Professional negligence – Causation – Limitation – Appellants appealing against order dismissing claim against respondent firm of solicitors for damages – Whether respondent negligent in failing to register restriction at Land Registry to protect appellants’ interest in contract to purchase property – Appeal allowed
The first appellant was the only child of W who died, aged 85, in 2013. W owned a property at 8 Denny Crescent, London, SE11. In 2003 she decided that she wished the property to pass to the first appellant and his family on her death.
W established a trust for the first appellant and his wife (the second appellant) to minimise their liability to inheritance tax in the event of her death. However, W changed her will after entering into a civil partnership with her new partner in 2007, leaving nothing to her son and much of her estate to her partner.
After her death, the appellants discovered that the property had been sold without his knowledge in 2010. The appellants brought proceedings against the respondent firm of solicitors responsible for drawing up the trust agreement, claiming damages for negligence. They argued that the respondent was negligent in failing to register a restriction on the property with HM Land Registry, which would have enabled them to control whether or not it was sold.
The judge held that the respondent had been negligent in failing to register a restriction at HM Land Registry in order to protect the appellants’ interest. However, the appellants had not established that the negligence had caused them any loss.
The appellants appealed. The respondent challenged the judge’s finding that the appellants were entitled to rely on the extended limitation period under section 14A of the Limitation Act 1980. The appeal centred on the limited issues of causation and limitation.
Held: The appeal was allowed.
(1) The appellants’ claim was pleaded and presented on the basis that what they had lost through the respondent’s negligence was the power to veto the sale. Had the respondent registered the restriction in accordance with the duty of care which they owed to the appellants, no sale could have taken place without their consent. The appellants’ case was not that they had a real or substantial chance of persuading W not to go ahead with the sale. It was that they would not have given consent to a sale in the circumstances prevailing in 2010.
The necessary evidential foundation for the judge’s conclusions about consent was missing. The judge fell into error by approaching the issue of causation in terms of whether W could have been persuaded to abandon a sale and of treating the consent of the appellants to what she decided as a given. Instead, he should have regarded the likelihood of the appellants giving consent as the primary issue. The appellants’ evidence, put at its lowest, was that they would not have considered agreeing to a sale without being given an explanation or justification for the sale and the use of its proceeds which both indicated that the sale was the product of an independent, informed decision by W and was in her own best interest.
On the evidence, the only realistic and proper conclusion available to the judge was that the appellants would not have consented to the sale. The judge was therefore wrong to hold that the respondent’s negligence had not caused the appellants any damage.
(2) The primary period of limitation for a claim in tort for negligence was six years from the date when the cause of action first occurred: see section 2 of the 1980 Act. The primary limitation period therefore expired long before the issue of the claim form on 26 October 2016 and the appellants were compelled to rely on the provisions of section 14A of the 1980 Act in order to prevent their claim being statute-barred.
On the judge’s findings as to when the appellants first knew that the property had been sold, the starting date for the alternative three-year limitation period under section 14A(4)(b) and (5) would not have been before 30 April 2015. But the knowledge required for bringing an action for damages in respect of the relevant damage within the meaning of section 14A(5) included knowledge which the appellants might reasonably have been expected to acquire from facts obtainable or ascertainable either by themselves or with the help of appropriate expert advice which it was reasonable for them to seek: section 14A(10). The judge was therefore required to apply an objective test which meant that he was compelled to disregard the effect on the first appellant personally of his mother’s death and the other surrounding factors and instead to have asked what a reasonable person in the position of the appellants would have done.
The judge considered that it would not have been reasonable for the appellants to have made enquiries until after the memorial service on 5 April 2013. On that basis they were not likely, he said, to have acquired all the knowledge necessary for bringing the claim much before the end of February 2014. He based that period on the fact that it would not have been sufficient for the appellants merely to discover that the property had been sold. In order to know that damage had been caused by an act or omission of the respondent, the appellants would have needed to know that the restriction had not been registered and they could not reasonably be expected to have discovered this without the assistance of solicitors.
Although knowledge of the sale was the trigger for further enquiries about the circumstances in which it took place, the possibility of a claim against the respondent depended on at least knowing that no restriction had been placed on the register in 2003 to prevent any such sale. The judge was right to conclude that the appellants had established their case for relying on the extended period of limitation under section 14A of the 1980 Act.
In the present case, the loss which the appellants suffered from the breach of duty was not the incurring of a liability nor was it contingent. The failure to register the restriction exposed them and their interests under the property trust to an immediate risk which would have cost money to rectify and arguably reduced the value of those interests: Bell v Peter Browne & Co [1990] 2 QB 495 followed.
Teresa Rosen Peacocke and Gabor Bognar (instructed by Blake Morgan LLP) appeared for the appellants; Katherine McQuail (instructed by BLM LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Gosden and another v Halliwell Landau (a firm)
