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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Hatton v Messrs Chafes (a firm) [2003] EWCA Civ 341 (13 March 2003) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2003/341.html Cite as: [2003] EWCA Civ 341, [2007] Lloyd's Rep PN 15, [2003] PNLR 24

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER COUNTY COURT
His Honour Judge Howarth

		Royal Courts of Justice Strand, London, WC2A 2LL
		13 March 2003

Lord Justice Clarke:

Introduction

1. This an appeal from an order made by His Honour Judge Howarth in the Manchester County Court on 7 June 2002 in which he dismissed an application to strike out the respondent's claim against his former solicitors. The appeal is brought by the solicitors with the permission of the judge. The appeal is essentially brought against two decisions made by the judge, one on 11 December 2001 and the other on 23 May 2002. Those decisions must be seen against the background to the action and the events underlying it.

Background

2. Those events began as long ago as 1983. The respondent says that between February and July 1983 he suffered loss as a result of negligence on the part of his then accountants. He instructed the appellants as his solicitors on 3 May 1984 in connection with a possible claim against the accountants. He was granted legal aid to sue them on 9 September 1984. He issued a writ against them in January 1987. I shall return below to the key events between January 1987 and 8 June 1999, when the action was struck out for want of prosecution.
3. The claim form in this action was issued in the High Court on 13 October 2000. The respondent claims damages against the appellants for alleged negligence while they represented him in his claim against the accountants. The appellants plead by way of defence that the respondent's claim against them is time barred. On 10 April 2001 District Judge Rawkins ordered that the claim be transferred to the Manchester County Court and that the issue of limitation be tried as a preliminary issue. He also ordered that there be standard disclosure, that witness statements limited to the preliminary issue be exchanged and that they should stand as the witnesses' evidence in chief.
4. The preliminary issue came before his Honour Judge Howarth on 8 October 2001. Neither party called oral evidence or sought to cross-examine the other party's witness, namely the respondent on his own behalf and Mr. Roberts on behalf of the appellants.
5. The respondent's claim is pleaded as damages for breach of contract and/or damages for breach of duty in tort. The judge said in his first judgment that it was conceded that the claim in contract must fail on limitation grounds. We were told that it is not accepted on behalf of the respondent that any such concession was made. I will therefore return to the position in contract below. The limitation defence to the claim in tort involves two questions, namely whether the primary limitation period had expired before the action was brought and, if so, whether the claim could be saved under section 14A of the Limitation Act 1980 ('the 1980 Act').
6. The judge reserved his judgment and subsequently prepared a written judgment dated 11 December 2001. On the first question the respondent had relied upon the decision of this court in Hopkins v McKenzie (1995) 6 Med LR 26 which the judge held remained good law notwithstanding an attack upon its reasoning based (among other things) upon the decision of the House of Lords in Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd. (No. 2) [1997] 1 WLR 1627. He held that it is possible that the respondent's cause of action in negligence is not statute barred but also that it is possible that it is partly statute barred. He said that the issue could not be fairly determined without hearing further evidence. On that basis the second question did not arise but the judge said that, if it had, he would have decided it in favour of the appellants and held that the claim was statute barred.
7. The judge distributed the judgment (or draft judgment) to the parties but did not formally hand it down on that occasion. Before it was formally handed down the parties learned that the issue whether the reasoning in Hopkins v McKenzie survived Nykredit was likely to be considered in a case to be decided by this court in the comparatively near future and the judge was asked on behalf of the appellants to defer handing down his judgment for the time being. He agreed. The case was Khan v Falvey [2002] ECCA Civ 400, [2002] PNLR 28, which was decided on 22 March 2002. The judge thereafter heard further argument from the parties. He was asked to reconsider his judgment in the light of the decision and reasoning in the Khan v Falvey, but he declined to do so.
8. For some reason the parties agreed that the appropriate order was that the application to strike out the respondent's claim be dismissed. That was a curious form of order because no application to strike out had been made and, as I understand it, the hearing on 8 October 2001 had been treated by both parties as the trial of the preliminary issue which had been ordered by the district judge. In any event, as already stated, the judge granted permission to appeal.
9. The appellants now appeal on the grounds that the judge's decision contained in his judgment in December 2001 is wrong and that the judge should have reconsidered his judgment and altered his conclusions in May 2002 in the light of Khan v Falvey. It seems to me that the essential question for decision in the appeal is whether the respondent's claim is time barred on the facts having regard to all the authorities including Khan v Falvey. It does not seem to me to be necessary for us to consider the separate questions whether the judge was right on the material available to him in December and whether he ought subsequently to have reconsidered his decision and changed it in May 2002. I would only say that there is much to be said for the view that, other things being equal, where a significant decision of this court or the House of Lords becomes available before a judgment is formally handed down, the judge should be willing to reconsider his or her conclusions in the light of the decision in order to minimise the possibility of an appeal with its attendant delay and expense. I turn to the issues of substance.

The Primary Limitation Period

The Question

10. Section 2 of the 1980 Act provides:

"An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued."

This action was brought by the issue of the claim form on 13 October 2000. It follows that the action is statute barred if the respondent's cause of action accrued before 13 October 1994.

