes of Haward's allegations of negligence:
consequently, Haward's claim was within time.
This case
may have far reaching consequences in this area of law, particularly
in relation to pure economic cases such as those which arise in professional
liability claims.
The Court
of Appeal refused leave to appeal to the House of Lords, although it
stated that it did not wish to discourage the losing party from applying
to the House of Lords for leave, with the aim and purpose of the House
throwing some definitive light on this area of law. Fawcetts petitioned
for leave in April 2004 and a decision is awaited.
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