Hatton v Messrs Chafes (a firm)

A negligence claim arising from solicitors’ delay accrues when the client first suffers real, financially assessable and legally relevant damage. Where the underlying proceedings have become worthless because there is no arguable defence to striking them out, damage has occurred even though no striking-out order has yet been made. Later losses caused by the same wrongful delay do not restart the primary limitation period.

The alternative three-year period under section 14A of the Limitation Act 1980 begins when the claimant knows the material facts about sufficiently serious damage, its attribution to the defendant’s conduct, the defendant’s identity and the right to bring an action.

The claimant instructed the defendant solicitors to pursue a professional negligence claim against his former accountants. After prolonged inactivity, the underlying proceedings were struck out for want of prosecution in 1999. The claimant then sought damages from the solicitors in contract and tort.

His Honour Judge Howarth declined to determine that the tort claim was barred under the primary six-year limitation period, although he concluded that section 14A of the Limitation Act 1980 would bar it. The solicitors appealed, and the claimant cross-appealed on section 14A.

The central questions were when the underlying claim became worthless, when the negligence cause of action accrued, and when the claimant acquired the knowledge required by section 14A.

1. Appeal allowed and cross-appeal dismissed. Clarke LJ, with whom Sir Anthony Evans and Peter Gibson LJ agreed, held that the claimant’s action was time barred and must be dismissed.

2. A negligence cause of action accrues when negligent conduct causes real, financially assessable damage falling within the applicable measure of damages. Once relevant recoverable damage has been suffered from the wrongful act, time runs notwithstanding that further damage of the same kind occurs later.

3. The underlying claim had become worthless by 13 October 1994. Had the claimant attempted to reactivate it, an application to strike out for want of prosecution would have been bound to succeed. The accumulated delay was inordinate and inexcusable, and the age and partly undocumented nature of the dispute created a substantial risk that a fair trial was no longer possible. The subsequent striking-out order in 1999 did not postpone accrual.

4. The tort claim was therefore brought outside the six-year period prescribed by section 2 of the Limitation Act 1980. Later losses arising from the same negligent delay could not create a fresh limitation period. The contractual claim was also barred because a contractual cause of action accrues upon breach, and all pleaded breaches occurred before October 1994.

5. Permission to plead a new retainer arising in 1995 was refused. By then the opportunity to pursue the accountants had already been lost, so later delay could not cause that loss. A specifically identified expense caused by a later breach might have stood differently, but none was pleaded.

6. Section 14A did not save the claim. By October or November 1995 the claimant knew that his solicitor regarded the underlying proceedings as indefensible, admitted negligent delay and suggested independent advice. The claimant obtained such advice. He consequently knew the sufficiently serious damage, its attribution to the solicitors, their identity and his right to sue more than three years before commencing proceedings.

7. Clarke LJ left open whether damage in other delayed-litigation cases first occurs when striking out becomes unanswerable, more probable than not, or a real rather than fanciful risk. Sir Anthony Evans considered that loss occurs when the underlying action is actually lost or becomes doomed to failure, proved on the balance of probabilities. That further formulation was unnecessary to the decision.

1. Court of Appeal (Civil Division): By judgment reported at [2003] EWCA Civ 341, allowed the solicitors’ appeal, dismissed the claimant’s cross-appeal, declared the action time barred and dismissed it.
2. Manchester County Court: His Honour Judge Howarth held that further evidence was required to determine primary limitation, but that section 14A of the Limitation Act 1980 would bar the claim. On 7 June 2002 he dismissed what was framed as an application to strike out and granted permission to appeal.