The Court of Appeal has looked at whether or not a claimant had sufficient knowledge under Section 14A when it was told that a firm had been negligent but not told that any damage may result.   On a summary judgment application, the Court of Appeal found that this was insufficient knowledge albeit the issue is likely to be given further consideration at trial.

Blakemores LDP (now in liquidation) (the Firm) acted for three unrelated villagers from Ireby Lancashire (the Clients) between March 2005 and 2012.  The Clients wanted to correct a mistake in relation to two land titles.  The underlying issues related to manorial law.  The Firm missed a deadline in April 2005 to register objections on behalf of the Clients.  As a result, they had to rely on the Land Registry's discretion in relation to whether or not to amend the register.

The Facts

The Clients ran out of money to fund the litigation and so entered a CFA with the Firm on 27 April 2009 – one of the three Clients met with the Firm before entering the CFA and was told that the firm had acted negligently in April 2005 in failing to meet the deadline to enter the objections.  The Adjudicator refused one of the corrections in a judgment entered in 2009.  Subsequent appeals to the High Court and Court of Appeal were refused and the Client's attempts to correct the error came to an end in October 2013.

On 11 December 2012 the firm issued a claim form against the Clients for c. £635,000 in relation to work done under the CFA.  Two of the Clients counterclaimed arguing that they had not been advised that even if they proved the registrations had been mistaken the court had a statutory discretion as to whether or not to amend the titles as the objection was raised after 21 April 2005 deadline.  The counterclaim pleaded that in April 2009 the firm told the Clients that it had been negligent in missing the April 2005 deadline. 

The Firm relied on this passage in the Defence to argue that the Clients had sufficient knowledge under Section 14A of the Limitation Act 1980 in April 2009 and on that basis were out of time to make the counterclaim.  The Clients argued that they did not know that they could have brought an action for damages until the Adjudicator’s decision in December 2009 and so did not have sufficient knowledge. 

The Firm succeeded before the High Court on a summary judgment application where the Judge found that the claim was time-barred as on the face of the pleading the Clients had been told that the Firm was negligent and that they had suffered damage because the objections had not been registered by April 2005.  The Clients had knowledge of the relevant facts being the failure to register.

The Court of Appeal’s decision

The Clients' appeal to the Court of Appeal was allowed.  On the substantive issue of the application of Section 14A the Court of Appeal said that Section 14A requires that the starting date is the earliest date on which a claimant has both (1) knowledge required to bring an action for damages and (2) a right to bring that action.

The Court of Appeal then asked what material facts about the damage the Clients knew in April 2009.  On this issue the Court of Appeal decided that one of the Clients knew that the Firm had been negligent in failing to file the objections but not the consequences of that failure.  In light of this knowledge, was it enough to lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against the Firm?

On this second issue the Court of Appeal noted that the Clients' counterclaim did not set out the consequences of the failure to file the objections in April 2005, just that they were told that the objections had not been filed.  On that basis the Court of Appeal found that a reasonable person would not have considered the damage sufficiently serious to justify instituting proceedings for damages against the Firm.

The Court of Appeal based its conclusion on two reasons.  First, the Clients were not experts in land registration or manorial law and could not be taken to have known the obscure consequences of a failure to file an objection in time without being told what they were. Secondly, the relevant material facts about the damage have to be such as would lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against a solvent firm, not disputing liability. Here, and given the Firm had applied for summary judgment on limitation, it was highly arguable that the Clients did not know anything that would lead a reasonable person to sue. There was no reason to think they would be worse off – the firm was covering the cost, the Clients were advised that the case was going to be successful and “crucially” the Clients did not know that the amendment of the error was dependent on the discretion of the Adjudicator.

What can we learn from the decision?

The decision can be seen as reminder of the principle that a claimant has to know both that something has gone wrong and that they may have suffered loss as a result.  If an adviser does not go on to explain that there is likely to be a loss as a result of their negligent acts then limitation will not start to run under section 14A unless it is patently obvious to the claimant that loss will result (save for in cases where knowledge can be imputed to a claimant where they should have obtained advice from an expert). 

The issues will however be revisited if the case proceeds to a full trial.