3M United Kingdom Plc & Anor v Linklaters & Paines (A Firm)

For the purposes of section 14A of the Limitation Act 1980, the seriousness inquiry is directed solely to the quantum of the damage known to the claimant. It does not depend on the claimant’s evaluation of its cause, nature, legal consequences or prospects of rectification.

Knowledge of the loss of valuable contractual rights caused by a professional’s acts or omissions may therefore be sufficiently serious to start time running. A merely hopeful or remote prospect that the loss will be repaired does not postpone the starting date. The claimant need not know enough to issue proceedings immediately, but must know enough to make it reasonable to investigate and take the preliminary steps towards a claim.

The claimants alleged that their solicitors negligently failed, during a 1989 corporate restructuring, to advise that assigning three leases would extinguish break options personal to the original tenant. The loss was not discovered until the claimants’ in-house lawyer reviewed a proposed deed of variation on 30 August 1995.

By a standstill agreement, the proceedings were treated as issued on 1 September 1998. The decisive issue was whether the claimants had the knowledge required by section 14A of the Limitation Act 1980 before 1 September 1995. Hart J held that they did and dismissed the claim as time-barred: [2005] EWHC 1382 (Ch). The claimants appealed, contending that the damage was not then sufficiently serious because the landlord might still honour an agreement in principle to defer the break options.

1. Appeal dismissed unanimously. The claimants had the knowledge required by section 14A(5) of the Limitation Act 1980 on 30 August 1995. The three-year period had therefore expired before the deemed commencement date of 1 September 1998.

2. Section 14A(6) separates knowledge of the material facts about the damage from the other facts relevant to the action. Section 14A(7) concerns only whether the known damage was sufficiently serious in quantum to justify proceedings against an acquiescent and solvent defendant. Following the analysis in Haward v Fawcetts [2006] UKHL 9, and the analogous personal-injury authorities, questions about the cause, nature or classification of the damage belong to the other aspect of the required knowledge.

3. On 30 August 1995, the claimants knew that the break options had been lost through the 1989 assignments and that the solicitors’ failure to advise had caused that loss. The pleaded damage was the loss of the 1997 break rights and, consequently, the opportunity to negotiate an extension of them. It was sustained on assignment, rather than when the landlord later declined to continue negotiations.

4. A reasonable person would have regarded the loss of those valuable commercial rights as serious enough to justify proceedings. The hope that the landlord or its solicitors would overlook the defect, or decline to rely on it, was not a rational expectation. Nor was reassignment a viable solution: it rested on a misunderstanding of the law and required the landlord’s consent, which the landlord could not be compelled to give for that purpose.

5. The court stressed that the statutory test did not require knowledge sufficient to issue a claim immediately. It required sufficient knowledge and confidence to justify investigating further, taking advice, collecting evidence and submitting a claim to the proposed defendant. Wall LJ agreed with Chadwick LJ. Moore-Bick LJ added that a possibility that existing damage may be made good does not prevent that damage from being sufficiently serious under section 14A(7).

• Court of Appeal (Civil Division): dismissed the claimants’ appeal and upheld the limitation ruling: [2006] EWCA Civ 530.
• High Court, Chancery Division: Hart J held that the claimants had the requisite knowledge on 30 August 1995, so that the action was time-barred: [2005] EWHC 1382 (Ch).