Three R Tourism and Hospitality Limited & Ors v Orrick Herrington & Sutcliffe (UK) LLP

In a professional negligence claim arising from an investment transaction, actionable damage may be suffered when a claimant enters a flawed bilateral transaction and receives a package of rights worth less than it should have been. Uncertainty about future performance or eventual quantum does not postpone accrual where the claimant has accepted immediate liabilities or a diminished asset or interest. A purely contingent liability, without more, is different. Under section 14A of the Limitation Act 1980, constructive knowledge is assessed mainly objectively. A claimant need only know enough about the damage and its possible attribution to the alleged advice to justify investigation. Knowledge that the advice was legally negligent is unnecessary. The primary limitation periods had expired, and constructive knowledge existed by January 2020 at the latest. Summary judgment was granted and the claim dismissed.

The claimants brought contract, tort and misrepresentation claims alleging negligent legal advice on a 2018 Carlyle investment in Wakanow. They alleged that the transaction exposed them to substantial liabilities and enabled conversion of their equity for nominal consideration in January 2020. The defendant applied to strike out or obtain summary judgment, contending that proceedings issued in November 2025 were statute-barred. A standstill agreement extended time for specified claims to 30 May 2025. The central issues were when actionable loss was sustained and when the claimants acquired constructive knowledge under sections 2, 5 and 14A of the Limitation Act 1980. The court also considered whether the misrepresentation claim fell within the standstill agreement.

Disposition. The defendant’s application for summary judgment was granted. The claim was dismissed as statute-barred.

1. Contract limitation. Under section 5 of the Limitation Act 1980, the latest possible breach was 27 November 2018. The 212-day standstill period extended the deadline to 27 June 2025. Proceedings issued in November 2025 were out of time.
2. Actionable damage in tort. The court applied the principle in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] 1 WLR 1627. A purely contingent liability is not damage merely because it may produce a future payment, as explained in Law Society v Sephton [2006] UKHL 22. That principle did not apply to the present bilateral transaction. On the claimants’ own case, they had entered a wrong transaction whose package of rights was immediately diminished. They accepted substantial unconditional liabilities, surrendered control, received onerous convertible preference share terms and lacked employment protection. Uncertainty about future trading and the ultimate valuation affected quantification, not accrual. The reasoning in Axa Insurance Ltd v Akther & Darby Solicitors [2009] 2 CLC 793 was applied, while Evans v Price Waterhouse [2019] EWHC 1505 (Ch) was distinguished.
3. Constructive knowledge. Section 14A of the Limitation Act 1980 requires a mainly objective assessment. The claimant need not know that the defendant was legally negligent. It is enough to know the material facts about the damage and that it may be attributable to the alleged advice, so as to justify investigation. The approach in Haward v Fawcetts [2006] 1 WLR 682, Witcomb v Keith Park Solicitors [2023] EWCA Civ 326 and Kay v Martineau Johnson [2026] EWCA Civ 224 supported that analysis. The dismissals in October 2019 and the conversion notice in January 2020 made the loss obvious enough to require investigation. The analogy with Forbes v Wandsworth Health Authority [1997] QB 402 was apt.
4. Summary judgment and standstill. The court could determine the short limitation issues without a mini-trial because the evidence had been set out and was not materially challenged. The claimants’ lack of understanding of the conversion mechanics and the evidential gap between January 2020 and September 2022 did not create a realistic prospect of avoiding limitation. The standstill agreement covered only the defined dispute and did not extend to the misrepresentation claim.