Havenledge Ltd v Graeme John & Partners (A Firm)

For limitation in negligence, time begins when the claimant first suffers actual and relevant loss in respect of the pleaded damage, rather than merely potential future loss. The date is fact-sensitive and depends on the true measure of loss and the claim as pleaded. Uncertainty about future events may affect quantification rather than accrual. By a majority, the claim accrued before the limitation period expired: either when the company acquired an unsuitable property (Buxton LJ) or, on the unusual facts, when it began substantial conversion expenditure (Pill LJ).

The claimant purchased Haven Lodge in 1987 after the defendant solicitors allegedly failed to advise it to obtain a mining report. The property was converted into a nursing home. Mining subsidence later caused cracking, repairs and disruption to the business. Proceedings issued on 8 February 1996, and the defendants pleaded limitation under section 2 of the Limitation Act 1980.

Stephen Richards J held on 11 May 2000 that the claim was not statute-barred. The appeal concerned when the claimant first suffered actual and relevant loss: on purchase, when conversion expenditure began, or when the cracks and business disruption occurred. The court also considered whether the claim could be reformulated by amendment.

The appeal was allowed by a majority. Buxton LJ and Pill LJ held that the claim accrued before 8 February 1990. The claim was struck out, with costs here and below. Permission to appeal to the House of Lords was refused. Sir Anthony Evans dissented.

1. Under section 2 of the Limitation Act 1980, a negligence claim accrues when the claimant first suffers more than minimal actual and relevant loss in respect of the damage claimed. The court must identify the recoverable loss and assess the particular facts. Actual loss must be distinguished from a merely potential risk, although later contingencies may affect the quantification of loss. The approach in Nykredit Plc v Edward Erdman Ltd [1997] 1 WLR 1627 was not confined to mortgage lending.
2. Buxton LJ. The damage was determined by the claim as pleaded. The claimant alleged that negligent advice allowed it to acquire property wholly unsuitable for its known purpose. The burden of being committed to that property was the actionable damage. The particulars in the claim quantified the resulting loss; later cracks and business disruption were not the damage completing the cause of action. Loss could be assessed at purchase by valuing future contingencies. Amendment could not save the pleaded claim, which was statute-barred and ordered to be struck out.
3. Pill LJ. On the unusual facts, the property was bought at market value and there was no recoverable diminution in its value. The relevant loss was instead the substantial expenditure on conversion for the intended nursing-home business. That expenditure became abortive because of later subsidence and completed the cause of action when it began. The later cracking made the loss easier to quantify but was not necessary to establish it. Since the expenditure began before February 1990, the appeal succeeded.
4. Sir Anthony Evans. He considered that the relevant economic loss was the financial consequence of disruption to the nursing-home business, suffered when the cracks appeared in August or September 1990. He would have held the claim not statute-barred and stayed the proceedings to permit an application to amend.

• Court of Appeal (Civil Division): Allowed the appeal by majority, substituted an order striking out the claim, and awarded costs here and below.
• Merthyr Tydfil District Registry: Stephen Richards J held on 11 May 2000 that the claim was not statute-barred on the preliminary issue.