Gosden & Anor v Halliwell Landau (a firm) & Anor

Where solicitors negligently fail to protect a client’s power to prevent a property disposition, causation ordinarily depends on whether the client would have withheld the required consent. It is not a loss-of-chance question about whether another person might have been persuaded to abandon the transaction.

For the extended limitation period under section 14A of the Limitation Act 1980, knowledge that the property was sold may be insufficient. The claimant must know enough to connect the damage with the relevant omission, which may require knowledge that the promised restriction was never registered. Reasonable reliance on an apparently appropriate solicitor is relevant when fixing constructive knowledge.

The claimants were trustees and beneficiaries of arrangements under which a property owner contracted to sell her home to trustees. The defendant solicitors negligently failed to register a restriction intended to prevent a disposition without the trustees’ consent. The owner later sold the property to a third party without their knowledge.

HHJ Pelling QC held that the solicitors had been negligent but dismissed the damages claim because their omission had caused no loss. He found that the claimants would have accepted the owner’s wishes. He nevertheless held that the claim could proceed under the extended limitation period in section 14A of the Limitation Act 1980.

The claimants appealed on causation. The defendants challenged the limitation ruling by respondent’s notice. The central questions were whether the claimants would have consented to the sale and when they had, or reasonably should have acquired, the knowledge needed to sue.

1. Appeal allowed. The judge applied the wrong causation analysis. The alleged loss was the destruction of the claimants’ power to veto the sale, not the loss of a chance to persuade the owner to cancel or postpone it. The primary counterfactual question was whether the claimants would have consented had the promised restriction been registered and the proposed sale disclosed to them.

2. The judge lacked an evidential basis for finding that the claimants would readily have accepted whatever the owner wanted. Events in 2005 did not support that inference because no dismantling of the trust arrangements was then proposed and the claimants made no relevant decision. By 2010, relations and circumstances had materially changed. The claimants honestly believed that the owner might lack capacity and might be subject to another person’s malign influence. Their unchallenged evidence was that they would require a satisfactory explanation showing that the sale was independently decided and in the owner’s interests. No evidence established that such an explanation could have been provided. The only realistic conclusion was that consent would have been withheld.

3. The defendants’ limitation challenge failed. For section 14A of the Limitation Act 1980, knowledge that the property had been sold did not itself supply the material knowledge needed for a claim against the solicitors. The claim depended on discovering that no restriction had been registered. Obtaining that information realistically required legal assistance.

4. The claimants acted reasonably by consulting the solicitor who had established the trusts and understood the scheme. He appeared best placed to explain what had happened. His failure to disclose the missing restriction and the potential claim against himself could not accelerate the claimants’ constructive knowledge. Allowing a reasonable period for those inquiries placed the statutory starting date after 26 October 2013, so proceedings issued on 26 October 2016 were timely.

5. The application to amend the grounds of appeal on primary limitation was refused. The failure to register the restriction caused immediate, non-contingent loss because it exposed the trust interests to risk, cost money to rectify and arguably diminished their value. Law Society v Sephton & Co [2006] UKHL 22, concerning exposure to a genuinely contingent liability, did not displace Bell v Peter Browne & Co [1990] 2 QB 495.

Peter Jackson and Asplin LJJ agreed with Patten LJ.

• Court of Appeal (Civil Division): The appeal was allowed in [2020] EWCA Civ 42. The defendants’ challenge to the ruling under section 14A of the Limitation Act 1980 failed, and the claimants’ application to amend their grounds was refused.
• High Court, Business List (Chancery Division): HHJ Pelling QC held that the solicitors had been negligent but dismissed the damages claim for want of causation. He held that the claimants could rely on the extended limitation period under section 14A of the Limitation Act 1980.