Watkins and another v Jones Maidment Wilson (A Firm)

JurisdictionEngland & Wales
JudgeLady Justice Arden :,Lord Justice Thomas,Lord Justice Longmore
Judgment Date04 March 2008
Neutral Citation[2008] EWCA Civ 134
Docket NumberCase No: A3/2007/0204
CourtCourt of Appeal (Civil Division)
Date04 March 2008
Between
(1) Dr Stephen John Watkins
(2) Mrs Elizabeth Watkins
Appellants
and
Jones Maidment Wilson (a Firm)
Respondents

[2008] EWCA Civ 134

Before:

Lady Justice Arden Lord Justice Longmore and

Lord Justice Thomas

Case No: A3/2007/0204

IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION MERCANTILE COURT LEEDS DISTRICT REGISTRY FROM HIS HONOUR JUDGE BEHRENS

Royal Courts of Justice

Strand, London, WC2A 2LL

Dr Stephen Watkins (in person) for the Appellants

Mr Derek Holwill (instructed by Messrs Weightmans LLP) for the Respondents

Hearing date : 2 November 2007

Lady Justice Arden

Introduction

1

This is an appeal by Dr Stephen Watkins and Mrs Elizabeth Watkins (to whom I refer as “the Watkins”) from the order dated 4 January 2007 of HHJ Behrens, sitting in the mercantile list of the Leeds District Registry, answering certain of the preliminary issues which had been set down for trial before him. The proceedings seek damages for professional negligence from the respondents, Jones Maidment Wilson (“JMW”). The allegations are denied. The pleadings are complex, and the preliminary issues are designed to avoid the risk that substantial costs will be thrown away if certain defences raised under the Limitation Act 1980 are good in law. When I say that the pleadings are complex, I intend no criticism of Dr Watkins who acts in person and who argued this appeal with conspicuous skill.

2

The preliminary issues are directed to a single problem. The Watkins allege that JMW gave them (1) negligent advice leading to the execution of a building agreement on 3 April 1998 and (2) negligent advice leading to the loss of rights under cl 21 (ii) of that agreement, which on one view of the facts if given was given before 26 August 1998. On conventional principles, any cause of action in respect of that advice accrued before 26 August 1998 and thus became statute-barred prior to 26 August 2004 when the present proceedings were issued. The Watkins seek to meet this fundamental problem by utilising principles established in two recent decisions of the House of Lords, namely Law Society v Sephton [2006] 2 AC 543 and Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) [1997] AC 1627. They say that under these authorities (a) the loss was contingent only and thus the limitation period did not start to run until the contingency matured, which was after 26 August 1998 (I refer to this as “the Sephton argument”), or alternatively (b) that there was no loss on entry into any agreement with Flemings since the net position was beneficial to the Watkins and thus the limitation period could not start to run until the net position was disadvantageous to them. This they say did not occur prior to September 1998 (I refer to this as “the Nykredit argument”).

3

That takes me to the terms of the preliminary issues, which I have set in an appendix to this judgment with some modifications designed to make them easier for the reader to follow. This judgment should be read in conjunction with the appendix. A number of definitions are to be found in the appendix, namely the definitions of the “pre-agreement claim”, “the post-agreement claim”, “the later transaction” and “the deferred start date”. I will use those definitions in this judgment, where appropriate. It will be immediately apparent that the preliminary issues are directed to ascertaining the date of the accrual of the causes of action on which the Watkins rely.

4

For the reasons given below, I consider that the judge answered the first two preliminary issues correctly and that his decision not to answer the remaining issues cannot be challenged. Accordingly this appeal should be dismissed. Before I give my reasons, I will set out the relevant background and a general introduction to the relevant law on accrual of a cause of action, including an analysis of the two key decisions of Sephton and Nykredit.

Background

5

In late 1997 the Watkins agreed to acquire a site at Littleborough, Rochdale, Lancashire (“the property”) from a Mr Wilfred Fleming. They wanted to have a house built on the property by the seller and a Mr David Fleming (together “Fleming”), who were builders. The Watkins instructed JMW to act as their solicitors on the transaction on or about 27 November 1997. The Watkins allege that JMW negligently advised them in relation to the transaction. The Watkins executed various contractual documents on 3 April 1998. The documents comprised a contract for the purchase of a leasehold interest in the property, a legal charge, a 999 year lease and a building agreement. In this judgment I refer only to the building agreement, but references to that document should where appropriate be read as including the other documentation executed on the same date.

