Limitation and loss in professional negligence claims

In Holt v Holley & Steer Solicitors (A Firm) [2020] EWCA Civ 851 the Court of Appeal considered when a claimant had sustained damage in the context of the calculation of limitation periods for bringing a claim against her former solicitors. In doing so, the Court gave a useful reminder of the relevant case law and applicable principles that apply in this complex area.

A claim against a solicitor is usually made in both contract and negligence. A claim in contract is based on an alleged breach of either an express or implied term in the retainer (for example a failure to act with reasonable care and skill). A claim in negligence arises on the basis that a solicitor owes their client a duty of care, and acts in breach of that duty where their advice/actions fall below the standard of a reasonably competent solicitor.

The Limitation Act 1980 provides that claims in both contract and tort must be brought within six years of the date the cause of action accrued[1]. However in contract, the cause of action accrues when the breach of contract is committed, whereas in negligence claims, the cause of action accrues when the claimant sustains damage.

It is usually relatively straightforward to establish when a breach of contract was committed (for example if the claim relates to negligent advice, it would be the date upon which that advice was provided). However establishing when the claimant sustains damage for the purpose of a negligence claim is more complicated. Whilst a superficial analysis may lead to a conclusion that loss is only suffered when a defined event takes place, for example the completion of a property transaction or a Court Judgment, it is often the case that the loss was suffered at a much earlier point in time, when the negligence occurred which made the eventual outcome unavoidable or inevitable.

In Holt the Claimant issued a professional negligence claim against the solicitors that acted for her in financial relief proceedings arising from her divorce from her husband. The central allegation of negligence was that the solicitors had failed to obtain expert evidence on the value of certain matrimonial assets (a number of buy to let properties and jewellery) and failed to secure permission to rely on that evidence during the course of the proceedings.

The final hearing had been listed for February 2012. Shortly before the hearing, the solicitors obtained drive-by valuations of the buy to let properties from a local estate agent, and wrote to the husband's solicitors seeking his consent to adduce this evidence at the hearing. The husband’s solicitors refused on the basis that (inter alia) the assets had previously been valued at the first directions appointment, and it was unacceptable to attempt to submit unilaterally obtained evidence a matter of days before the hearing. It appears that after receiving this response the solicitors did not pursue the point or seek to admit the evidence.

The final hearing was heard on 16 February (two days) and 16 March 2012 (two days). The Judge provided his draft Judgment to the parties on 10 April 2012 and handed down Judgment on 30 May 2012.

The professional negligence claim was issued on 5 April 2018. The defendant solicitors argued that the claim was time barred, as the claimant had sustained damage by 16 March 2012 at the latest (i.e. the conclusion of the final hearing) as after the hearing had concluded it was no longer open to the claimant to have sought to admit the expert evidence.

The claimant's solicitors argued that the claimant only sustained damage on 30 May 2012 (i.e. when Judgment was handed down) and that accordingly the claim had been brought in time. The claimant was unable to argue that secondary limitation applied in this case as she was aware of the allegedly negligent actions/steps taken by her solicitors at the time.

The solicitors sought Summary Judgment on the basis that the claim was time barred. The District Judge at first instance found the contractual claim was time barred but the negligence claim was not, accepting the claimant's argument that damage was sustained when the Judgment was handed down. The solicitors appealed, and His Honour Judge Ralton found the negligence claim was also time barred.

The Court of Appeal dismissed the claimant's appeal and found the claim in negligence to be time barred. In doing so they reiterated that the relevant date for assessing limitation in negligence claims was the date at which the claimant was financially worse off/had suffered measurable damage as a result of the negligence. Lord Justice McCombe, giving the leading Judgment stated the following:

"In my judgment, as I have already said, I consider that Ms Holt's Particulars of Claim show that her loss was sufficiently well measurable, if not precisely quantifiable, when she lost the ability to adduce the evidence that she avers that she should have been able to produce before District Judge Daniel in the financial remedies proceedings. That date may, in reality, have been shortly after the FDR [Financial Dispute Resolution]. It may have been when the Firm (as is to be inferred) recognised, in January 2012, that any application to the Family Court to adduce more valuation evidence would have been bound to fail. In the present case, it could hardly have been later than the end of the hearing on 16 March 2012".

The Claimant raised a number of points to support her contention that loss was not sustained until the Judgment was handed down on 30 May 2012, including the following:

• that financial relief proceedings in divorce were a very particular type of litigation, in which the Court had a wide degree of discretion to seek to achieve a fair outcome, and therefore it could not be predicted with any certainty what the outcome of the litigation would have been until the final Judgment had been handed down. In response to this point, the Court of Appeal noted that there were two stages to a financial remedies dispute: (1) the computation stage (where the values of the parties' assets are ascertained); and (2) the distribution stage (when it is determined how those assets are to be split). Whilst it was correct to say that a Judge has a considerable range of discretion when ordering the final distribution of matrimonial assets on divorce, "the building blocks of that eventual distribution are set when the values of the parties' assets are computed". It followed that where an allegation of negligent valuation was being made, the claim was capable of being assessed before any final judgment was delivered
• that the claimant's case was a case of contingent loss/damage, as the damage suffered was dependent on a contingency that might never have occurred, namely the final Judgment in the family proceedings. In making this argument the Claimant attempted to rely on the case of the Law Society v Sephton & Others, where it was held that the Law Society had not suffered damage until a claim was made to the Law Society's Compensation Fund, notwithstanding that the events giving rise to that claim had occurred much earlier. The Court of Appeal found that this case was not analogous to Sephton, as the loss was not contingent on the actions of third parties, and the outcome of the litigation was bound to be defined by the valuation evidence that was before the Court

The case provides a useful reminder to professional negligence practitioners of the need to interrogate when the claimant sustained damage for the purposes of a negligence claim, and not just assume that damage is sustained when a final Judgment is handed down or a defined event occurs. It is also a further reminder (if one were needed) of the dangers of leaving it too late before issuing proceedings.

[1] In tort there is also a secondary limitation period which enables a claimant to bring a claim within three years of the date of knowledge, subject to a 15 year long stop date.