Land – Building agreement – Damages – Respondent solicitor acting for appellant purchasers acquiring land – Appellants alleging negligent advice leading to loss of contractual rights – Whether claims statute-barred – Appeal dismissed
In 1997 the appellants acquired land from F, a builder, who agreed to build them a house on the site. The appellants instructed the respondent firm of solicitors to act for them. They executed a number of documents, including a contract for the purchase of a leasehold interest in the property, a legal charge, a 999-year lease and a building agreement. Clause 21(ii) of the building agreement provided that if F failed to complete the works by 31 August 1998, the appellants could terminate the building agreement and pay for any work completed by that date. In the event of a dispute as to the value of those works, the parties could appoint an expert, whose determination as to the amount due would be binding.
The appellants subsequently claimed damages for professional negligence against the respondent. They contended that it had given them negligent advice, which led to the execution of the building agreement on 3 April 1998 and to the loss of rights under clause 21(ii) when they waived the completion date (the later transaction) and became embroiled in an expensive building dispute with F. The respondent denied the allegations and raised defences under the Limitation Act 1980.
On conventional principles, any cause of action in respect of the advice given to the appellants had accrued before 26 August 1998 and was therefore statute-barred when the appellants issued their proceedings. The appellants addressed that problem by relying upon principles established in Law Society v Sephton & Co [2006] UKHL 22; [2006] 2 AC 543 and Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1998] 1 EGLR 99; [1998] 05 EG 150. They argued that, under those authorities, their loss was contingent only and thus the limitation period did not start to run until the contingency matured, which was after 26 August 1998 (the Sephton argument). Alternatively, there was no loss on entry into any agreement with F since the net position was beneficial to the appellants and, thus, the limitation period could not start to run until the net position became disadvantageous to them (the Nykredit argument).
At the trial of those preliminary issues, the judge rejected the appellants’ submissions and held that their claims were statute-barred. The appellants appealed.
Held: The appeal was dismissed.
If the advice had not been negligent, the appellants would have had the chance of negotiating a better agreement. The loss of a chance was a separate loss that arose in any event when the contract was entered into. It did not inevitably mean that the contract would not go ahead. Accordingly, there was an actual tangible loss at the time the contract was entered into and the claims based on the contract dated 3 April 1998 were statute-barred: Nykredit distinguished.
In the instant case, the alleged negligent advice had led to entry into the transaction. The cause of action was then complete. Even if the advice should have included advice to renegotiate the agreement, the same event constituted the breach of duty. The claim for damages for loss of the chance of renegotiation was merely an alternative or additional head of loss.
The fact that clause 21(ii) could not be used before 31 August 1998 and could be used only if F failed to complete by that date did not mean that it did not have a value prior to that date. Although the value of the clause depended upon a number of factors, including the likelihood of the appellants being able to exercise it after 31 August, it had a value before that date. When the appellants entered into the building agreement they acquired a bundle of rights that they said was of a lesser value than they had been led to believe. Those rights were an asset capable of valuation. Thus, the appellants had suffered measurable loss when they acted on the allegedly negligent advice to enter into a later transaction and that claim was statute barred: Sephton distinguished.
Dr Stephen Watkins (in person) appeared for the appellants; Derek Holwill (instructed by Weightmans LLP, of Liverpool) appeared for the respondent.
Eileen O’Grady, barrister