6

Cl 21 of the building agreement provided that, if Fleming failed to complete the works by 31 August 1998, the Watkins could terminate the building agreement and pay for work completed by that date. In the event of a dispute as to the value of the completed work, the parties could appoint an expert, whose determination would be binding, who could fix the amount due. Cl 21 thus provided:

“Insolvency of Builder/failure to complete the works

In the event of

i. the insolvency of the Builder and /or

ii. the failure of the Builder to complete the works by [31 August 1998]

then in either such case the Watkins may at their option pay to the builder an amount equal to the value of the works to that date completed (to be fixed in default of agreement by an independent chartered surveyor the identity of such surveyor either to be agreed between the parties or in default of such agreement the surveyor to be nominated by the President for the time being of the RICS who shall act as an expert and whose decision shall be binding) (but minus an allowance to be fixed by the said independent surveyor in favour of the Watkins to compensate them for the inconvenience of them having to complete the works) leaving the Watkins to complete the works thereafter. In the event of the Builder having been paid more than the amount due to him as becomes apparent after the independent surveyor's valuation, then the excess shall be repaid immediately to the Watkins.”

7

On 6 August 1998, prior to completion of the house, the Watkins wrote a letter to Fleming, in the following terms:

“Completion date

We confirm our verbal agreement waiving the August 31 completion date insofar as it relates to work covered by provisional sums or work held up consequentially to those delays.”

8

The Watkins allege they obtained the advice of JMW on this letter. They contend that they did not thereby waive the right to refer disputed costs for expert valuation under cl 21 of the building agreement, but that if they did so the advice given by JMW was negligent and they suffered substantial loss as a result. They contend that if they had not lost the right to use cl 21(ii), they would, at some point, have exercised that right and their dispute with Fleming would have been resolved swiftly and economically to their satisfaction; they would have secured possession of the property and would have been able to rectify what they say were defects. However, because they were unable to utilise cl 21(ii), they became locked into an expensive building dispute with Fleming. We are not concerned with the nature of the loss claimed or indeed with whether any of the allegations in either the particulars of claim or the defence can or will be proved at trial.

9

The Watkins allege that as at August 1998 they were aware only of various minor defects, amounting to some £2,000 in value, in the works, which they were prepared to waive, and that the loss arising from their dispute with Fleming crystallised when a National Housing Building Council (“NHBC”) certificate was issued in September 1998. They contend that the contractual arrangements as a whole were not disadvantageous to them because of movements in property prices, and that their present loss under the pre-agreement claim is for wasted costs estimated in what today is the comparatively modest sum of £50,000.

The relevant law on the date on which a cause of action in respect of negligent advice about entering into a transaction accrues

10

Under s 2 of the Limitation Act 1980 a claimant in respect of negligent advice or omission to advise has six years in which to bring his claim, starting with the date on which the cause of action accrued. In the case of a breach of contract, the claimant has the same period (s 5 of the 1980 Act) but time begins to run when the breach of contract occurs. Where, as here, the claim lies also in negligence, damage is a necessary ingredient of the tort and the limitation period cannot begin until damage has occurred. This often, but not invariably, takes place when the claimant relies on the negligent advice or omission to advise.

11

We are concerned only with economic loss but even in this field many different types of cases can arise. In some cases, it will be obvious that the claimant has suffered a loss, for example where he is advised to enter into a compromise of legal proceedings on disadvantageous terms, or, as in D. W Moore v Ferrier [1988] 1 WLR 267 (cited with approval in Nykredit), his solicitor fails to draft an agreement for a prospective employee with an enforceable covenant against competition, or, as in Knapp v Ecclesiastical Insurance [1998] PNLR 172, where he is advised to take out an insurance policy which does not provide appropriate cover. It may be difficult to quantify the damage shortly after...

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