Hong Kong: Certainty Restored in Professional Negligence Claims

Having been exposed to virtually indefinite limitation periods in respect of negligence claims by virtue of Brocklesby, interpretation of the Limitation Act has now been clarified following the House of Lords’ decision in Cave v. Robinson Jarvis & Rolf [2002] UKHL 18. In Cave, the House of Lords overruled an English Court of Appeal decision, Brocklesby v. Armitage & Guest [2001] 1 All ER 172, which had the effect of undermining the viability of a limitation defence in many professional negligence cases by extending the meaning of the expression "deliberate concealment" in Section 32(1)(b) Limitation Act 1980, a provision which is mirrored by Section 26(1)(b) of the Hong Kong Limitation Ordinance.

Cave has re-established the position that a professional who has acted conscientiously and in good faith in attempting to perform an obligation, should not be faced with the statutory time limitations applicable to cases of deliberate concealment. This obviously good news for professionals and their insurers.

Section 26 of the Limitation Ordinance governs the postponement of the commencement of the limitation period in cases of fraud, concealment or mistake. S.26(1)(6) provides:

Where "any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant…the period of limitation shall not begin to run until the plaintiff has discovered the fraud concealment or mistake (as the case may be) or could with reasonable diligence, have discovered it."

S.26(3) provides that:

"For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty."

In Brocklesby, which concerned a solicitor’s failure to ensure release from liabilities under a mortgage, it was held by the English Court of Appeal that "deliberate commission of a breach of duty" occurred where:

"…the commission of the act was deliberate in the sense of being intentional and that act or omission, as the case may be, did involve a breach of duty whether or not the actor appreciated that legal consequence."

Prior to Brocklesby, it was assumed that where a professional acted in breach of duty, but did not act culpably in concealing the breach from his client, the commencement of the limitation period would, pursuant to S.31 of the Ordinance, expire six years from the date of the breach (the normal limitation period), or three years after the plaintiff had the knowledge required to bring the proceedings, whichever is the later, subject to a "long stop" date of 15 years (S.32, see also Ss.14A and 14B Limitation Act 1980). Claims under S.26 have no such long stop date.

Brocklesby effectively eliminated the distinction between "deliberate" breach of duty and the "ordinary" case where a breach of duty was not appreciated at the time of the breach and was unlikely to come to light for some time thereafter (e.g. where a title defect to property was missed by a solicitor acting for the purchaser). Potentially, therefore, professionals were faced with indefinite limitation periods, and therefore the prospect that they must defend cases on the merits many years after their involvement had concluded. Brocklesby was followed in England at first instance in the subsequent case of Liverpool Roman Catholic Archdiocese v. Goldberg [2000] Lloyd’s Rep PN 836 and reluctantly in Gold v. Mincoff Science & Gold [2001] Lloyd’s Rep PN 423. It was also followed in Hong Kong (as one would expect), in the first instance decision in Gimex Development Limited v. Fang Meng Sung, John (formerly trading as Messrs. J Fang & Co, Solicitors) [2001] 1217 HKCU 1, a case involving a conveyancing transaction where the solicitor was alleged to have failed to ensure that his client purchaser obtained good title to the property being purchased.

The plaintiff instructed a firm of solicitors, the defendants, to act for him in connection with a transaction under which a company was to grant him mooring rights for a period of 100 years over its land. The defendants approved the drafting of the document by which the mooring rights were to be granted and the transaction was completed in March 1989.

In early 1994, receivers of the company informed the plaintiff that his moorings rights were no longer exercisable. In November 1995 the plaintiff wrote to the defendant complaining that the mooring rights he thought he had been granted were being challenged and he sought assistance in resisting the challenge. Despite repeated letters during the following two years, no answer to his letter was received. The plaintiff issued a writ claiming damages in negligence on 16 January 1998, outside of the three-year extension permitted by the equivalent of S.31 of the Limitation Ordinance. Both at first instance and in the Court of Appeal it was held, following Brocklesby, that breach of duty had been deliberate in circumstances where the breach was unlikely to be discovered for some time and therefore that the primary six year limitation period had not started running until 1994, which was the date when the plaintiff first became aware of the alleged negligent act. Accordingly the limitation defence failed. It should be noted however that the Court of Appeal expressed some disquiet at the decision in Brocklesby, but considered itself bound by it.

Cave went on appeal to the House of Lords. The House unanimously held that the construction of the equivalent of S.26 given by Morritt LJ in Brocklesby was wrong. Lord Millett, who gave one of the leading speeches, held that, in the absence of any intentional wrongdoing on the part of the professional, the result of Brocklesby could neither be just nor consistent with the underlying policy of the Limitation Act. To expose a professional to a claim for negligence long after he had retired from practice and had ceased to be covered by indemnity insurance must defeat the purpose of a statutory limitation period. Further Lord Millett opined, a man could not sensibly be said either to conceal or to fail to disclose something of which he was ignorant.

He concluded that the equivalent of s.26(1)(b) serves to deprive a defendant of a limitation defence in two situations: (i) where he takes steps to conceal his own breach of duty after he has become aware of the breach; and (ii) where he is guilty of deliberate wrongdoing and conceals or fails to disclose it in circumstances where it is unlikely to be discovered for some time. Lord Scott in Cave distinguished "deliberate commission of a breach of duty" from "commission of a breach of duty which is not deliberate", i.e., a breach of duty which is inadvertent, accidental or unintended, and similarly supported the view that the provision could not apply to a breach of duty of which the alleged wrongdoer was unaware.

Conclusion

Cave restores the assumed position prior to the Court of Appeal decision in Brocklesby. It ought to be followed in Hong Kong. In confining the limitation period in cases where the professional, although negligent, was not deliberately so and did not deliberately conceal his breach of duty to his client, Cave must reduce the exposure of professionals and their insurers to claims.

© Herbert Smith 2002

For more information on this or other Herbert Smith publications, please email us.