Hatton v Messrs Chafes (a firm)

Factual and Procedural Background

This appeal arises from an order made by His Honour Judge Howarth in the Manchester County Court on 7 June 2002, dismissing an application to strike out the respondent's claim against his former solicitors. The appeal is brought by the solicitors with the judge's permission and challenges two decisions made on 11 December 2001 and 23 May 2002.

The underlying events date back to 1983, when the respondent alleges he suffered loss due to negligence by his then accountants. The respondent instructed the appellants as solicitors in May 1984 to pursue a claim against those accountants. Legal aid was granted, and a writ was issued against the accountants in January 1987. The original action was struck out for want of prosecution on 8 June 1999.

The respondent subsequently issued a claim form in the High Court on 13 October 2000, seeking damages from the appellants for alleged negligence in their conduct of the claim against the accountants. The appellants defended on limitation grounds. The claim was transferred to the Manchester County Court, and the limitation issue was tried as a preliminary issue before Judge Howarth on 8 October 2001. No oral evidence was called, and the parties relied on witness statements.

The claim was pleaded both in contract and tort, with the contract claim conceded to be time barred by the judge, although this concession was disputed by the respondent. The limitation defence in tort raised two questions: whether the primary limitation period had expired before the claim was brought, and if so, whether the claim could be saved under section 14A of the Limitation Act 1980.

Judge Howarth reserved judgment and issued a written judgment on 11 December 2001, holding that it was possible the respondent's negligence claim was not statute barred but further evidence was needed. He later declined to reconsider this judgment in light of a recent Court of Appeal decision. The judge granted permission to appeal, and the appellants now challenge his limitation rulings.

Legal Issues Presented

1. Whether the respondent's claim against the appellants is time barred by the Limitation Act 1980, having regard to when the cause of action accrued.
2. If time barred, whether the claim is saved by section 14A of the Limitation Act 1980, which allows for a later starting date based on the claimant's knowledge of the relevant facts.
3. Whether the judge erred in declining to reconsider his earlier judgment in light of the Court of Appeal decision in Khan v Falvey.
4. Whether permission to amend the particulars of claim to allege negligence after October 1994 should be granted.

Arguments of the Parties

Appellants' Arguments

• The respondent's cause of action accrued before 13 October 1994, making the claim time barred under the six-year limitation period.
• The respondent had no arguable defence to a strike-out application by that date, rendering the claim against the accountants worthless and the negligence claim against the appellants similarly time barred.
• The respondent had the requisite knowledge by October or November 1995 to bring a negligence action against the appellants, so the claim also fails the three-year limitation period under section 14A.
• Permission to amend the claim to allege negligence after 1994 should be refused as no new loss is identified and the claim remains time barred.

Respondent's Arguments

• The burden is on the appellants to prove that the respondent had no prospect of resisting a strike-out application as at October 1994.
• The respondent disputes that he had the relevant knowledge by late 1995 to trigger the limitation period under section 14A.
• The respondent seeks permission to amend to allege negligence after 1994, contending this may avoid the limitation bar.
• The respondent challenges the judge's concession that the contract claim is time barred.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hopkins v McKenzie (1995) 6 Med LR 26	Limitation period accrual in negligence claims involving delay; loss occurs when claim becomes worthless or is struck out.	The court held Hopkins remains good law; the respondent's cause of action may be partly or wholly statute barred; the claim accrues when the underlying claim is "amenable to striking out".
Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd. (No. 2) [1997] 1 WLR 1627	Definition of damage and loss for limitation purposes; actual damage must be real and relevant.	Confirmed that Hopkins remains valid; principles on material facts and damage applied to determine limitation accrual.
Khan v Falvey [2002] EWCA Civ 400, [2002] PNLR 28	Clarification on when damage is caused in solicitor negligence claims; limitation accrues when claim is doomed or struck out; knowledge for section 14A.	The court declined to reconsider earlier judgment in light of Khan but applied its principles to hold the claim time barred; knowledge for section 14A found by late 1995.
Birkett v James [1978] AC 297	Delay must be both inordinate and inexcusable and cause prejudice to justify striking out.	Applied to assess whether delay was inordinate and inexcusable; delay by respondent and solicitors found inordinate and inexcusable by 1994.
Roebuck v Mungovin [1994] 2 AC 224	Estoppel principles in delay cases; impact on striking out applications.	Noted that estoppel approach used by district judge in 1992 would not now be appropriate; relevant to delay and prejudice analysis.
Department of Transport v Chris Smaller (Transport) Ltd [1989] AC 1197	Prejudice and delay in striking out applications; long delay before writ affects assessment of post-writ delay.	Used to evaluate prejudice resulting from delay; supported finding that delay was prejudicial and inexcusable.
Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229	Prejudice from cumulative periods of delay can be considered in striking out applications.	Supported consideration of total delay in assessing whether striking out was justified.
Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172	Claimant cannot avoid limitation by claiming only for damage occurring within limitation period if damage occurred earlier.	Applied to confirm that claim based on damage suffered before limitation period is time barred.

Court's Reasoning and Analysis

The court began by examining the accrual of the respondent's cause of action under the six-year primary limitation period of section 2 of the Limitation Act 1980. It was undisputed that the claim was issued on 13 October 2000, so the claim is time barred if the cause of action accrued before 13 October 1994.

The court analysed established principles: a cause of action accrues when the claimant suffers real and relevant damage caused by the defendant's negligence. In solicitor negligence cases involving delay, the damage is the loss of the claim or the loss of the chance to pursue it successfully. The court rejected the view that damage only occurs when the claim is actually struck out, holding instead that damage occurs when the claim becomes "amenable to striking out" or is doomed to failure.

On the facts, the court found that by 13 October 1994 the respondent's claim against the accountants was effectively worthless, with no arguable defence to a strike-out application for want of prosecution. The respondent and his solicitors had caused inordinate and inexcusable delay, and the prejudice to the accountants was such that a fair trial was substantially at risk. The court relied on contemporaneous procedural history and findings by the district judge in 1992, as well as the respondent's financial difficulties and lack of action after 1993.

Because the respondent's cause of action accrued by October 1994 and the present claim was brought more than six years later, the claim is time barred unless saved by section 14A of the Limitation Act 1980. Section 14A provides a later starting date based on the claimant's knowledge of material facts and the right to bring the action.

The court found that the respondent had the requisite knowledge by October or November 1995, when his former solicitor admitted negligence and that the claim against the accountants could not be defended. This knowledge, combined with advice from new solicitors, meant the respondent knew both the damage and his right to sue the appellants. Therefore, the claim also fails the three-year limitation under section 14A.

The court rejected the respondent's proposed amendment to allege negligence after October 1994, as no new loss was identified, and the claim remained time barred.

The court emphasized that the claim in contract was also time barred, as all breaches related to events before October 1994.

Holding and Implications

The court ALLOWED THE APPEAL and DISMISSED THE CROSS-APPEAL, declaring the respondent's claim time barred and dismissing the action.

The court ordered repayment of sums paid into court and costs in favour of the appellants, including costs of the appeal.

The decision confirms the application of limitation principles in solicitor negligence claims involving delay, particularly regarding when damage accrues and the application of section 14A knowledge requirements. No new precedent was set beyond the application of existing authorities to the facts. The direct effect is the dismissal of the respondent's claim on limitation grounds.