Sunday, October 20, 2013

The Date of Accrual of the Cause of Action in Negligence Claims

Under article 113 of Schedule I to the Limitation Act, 1963 (the residuary provision), a suit must be filed within three years of the date of the accrual of the “right to sue”. It is well-known that a court has no power to condone delay in the institution of a suit (as opposed to an appeal or application) and it is therefore important to be able to ascertain precisely when the cause of action accrued. In many cases, this is not particularly difficult, since loss immediately follows, or coincides with, the negligent act (for example negligent driving resulting in personal injury). But the inquiry is considerably more complex when the loss caused is purely financial because, unlike physical injury, there is usually more than one intervening step between the negligent act of the defendant and the financial loss incurred by the plaintiff, typically because the plaintiff acts or omits to act in a certain way depending on the advice. In addition, sometimes the fact that the defendant has been negligent may not come to light until the loss is actually suffered.

In asking when the cause of action accrued, it is of central importance to isolate the cause of action: is one suing for a breach of a duty to exercise reasonable care or for breach of contract? In many cases, there may be concurrent tort and contract duties to exercise reasonable care; the tort duty based on the principle established in Hedley Byrne v Heller and the contractual duty based either on an express or an easily implied term. The asymmetry of limitation periods arises from the fact that breach of contract is actionable per se (ie, before loss is suffered) but the cause of action for negligence is complete only when damage is sustained. This means that the same facts may give rise to different limitation periods depending on which cause of action is pleaded. This problem has given rise to formidable case law dealing with the accrual of the cause of action in negligence (since that is inevitably more generous to claimants as the clock does not start ticking until loss is incurred) and the Court of Appeal has recently considered a case in which the point arose in relation to the alleged negligence of a solicitor in failing to conduct legal proceedings expeditiously. The case is Berney v Saul and the leading judgments were given by Gloster LJ and Moses LJ (with whom Rimer LJ agreed).

In April 1999, Ms Berney was injured by Mrs Liddell’s negligent driving. In May, she instructed the defendant solicitors, Thomas Saul & Co, to pursue an action for damages for negligence. The defendant’s insurer’s solicitors admitted liability. But Ms Berney’s solicitors (allegedly) negligently failed to serve Particulars of Claim for nearly six years. An undertaking was given by the defendants to not rely on the delay until 25 January 2005, after which it was withdrawn. Nothing had been done by this stage. Ms Berney finally instructed another firm of solicitors which was advised by counsel that there was only a 20 percent chance of the court granting permission to extend time to serve Particulars of Claim. At this point, the defendant offered to settle the matter for £25,000 plus costs, which Ms Berney accepted on 1 November 2005, because of the apprehension that if she pursued and lost the application to extend time, she would not only not get the £25,000, but would also be liable for her own and Mrs Liddell’s costs. Then she fell ill. She sued her former solicitors (Thomas Saul) for negligence on 10 January 2011.

The defendant argued that her cause of action arose on 2 June 2004 (and therefore more than six years before the institution of the claim) when she was advised by counsel that there was merely a 20 percent chance of success. The basis of this argument was that the right to sue is a chose in action capable of assessment in monetary terms and it became ‘less valuable’ when there was a real chance that the claim would be struck out. The judge at first instance accepted the contention and struck out the claim as time-barred. In the Court of Appeal, Gloster LJ noticed that the approach in previous cases on this subject is not entirely consistent but came to the conclusion that it was unnecessary to resolve that conflict for the purposes of this case. Pointing out that “cases of this sort are notoriously fact-sensitive”, she held that the correct approach is to apply the test set out by Lord Hoffmann in Nykredit v Edward Hardman:  “when was the claimant financially worse off by reason of a breach of the duty of care?” Applying that test, it could not be said that Ms Berney’s right to sue accrued in June 2004 because what she sued for in the present proceedings was not compensation for the “diminution in the value of her chose in action” but for being forced to settle on unattractive terms to avoid the risk of a claim being struck out. Therefore Ms Berney was not “financially worse off” at any time prior to the actual settlement in November 2005 and the claim against the solicitors was within time. Interestingly, Gloster LJ does not rule out the possibility that the cause of action can accrue at an earlier stage:

72. Of course, there may well be a time in the life of a chose in action when its value will diminish towards being worthless due to the negligent delay by a claimant’s solicitor.  Personal injury claims where liability and damages are in serious dispute, if left for an inordinate period of time without movement, may well lead a court to take the view that the reluctance to bring proceedings is due to a lack of confidence or enthusiasm for the case.  In such circumstances, the result may well be that, prior to settlement or strike-out, the claimant has suffered actual loss because the value of her claim has been rendered worthless… But that is not this case, as the chronology which I have extensively set out above clearly demonstrates.

Moses LJ reached the same result but on a different basis. He concluded that it is not incorrect to characterise Ms Berney’s claim as an action for “the diminution in the value of her chose in action” because a plaintiff cannot postpone the commencement of the limitation period simply by restricting his claim to a later period; and there would have been a diminution in the value of the chose of action but for the concession given by the defendant’s solicitors that the point would not be taken until 25 January 2005: therefore the present claim was just in time. The following passages illustrate the difference in approach:

88. Nor do I agree that it is incorrect to characterise Ms. Berney’s claim as one for “diminution of the value of her chose in action”[71].  It is true that she claimed for having to settle her loss at a figure far below the true value of the claim.  It remains for her to prove that the true value was greater.  But non constat that her cause of action did not commence at a date before the settlement. A claimant cannot avoid the identification of an earlier date as the date when she suffered actual damage merely by the form of her pleading, whether relying on an actual strikeout or a settlement.  If in fact the value of her claim was diminished before  settlement then her cause of action arose before settlement.

90. It does not follow, from the fact that there was a settlement, that actual damage had not been suffered before… I have mentioned these points only out of caution.  They do not, in my view, affect the result.  This is because up to 25 January 2005 there was no risk that time would not have been extended or that the claim would have been restricted.  Up to that date, Davies, Wallis Foyster had been prepared to give Ms Berney’s solicitors, Martin Ross, time to obtain the answers to questions posed to Mr Good.  They had done so on the express assurance that they would “take no procedural point over the additional delay” (19 November 2004, extended by letter dated 15 December 2004).  Those assurances were only withdrawn on 25 January 2005.  It is inconceivable that they would have been allowed to go back on those assurances had Martin Ross sought to extend time before 25 January 2005. After that time, for the reasons I have given, there was a real risk that Ms. Berney’s claim would have been restricted.  From 25 January onwards she had suffered actual damage, measurable by the risk of a restriction being imposed.

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