The Principles

11. The appellants' case is that the respondent's cause of action accrued before 13 October 1994. They say that the alleged breaches of duty (which I shall describe as negligence for short) and the respondent's relevant loss occurred before that date. The negligence was essentially the failure to progress the action against the accountants.
12. The following principles are not in dispute and may be summarised in these propositions:

i) A cause of action in negligence does not arise until the claimant suffers damage as a result of the defendant's negligent act or omission.

ii) The damage must be 'real' as distinct from minimal: Cartledge v Jopling [1963] AC 758 per Lord Reid at 771 and Lord Evershed MR at 773-4.

iii) Actual damage is any detriment, liability or loss capable of assessment in money terms and includes liability which may arise on a contingency: Forsted v Outred [1982] 1WLR86 per Stephenson LJ at 94, approved by the House of Lords in Nykredit per Lord Nicholls (with whom the other members of the appellate committee agreed) at 630F.

iv) The loss must be relevant in the sense that it falls within the measure of damages applicable to the wrong in question: Nykredit at 1630F.

(Propositions i) to iv) were confirmed by Sir Murray Stuart-Smith in Khan v Falvey at paragraphs 11 and 12.)

v) A claimant cannot defeat the statute of limitations by claiming only in respect of damage which occurs within the limitation period if he has suffered damage from the same wrongful act outside that period: Khan v Falvey at paragraph 23, following Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172 per Hobhouse LJ at 184 and 187.

13. The question arises how those principles should be applied to a case of this kind, where a claimant complains that, as a result of negligence in the conduct of his claim against, say, his previous accountants, that claim has been struck out. The negligence will often take the form of delay. It follows that, in accordance with the principles set out above, the question is when the claimant first suffered damage as a result of that negligent delay. The cases show that, once he has suffered some relevant recoverable damage as a result of that delay, his cause of action is complete and the six year period runs from that date and not from any later date, even in respect of other damage or loss of the same kind suffered as a result of the same tort, that is as a result of the same delay.
14. What then amounts to such damage? In Khan v Falvey, where the claim had been struck out in each of three cases, the judge at first instance held that the decision of this court in Hopkins v Mackenzie required him to hold that the cause of action pleaded did not arise until the claim was actually struck out because no damage occurred until then. This court held in Khan v Falvey that Hopkins v Mackenzie did not compel that conclusion or, if it did, that it was wrong and should not be followed in the light of the decision of the House of Lords in Nykredit.
15. The reason why it was held that Hopkins v Mackenzie did not compel that conclusion can be seen from the conclusions of Chadwick LJ in paragraph 57 of his judgment:

"If the decision of this court in Hopkins v Mackenzie is understood, as I think it should be, as limited to those cases in which the only loss on which the claimant seeks to found his cause of action is the loss of his right to pursue the earlier action by reason of the strike out and – measured by, and confined to, the residual value of the claim immediately before actual strike out – then it cannot, in my view, be held to be inconsistent with the later decision in the Nykredit case. But the circumstances in which a claim can be advanced on that limited basis are likely to be rare. As soon as the claimant seeks to found his cause of action on the diminution in value of his claim arising from a period of delay, the decision in Hopkins v Mackenzie is of no assistance."

16. Khan v Falvey is authority for the proposition that it is not a condition precedent for any claim against defendant solicitors that the underlying action should have been struck out. That is because the claimant may have suffered relevant damage before an order is made striking the action out. The question remains by what criteria to judge when that moment arises. Although that question was discussed in the judgments in Khan v Falvey, as I read them it was not necessary to decide it for the purposes of the decision in that case. Nor is it to my mind necessary for it to be determined for the purposes of the decision in this appeal.
17. It seems to me that there are three possibilities as to when damage is caused by negligence in such a case so that the claimant's cause of action has accrued and time begins to run against him. The first is when the claimant has no arguable basis for avoiding the claim being struck out, the second is when it is more probable than not that the claim will be struck out and the third is when there is a real (as opposed to a minimal or fanciful) risk of the claim being struck out. The reason why it is not necessary to determine which of those possibilities is correct here is that, in my opinion, this is an example of the first class of case on the facts.
18. As I read it, Khan v Falvey was also an example of such a case. This can be seen with particular clarity in the judgment of Schiemann LJ. He noted in paragraphs 65 and 66 that in both Case 1 and Case 3 (which were the first two of the cases being considered) the claimant had pleaded that by a certain date his claim (or in one case counterclaim) was "amenable to be struck out for want of prosecution". Schiemann LJ said in paragraph 65:

"By the phrase "amenable to be struck out" the pleader intended to convey that after 1990 there was no arguable defence to an application to strike out. This is common ground. On that basis the claimant had suffered damage from the defendant's negligence by, at the latest, January 1, 1991 and his cause of action had arisen then. What had been (let us assume) a right of action against the debtor which was worth something, had become a right of action which was worth nothing. All the alleged negligence by the solicitor had occurred by then. The present action was not started until more than six years later. In those circumstances it is time barred."

19. Thus if, on the facts here, there was no arguable defence to an application to strike out as at 13 October 1994, the claim here is time barred in so far as it is a claim for loss of the chance of recovering damages against the accountants. I therefore turn to the pleaded claim and the relevant facts, before returning briefly to the other two possibilities identified in paragraph 17.

The Pleaded Claim

20. The particulars of claim (in the form in which they were before the judge) may be summarised as follows. The respondent instructed the appellants to advise him in relation to his claim against the accountants in or about May 1984. The appellants advised him that he had reasonable prospects of successfully suing them and a writ was served on 9 January 1987. The allegations pleaded against the accountants alleged, among other things, that the respondent became a director in a company from 1 October 1982 and that the accountants gave him an inaccurate and/or misleading view of the value of the company and/or failed to advise him properly or at all. It was alleged that in reliance on that negligent advice or misstatement and/or in breach of a contractual duty of care the respondent had executed a charge over his home, provided further security in the form both of a life policy and a personal guarantee and had paid money into the company's account. The loss alleged was in excess of £65,000. It is admitted in the defence in this action that those were indeed the allegations made against the accountants.
21. It is further admitted in the defence that it was a term of the appellants' retainer that they would use reasonable care, skill and diligence in the prosecution of the claim and that the appellants owed the respondent a like duty in tort. The allegations of breach and loss are pleaded in the particulars of claim as follows:

"6. The defendant failed to exercise reasonable care, skill and diligence in the conduct of the claim as a result of which it was struck out for want of prosecution on 8 June 1999.

