Bowling & Co Solicitors v Edehomo

For limitation purposes, actionable damage may arise before completion of a land sale. An innocent co-owner suffers actual loss when an unauthorised contract for sale materially diminishes the marketability or value of the co-owner’s interest, even though completion has not occurred and the claimant is unaware of the fraud.

A forged contract may nevertheless be valid against the fraudulent co-owner and may sever a beneficial joint tenancy on exchange. But severance does not automatically constitute loss: whether it causes damage is fact-specific. A merely nominal cost of discovering and reporting the fraud is not necessarily actionable damage.

The claimant, a joint tenant of land, alleged that solicitors acting on a sale had negligently failed to verify her identity when her signature was forged. Contracts were exchanged on 21 November 2002 and completion occurred on 2 December 2002. She issued proceedings on 1 December 2008.

The Central London County Court held that damage arose only on completion. The solicitors appealed, arguing that the tortious cause of action accrued on exchange and was therefore statute-barred under section 2 of the Limitation Act 1980. The central issue was when the claimant first suffered actionable damage.

1. Appeal allowed on the limitation issue. The claimant suffered actionable loss on exchange of contracts on 21 November 2002. Her claim, issued more than six years later, was therefore statute-barred under section 2 of the Limitation Act 1980.
2. The reasoning in Nouri v Marvi [2010] EWCA Civ 1107 applied. Although exchange and completion had been simultaneous in that case, the relevant damage arose when the forged transaction created a material blot on title and diminished the property’s marketable value. The claimant’s interest here became materially less marketable because a potential purchaser would not knowingly enter a binding obligation to buy an interest which had already purportedly been sold.
3. The claimant’s lack of knowledge did not prevent limitation from running. Actual damage depends on whether the breach caused actual loss, assessed on the hypothesis that the claimant knew of the breach and its consequences. The alternative periods based on knowledge in sections 11 and 14A of the Limitation Act 1980 did not alter that principle.
4. The exchange also severed the beneficial joint tenancy. A contract bearing one co-owner’s forged signature is not a nullity as against the fraudulent co-owner: Edwards v Lloyd’s TSB Bank plc [2004] EWHC 1745 (Ch). Exchange constituted sufficient alienation, so severance was not postponed until completion. However, severance itself did not establish loss on these facts, because the benefit of survivorship was double-edged in the circumstances.
5. The suggested expenditure of identifying the fraud and alerting the solicitors did not establish a separate head of damage. The observations in Bell v Peter Browne & Co [1990] QB 495 had to be kept within their context. The issue was academic in light of the finding that exchange caused actionable damage on other grounds.

1. High Court (Chancery Division): The court allowed the solicitors’ appeal from the judgment of HH Judge Hand QC in the Central London County Court delivered on 3 August 2010. The court held that the claim accrued on exchange and was statute-barred.