LIMITATION UPDATE. 1. Recently, the Courts have been looking at three areas of limitation law and

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1 LIMITATION UPDATE 1. Recently, the Courts have been looking at three areas of limitation law and practice. One is when it is permissible to introduce a new claim in pending proceedings after the limitation period has ended, the second is the date when the limitation period begins to run in negligence cases, especially in relation to claims for damages for professional negligence and the third is at what date does the claimant acquire sufficient knowledge for the limitation period to begin to run against him either in a personal injury action or where the claimant is relying on section 14A Limitation Act 1980 (latent damage). We will look at each of these areas of limitation law and practice in turn. New claims in pending actions 2. The Limitation Act provides two ways in which new claims can be introduced into pending actions after the expiry of a relevant limitation period. The first is via section 33, which gives the court in personal injury claims a discretion to disapply the limitation period and the second is in section 35, which allows new claims to be introduced into pending actions where, essentially, the new claim arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action. We will look at the latter area of the law. 3. Section 35 defines a new claim as any claim by way of set off or counterclaim, and any claim involving either - (a) the addition or substitution of a new cause 1

2 of action; or (b) the addition or substitution of a new party. Section 35 further provides for rules to be made to govern the situations in which such new claims can be included in a pending action and finally provides that if, within those rules, a new claim is allowed to be included in a pending action, the new claim is deemed to have been commenced on the same date as the original action, thus overcoming any limitation problems that may have arisen since then. 4. The relevant rule is CPR Sub-paragraph (2) of that rule provides:- The Court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings. 5. In the case of Goode v Martin (2002) 1 WLR 1828, the Court of Appeal had to consider whether that rule complied with the Human Rights Act 1998 in a personal injury claim. The claim arose out of a boating accident. The claimant, in her particulars of claim, made an allegation of negligence based on one account of the facts of the accident. The defendant served a defence that put forward a different account of the accident. 6. After the limitation period had expired, the claimant sought to amend her particulars of claim to allege negligence based on the factual account contained in the defence. The defendant resisted that on the basis that the claimant was 2

3 seeking to rely on a new cause of action that did not arise out of the same facts as a claim in respect of which she, the claimant, had already claimed a remedy. 7. Both the master and the judge on appeal upheld that submission, interpreting CPR 17.4(2) quite narrowly so that, in effect, all the court did was to look at the facts alleged in the original particulars of claim and ask the question whether or not the new cause of action arose out of those same facts or substantially those same facts. 8. That, narrow, interpretation was rejected by the Court of Appeal, holding that to interpret Rule 17.4 so narrowly would violate the claimant s Article 6 rights (right of access to a court for the determination of her civil rights) and, therefore, the court was prepared to interpret the rule so that it read that a new claim could be added where, the new claim arises out of the same facts or substantially the same facts as are already in issue on an existing claim. 9. This allowed the court to look at both the facts alleged in the particulars of claim and those alleged in the defence. It being able so to do, the court could then allow the amendment to bring in the new claim based on the facts that had been put forward by the defendant. It is certainly to be welcomed that the Court of Appeal was able to achieve a result that was so obviously just, it is, however, slightly worrying that Master Miller and Colman J had felt unable to interpret the rule in this way. 10. Recently, the Court of Appeal has taken the Goode v Martin approach one stage further in Hemmingway v Roddam [2003) EWCA Civ In that case, the 3

4 Court of Appeal held that it was wrong to concentrate solely on the pleadings. The question that must be asked is what facts would have been litigated at trial on the old pleadings (see paragraph 23) and then the court must ask whether the new claim arises out of those facts or substantially those facts. Again, the judge was overruled for taking too narrow an approach. 11. The task of the court, therefore, is now to look at the pleadings as they are (both particulars of claim and defence), ask what facts would be litigated on those pleadings and then ask whether the new cause of action arises out of those facts or substantially those facts. Then the court has a discretion as to whether or not to allow the new claim and if that discretion is exercised, the new claim is deemed to have been made when the original action was commenced. This is a much broader approach than was available previously and, in my view, much more likely to lead to a just result. Accrual of the cause of action in negligence 12. The law on the accrual of a cause of action based on negligence is relatively simple to state, namely that the cause of action accrues when the claimant suffers damage. It is, however, sometimes more difficult to say when that occurs. 13. Questions as to this most commonly arise in claims based on the negligence of professionals. That is because such professionals will ordinarily owe a duty of care in the tort of negligence as well as a contractual duty to take care in the conduct of the client s affairs. In the case of a claim based on breach of 4

5 contract, often the limitation period will have expired before proceedings are brought because, in a contract claim, the limitation period begins to run when the contract is broken. 14. In Khan v Falvey [2002] PNLR 28 and [2002] EWCA Civ 400, the Court of Appeal considered the issue of when actual damage was sustained in the context of a solicitor s negligence action. The solicitors had, negligently, allowed the claimant s claim to be struck out for want of prosecution. 15. The claimant brought an action for damages within six years of the dismissal of his claims for want of prosecution, but the defendant alleged that, in fact, actual damage had been suffered significantly earlier than that. 16. The starting point was the familiar case of Forster v Outred (1982) 1 WLR 86 at 94 where Stephenson LJ stated in relation to what was meant by actual damage in this context, It 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; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous positions or covenants in leases. They are all illustrations of a kind of loss which is meant by actual damage. 17. At paragraph 33 of his judgment, Sir Murray Stuart-Smith held that in that type of case, actual damage was suffered when the value of the cause of action in 5