PARTICULARS

a) failing to prosecute the claim with a reasonable degree of expedition and/or diligence … having regard in particular to the fact that the events surrounding the claim had occurred in the early 1980s and were not fully documented;

b) failing to take any steps to prosecute the claim between 1982 and 1992 and from 1993 onwards;

c) failing to take steps to avoid the case being struck out;

d) failing to take timeous instructions from the claimant on, inter alia, the comments of Thornton Harper & Relph (the claimant's forensic accountants) on the contents of the report by Touche Ross (the forensic accountants instructed on behalf of Heywoods);

e) failing to disclose the report of Thornton Harper & Relph dated 14 May 1992;

f) failing to progress the claim to trial in accordance with the directions which had been given or at all.

7. By reason of the matters aforesaid the claimant has suffered loss and damage together with distress and inconvenience. The claimant would aver that but for the defendants' negligent acts or omissions the claim would have been tried within six months and a year of the directions order being made on the 7 July 1989 by which provision was made for directions for trial.

PARTICULARS OF LOSS AND DAMAGE

i) loss of the chance of recovering a sum estimated by Thornton Harper & Relph in May 1992 to be £96,968 plus interest;

ii) the wasted costs incurred in prosecuting the claim which are estimated to have been around £52,000;

iii) the extent of the claimant's contribution to his Legal Aid."

The reference in ii) to the wasted costs is, as I understand it, intended to be a reference to the respondent's liability (or potential liability) for the accountants' costs pursuant to the order striking the action out dated 8 June 1999.

22. It is important to note that the respondent's pleaded case is that his claim against the accountants was struck out as a result of the appellants' negligent delay. As I read the pleading, all the heads of loss alleged flow from the loss of the claim (or perhaps strictly the loss of the chance of the success of the claim) against the accountants. Thus they are the loss of the chance of recovering damages from the accountants, the respondent's liability for the accountants' costs pursuant to the strike-out and the costs wasted by the respondent in pursuing the claim. It is also important to note that there is no specific allegation that any negligent act or omission occurred after 13 October 1994
23. It follows, as I see it, that if the claim against the accountants was doomed to failure as at 13 October 1994, the respondent's cause of action accrued before that date and the respondent's claim is time barred.

Value of Claim in October 1994

24. Mr Stewart submits on behalf of the appellants that the respondent's claim against the accountants had become worthless by then because the respondent would have had no arguable case for resisting an application to strike it out. By contrast, Mr Field submits on behalf of the respondent that the burden is on the appellants to show that the respondent had no prospect of resisting such an application and correctly observes that on such an application the burden would have been on the defendant accountants to show both inordinate and inexcusable delay and the relevant prejudice. In order to evaluate those submissions it is necessary to set out briefly the relevant facts.
25. As already stated, the claim against the accountants arose out of events in 1983 and the writ was issued in 1987. Pleadings were subsequently exchanged and the last event in 1987 was the service of further and better particulars of the statement of claim on 14 September pursuant to an order made in July. Thereafter the action went to sleep for 18 months until the defendants, as the plaintiff's solicitors, served a notice of intention to proceed on 23 March 1989. The accountants issued a summons to strike the action out for want of prosecution on 22 June 1989. In an affidavit in response Mr Roberts accepted that the delay had been inexcusable but denied that it was inordinate. In the event the application was withdrawn on 18 September 1989.
26. In the meantime the limitation period for the claim against the accountants had expired in July 1989. Also directions had been given by consent, I think on 7 July 1989. On 7 November 1989 the accountants served an extensive list of documents and correspondence followed with a view to arranging for the respondent's expert to inspect the documents, which he did on 6 March 1990. When an application to strike the action out was subsequently heard by District Judge Stansfield on 3 November 1992, he observed that counsel for the accountants made no complaint about the period up to 6 March 1990. He said that such delay as occurred until then was largely caused by the accountants' solicitors.
27. The first period of delay relied upon at the hearing of that application was from 6 March to 13 August 1990. The district judge concluded that during that period both parties' experts should have been going ahead with the preparation of their reports with a view to mutual exchange as envisaged by the order for directions made on 7 July 1989. He said that he did not consider the respondent or his solicitors (the appellants) to have been guilty of inordinate or inexcusable delay during that period.
28. The second period of delay was a period of 17½ months between August 1990 and 30 January 1992 when the respondent's expert's report was approaching completion and the appellants wrote to the accountant's solicitors for the first time in that period. The district judge again held that the period of delay was neither inordinate nor inexcusable. He said that the expert's report was complex, as indeed were the issues in the action, and declined to blame the respondent or his advisers for any delay.
29. The third period of delay was from 31 January to 22 April 1992 when the appellants served a notice of intention to proceed. The district judge held that such a notice should have been served when the letter of 30 January was written, but again did not blame the respondent. He concluded that the reality of that period was that the appellants were taking the initiative in seeking to arrange mutual disclosure of expert evidence. He added that he did not consider that the overlooking of a formal procedural step rendered them guilty of inordinate or inexcusable delay.
30. The district judge correctly recognised that as the law stood at that time, the effect of the decision of the House of Lords in Birkett v James [1978] AC 297 was that the defendant must show both inordinate and inexcusable delay and either specific prejudice or prejudice because there was a substantial risk that a fair trial would no longer be possible. As I read his judgment, the district judge declined to consider whether there was any relevant prejudice. He said this:

"I accept that by the time this case which is for trial [perhaps he meant reaches or is ready for trial] the events with which the Court will be concerned will be over ten years old. By any yardstick it is a stale case, but it was always going to be so. This situation and the difficulties that may be encountered do not in my judgment result from inordinate or inexcusable delay on the part of the Plaintiff and his solicitors. In the light of this finding it is not necessary for me to consider to what extent (if at all) the Defendants may have suffered prejudice. I shall however deal with the issue of estoppel."

