Elliott v Hattens Solicitors (a firm)

In a solicitor-negligence claim involving a flawed transaction, limitation begins when the claimant first suffers real, measurable damage. Where negligent drafting or advice leaves the claimant with rights or an asset objectively less valuable than those intended, the loss arises when the transaction is completed. The claimant’s intention not to sell or assign does not postpone accrual. This differs from merely assuming a personal, wholly contingent liability, which is not damage until the contingency occurs unless it also affects the value of an existing asset or bilateral bargain. Subjective objectives may show detriment where the claimant received an unwanted form of transaction, but they cannot defer limitation after objective financial loss has already arisen.

Hattens Solicitors were retained to prepare a lease and underlease. They failed to ensure that the underlease was guaranteed by the tenant’s parents and failed to advise Mrs Elliott to insure the premises. A fire later destroyed the buildings, and the tenant did not repair them.

Mrs Elliott issued negligence proceedings more than six years after the documents were executed but less than six years after the fire. On a preliminary limitation issue, the County Court at Central London, before His Honour Judge Bailey, held that the claim was not statute-barred. The appeal concerned when actionable damage was first sustained.

The appeal was allowed unanimously. The claim was statute-barred in its entirety.

1. Under the Limitation Act 1980, a negligence claim accrues when the claimant first suffers real and actionable damage. Later or greater loss does not postpone limitation. The Court applied the distinction in Maharaj v Johnson [2015] UKPC 28 between a no-transaction case and a flawed-transaction case. In a flawed-transaction case, the relevant inquiry is whether the transaction received was measurably less valuable than the transaction that should have been received.
2. This was a flawed-transaction case. The absence of parental guarantors objectively reduced the value of Mrs Elliott’s lease and underlease package from the outset. The deficiency could not be remedied without the parents’ cooperation. It was unnecessary for Mrs Elliott to have assigned the lease or for the tenant to have defaulted before damage arose.
3. The case was distinguishable from Law Society v Sephton & Co [2006] UKHL 22. That case concerned a purely personal and wholly contingent liability. Here, the negligence caused Mrs Elliott to receive less advantageous rights and affected the value of an existing asset.
4. The failure to advise on insurance had the same consequence. Mrs Elliott was left in breach of insurance obligations and exposed to a risk of forfeiture. That risk could not be dismissed as negligible, particularly because she remained unaware of the relevant provisions and could incur expense even if the lease were ultimately retained. The lease was therefore less valuable at the date of grant. The later fire was not required to create actionable damage.
5. Shore v Sedgwick Financial Services Ltd [2008] EWCA Civ 863 did not assist Mrs Elliott. Subjective intentions may demonstrate detriment where a claimant receives an unwanted form of transaction, but they cannot postpone limitation where the claimant has objectively sustained financial loss.

The Court respectfully differed from the Judge and held that both causes of action accrued when the lease and underlease were entered into.

• Court of Appeal (Civil Division) allowed Hattens’ appeal and held that the claim was statute-barred: [2021] EWCA Civ 720.
• County Court at Central London, His Honour Judge Bailey, determined the preliminary limitation issue in Mrs Elliott’s favour and held that the claim was not statute-barred. Permission to appeal was granted.