Professional negligence – Court of Appeal rules on limitation and the timing of loss

The Court of Appeal in Pegasus Management Holdings SCA & Anr v Ernst & Young & Anr [2010] EWCA Civ 181 has ruled that the limitation period for a claim for breach of duty against a professional adviser will run from the moment that damage has been suffered. In identifying when that moment has occurred, the court is ready to infer from the non-delivery by an adviser of what a client ought to have received that the relevant damage has been suffered, even if it is very difficult to quantify that damage at that stage. The effect of this was to render various alleged claims against Ernst & Young time-barred. Continue reading

House of Lords rules on limitation: contingent liability not actual damage

In its second judgment on limitation in just over two months, in Law Society v Sephton & Co (a firm) [2006] UKHL 22, the House of Lords has ruled on when the basic six-year limitation period will start to run against a claimant in a negligence action.

Where the defendant’s negligence has caused the claimant to incur a contingent liability, without more, time will not begin to run for limitation purposes until the contingency occurs. In their Lordships’ judgment a contingent liability, or the possibility of an obligation to pay money in the future, does not in itself amount to damage and therefore does not give rise to a cause of action in negligence.

In this case the Law Society sought to recover sums paid out of its Compensation Fund to clients whose funds had been stolen out of a solicitor’s client account. The defendant accountants had prepared annual reports on the solicitor’s accounts for submission to the Law Society but had failed to spot the misappropriations of client money. The House of Lords ruled that the Law Society did not suffer actual damage until the first claim on the Compensation Fund was received. Until that point, there was merely a contingent liability that the Law Society might have to pay money in future.

In their Lorsdships’ judgment, however, the position is different in circumstances where the existence of a contingent liability diminishes the value of property owned by the claimant, or means that the claimant has received less than he should have done in a particular transaction. In such cases, the claimant will have suffered damage at that point. Whilst the case has brought some clarity to this area, the distinction seems somewhat arbitrary.

In March of this year their Lordships handed down judgment in Haward v Fawcetts (a firm) [2006] UKHL 9, establishing principles for extending the basic six-year limitation period where the claimant lacked knowledge of the relevant facts at the time the cause of action accrued (under section 14A of the Limitation Act 1980) – see postContinue reading

Extending the limitation period: House of Lords reins in claimants

A recent House of Lords judgment, Haward v Fawcetts (a firm) [2006] UKHL 9, has set out the basic principles for extending the limitation period in negligence actions where the claimant lacked knowledge of the relevant facts at the time the cause of action accrued (under section 14A of the Limitation Act 1980).

The five Law Lords agreed that to set time running for limitation purposes the claimant must know, in general terms, those facts which constitute the “essence” of the claim of negligence. Their Lordships unanimously held that in this case there was no basis on which to extend the normal six year limitation period against the defendant accountants. They reversed the Court of Appeal’s judgment which had broadened the scope for claimants seeking to extend the limitation period under section 14A.

However, whilst there was unanimity as to both the basic underlying principle to be applied and the end result, the opinions delivered by their Lordships contained significant differences of reasoning. Indeed they were not even in agreement as to when, on the facts of this case, time started to run against the claimant. Continue reading

Limitation: a game of chance?

A recent Court of Appeal judgment means bad news for defendants and their professional indemnity insurers seeking to defeat a “loss of chance” claim on limitation grounds.

Josselyne Cohen v Kingsley Napley [2006] EWCA Civ 66 concerned a claim against solicitors for failing to pursue an underlying action which was subsequently struck out as an abuse of process for failure to pursue it. The Court of Appeal unanimously held that even though the claimant’s claim in the underlying action had for some time been liable to be struck out, that claim would continue to have value for the purposes of a professional negligence claim if, as a matter of fact, the defendant to the underlying claim might not have applied to strike it out. It followed, in the Court of Appeal’s judgment, that time did not start to run for the purposes of limitation so long as there remained a substantial chance that the defendant would not have applied to strike out the claim.

This judgment introduces an additional hurdle in the way of establishing a limitation defence to a “loss of chance” claim. It is a hurdle which may be particularly difficult to surmount at the strike out / summary judgment stage. Continue reading