In reaching those conclusions on causation he no doubt had in mind the decision of the House of Lords in Department of Transport v Chris Smaller (Transport) Ltd [1989] AC 1197.

31. The district judge then considered whether the accountants were estopped from relying upon the delay. He held that by their solicitors' conduct they induced the respondent to believe that the action was to proceed to trial and to incur substantial costs as a result. He held, in effect, that they were estopped from relying on the delay such that he would not in any event have struck the action out. He therefore dismissed the application. I note in passing that that approach to estoppel in this context would not have been appropriate after the decision of the House of Lords in Roebuck v Mungovin [1994] 2 AC 224, although that case was not decided until 3 February 1994.
32. Mr Stewart submits with force that the respondent was very fortunate that the action was not struck out in November 1992 but he has advanced his submissions in this appeal on the basis that the decision of the district judge was correct. To my mind that is the right approach, namely to proceed on the basis that the district judge was entitled to refuse to strike the action out in November 1992. The question is whether the position was the same in October 1994. I am bound to say that, given the fact that the accountants had issued two applications to strike out, even though the first was withdrawn and the second failed, I would have expected both the respondent and his solicitors, the appellants, (a) to have appreciated the risk of the action being struck out in the future, especially since at any trial the relevant events would be over ten years in the past, and (b) to take urgent steps to press ahead with the action. What then happened?
33. On 17 December 1992 the accountants' solicitors wrote to the appellants saying that they had lodged notice of appeal and asked for a stay of the proceedings pending an appeal. However on 4 January 1993 they wrote to say that the appeal was withdrawn. There followed some desultory correspondence during the early part of 1993. On a date which is unclear on the material before us the appellants asked the accountants' solicitors to disclose their expert evidence and to say whether they were ready for trial. They sent a chaser on 19 April and on 24 May 1993 they issued a summons for further directions seeking (perhaps among other things) a direction that the case be set down for trial. The accountants disclosed their expert's report on the next day. There are few details in the evidence available to us; so I am not sure whether the respondent's expert's report was disclosed to the accountants. However, it appears that the respondent's expert was sent a copy of the accountants' expert's report and that he sent the appellants a draft report on 30 June 1993. According to the appellants' chronology attached to the amended defence in this action, on 5 July 1993 the appellants sent that draft report to the respondent and asked him to arrange a meeting. He did not, however do so. Nor did the appellants.
34. It is common ground that the last event which occurred in the action before 13 October 1994 was on 9 July 1993. A contemporary note made by someone called CFE on behalf of the appellants was shown to us. It records CFE's attendance at the Macclesfield District Registry for the hearing of the appellants' application on behalf of the respondent to have the matter set down for trial. It appears that it was agreed between CFE and a representative of the accountants' solicitors that the application sought no more than was already provided for in the order for directions made as long before as 7 July 1989. Accordingly it was agreed that the application should be withdrawn and that the matter could be listed (presumably for trial) by request. The note records that the parties attended before District Judge Tynas who confirmed that the application appeared to be inappropriate for a number of reasons, which were in summary that there was already an order for the case to be set down, although since the original 28 days (which was presumably in the original order) had expired the consent of both parties must be obtained before it could be set down, and that in view of the amount in dispute and the absence of any particularly complicated issues the case should be transferred to the county court. He directed that it be transferred to either to Crewe or to Stoke County Court.
35. As between the respondent and the accountants, it was thereafter the duty of the respondent as the plaintiff to set the matter down for trial and to ensure that the action was now at last pursued with reasonable despatch. Unfortunately neither he nor the appellants, as his solicitors, did so. On the contrary, no steps were taken to that end.
36. The respondent made a detailed statement which was before the judge for the purposes of the preliminary issue. It is plain that in the early 1990s the respondent's financial position was very difficult and on 25 February 1992 he entered into an Individual Voluntary Arrangement ('IVA') with his creditors, which itself gave rise to difficulties of which the appellants were aware. Both in 1993 and in 1994 bankruptcy proceedings were brought by one of the respondent's supervisors against him. The appellants acted for him both in those proceedings and in other proceedings, each time with the benefit of a Legal Aid Certificate. Some, if not all, of those other proceedings were ultimately settled. The respondent says that throughout that time, which (as I read his statement) includes the period from July 1993 to October 1994, it was almost as if the claim against the accountants had been forgotten by the appellants. He telephoned Mr Roberts on a large number of occasions and all Mr Roberts would say was that "he was dealing with my matters". The respondent says in his statement that it does not appear that after the hearing in July 1993 any work whatsoever was done on the case.
37. If a notice of intention to proceed had been served on the accountants' solicitors in, say, July 1994, it is to my mind very likely that an application would have been made to strike the action out for want of prosecution. The question is that identified in paragraph 19 above, namely whether there was an arguable defence to such an application, assuming that it was heard in, say September 1994. In my view such an application would in practice have been bound to succeed.
38. It is well settled that, in the context of several periods of delay, where (as here) the plaintiff was guilty of further delay, the prejudice caused by the totality of the periods of delay can be looked at: see eg Roebuck v Mungovin, approving statements of principle made by Diplock and Salmon LJJ in Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at pp 260 and 272 respectively, and Department of Transport v Smaller, where Lord Griffiths said (at p 1208):

"... it should not be forgotten that long delay before the issue of the writ will have the effect of any post-writ delay being looked at critically by the court and more readily being regarded as inordinate and inexcusable than would be the case if the action had been commenced soon after the accrual of the cause of action. And that if the defendant has suffered prejudice as a result of such delay before the issue of the writ he will only have to show minimal prejudice as a result of post-writ delay to justify striking out the action."

