Claimant alleging solicitor negligent for failing to advise – Claim relating only to effect of negligence upon claimant’s business – Whether cause of action arising more than six years before action commenced – Whether cause of action arising at date of purchase of property or subsequently – Section 2 of Limitation Act 1980 – Judge holding action not statute-barred – Appeal allowed
In 1987 the claimant company purchased a property known as Haven Lodge, Edwardsville, Treharris, Wales, for £80,000. It proceeded to spend £500,000 extensively refurbishing the property, from its then derelict condition, for use as a nursing home. The home was opened in April 1988, and within three weeks was fully occupied. In January 1990 the property was surveyed. It was reported that there were no serious problems, but there were “hairline cracks… which may have been caused by past coal mining”. By August 1990 the cracks appeared to have grown, and, upon inquiry, British Coal reported that “workings in the Seven Foot Seam at considerable depth are presently taking place beneath the property”. British Coal assumed full responsibility for the cost of all repairs and remedial works to the property, which were duly undertaken between 1990 and 1994.
On 8 February 1996 the claimant issued proceedings, alleging that the defendant firm was negligent in failing to advise it to obtain a mining engineer’s report, which would have revealed that British Coal had plans for working the seams near the property when the property was purchased. The claimant alleged that the disruptive effect of the damage and repairs upon the nursing home, together with adverse publicity, was such that the business was irreversibly damaged. The defendant relied on section 2 of the Limitation Act 1980, and claimed that the action being founded on tort was time-barred, as six years had elapsed from the date upon which the cause of action occurred. A preliminary issue was ordered as to whether the claim was statute-barred. The defendant contended that the claimant had acquired a property that was subject to the risk of damage caused by future mining subsidence, and the fact that it had been unaware of this did not prevent it from suffering actual loss at that time, or at least when the cracks first appeared, which, on the evidence, was before 8 February 1990. The action had therefore been commenced outside the limitation period. The claimant contended that the “relevant” damage constituted the economic loss caused by the discovery in August 1990 of cracks resulting from the post-1987 mining operations, and, accordingly, the action was not time-barred. The judge held that the action was not statute-barred. The defendant appealed.
Held: The appeal was allowed by a majority.
1. (Per Buxton LJ) The cases that related to bank loans secured by mortgages (cf Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1998] 1 EGLR 99, where it had been held that the cause of action did not arise until there was a future contingency, such as the loan failing or the security for it proving insufficient) fell into a separate category. The claimant had become irrevocably committed to the property when it had entered into the contract to purchase it. Thus, it had suffered the relevant damage, and the limitation period had started to run at the time of the purchase. The admitted inequity of holding the claimant statute-barred on the basis of a legal fact of which he was unaware had been recognised by parliament, in the special relief provided by the Latent Damage Act 1980. However, the claimant had permitted the time allowed by those provisions to elapse, and, accordingly, the action was time-barred: Byrne v Pain & Foster [1999] 1 EGLR 73, applied; First National Commercial Bank plc v Humberts [1995] 1 EGLR 142 followed.
2. (Per Pill LJ) In order to identify the date at which time would run for limitation purposes in an action for negligence, it was necessary to identify the point at which recoverable loss was actually suffered by the claimant. The approach to the problems laid down in Nykredit was not confined to mortgage lenders. It demonstrated that the analysis of the circumstances of the particular transaction was required. The claimant was not pursuing a claim that the sum paid for the property exceeded its true market value, since there was no recoverable loss at the time of the purchase because of the statutory liability of British Coal to pay for the repairs. The claim was for loss of profit. On the usual facts, actionable loss was suffered when significant sums were spent on the redevelopment and conversion of the property. It was that expenditure, rather than the purchase itself, that commenced the recoverable loss resulting from the negligent advice. However, the date upon which the expenditure and conversion commenced was plainly before February 1990, and, accordingly, the action was time-barred: Hopkins v Mackenzie [1995] 6 Med LR 26, considered.
Christopher Gibson QC and Hugh Evans (instructed by Hugh James Ford Simey, of Merthyr Tydfil) appeared for the claimant; Nicholas Davidson QC (instructed by Morgan Cole, of Cardiff) appeared for the defendant.
Thomas Elliott, barrister
