Court of Appeal considers date of knowledge to set time running for limitation in negligence actions

The Court of Appeal has held that a negligence claim against a broker of forward freight agreements was time-barred. The limitation period could not be extended on the basis that the claimant lacked the knowledge required to bring the claim until less than three years before commencing the action (under section 14A of the Limitation Act 1980): Nobu Su v Clarksons Platou Futures Ltd [2018] EWCA Civ 1115.

The judgment emphasises that, to start time running, a claimant need not know for certain that it has a claim for damages, or even that it might have a claim for damages. Applying the decision of the House of Lords in Haward v Fawcetts [2006] UKHL 9 (see our blog post here), it is sufficient that the claimant knew enough to make it reasonable to investigate further.

While this decision does not establish new principles, it will be welcome to defendants as a helpful reminder of the limits of section 14A. From a claimant's perspective, it illustrates the need to get on and investigate potential claims, when it has information that makes it reasonable to do so, rather than waiting for certainty.

Background

The claimant was the owner of the TMT companies. The first defendant was a broker of freight forward agreements (FFAs) and the second defendant was its employee.

In July 2008 the second defendant had discussions with the claimant and with a third party, the principal of a shipping company called Lakatamia, which culminated in an oral agreement involving the purchase and buy-back of an FFA position. Lakatamia performed its part of the FFA contract but the claimant/TMT failed to buy back the FFA position.

In March 2011 Lakatamia issued proceedings against the TMT companies and the claimant, alleging that the claimant was party to the FFA contract and personally liable for the TMT companies' breach, leading to a loss of about US$79.6 million.

In August 2011 the High Court granted a freezing order against the claimant and the TMT companies, and that order was upheld on appeal in July 2012. The Court of Appeal found that Lakatamia had established a good arguable case that the claimant was personally liable for the breach, which had to be resolved at trial. Following that trial, the High Court held that the claimant was personally liable along with the TMT companies.

In November 2015 the claimant began the present proceedings against the defendants, alleging that they were in breach of duty by failing to ensure that only the TMT companies, rather than the claimant personally, were party to the FFA contract.

The High Court held that the claims were time-barred as the cause of action arose in July 2008 when the claimant incurred a personal liability which, on his case, he would not have incurred but for the breach of duty. The claimant was not assisted by section 14A of the Limitation Act 1980, which may extend the six year limitation period for negligence until three years from when the claimant can establish that it first had knowledge of both:

• the material facts about the damage for which he is claiming; and
• other facts relevant to the action, including that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence, and the identity of the defendant.

It is irrelevant whether the claimant also knew that, as a matter of law, the act or omission in question involved negligence.

In this case, the High Court held that the claimant could not rely on section 14A to extend time for his claim in negligence; he had the knowledge required to bring an action by no later than July 2012, when the Court of Appeal upheld the freezing order. The claimant was given permission to appeal to the Court of Appeal on the date of knowledge point.

Decision

The Court of Appeal (Kitchin and Henderson LJJ) dismissed the appeal. The High Court was right to find that the claimant had no real prospect of establishing that he only acquired the relevant knowledge less than three years before commencing the proceedings. He had that knowledge, at the latest, by the date of the Court of Appeal's judgment in July 2012.

The court referred to the guidance given by the House of Lords in Haward v Fawcetts, including that "knowledge does not mean knowing for certain and beyond possibility of contradiction". In that case, the House of Lords held that the relevant date was not when the claimant first knew he might have a claim for damages. It was an earlier date, namely when the claimant first knew enough to justify setting about investigating the possibility that defendant's advice was defective.

In the present case, the claimant argued that he did not have the relevant knowledge until the High Court gave its judgment in November 2014. Until that point there was considerable uncertainty surrounding the issue of the claimant's personal liability; it was not until judgment was delivered, it said, that matters became sufficiently clear and certain to meet the knowledge requirements of section 14A.

The Court of Appeal rejected that argument, saying it depended on a "fundamental misapprehension" regarding the knowledge requirements of section 14A. That section requires more than mere suspicion, particularly if that suspicion is vague and unsupported. But it is sufficient that the claimant knew enough for it to be reasonable to begin to investigate further.

Here, the damage was the fact that the claimant was bound personally to the FFA contract and therefore incurred personal liability under it. By the end of July 2012 the claimant knew that Lakatamia had asserted that he was a party to the contract, and that both the High Court and the Court of Appeal had found there was a good arguable case to that effect. It was therefore "absolutely plain" that the claimant knew enough for it to be reasonable to begin to investigate further. He also knew that there was a real possibility that his personal liability was attributable to the acts of the defendants, as they were responsible for negotiating and agreeing the terms of the FFA contract.

As for the claimant's evidence that he was advised by his then solicitors in July 2012 that they were confident that he would not be found liable at the trial, this carried little weight. The claimant had not waived privilege nor disclosed any written advice that he received. In any event, the test was objective. The Court of Appeal's finding that Lakatamia had a good arguable case was by far the most important consideration.