39. The action related to events in 1983. The writ was issued in 1987. There had been substantial delay in the early years of the action. After the application to strike out failed in November 1992, no urgent steps were taken to progress the action. After the hearing in July 1993 nothing whatever was done. The delay since the hearing on 9 July 1993 was plainly both inordinate and inexcusable. The contrary would not have been arguable.
40. As to prejudice, the question for present purposes is whether it would have been arguable on behalf of the respondent that the accountants could not show that they had suffered relevant prejudice or that there was a substantial risk that a fair trial was no longer possible. I have reached the firm conclusion that it would not. If an application to strike out for want of prosecution was heard in, say, September 1994, the court would be considering whether a fair trial could take place in 1995 at the earliest, which was some 12 years after the alleged loss had been incurred and even longer after the allegedly negligent acts or omissions.
41. In paragraph 6(a) of the particulars of claim in this action, which are quoted in paragraph 21 above, the respondent alleges that the appellants were negligent in that they failed to prosecute the claim with a reasonable degree of expedition and/or diligence

"having regard in particular to the fact that the events surrounding the claim had occurred in the early 1980s and were not fully documented;"

It is thus clear that the case against the accountants did not depend wholly upon the documents.

42. Mr Stewart relies upon the events after October 1994 as throwing some light on the question whether an application was bound to succeed as at that time. Those events are also relevant to the application of section 14A of the Limitation Act 1980. It is convenient to set out the facts relevant to both aspects of the case here. They are derived entirely, or almost entirely, from the respondent's statement made for the purpose of the preliminary issue. Unfortunately no evidence was adduced by the appellants in response and (as stated earlier) neither party called oral evidence on the preliminary issue.
43. According to the respondent's statement, he went to see Mr Roberts on 17 October 1995. Mr Roberts told him that he had not applied for a court date for the respondent's claim against the accountants because he had done nothing on the case for a long time and he felt that if he applied for a court date there would be another application to have the case dismissed "and he could not defend it again". Mr Roberts also said that he was too busy and could not be bothered to open the file. He appeared distressed and was near to tears. He told the respondent that if he would forget the matter he would do all his work for nothing but that he could also seek the advice of another solicitor "as he had been negligent".
44. The respondent first made contact with his present solicitors on 11 November 1995. He was given advice about the possibility of pursuing a claim for negligence against the appellants, although he does not say what that advice was. In any event he again saw Mr Roberts on 20 November. Mr Roberts told him that he would do something immediately and that he would progress the case. The respondent therefore told his present solicitors that he did not require their services at that time. He subsequently had a number of meetings with Mr Roberts on 11 January, 6 March, 21 March, 24 May, 4 July and 11 September 1996. However some of those meetings were specifically to discuss other matters, including his IVA and separate proceedings in which the appellants were acting for him with the benefit of a Legal Aid Certificate. The respondent does not specifically say that the claim against the accountants was discussed at any of them. Indeed, to my mind, the reasonable inference from the respondent's statement is that it was not.
45. The respondent says that he once again formed the view that the appellants had failed to pursue the matter on his behalf and accordingly transferred the papers to his present solicitors. I am not sure when that occurred but it seems likely that it was some time in 1998. In any event, I think that we were told that it was in August 1998 that the Legal Aid Certificate referable to the claim against the accountants was transferred to his present solicitors and that he was advised by solicitors and counsel. He was advised that the proceedings against the accountants were technically still alive and that before he could pursue any potential claim against the appellants those proceedings would have to be resolved. Accordingly, on 20 January 1999 a notice of intention to proceed was served and on 16 March 1999 a summons for directions was issued.
46. As a result, the accountants issued an application to strike out the proceedings for want of prosecution. The respondent was advised by counsel that he should consent to the application and on 8 June 1999 the action was struck out for want of prosecution and he was ordered to pay the accountants' costs, albeit on the basis that the order for costs was not to be enforced without the leave of the court because the Legal Aid Certificate had remained in force throughout.
47. For present purposes the key points which emerge from that account seem to me to be these. When the matter was discussed with Mr Roberts on 17 October 1995, Mr Roberts said that he could not defend an application to strike out again. There is no suggestion that that advice was itself negligent. On the contrary, to my mind it was realistic advice because by then the delay was so great that a court would in practice have been bound to hold that a fair trial was no longer possible, given the fact that (as pleaded in paragraph 6(a) of the particulars of claim quoted above) the case against the accountants did not depend wholly upon the documents. Moreover, there is no suggestion that the respondent's present solicitors took a different view in 1995 and both they and counsel advised him in 1999 that he should consent to the application to strike out. There is no evidence of any particular deterioration in the position of the accountants, so far as prejudice is concerned, in the interim beyond the effects of the further passage of time.
48. As the respondent realistically observes at the end of his statement, "obviously by the time the matter was transferred to my present solicitors the case was beyond redemption, as one might expect in a case which had been standing for over 12 years". In my opinion the same was true as at October 1994. By then the respondent (through his solicitors) had been guilty of inordinate and inexcusable delay which the court would in practice be bound to have held would give rise to a substantial risk that a fair trial was no longer possible.
49. The judge did not determine whether that was so or not. He expressed his conclusions thus in paragraph 32:

"… it is possible that Mr Hatton's cause of action in common law negligence is not statute barred and it is possible that part of it may be statute barred. I do not believe that without hearing all the evidence this aspect of the case can be finally determined. In particular, evidence will be required from the solicitors who acted for the accountants in the original action. When did they first consider bringing a strike out application after 5 November 1992? When did they finally decide to launch such an application? It seems to me that this evidence must be relevant to the limitation issue and perhaps more importantly to the precise extent, if any, of what may or may not be statute barred."

