UK: Tort and Time Bars - Suing by Stop Watch

Even the laziest law student knows that the ingredients of a tort claim for professional negligence are duty, breach and damage. Time starts to run once all 3 elements are present. In Malik Khan -v- RM Falvey & Co, the Court of Appeal reminded the legal profession of these basic principles in a professional negligence claim where several debt recovery actions were struck out for want of prosecution.

Until Khan, the assumption was that time runs from the date the court strikes out the negligent litigation, and not before, if suing a solicitor who allows litigation to be struck out. This was thought to be so even if the case had been dead on its feet for years before the court put it out of its misery with a strike-out order. It was certainly a convenient assumption in that it provided a clear and easily identifiable trigger date for limitation purposes, and made quantification of the loss easier as it was performed with hindsight. This assumption cannot survive after Khan.

On 2 June 1999, Malik Khan issued proceedings alleging his solicitor had conducted debt recovery actions negligently from 1987 until 1999 : the actions were struck out between 1997 and January 1999. The Claimant did not instruct the Defendant firm continuously from 1987 onwards: he would occasionally handle the litigation himself, re-instructing the Defendant when matters became complex, on at least one occasion a few days before a Court hearing; he also instructed other firms to handle the same actions on similar terms. Every solicitor knows this can be a recipe for disaster. Despite the Defendant's best efforts (negligence was denied), disaster befell.

The Claimant pleaded (a) that judgments should have been obtained in the three debt recovery actions by 1987, 1988 and an unspecified date; (b) that two actions were vulnerable to strike-out from 1990 and 1992 respectively - the vulnerability of the third was not specified; and (c) that the l suffered was wasted litigation costs paid in the 1980s and early 1990s and loss of the chance to recover the debts themselves by 1988, 1989 and an unspecified date. (The third case was not pleaded clearly and the Court of Appeal's attempts to elicit a more detailed set of facts during the appeal hearing were unsuccessful. In the end, the Court of Appeal took the view it was statute barred on the facts pleaded.)

The Claimant's Leading Counsel relied on Hopkins v McKenzie [1995] PIQR43(CA), a loss of opportunity personal injury action against a doctor. Hopkins was a very narrowly pleaded case, claiming only for the loss of the chance to pursue the original action. There was no allegation that the value of the action had been diminished at any point prior to its being struck out. The court in Hopkins concluded the loss was only sustained when the original personal injury action had been struck out and not before.

The Court of Appeal in Khan went back to first principles of tort and had a close look at what constitutes actual damage: "any detriment, liability or loss capable of assessment in money terms [including] liabilities which may arise on a contingency…loss of earning capacity, loss of a chance or bargain, loss of profit..." [Forster v Outred]. The Court of Appeal pointed out that the Claimant in Khan had sustained actual damage more than six years before the date on which he issued proceedings against the Defendant.

The Court of Appeal then reviewed Hopkins citing the judgment of Saville LJ, in particular the fact that at the relevant limitation date the Plaintiff's cause of action as at the date of strike-out remained in being, adding "certainly the Plaintiff was by then potentially worse off as a result of the alleged negligence, since he was highly likely (if not foredoomed) to lose his cause of action. To my mind, however, he had not at that stage suffered that loss [loss of his cause of action] or damage" …"what on the Plaintiff's case has been lost is the right to advance his medical negligence claim in a Court of law. That loss was not sustained until the action was struck out. To my mind a cause of action for diminishing the value of a claim is not the same thing as a cause of action for losing the right to advance that claim in a Court of law" (emphasis and bracketed words added).

Unfortunately, in the author's view, Saville LJ then muddied the waters slightly in Hopkins by rejecting Rupert Jackson QC's submission that it was not necessary for the action actually to be struck out before the client could bring tort proceedings against the solicitor for negligence. The other two judges in Hopkins, Mann LJ and Nourse LJ, agreed with Saville's reasoning as cited above but Mann LJ reserved his position on Jackson's question of whether the diminution in value of a cause of action through its susceptibility to a strike out could constitute damage for the purposes of an action in negligence. He felt that it could but went on to stress that that was not the situation in Hopkins. Nourse LJ also was at pains to point out that Hopkins had not sued "in respect of the loss or damage suffered by him by reason of some earlier depreciation in value of his right of action against the Defendants" [emphasis added].

In Khan the Court of Appeal agreed with defence Counsel's submission that Hopkins v McKenzie could be distinguished on the facts. They nevertheless felt it was important to go on to address the other defence submissions that Hopkins was wrongly decided and/or could not stand in the light of the House of Lords decision in Nykredit Mortgage Bank PLC -v- Edward Erdman Group Limited (No.2) [1997] 1 WLR 1627.

