Nouri v Marvi & Ors

For limitation in tort, actual damage occurs when negligence causes measurable financial loss, including diminution in the value of an existing asset. Where negligent conveyancing exposes registered property to a forged transfer, the cause of action may accrue on completion if the property is then worth less, even though registration and greater loss occur later. The assessment assumes that the claimant knew of the breach and takes account of any duty to disclose the defect to a purchaser. Ignorance does not postpone accrual under section 2 of the Limitation Act 1980. A continuing duty after completion requires special facts showing continuing responsibility. Even if such a duty exists, it does not postpone limitation where loss was already suffered. Later rectification costs are an enhanced measure of the same loss, subject to mitigation.

Mr Nouri owned a registered leasehold flat. A fraudster procured a mortgage and then a sale of the flat using forged documents. The appellant alleged that the respondent solicitors negligently failed to verify the supposed client’s identity and failed to protect his title.

The fraudulent sale completed on 2 April 2001, but the fraudster was not registered as proprietor until 4 July 2001. Norris J held that the negligence claim was statute-barred because actual damage occurred on completion: [2009] EWHC 2725 (Ch). The appeal concerned whether loss arose only on registration and whether the solicitors owed a continuing duty until then.

1. The appeal was dismissed. The six-year period under section 2 of the Limitation Act 1980 began when the negligent conveyancing caused actual damage, not necessarily when the claimant’s title was later defeated on registration.

2. Actual damage could consist of an immediate diminution in the value of the flat. The court applied the reasoning in Bell v Peter Browne & Co [1990] 2 QB 495: the cost of remedial steps may provide a convenient measure of loss, but the underlying loss is the reduced value of the claimant’s rights. The later registration of Mr Marvi’s title created a greater and more expensive problem, but did not create a new kind of loss.

3. The case was distinguished from Law Society v Sephton & Co [2006] 2 AC 543, which concerned a purely contingent liability. Here the issue was diminution in the value of existing property. The correct hypothesis was that Mr Nouri knew of the breach immediately after completion and had to disclose the forged transfer to a prospective purchaser. Because the flat could not have been sold without that disclosure, its open-market value was the price a purchaser would have paid with knowledge of the defect. Actual damage therefore arose on 2 April 2001.

4. The claimant’s lack of knowledge did not postpone accrual. The principles in Cartledge v E. Jopling & Sons Ltd [1963] AC 758 and Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 remained applicable, subject to the alternative knowledge-based periods in sections 11 and 14A of the Limitation Act 1980.

5. No special facts established a continuing duty after completion. The solicitors’ later request for a passport showed general lack of care, not continuing responsibility. Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 depended on particular facts and an assumed continuing obligation. In any event, even if a continuing duty existed, loss had already occurred on completion; later rectification costs were only an enhanced measure of the same loss and could raise mitigation issues.

• Court of Appeal (Civil Division): dismissed the appeal and upheld the conclusion that the negligence claim was statute-barred.
• High Court, Chancery Division: Norris J determined the preliminary limitation issue against the claimant: [2009] EWHC 2725 (Ch).