50. The judge did not of course have the benefit of the decision of Khan v Falvey when he reached those conclusions. In any event, assuming the questions posed by the judge to be potentially relevant, it seems to me (as stated above) to be a reasonable inference on the facts that if the respondent had served a notice of intention to proceed in say July 1994, the accountants would have applied to strike the action out for want of prosecution. It would be the natural step for them to take.
51. The judge seems to have declined to determine the preliminary issue on the basis that evidence would be "required" from the solicitors to the accountants. However, neither party had sought to put evidence from them before the court on what was intended to be the trial of the preliminary issue. That was the time that any such evidence should have been put before the court. Moreover, there is no evidence that further evidence would even now be available from them on the questions posed by the judge. The only evidence we have seen (which so far as I am aware was not before the judge) is the accountants' solicitors' bill of costs. It contains many references to discussing tactics without reference to what those tactics were. The first reference to an application to strike out is dated 23 January 1997, where there is a reference to a "proposed strike-out application". In the event no such application was issued at that time.
52. All the materials we have seen seem to me to be consistent with the conclusion that the tactics being considered throughout included the possibility of such an application and that it was decided to let sleeping dogs lie but that, if the respondent should reactivate the action an application would be made to strike the action out for want of prosecution. In all these circumstances it seems to me (as stated above) to be very likely that, if a notice of intention to proceed had been given on behalf of the respondent in, say, July 1994 the accountants would have applied to strike the action out.
53. I would hold that the judge should have determined the question as at 13 October 1994. I would further hold that as at that date the respondent had no arguable defence to an application to strike out and that, in the words of Schiemann LJ in paragraph 65 of his judgment in Khan v Falvey quoted in paragraph 18 above, what had been a right of action against the accountants which was worth something had become a right of action which was worth nothing. Thus the claim had no value as at that date.
54. It follows that as at October 1994 the respondent's cause of action in tort by reason of the appellants' negligent delay had accrued because the respondent had already suffered relevant damage in that his cause of action against the accountants had become worthless and, since this action was brought more than six years later, it is time barred unless saved by section 14A of the 1980 Act. It also follows that any loss incurred as a result of that cause of action becoming worthless is time barred because, as stated in proposition v) in paragraph 12 above, a claimant cannot defeat the statute of limitations by claiming only in respect of damage which occurs within the limitation period if he had suffered damage from the same wrongful act outside that period.
55. The particulars of breach of duty identified in paragraph 6 of the particulars of claim quoted above all relate to events in 1992 or earlier except for the allegation in paragraph 6 b) that they failed to take any steps to prosecute the claim from 1993 onwards. There is no allegation of negligence which expressly relates to alleged delay after 13 October 1994. Moreover, the allegations of negligence are all directed to the case that the appellants' negligence caused the claim to be struck out in June 1999. If my conclusion that the claim against the accountants was worthless as at 13 October 1994 is correct, it seems to me to follow that, subject to the effect of section 14A, all the respondent's pleaded claims in tort are time barred.
56. It also follows that the respondent's claim for damages for breach of contract based on the same negligent acts or omissions is also time barred. A cause of action for damages for breach of contract of course accrues at the date of the breach. As I read the particulars of claim, all the allegations of breach related to events before October 1994. It follows that they are time barred. It would not therefore be surprising if (as the judge says in paragraph 3 of his first judgment) it was accepted before him that if it is to succeed the claim must be based in tort and not in contract because the claim in contract must fail on limitation grounds. Although it is now said that no such concession was made, I see no reason why the judge should have made a mistake of that kind. In any event any such concession was properly made on the basis of the allegations pleaded in the particulars of claim.
57. If, contrary to my view of the particulars of claim in the unamended form in which they were before the judge, it were held that the respondent relied upon a breach of duty after 13 October 1994, the allegation could only be that of continued negligent delay after that date which led to the pleaded result, namely the striking out of the claim and the loss consequent upon the loss of the claim or the chance of pursuing it. For the reasons already given, the respondent had already lost the chance of proceeding with the claim, so that a claim based upon the loss of that chance based upon any subsequent negligent delay could not succeed.

The Proposed Amendment

58. The respondent seeks to avoid that result by inviting us to give him permission to amend the particulars of claim to add the following paragraphs:

"6A. Further, or alternatively, at a meeting between the claimant and Mr Roberts of the defendant which took place on a date in the autumn of 1995, the claimant instructed the defendant to progress the claim. Mr Roberts accepted those instructions and a new retainer thereby arose the terms of which mirror those in paragraphs 4 and 5 hereof.

6B. Negligently, and/or in breach of the terms of its retainer, the defendant failed to exercise reasonable care, skill and diligence in the conduct of the claim after the said meeting with Mr Roberts. The Claimant repeats the particulars in paragraph 6 hereof mutatis mutandis."

