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Timing is everything – Section 14A in practice

In a claim for damages for the tort of negligence the cause of action accrues at the date that damage occurs, even if is no-one knows about it at the time. The problem with this principle is vividly illustrated by the famous decision of the House of Lords in Pirelli v Oscar Faber & Partners [1983] 2 AC 1 where the defendant engineers were retained by the claimants to design a chimney at their factory. The chimney was lined with a new material Lytag and completed in July 1969. By April 1970 cracks had appeared at the top of the chimney but the claimants did not become aware of them until November 1977. They made repairs and issued a writ in October 1978.  Overturning the decision below the Lords held that the claim was statute barred because the damage had occurred in April 1970, and thus the cause of action was complete more than six years before the claim was issued and, as it happened, more than six years before the claimants knew they had a claim.

It was hard cases such as this which led to the Latent Damage Act 1986 which inserted section 14A into the Limitation Act 1980. But as with all reforms, replacing a bright line test that is easy to apply with a fairer and more nuanced test has led to much litigation: at the last count Westlaw reports 173 decisions of the High Court and above on the effect of section 14A, i.e. approximately six per year since the section came into force.  Most of the cases are in fact concerned with claims against professionals.

Note that section 14A only applies to claims in negligence and does not apply to claims in nuisance, breach of statutory duty or misrepresentation.

The text of section 14A is set out at the foot of this article. The section disapplies section 2 of the Act and provides for two alternative periods of limitation – 6 years from the date on which the cause of action accrues or 3 years from “the starting date” as defined by subsection (5)  - “the earliest date on which the claimant or any person in whom the cause of action was vested before him 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”.

The Claimant

On general principles of agency knowledge possessed by the claimant’s agent within the scope of his authority is the knowledge of the principal, thus for example the knowledge of the claimant’s solicitors is usually considered to be the knowledge of the claimant – depending of course upon the scope of the retainer.

If the claimant is a corporate person the separate pieces of individual knowledge that individuals working for a company have can be aggregated together to deem knowledge to the claimant – see the first instance decision by Hart J in 3M United Kingdom Plc v Linklaters [2005] EWHC 1382 (Ch.); [2005] PNLR 46 at [28] (a decision for the defendant on the preliminary issue of limitation which was appealed unsuccessfully to the Court of Appeal).

Or any person in whom the cause of action was vested..” This applies in claims brought by personal representatives or assignees of course.  Relevantly, in Graham v Entec Europe Ltd [2003] EWCA Civ 1177; [2003] 4 All ER 1345 the Court of Appeal held that the knowledge acquired by loss adjuster investigating a claim on behalf of insurers was to be treated as the knowledge of the insurer in the subsequent subrogated claim.

Knowledge of the Acts

The difficult issue in most of the 173 decisions is what counts as relevant knowledge. Knowledge for the purpose of sub-section (5) means knowledge both of the material facts about the damage (ss.6(a)) and of the other facts mentioned in ss.(8), most important of which is that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence (ss.(8)(a)).

Over-analysing these sub-sections is not always helpful. It is worth bearing in mind that the approach of a trial judge at least will almost always be motivated by an attempt to do practical justice. As Hart J put it in 3M v Linklaters at [19]: “The purpose of the section is to avoid the injustice which arises when a cause of action accrues without the claimant who is entitled to sue for damages ‘appreciating that the damage which gives rise to the cause of action has occurred’: Oakes v Hopcroft [2000] Lloyd's Rep. P.N. 946 at 947 (per Lord Woolf). It seeks, therefore, to ‘try to identify the moment when a claimant has such knowledge that he or she can reasonably be expected to start proceedings’: Oakes at 952 (per Clarke L.J.). The inquiry under s14A must be approached in a broad common sense way in the light of the object of the section and the injustice that it was intended to mitigate, although a desire to be over-indulgent to claimants should be resisted.”

