Seton House Group Ltd & Anor v Mercer Ltd

For limitation purposes, constructive knowledge under section 14A of the Limitation Act 1980 requires two stages. The court must first identify what the claimant actually knew, or ought reasonably to have acquired from observable or ascertainable facts and, where appropriate, reasonable expert advice. It must then decide whether that knowledge satisfies the statutory requirements. The approach in Haward v Fawcetts is applied only at the second stage. A claimant may be fixed with knowledge of the contents of a document which it reasonably ought to have read, even if the document was in practice left to an adviser. Reliance on the allegedly negligent adviser cannot ordinarily establish that all reasonable steps were taken to obtain advice about the adviser’s own possible error.

The claimants appealed from the order of Master Marsh dated 6 January 2014, which granted summary judgment dismissing their negligence claim on limitation grounds. The claim concerned advice given in connection with the purported equalisation of pensionable ages following Barber v Guardian Royal Exchange Group. The claimants contended that the relevant pension rules had not been effectively amended until 2000 and that the defendant’s earlier advice was negligent.

The primary limitation period was accepted to have expired. The issue was whether the claimants had acquired, or ought reasonably to have acquired, the knowledge required by section 14A of the Limitation Act 1980 through a due diligence report and an actuary’s warning that legal advice should be obtained.

1. Appeal dismissed. The Master had correctly granted summary judgment because the claimants had no real prospect of establishing at trial that the section 14A limitation period had not begun earlier.
2. Constructive knowledge under section 14A(10) had to be assessed before applying the degree-of-certainty approach discussed in Haward v Fawcetts. The court first identifies what facts or information the claimant ought reasonably to have acquired, including through reasonable further enquiry or expert advice. It then asks whether that knowledge meets section 14A(6) and the related statutory requirements. The Master’s reasoning followed that sequence despite describing part of it as applying the Haward test.
3. The full due diligence report was in the claimants’ possession. Given the size and importance of the transaction, the pension arrangements, warranties and indemnities, it was reasonable to expect suitably senior personnel to review the report and the pensions appendix. The claimants were therefore fixed with constructive knowledge of the relevant passage under section 14A(10)(a).
4. The passage identified a serious inconsistency concerning the method of equalisation and recommended legal advice. It was a sufficient warning to make further investigation reasonable. A legal review of the scheme rules and related communications would have revealed the alleged failure to implement equalisation before 2000. That further legal knowledge was constructively acquired under section 14A(10)(b).
5. The claimants could not rely on general retainers of Eversheds or Mercer to show that they had taken all reasonable steps to obtain expert advice. There was no evidence that Eversheds had received or reviewed the report. In any event, relying on Mercer, the allegedly negligent adviser, to identify its own possible mistake could not amount to taking all reasonable steps.
6. The Master had not conducted an impermissible mini-trial or applied the balance of probabilities as the operative test. His conclusions concerned whether it was fanciful to suppose that the claimants could establish the necessary contrary case at trial. The order resulting from the dismissal was left to be agreed, subject to further directions if agreement proved impossible.

• High Court (Chancery Division): The appeal from Master Marsh’s order of 6 January 2014 was dismissed. Permission to appeal had been granted by Barling J on 15 May 2014.
• Master Marsh: Summary judgment was granted dismissing the claim on limitation grounds.