59. The duties alleged in paragraphs 4 and 5 are simply duties to exercise reasonable care and skill in contract and tort. However, one of the striking aspects of the proposed amendment is that the breach of duty remains the same, albeit mutatis mutandis, although, as already observed, the particulars alleged in paragraph 6 all relate to the period before 1994, except for the allegation in paragraph 6 b) of failure to take steps to prosecute the claim from 1993 onwards. Paragraph 7, which pleads the loss, remains as before so that none of the particulars of loss is specifically related to any breach of duty arising from the new retainer.
60. In these circumstances, subject to one point, the problem seems to me to remain the same as already identified in the light of the conclusions which I have reached. Once it is held that the claim for loss of a chance became worthless at or before October 1994, any new allegation of breach of duty cannot cause the loss of that chance. It follows that, in so far as the respondent seeks to claim the same loss by relying upon the new cause of action the claim in tort cannot succeed and the claim in contract could only lead to an award of nominal damages, which is not the purpose of the action. In these circumstances I would refuse the application for permission to amend.
61. The one point is this. The position might have been different if the proposed pleading identified a separate head of loss which could be said to be caused by a breach of duty after 13 October 1994. Thus, if it could be said that a particular expense was incurred as a result of the alleged breach of duty after October 1994, it might be (or have been) appropriate to permit the respondent to advance it. However, so far as I understand it, no attempt has been made to identify particular heads of loss under this head.
62. Finally I would add that there is no allegation that the appellants were in breach of duty after October 1994 in any respect other than that of continued delay in pursuing the claim against the accountants. There is no allegation, for example, that they failed to give the respondent appropriate advice after he returned to them in November 1995 having consulted his present solicitors.

Conclusion

63. In all the circumstances I would hold that the primary limitation period had expired when this action was begun on 13 October 2000 and that the action is time barred unless it is, as it were, saved by section 14A of the 1980 Act.
64. It follows that it is not necessary to discuss further the other possibilities identified in paragraph 17. I shall not therefore further lengthen this judgment by doing so. There seems to me to be something to be said for each of the three possibilities. The first, namely that damage is caused when the claimant has no arguable basis for avoiding the claim being struck out, has the advantage of certainty and that it can be said that thereafter the claim is worthless. The second, namely that damage is caused when it is more probable than not that the claim would be struck out, has the advantage of consistency with the ordinary standard of proof in civil litigation. The third has the advantage that it is consistent with the proposition that damage is caused when the chance of success in the action against the original defendant is reduced, but it would mean that any further negligent delay would cause further loss. Since it is not (in my view) necessary to resolve these issues on the facts of this case I would prefer to leave their resolution to a case in which it is necessary to do so. It is to be hoped that it will never be necessary because the CPR are designed to eradicate applications to strike out for want of prosecution, which were unfortunately so common in the past.

Section 14A of the 1980 Act

65. Section 14A(1) provides, so far as relevant:

"(1) This section applies to any action for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued.

…

(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.

(4) That period is either –

(a) six years from the date on which the cause of action accrued; or

(b) three years from the starting date as defined by subsection (5) below, if that period expires later than the period ,mentioned in subsection (a) above.

(5) For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff … first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.

(6) In subsection (5) above "the knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge both –

(a) of the material facts about the damage in respect of which damages are claimed; and

(b) of the other facts relevant to the current action mentioned in subsection (8) below;

(7) For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings against a defendant who did not dispute liability and was able to satisfy a judgment.

(8) The other facts referred to in subsection (6)(b) above are –

(a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and

(b) the identity of the defendant; and

(c) …

(9) …

(10) For the purposes of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire –

(a) from facts observable or ascertainable by him; or

(b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek;

but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice."

66. It is common ground that that section applies to this action because it is not an action for damages for personal injuries to which section 11 of the 1980 Act applies. It is further common ground that, on the facts of this case, the effect of section 14A(3),(4)(b) and (5) is that this action is time barred if it was brought after the expiration of three years from the earliest date on which the respondent first had both the knowledge required for bringing an action for damages against the appellants in respect of his claim for the loss of his chance of succeeding against the accountants and the knowledge that he had a right to bring such an action.
67. The appellants say (and the judge held) that he had that knowledge by 17 October 1995 or 11 November 1995 at the latest and that, since the action was not commenced until 13 October 2000, it follows that it was begun both more than six years after the cause of action accrued and more than three years after he had the relevant knowledge and that it is time barred under section 14A(3). It is common ground that that is indeed the consequence if the respondent had the relevant knowledge by October or November 1995, but Mr Field submits on behalf of the respondent that the judge was wrong to hold that he had the relevant knowledge at that time and that it follows that the action is not time barred.
68. Mr Stewart submits that on this part of the case the judge was right for the reasons he gave. In short, they were these. As stated in paragraph 43 above on the basis of the respondent's statement, on 17 October 1995 Mr Roberts told the respondent that he had not applied for a date for the claim against the accountants because he had done nothing on the case for a long time and, if he applied for a date, there would be another application to have the case dismissed "and he could not defend it again". He also advised him that he could seek the advice of another solicitor "as he had been negligent". The respondent accordingly did so on 11 November 1995 and he was given advice about the possibility of pursuing a claim for negligence against the appellants.
69. It is not suggested that the respondent did not know what Mr Roberts meant when he said that he felt that if he had taken any step in the action there would be another application to have the case dismissed. He thus knew that Mr Roberts' concern was that if he did anything the case would be dismissed for want of prosecution. Equally he could be in no doubt that the reason for that was that, as Mr Roberts expressly conceded, he had been negligent. The judge said in paragraph 38 of his judgment that, although the respondent does not say what advice he was given by his new solicitors in November 1995, it is easy to imagine what it is likely to have been. I agree.
70. To my mind the judge was right for the reasons he gave. Under section 14A(5) the question is whether the claimant had two classes of knowledge. The first is the knowledge required for bringing an action for damages in respect of the relevant damage. By subsection (6)(a) and (b) that means knowledge both of the material facts about the damage and of the other facts identified in subsection (8) quoted above, respectively. By subsection (7) the material facts referred to in subsection (6) are defined as such facts as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a solvent defendant who admitted liability.
71. In my judgment, the respondent had such knowledge. He knew that Mr Roberts regarded the position as so serious that he could not defend an application to strike out for want of prosecution. He thus knew that he had lost all chance of succeeding against the accountants. The loss of that chance was sufficiently serious to justify instituting proceedings against the appellants. I would therefore hold, in agreement with the judge, that the respondent had the relevant knowledge identified in subsection (6)(a) and (7).
72. The knowledge identified in subsection (6)(b) and (8) is, so far as relevant here, knowledge that the damage was attributable in whole or in part to the appellants' delay and the identity of the appellants. The respondent of course knew the identity of the appellants, but he also knew that the loss of the chance of recovering against the accountants was attributable to the appellants' negligent delay. On his case, he knew that the delay was caused by inaction on the part of the appellants and, indeed, he knew that the appellants, through Mr Roberts, accepted that they were responsible for it.
73. It follows that the respondent had both limbs of the knowledge required for bringing an action for damages in respect of the relevant damage within the meaning of subsection (5).
74. The question remains whether he also had the second of the two classes of knowledge identified in subsection (5), namely knowledge of the right to bring an action against the appellants. I do not think that there can be any doubt that he did indeed have that knowledge because he knew that the appellants were responsible for the delay and he had taken advice from his present solicitors. The respondent does not say that he did not know that he had the right to bring an action for negligent delay against the appellants as his solicitors. In the absence of evidence to the contrary, I do not think that there can be any doubt that he was advised to that effect.
75. It follows that I would hold that the respondent had the relevant knowledge referred to in subsection (5). Moreover, like the judge, I would do so without the necessity of considering what knowledge the respondent might reasonably have been expected to have in accordance with subsection (10).