6 relation to which the original claim was being made had been substantially diminished. In other words once the negligent delay had caused any devaluation in the cause of action, putting it at substantial risk, say, of being struck out, actual damage had been suffered and the cause of action against the negligent solicitors had arisen and limitation had started to run. The Court of Appeal held that inasmuch as it seemed to hold that in this sort of case damage was only suffered when the action was struck out, Hopkins v Mackenzie [1995] PIQR 43 was wrongly decided and could not stand in the light of the House of Lords decision in Nykredit v Edward Erdman (1997) 1 WLR The test appears to be whether or not in any given case at any given time had the claimant brought an action against the negligent professional, the negligent professional could have defended it by stating that the claimant had suffered no loss or no loss yet. The moment that that defence ceases to be available, then the cause of action is complete and the period of limitation begins to run even if more damage from the same negligence occurs later. 19. There is no doubting the correctness of the principles enunciated in Khan. In any given case, however, it may be quite difficult to apply those principles. In the solicitor s negligence in running litigation type of case, the question will be at what point did the delay or other negligence cause the value of the cause of action to be significantly diminished. It is quite easy to see that there might well be differing views on when that point is reached. Paragraph 30 of the Khan judgment states that the claimant must suffer real damage, in that context a serious risk that the original action could be dismissed for want of prosecution. 6

7 Date of knowledge 20. Date of knowledge arises in two separate but related contexts in the Limitation Act. In relation to personal injury claims, section 11 provides that the three year period starts from the date of accrual of the cause of action (when damage occurs) or the date of knowledge (if later) of the person injured. Section 14 of the Act defines date of knowledge for these purposes. The date of knowledge is defined in sub-section 1 as, The date on which he first had knowledge of the following facts that the injury in question was significant, and that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty, and the identity of the defendant knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, nuisance or breach of duty is irrelevant. 21. The section then goes on to define when an injury is significant and includes knowledge which the claimant might reasonably have been expected to acquire from facts observable or ascertainable by him, or from facts ascertainable by him with the help of medical or other appropriate expert advice which it is reasonable for him to seek, although the claimant will not be fixed with knowledge of a fact ascertainable only with the help of expert advice so long as the claimant has taken all reasonable steps to obtain and where appropriate to act on that advice. 7

8 22. The other context in which knowledge is relevant is under section 14A in respect of latent damage. That section applies to actions for damages for negligence, other than personal injury actions. The section allows a three year period of limitation from the starting date (effectively the date of knowledge of certain facts) if later than the ordinary six year period with an overriding period of 15 years from the date when the act or omission alleged to constitute negligence occurred. 23. Section 14A(6) defines the knowledge required as being knowledge both:- (a) Of the material facts about the damage in respect of which damages are claimed; and (b) Of the other facts relevant to the current action mentioned in sub-section (8). 24. Sub-section 8 defines the other facts as that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence, and the identity of the defendant. Again knowledge that the act or omission complained of does not amount to negligence in law is irrelevant and there is a similar provision relating to constructive knowledge as set out in section The Court of Appeal recently reviewed the authorities in this field in Haward v Fawcetts (2004) EWCA Civ 240. The case concerned negligent advice leading to business losses. The case centred on the question of when it could be said the claimant knew that the business losses were attributable to the act or omission 8

9 alleged to constitute the negligence, namely the negligent advice. The essence of the decision was to the effect that where, as in the instant case, there were several possible causes of loss, a claimant will not be held to have the necessary knowledge until either he is aware that there might have been something wrong with the advice which caused the loss or the other possible causes are discounted and there remains only one possible cause of the loss, namely the advice. 26. The core of the very long judgment of Jonathon Parker LJ is at paragraphs 159 to 166. There he set out various propositions that he found from the authorities as follows:- (a) Knowledge means know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence (b) Attributable to means capable of being attributed to. (c) The act or omission of which the Plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence. (d) The judge gave the example of deafness at work claims and pointed out that a claimant could not be in a position to start proceedings 9

10 before he knew whether his deafness was caused be aging or by noise and he could only find that out with the help of expert advice. (c) The distinction that the court draws is between a claimant who could in a general sense be shown to have known that the damage was attributable to the defendant in a general way and a claimant who knows what acts or omissions are causally relevant for the purposes of an allegation of negligence. 27. To take an example from the cases, in the case of Dobbie v Medway Health Authority (1994) 1 WLR 1234, it would not have been enough for the claimant in that case to simply have known that she had had her breast removed. She needed to know that the breast that was removed was a healthy breast and not cancerous for her to know, in the sense required, that her loss was attributable to any causally relevant negligence. 28. There is nothing particularly new in this case, but it did emphasise the significance of the degree of detailed knowledge required. The court will look to whether the claimant knew of the act or omission that is actually said to have caused the loss. The question is not, did this happen at work? it is, what act or omission is alleged to have caused the loss and did the claimant have the requisite knowledge that his loss was capable of being attributed to that act or omission? 10

11 29. In emphasising this point in the Haward case, the Court of Appeal placed much emphasis on one of the lesser known decisions in this field (although a Court of Appeal decision) Hallam-Eames v Merrett Syndicates [2001] Lloyd s LR 178. That case emphasised that what the claimant must have known are, facts which can fairly be described as constituting the negligence of which he complains. SIMON EDWARDS May

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