Negligent advice — Limitation period — Knowledge needed by claimant before time starting to run — Whether necessary to know that advice flawed — Appeal allowed
The respondents invested money in a company following advice given to the first respondent by his accountant, a partner in the appellants’ firm. The company failed, and the respondents lost money. They subsequently brought a claim against the appellants for negligence. The appellants argued that the claim was time-barred under the Limitation Act 1980.
A preliminary issue was tried as to when the respondents had acquired the necessary knowledge for bringing an action, so as to start the limitation period running under section 14A(5) of the 1980 Act. Section 14A(8)(a) required knowledge that “the damage was attributable in whole or in part to the act or omission alleged to constitute negligence”. The judge took the approach that the first respondent had known all the material facts as they had occurred, namely the accountant’s retainer, the advice that he had been given, his reliance upon that advice and the consequence of losing his money. The trial judge found that the causal connection between the advice and the loss had been patent and obvious and he concluded that the respondents’ knowledge had been sufficient to fulfil section 14A(8)(a). He considered that the only knowledge that the respondents had lacked was that the appellants had been negligent, or that they had a cause of action against them, and such matters were irrelevant.
That decision was overruled on appeal on the ground that it had wrongly treated as irrelevant knowledge that the appellants’ advice might have been flawed: see [2004] EWCA Civ 240. The Court of Appeal held that the respondents’ claim was not time-barred. The appellants appealed.
Held: The appeal was allowed.
In addition to being aware of the material facts about the damage, a claimant had to know that it was possible that the damage had been caused by the acts or omissions that were alleged to constitute negligence; he or she needed to know the facts constituting the essence of the claim of negligence. The conduct alleged to constitute negligence in the instant case was not merely the giving of advice, but the giving of flawed advice. The respondents claimed that the appellants had failed to do their job properly. Time did not start to run against the respondents until they knew enough for it to be reasonable for them to embark upon preliminary investigations into that possibility. Where, as in the instant case, the error was not transparent on its face, something was needed to put a claimant on inquiry, and reasonably cause him or her to start asking questions about the advice that had been given. That was different from the knowledge that he or she had a claim. The Court of Appeal had erred in its application of that approach to the facts of the instant case. The respondents had not discharged the burden of proof of showing that their claim was not time-barred: Nash v Eli Lilly & Co [1993] 1 WLR 782, Dobbie v Medway Health Authority [1994] 1 WLR 1234 and Hallam-Eames v Merrett Syndicates Ltd [2001] Lloyd’s Rep PN 178 considered.
Howard Palmer QC and Neil Moody (instructed by CMS Cameron McKenna LLP, of Bristol) appeared for the appellants; Michael Pooles QC and Christopher McCourt (instructed by Anthony Taylor, of Dorchester) appeared for the respondents.
Sally Dobson, barrister