Conclusion

76. For the reasons which I have given I would allow the appeal and dismiss the cross-appeal. I would therefore declare that the action is time barred and, subject to any other point which may arise, dismiss the action.

Sir Anthony Evans:

77. I agree with the judgment of Clarke LJ and that the appeal should be allowed and the cross-appeal dismissed, for the reasons given by him.
78. I agree, in particular, that by 13 October 1994, which was the relevant date for limitation purposes, the respondent's claim against his former accountants was doomed to failure, and therefore was "worthless" (per Schiemann L.J. in Khan v Falvey [2002] EWCA Civ 400 [2002] PNLR 28 at paragraph 65). Any value which the claim had had for him previously was lost, irretrievably, by that date.
79. This is clear, in my judgment, because any attempt to proceed with the action against the accountants in October 1994 would have been met with an application to dismiss the claim for want of prosecution, and the application would certainly have succeeded. The action was, on any view, "amenable to striking out." The fact that the striking out order was not made until June 1999, after an even more belated attempt to revive the proceedings in January 1999, does not alter the circumstances as they were in 1994.
80. It is unnecessary, therefore, in the present case to define the precise nature of the evidential burden which rests upon the claimant in cases of this sort. Nevertheless, an issue does arise, which was argued before us. Is it sufficient to prove that there was some chance – a "real" or "substantial" chance – that the claim would have been struck out at the relevant date, if an application had been made? Or must the claimant prove something more – perhaps, that an application would probably have succeeded, if one had been made?
81. The former view receives some support from statements which are found in the authorities to the effect that the relevant kind of loss is the diminished value of the claim. Some diminution occurs when a striking out application would have some prospect of success, though falling short of 50 per cent. Yet in such a case it could not be said that the application would probably succeed or that the claim was probably worthless.
82. The relevant kind of damage (compare Nykredit [1997] 1 WLR 1627 at 1630F), in my judgment, is the loss of the right to proceed further with the original action. The measure of that loss, when it occurs, is the value of the chance of that action succeeding. But the loss is not suffered until the action is lost. That occurs when the action is struck out in fact (Hopkins v McKenzie (1995) 6 Med. L.R. 26) or when it becomes "amenable to striking out" i.e. doomed to failure (Khan v Falvey). The claimant must prove that that was the state of the action at the relevant date. Consistently with general principle, he must prove this on the balance of probabilities. So the issue becomes, would a striking out application probably have succeeded, if one had been made at the relevant date?
83. This principle emerges, in my opinion, from the judgments of this court in Hopkins v McKenzie and Khan v Falvey, though there are statements of the law in both cases which are not easy to reconcile with it, nor with each other. Cases of this sort are notoriously fact-sensitive, and in my respectful opinion neither of the decisions is inconsistent with what I have suggested is the underlying principle.

Peter Gibson LJ:

84. For the reasons given in the judgment of Clarke LJ I agree that this appeal should be allowed and the cross-appeal dismissed.

Order:

85. The Defendant's appeal be allowed and the claimant's action be dismissed
86. The sum of £3,000 paid into court by the defendant on 14^th September 2001, together with accrued interest, be paid out forthwith to the defendant's solicitors
87. The claimant do pay the defendant's costs of the action, to be subject of a detailed assessment if not agreed
88. The claimant do pay the defendant's costs of the appeal to be assessed if not agreed, and the claimant do make an interim payment to the defendant on account of the defendant's costs of the appeal in the sum of £15,000 within 28 days
89. The claimant do repay to the defendant within 14 days the sum of £8,592.24, paid by the defendant to the claimant in respect of the claimant's summarily assessed costs pursuant to the order of His Honour Judge Howarth on 7^th June 2002, together with interest at the rate of 8 per cent per annum.
(Order does not form part of the approved judgment)