Jacobs v Sesame Ltd

For negligence claims under the Limitation Act 1980, constructive knowledge is assessed objectively. The court considers the circumstances and characteristics of a person in the claimant’s position, but not peculiar characteristics irrelevant to that objective standard. A claimant may reasonably be expected to inspect clear documents and ask simple questions, particularly where substantial loss and investment risk are apparent. A mistaken belief that capital is guaranteed does not postpone limitation where the absence of a guarantee could reasonably be discovered. The court need not resolve actual knowledge if constructive knowledge is established.

The claimant invested £65,000 in an investment bond following advice from a member of the defendant’s financial-adviser network. The bond’s value fell substantially, and the claimant later alleged that the advice and product selection were unsuitable.

Proceedings were issued in November 2012. After a preliminary trial in the Bath County Court, Deputy District Judge Webber held that the claimant could rely on section 14A of the Limitation Act 1980, because she lacked the requisite knowledge in July 2009. The defendant appealed, arguing that the claim was already time-barred. The central issue was whether the claimant had actual or constructive knowledge of the relevant damage by July 2009.

Lord Justice Tomlinson delivered the leading judgment. Lord Justices Lewison and Sullivan agreed.

1. Disposition and burden. The appeal was allowed. The claimant bore the burden of showing that the starting date under section 14A was postponed. If section 14A could not be relied upon, the claim was time-barred.
2. Statutory approach. The enquiry begins by identifying the damage for which damages are claimed. The relevant knowledge initially concerns the material facts about that damage and the other facts required by section 14A. The court referred to Haward v Fawcetts [2006] 1 WLR 682 as the leading authority on the statutory provisions.
3. Constructive knowledge. The approach under section 14A(10) is objective. The court may consider external circumstances and the characteristics of a person in the claimant’s position, but not characteristics peculiar to the claimant which the objective test makes irrelevant. Facts may be acquired from observable or ascertainable material, or through appropriate expert advice which it was reasonable to seek. The guidance in Gravgaard v Aldridge & Brownlee [2005] PNLR 19 was applied.
4. Application. By July 2009 the claimant understood the annual statements and knew that the investment had suffered a catastrophic fall in value and was more volatile than expected. She could reasonably have asked directly whether repayment of the capital was guaranteed. She could also have reviewed the plainly worded product literature, which stated that the investment value was not guaranteed and depended on fund performance. The relevant advice was readily available and free. Her naivety did not prevent constructive knowledge.
5. Actual knowledge and order. The court did not need to resolve whether the claimant had actual knowledge. It expressed reservations about the lower court’s treatment of her belief that the capital would be returned after five years. The lower court had misdirected itself by adopting the approach advanced by reference to Mortgage Corporation v Lambert & Co [2000] PNLR 820. The order of 3 December 2013 was set aside, the claim was declared time-barred, and the action was dismissed.

1. Court of Appeal (Civil Division) — In [2014] EWCA Civ 1410, the appeal was allowed. The order below was set aside and the action was dismissed as time-barred.
2. Bath County Court — Deputy District Judge Webber held, after trial of a preliminary limitation issue, that the claimant could rely on section 14A of the Limitation Act 1980.