Solicitor’s negligence — Starting date for limitation period — Section 14A of Limitation Act 1980 — Knowledge of relevant damage — Loss of break options — Relevance of negotiations with landlord — Appeal dismissed
The second appellant assigned certain leases to the first appellant as part of a corporate restructuring exercise in respect of which the respondent was retained to act as solicitor. The leases contained break options that were personal to the second appellant, and the benefit of these was lost on assignment. In proceedings brought by the appellants, the respondent accepted that its failure to advise them of that matter amounted to a breach of the duties owed under its retainer. However, the respondent disputed its liability on the ground that the claim had not been brought within three years of the “starting date” as defined in section 14A(5) of the Limitation Act 1980.
A preliminary issue was tried as to when the appellants had had the knowledge required to bring an action for damages in respect of the “relevant damage” within the meaning of section 14A(5), so as to start time running. The judge held that time had started to run on the date upon which the appellants’ in-house legal officer had become aware, during the course of negotiations with the landlord over a proposed deferment of the break options, that those options had ceased to be exercisable by virtue of the change of tenant. Accordingly, the judge ruled that the claim was time-barred.
On appeal against that decision, the appellants contended that the judge had erred in treating the loss of the options as being “relevant damage” for the purposes of section 14A(5). They submitted that knowledge of that loss was not sufficient because, at that date, a reasonable person would not have considered the damage sufficiently serious to justify instituting proceedings, as required under section 14A(7). The appellants submitted that they had not had the necessary knowledge until later, when it had become apparent that the landlord intended to rely upon the loss of the break options and to resile from its previous agreement in principle — made when both parties had wrongly believed the options to be exercisable — to grant the deferment sought.
Held: The appeal was dismissed.
The loss of the break options was relevant damage for the purposes of section 14A(5) and (7), since that was the damage in respect of which damages were being claimed. That loss, and the consequent loss of the opportunity to negotiate for a deferment, had been sustained when the leases were assigned, not subsequently when the landlord broke off negotiations. The appellants had known, upon learning of the loss of the options, that that loss was serious. They had had no reason to believe that a solution could be reached by negotiation. In the absence of any exercisable option, there had been no basis for negotiation, and it had been inevitable that the landlord would resile from its previous agreement in principle once it became aware that that agreement had been negotiated on a false basis. Accordingly, upon learning of the loss of the break options the appellants had known enough to justify embarking upon the preliminaries to the issue of a writ and to begin investigating further: Haward v Fawcetts (a firm) [2006] UKHL 9; [2006] 1 WLR 682 applied.
Michael Pooles QC (instructed by Simmons & Simmons) appeared for the appellants; Christopher Nugee QC (instructed by Barlow Lyde & Gilbert) appeared for the respondent.
Sally Dobson, barrister
