Haward & Ors v. Fawcetts (a firm) & Ors

This appeal concerns the operation of the extended limitation regime in section 14A of the Limitation Act 1980 in a professional negligence claim against accountants. The House held that, for the three-year extension in s.14A(4)(b) to begin to run, the claimant must have "the knowledge required for bringing an action" which includes (under s.14A(6) and (8)(a)) knowledge that the relevant damage was capable of being attributed in whole or in part to the act or omission alleged to constitute negligence. Mere knowledge that advice was given and that an investment had become loss-making is not necessarily sufficient; the claimant must know enough to make it reasonable to investigate whether the advice or omission was causative of the loss. Constructive knowledge under s.14A(10) was not invoked by the defendant in this appeal. The House allowed the defendants' appeal because the claimants failed to discharge the burden of proving that they lacked the requisite knowledge before 6 December 1998.

This is an appeal from the Court of Appeal ([2004] EWCA Civ 240) concerning preliminary issues tried on limitation in an action for professional negligence against an accountancy firm. The claimants (Mr Haward, a family trading company and a family trust) alleged negligent advice leading to an initial 1994 acquisition and large subsequent investments into Haward Agriculture Ltd, which proved loss-making. Proceedings were issued on 6 December 2001.

Nature of the claim: damages for negligent advice and breach of retainer by accountants in relation to acquisition and continued investment in a company.

Procedural posture: the limitation point was tried as a preliminary issue before HHJ Playford QC (judge's decision in favour of the defendants), reversed by the Court of Appeal, and then brought to the House of Lords.

Issues framed by the House:

• What is the content and degree of the "knowledge required for bringing an action" under s.14A(6) and, in particular, what is required by s.14A(8)(a) as to knowledge that the damage was attributable in whole or in part to the act or omission alleged to constitute negligence?
• When, as a matter of the claimants' actual knowledge, did the s.14A(5) "starting date" occur for the losses from the 1994 and 1995 investments?

Court's reasoning: The House analysed the statutory scheme, legislative history and authorities (including Nash, Dobbie, Hallam-Eames and related authorities) and concluded that s.14A requires knowledge of the factual essence of the act or omission alleged to constitute negligence, and that "attributable" denotes a real or possible causal link (i.e. "capable of being attributed"). Knowledge that an adviser gave advice and that an investment subsequently failed does not automatically establish the s.14A(8)(a) threshold; the claimant must have known enough to justify beginning investigations into whether the adviser’s conduct was causative. On the facts, the claimants’ evidence was directed to the later question of when they first thought they had a claim, not to the earlier question of when they knew enough to begin investigating causation; they therefore failed to discharge the burden of proving the relevant starting date was after 6 December 1998. The House restored the judge’s order that the earlier claims were statute-barred.

Appeal allowed. The House held that s.14A(6) and (8)(a) require knowledge of the factual essence of the act or omission alleged to constitute negligence and that the claimant must know enough to make it reasonable to begin an investigation into whether the defendant's acts or omissions may have caused the loss. The respondents failed to prove that they lacked such knowledge before 6 December 1998, so the earlier parts of their claim were statute-barred.

Trial on preliminary issues before HHJ Playford QC (limitation decided for defendants) (15 April 2003). Court of Appeal allowed the claimants' appeal [2004] EWCA Civ 240. Leave to appeal to the House of Lords granted; House of Lords allowed the defendants' appeal and restored the first instance order ([2006] UKHL 9).