McCarroll v Statham Gill Davies (a firm)

In a professional negligence claim, a tort cause of action accrues when the claimant first suffers actual, measurable financial damage. Where negligent advice leads to entry into a commercially less valuable agreement, the loss arises on execution if it could then be valued in money. Later uncertainty about the extent of loss affects quantification rather than accrual. Under section 14A of the Limitation Act 1980, knowledge concerns the essential facts linking damage to the alleged act or omission. Under section 32, concealment of evidence is insufficient; the concealed matter must be an essential fact needed to plead the claim.

The appellant, formerly a drummer in Oasis, claimed that the respondent solicitors negligently acted for the band in negotiating a Sony recording agreement signed on 22 October 1993. He alleged that the agreement created a conflict of interest, left the group name with the Gallagher brothers, and exposed him to summary expulsion without compensation. He was expelled on 28 April 1995 and issued his negligence claim on 24 April 2001.

Gray J granted the respondents summary judgment on limitation. He held that the cause of action accrued when the agreement was made and that the additional arguments under sections 14A and 32 of the Limitation Act 1980 had no real prospect of success. The appeal concerned the accrual of damage, the appellant’s knowledge, and alleged deliberate concealment.

Appeal dismissed. Pill LJ delivered the judgment. Latham LJ and Morland J agreed.

1. Accrual of damage. Section 2 of the Limitation Act 1980 requires a tort claim to be brought within six years of accrual. The applicable principle, stated in Nykredit Plc v Edward Erdman Ltd [1997] 1 WLR 1627 and reflected in Forster v Outred & Co [1982] 1 WLR 86, is that accrual occurs when actual damage is first suffered. In financial-loss cases, the transaction itself may cause damage where the claimant receives rights of lesser value or assumes greater liabilities than proper performance would have produced.
2. Contingent consequences. The court applied the reasoning in Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172 and D W Moore & Co Ltd v Ferrier [1988] 1 WLR 267. The appellant entered an agreement that, on the assumed negligence, was commercially less favourable from the outset. The risk of instant expulsion and its consequences constituted actual loss, capable of monetary valuation when the agreement was signed. Future events affected quantification, not the existence or accrual of damage. Failure to prove that more favourable terms could have been obtained might defeat causation, but would not negate the existence of damage.
3. The court rejected the argument that no goodwill loss could arise because the agreement created the goodwill. The agreement was potentially valuable, but, on the assumed negligence, was less valuable to the appellant than it should have been. Wardley Australia Ltd v The State of Western Australia [1992] 175 CLR 514 was not applied because it concerned a statutory cause of action and a contingent liability.
4. Knowledge and concealment. For section 14A, the relevant knowledge was knowledge of the essential facts showing that the damage was attributable to the solicitor’s act or omission. The appellant possessed that knowledge shortly after his expulsion; later information supplied additional evidence rather than the necessary knowledge. For section 32, deliberate concealment had to concern essential facts constituting the right of action. The distinction in Frisby v Theodore Goddard & Co (Transcript 27 February 1984) between knowledge of a right of action and evidence needed to prove it was applied. The appellant had no real prospect of establishing concealment of a necessary fact.
5. Summary judgment for the respondents on the limitation defence was upheld.

1. Court of Appeal (Civil Division): Appeal dismissed and summary judgment for the respondents upheld, [2003] EWCA Civ 425.
2. Queen’s Bench Division: Gray J, on 28 November 2002, granted the respondents summary judgment on their limitation defence.