Osborne v Follett Stock (a firm) & Anor

For limitation purposes, damage from negligent advice may arise when a claimant enters into a flawed transaction, even if a later contingency causes the loss to crystallise. The question is whether the transaction or rights obtained were measurably less valuable than the position that competent advice would have produced. A transaction is not converted into a true contingency merely because the claimant hoped to obtain a more secure outcome or because the adviser could not control the other contracting party. Expenditure incurred in reliance on the transaction may independently constitute actual damage. Where the claimant knew of the relevant claim, the extended period under Limitation Act 1980, section 14A, does not prevent expiry of the primary limitation period.

The claimant alleged that her former solicitors negligently failed to advise her about defects in a 1997 agreement varying the effect of a will. The agreement gave the claimant the estate residue in return for increasing a legacy to the testator’s daughter. The daughter later challenged the agreement and obtained summary judgment in 2006. The claimant subsequently settled that dispute and brought professional-negligence proceedings against the defendants in 2016.

The defendants relied on limitation. At this preliminary issue trial, the central question was whether damage occurred when the agreement was made in March 1997 or only when the daughter challenged it in 2005.

1. Preliminary issue and burden. The claimant bore the burden of proving that the claim was brought in time. It was insufficient merely to show that the limitation argument was arguable.
2. Accrual of damage. The alleged Agreement Negligence caused damage when the claimant entered into the agreement on 1 March 1997. The agreement was a bilateral transaction under which the claimant bought the daughter’s interest in the estate for a modest sum. It was therefore a flawed and precarious transaction requiring careful advice, rather than a true contingency of the kind considered in Law Society v Sephton & Co [2006] UKHL 22.
3. The fact that the solicitors could not control whether the daughter would agree to an unchallengeable arrangement did not postpone damage. The claimant lost the chance that such an agreement might have been achieved. The value of the agreement could also be assessed by asking what a fully informed third party would have paid for its benefit before the daughter’s letter of claim. That value would have been materially below the value of the estate because of the risk of challenge.
4. Alternatively, the claimant suffered actual loss when she spent money in reliance on the supposed validity of the agreement. The court rejected a balance-sheet approach which treated the value of the property obtained as cancelling that expenditure.
5. Section 14A of the Limitation Act 1980 did not assist. The claimant knew of the daughter’s claim in February 2005, and the primary limitation period under section 2 had expired. The preliminary issue was therefore resolved against the claimant and the claim was dismissed.

The judgment was a first-instance determination of a preliminary limitation issue. The judgment records earlier proceedings concerning the will agreement, including summary judgment for the daughter in 2006 and dismissal of an appeal, but those proceedings were not an appeal from the present decision.