Thus, for example, the suggestion that is often made by defendants in professional negligence claims that the claimant who has suffered loss as a result of his adviser’s negligence can be deemed to have acquired the relevant knowledge at a time when the defendant was still acting for him is unlikely to succeed in practice.

However if it can be demonstrated that the claimant had by X date some (if not full) knowledge of the damage he has suffered, together of course with the knowledge that this damage can be attributed at least in part to the defendant, there is a good chance of persuading the Court that X is the starting date.

Two decisions exemplify the approach the Courts will take. The first is the current leading case on section 14A, the decision of the House of Lords in Haward v Fawcetts [2006] UKHL 9; [2006] 1 WLR 682. In this case the claimants purchased a company in 1994 in reliance on an accountant’s advice that about £100,000 would have to be invested to make it profitable; the company was not profitable and more money was invested between 1995 and 1998; in 1998 the claimants asked a specialist in corporate rescues to investigate the company’s losses. The claim against the defendant was issued in December 2001. The House of Lords concluded the claim was statute barred -- section 14A did not assist the claimants because the date of knowledge for the purpose of ss.(5) was no later than early 1998; the reasoning was that the claimants had by then known in broad terms of the facts on which their complaint was based and of the defendant’s acts and omissions, and  knowledge that there was a real possibility that those acts and omissions had been a cause of damage was sufficient to satisfy  the test in ss(8).

The second is the recent decision in Eagle v Redlime Ltd [2011] EWCH 838 (QB); 136 Con. L.R. 137 (Eder J). In 2000 the claimant employed the defendant to construct a concrete base including drainage on which dog kennels were to be built. In early 2006 the claimant noticed cracks in the render of the walls and the drainage system sinking and repaired them. Six months later further cracks appeared. The claimant then obtained a structural engineer’s report which he received in November 2006. The claim was commenced in October 2009. The judge held that the claim was time barred – by the date he commissioned the report he knew that there was subsidence, that knowledge was sufficient to lead a reasonable person to consider it sufficiently serious to justify commencing proceedings; full knowledge was not required in order to start time running; knowledge does not have to be certain.

Reference should also be made to sub-section (10) which provides that knowledge includes constructive knowledge, that is: “..knowledge that [the claimant] 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.”

An example of circumstances in which subsection (10) applied is the decision of the Court of Appeal in Webster v Cooper & Burnet [2000] PNLR 240.  In this case in 1983 the defendant solicitor had negligently failed to advise the claimant that  a second charge on her home was an all monies charge rather than one limited to £28,000 as she believed.  In 1987 the lender wrote to her asking her to sign and return an acknowledgement of her husband’s indebtedness; the claimant did not read the letter; had she done so she would have realised that there was no limit of £28,000; receipt of this document gave her constructive knowledge and thus the starting date was 1987 and the claim issued in 1995 was time-barred.

Knowledge of the law

Sub-section (9) provides that “Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above.” Were it not for this section a claimant who had all the knowledge of the facts he needed but had not yet obtained legal advice as to the defendant’s negligence would not yet have reached the ‘starting date’ – an obviously unsatisfactory position.

But the sub-section has caused its own set of problems. What if the complaint is that the professional’s advice as to the law was negligent? It would be absurd if the claimant was deemed to know the law that his lawyer did not since if that were the case “.. no action for negligent advice as to the law could otherwise succeed” - Perry v Moysey [1998] PNLR 657.

Hart J’s approach to the problem in 3M v Linklaters appears now to be the correct one: knowledge of the legal consequences of a set of facts is not knowledge caught by ss.(9) – where the sub-section comes into play is “[33] ..where the only missing piece of knowledge is the legal knowledge that the known facts give rise to actionable negligence on the part of the defendant.”

And finally...

Don’t forget the long-stop provision of section 14B of the Act which bars claims brought after the expiration of 15 years from the date of the alleged negligent act or omission, whether or not the cause of action has accrued.

Section 14A of the Limitation Act 1980