St Anselm Development Company Ltd v Slaughter & May (A Firm) [01.02.13]

High Court considers when a cause of action accrued in a negligence claim.

Implications

This is an important case as the court gave careful consideration and guidance on the issue of knowledge under s.14A, confirming that the "degree of knowledge need not be as much as certainty but must be more than mere suspicion".

Where s.14A is relied on, careful consideration should be given to the claimant's knowledge and conduct of the matter, as cases could be disposed of by arguing that the limitation period has expired.

Insurers and their lawyers must remain vigilant when defending two or more apparently similar matters to ensure that limitation has not expired.

Background

Slaughter & May were instructed by St Anselm, the owner of a head lease, to finalise the lease extension of two flats. On 24 March 1999, Slaughter & May provided advice on the terms of the lease extension of flat 27. In June 1999, they approved the lease extension of flat 26 without providing further advice. The lease for that flat was executed on 2 November 1999.

Subsequently, the lessee contested demands for ground rent for flat 27 and it transpired that St Anselm were no longer entitled to a proportion of the ground rent due to the terms of the lease extensions. Accordingly, they issued a claim against Slaughter & May on 10 August 2005, alleging negligent advice.

The trial Judge held that there was a single cause of action concerning both flats, which arose when Slaughter & May first provided advice in March 1999. The claim was, therefore, statute-barred, as proceedings were issued nearly five months too late. St Anselm appealed, arguing that there were two separate causes of action.

Decision

The High Court ruled that there were separate causes of action in respect of each flat. The cause of action for flat 26 did not crystallise until agreement was reached on the terms of the lease in November 1999. Therefore, the flat 26 claim fell within s.2 of the Limitation Act 1980, which allows an action to be brought within six years of the date on which the cause of action arose.

In reaching his decision, the Judge concluded that Slaughter & May had been separately instructed in respect of each lease, their executions being at different times. There was a duty to use reasonable skill and care when finalising each lease. Slaughter & May gave "active consideration" to ground rent only once for flat 27 and did not "positively re-visit the issue" for flat 26.

The Judge dismissed St Anselm's appeal in respect of flat 27. It had been correctly decided that there was no reasonable prospect of St Anselm establishing an extended limitation period under s.14A of the Limitation Act 1980, which provides an additional time limit for negligence actions where facts relevant to the cause of action are not known at the date of accrual; namely, three years from the date of knowledge. St Anselm had knowledge of the material facts about the loss, as it realised in December 1999 that it could not recover ground rent for flat 27. This fact "was at least sufficient to give the claimant reasonable cause to start asking questions about the advice it had been given" and to consider whether its losses might have been caused by Slaughter & May.