Limitation was considered in the recent decision of Bowling & Co v Edehomo and the outcome was crucial to whether the claim would be time-barred
The court in this case considered the date upon which the cause of action would accrue for a property owner in her claim against solicitors who had breached their duty by acting in a fraudulent transfer of the property. The first instance decision was that the cause of action accrued on completion, meaning that the claim was within time. The defendant solicitors successfully appealed to the High Court.
The facts are relatively simple. In 1989 Mr and Mrs Edehomo bought a property in East London. They held it as joint tenants. Three years later Mr Edehomo, by that time estranged from his wife, instructed Bowling & Co to act for him in the sale of the property to a third party. Contracts were exchanged on 21 November 2002 and completion took place on 2 December 2002. Mr Edehomo received the sale proceeds.
Mrs Edehomo was unaware of the sale and played no part in the transaction. “Her signature was forged, it would appear by Mr Edehomo, on both the contract and the TR1 form of transfer,” Roth J said.
On 1 December 2008 Mrs Edehomo issued a claim against Bowling & Co. This alleged that the firm was in breach of its duty of care to her to take reasonable steps to establish her husband’s identity and the identity of the woman who had apparently impersonated her and to carry out the conveyancing transaction with skill and competence. Although pleaded in both contract and tort, it was proceeded with only in tort as on Mrs Edehomo’s own case there was no contract between her and the firm.
Bowling and Co sought to strike out the claim on the basis that it was timebarred, being more than six years since exchange of contracts.
Was Mrs Edehomo’s claim brought in time?
Section 2 of the Limitation Act 1980 provides that “... an action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.” A cause of action accrues in tort at the date when the claimant suffers damage. Therefore the question to be answered by the court was when, for the purposes of limitation, Mrs Edehomo suffered damage, so as to give rise to a cause of action, arising from Bowling Co’s breach of duty.
On Mrs Edehomo’s case, damage was suffered, and the limitation period therefore started to run, from the date of completion of the sale of the property, on 2 December 2002. Her claim form was issued on 1 December 2008 and so on her case she had brought her claim in time, within the six year limitation date (albeit only by one day). However, Bowling & Co maintained that damage was suffered on exchange of contracts.
What is meant by “damage”?
The High Court considered the decision in Forster v Outred & Co, where the Court of Appeal held that the plaintiff suffered damage caused by her solicitors' alleged negligence at the time when she executed a mortgage on her freehold property as security for a loan, and not only at the later time when she was required to pay on that security. The court in that case said that actual damage:
“... is any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control ...”
Was damage suffered on exchange of contracts or completion?
The judge agreed with counsel for Bowling & Co who advanced the same analysis applied in another recent decision (Nouri v Marvi) that Mrs Edehomo suffered damage on exchange of contracts. Critical to the reasoning of the Court of Appeal in Nouri v Marvi was the finding that on the date of simultaneous exchange and completion, as opposed to the date of registration, there was a blot on Mr Nouri's title that significantly decreased the marketable value of the property. Counsel in this case said that “if Mrs Edehomo had sought to sell her share in the property after 21 November 2002, and for this purpose is presumed to be aware of the fraud, she would have had to disclose to a potential purchaser the existence of the forged sale by her husband and the value of her interest in the property was therefore significantly diminished.”
The judge therefore held that Mrs Edehomo did indeed suffer loss on exchange, such that she could then have started proceedings against Bowling & Co. It follows that she had a cause of action against them in tort which accrued more than six years before the commencement of proceedings.
What about a continuing duty?
A question asked by the judge was whether there was a continuing duty on Bowling & Co to verify the identity of their clients up to the date of completion. If so there would have been a further breach at completion, the consequence of which being that the claim would not have been time barred. This had not been raised by the court below and so was not a question considered in the appeal. However the judge gave permission to Mrs Edehomo to amend her case to include this. It is not known whether Bowling will appeal.
Although it remains to be seen whether Mrs Edehomo will successfully pursue the continuing duty argument, as it stands this is another decision in favour of the defendant professional. It reinforces the message given in Nouri and confirms that, for the purposes of limitation concerning a sale of property, damage arising from a solicitor's breach of duty is suffered at the time contracts are exchanged rather than at completion. While the outcome of this case and Nouri is encouraging, the outcome of the continuing duty point is critical to the applicability of both of these cases. Guidance from the court is needed to clarify this issue.