Nykredit No 2 was a valuer's negligence case concerning the date on which interest on damages should start to run. The valuers over-valued a property by £1.4 million. In reliance on that over-valuation, the lender advanced £2.45 million to the borrower in March 1990 who defaulted at once. The House of Lords held that the lender's cause of action arose as soon as he made the advance because that was when he suffered loss on the facts of that particular case. They accepted that on some facts, a lender might not suffer loss the moment he made the advance: for example, if the borrower does not default at once, or if the over-valued security is nevertheless worth enough to cover the loan at the time of default. Their Lordships in Nykredit No 2 were unanimous in deciding that the cause of action arose when relevant and measurable loss was first revealed. Lord Nicholls of Birkenhead recognised that selecting such an early date might make it difficult in practice to quantify losses which are ongoing but took the view this was no reason to set a later date: "such difficulties as there may be are evidential and practical difficulties, not difficulties in principle".

Sir Murray Stuart-Smith in Khan stressed that 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 actual damage from the same wrongful acts outside the limitation period. He went further and held that where a Claimant decides to sue only for loss of his opportunity to pursue the original litigation, one may nevertheless conclude on the facts that he had "already suffered damage by diminution in the value of his chose in action well before the actual striking out of the actions". He goes on to stress there must be real damage, not nominal, and concludes: "…a claimant does not suffer real damage in the form of diminution of the value of his chose in action until there is a serious risk that the original action could be dismissed for want of prosecution… it does not seem to me that that diminution in value has to be quantified by a sale or settlement provided it can be shown that it has been substantial… If it is clear that the value of his chose in action has been substantially diminished before the limitation date, the action will be statute barred" [emphasis added].

Chadwick LJ in Khan distinguished between litigation cases where proceedings were struck out for want of prosecution after delays of months if not years ("delay strike-outs") and those cases where proceedings are struck out under CPR 3.4(2)(c) because of some failure to comply with a Rule, practice direction or Court order ("procedural strike-outs"). In the latter cases it is easy to see when the claim became liable to be struck out – it is the date when the solicitor fails to comply with the procedural requirement and that is when the opportunity to pursue the claim is lost: a case could have no residual value after such a date.

In the delay strike-outs, however, Chadwick LJ recognises it may be much more difficult to identify when the claim became vulnerable to being struck out. He states that once a claim becomes vulnerable to strike-out, its value begins to diminish and it is impossible to say damage has not occurred as a consequence of the previous delay. It is no answer that the damage may be difficult to quantify. If measurable damage has arisen from the delay then the cause of action is complete.

Where a Claimant pleads solely that he has lost his right to pursue the earlier action it will give rise to problems if the earlier action was worthless by the time it was eventually struck out. Chadwick LJ concludes that: "All that the Plaintiff could recover … would be the value of the claim immediately before the earlier action was struck out. If the Plaintiff's right to pursue the earlier action had become valueless by the time that action was struck out, the striking out of the action caused no loss; and, ex hypothesi, there could be no cause of action in tort arising from the strike out".

• It is no longer safe to assume that time for suing for negligently conducted litigation starts when it is struck out by the court;
• where proceedings are struck out because of some failure to comply with a Civil Procedure Rule, practice direction or Court order the start date is the date when the solicitor fails to comply with the procedural requirement;
• where proceedings are struck out as a result of delay, the limitation period begins to run when that delay causes "real, not nominal, measurable" damage, assuming all the other ingredients of the tort of negligence are present;
• once a claim becomes vulnerable to strike-out as a result of delay, its value begins to diminish and the court will take the view damage has occurred; it is no answer that the damage may be difficult to quantify at that early stage or that further damage may yet result – the limitation period has been triggered;
• if the only pleaded case is one for damages for loss of the opportunity to pursue the struck out cause of action then it is correct to say that the Claimant's cause of action only accrues on strike-out; pleading a narrow case for lost cause of action still may not save the Claimant because the Court will look at the value of that cause of action at strike-out - if the claim is worthless by then because of earlier delays or poor conduct, then no loss is suffered on the claim being struck out, and without the "loss" element of the claim, there is no complete cause of action in tort.

Case Citation: Malik Javid Khan -v- R M Falvey & Co, 22 March 2002 (unreported), Court of Appeal (Civil Division) Schiemann LJ, Chadwick LJ and Sir Murray Stuart-Smith, on appeal from QB Division, McKinnon J.

This article first appeared in New Law Journal 24/5/2002 Page 782".

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.