THE DATE OF KNOWLEDGE UNDER SECTION 14A OF THE LIMITATION ACT: DELAY WHEN APPLYING TO SET JUDGMENT ASIDE

In Blakemores LDP -v- Scott [2015] EWCA Civ 999 the Court of Appeal considered issues relating to date of knowledge for the purpose of  s.14A of the Limitation Act 1980 . The court also considered the impact of delay when applying to set judgment aside.

THE CASE

The claimant (a firm of solicitors in administration) was seeking £635,530.78 in costs allegedly due under a conditional fee agreement. Judgment was entered in default against one defendant. The other defendants filed a defence alleging estoppel arising out of the claimant’s negligence. They sought permission to amend to plead a specific counterclaim for negligence.  The judge at first instance held that the negligence actions were statute barred and granted the claimant summary judgment.

KEY POINTS

1. The test under s.14A of the Limitation Act includes the question of the date when a  “reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.”  Applying that test to the current case there was an argument that the limitation period had not expired.
2. It was reasonable, on the facts of this case, to set aside default judgment after applying the Denton principles. The delay was not great and was understandable in the circumstances.

Section 14A of the Limitation Act 1980

1. Before considering the judge’s decision, it is useful to set out the relevant parts of section 14A of the Limitation Act 1980 as follows:-

“14A  Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual

(1)     This section applies to any action for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued.

(2)     Section 2 of this Act shall not apply to an action to which this section applies.

(3)     An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.

(4)     That period is either—

(a)     six years from the date on which the cause of action accrued; or

(b)     three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above.

(5)     For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff 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.

(6)     In subsection (5) above “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge both—

(a)     of the material facts about the damage in respect of which damages are claimed; and

(b)     of the other facts relevant to the current action mentioned in subsection (8) below.

(7)     For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a r

(8)     The other facts referred to in subsection (6)(b) above are—

(a)     that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and

(b)     the identity of the defendant; and

(c)     if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.

(9)     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.

(10)     For the purposes of this section a person’s knowledge includes knowledge which he 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;

but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.”

THE DECISION IN THE COURT OF APPEAL

The judge at first instance held that the defendants had been told of the firms negligence in a meeting in April 2009 and the limitation period ran from that date.

1. In the judge’s view, the relevant “damage” for the purposes of section 14A(5)-(7) was the firm’s failure to file an objection to the registration of the titles before the deadline. The judge thought that the failure to file that objection was a “material fact about the damage” because section 14A(7) provided that such facts were, for the purposes of section 14A(6)(a), “such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment”. He compared the failure to file the objection in time to a failure to invest, which was, he said, the “damage” rather than the ultimately consequential “damages”.

2. I disagree with the judge’s approach. In my judgment, it is important to understand the way in which section 14A is obviously intended to work. Section 14A(5) requires that the starting date is the earliest date on which the claimant 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. Section 14A(6)(a) then says that “the knowledge required for bringing an action for damages in respect of the relevant damage” includes knowledge of “the material facts about the damage in respect of which damages are claimed”. Section 14A(7) provides that “the material facts about the damage” are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.

3. The first question in this case was, therefore, the factual one of what “material facts about the damage” the appellants accepted they had known in April 2009. I have already decided that the judge ought to have determined that all that was pleaded, as explained by Mr Baxendale’s statement, was that Ms Scott alone knew that Mr Barrett had been negligent in failing to file the objection, but not the consequences of that failure, which even Mr Baxendale said he did not appreciate. It is to be noted that there was no pleading that Ms Scott was acting on behalf of the other appellants or anyone else.

4. The question for the judge, therefore, was whether knowing simply that the firm had been negligent in not advising that the objection should be filed before the deadline was enough to lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against the firm, assuming it to be solvent and unwilling to dispute liability.

5. Paragraph 33 of the defence and counterclaim did not plead that the appellants were told, even in outline, the consequences of the failure to file the objections. It was not said that they knew about the dangers of the discretionary decision that the Adjudicator was able to take, which might result in their being unable to succeed in closing the title. Why, therefore, one might ask rhetorically, would a reasonable person, knowing only that costs might be incurred under a CFA which the firm was saying they would not claim anyway, consider the “damage” sufficiently serious to justify instituting proceedings for damages against the firm, even if the firm was solvent and unwilling to defend?

6. In my judgment, the judge was wrong to hold that the relevant “material fact about the damage” which the appellants needed to know to start time running for the purposes of sections 14A(6)(a) and (7) was the firm’s failure to file the objection before the deadline. The appellants needed to know, as became apparent at least when the decision of Mr Brilliant was available, that the effect of the failure to file the objection was to allow a discretionary decision to be made against them in relation to the Ireby Fell title. It could, I suppose, have been argued (but it was expressly not) that the appellants must have known of that consequence earlier than the actual decision of Mr Brilliant, because they no doubt attended the hearing and heard the legal argument. We do not need to be concerned about that, since it is common ground between the parties that the starting date was to be taken as either April 2009 or 10^th December 2010, when Mr Brilliant’s decision was promulgated. The 10^th December 2010 was, of course, less than 3 years before the claim form in the second action was issued on 6^th December 2013.

7. There are two reasons why the material fact about the damage in this case cannot just be the negligent advice or the failure to file the objection before the deadline. First, the appellants are not experts in land registration or manorial law. They cannot be taken to have known the obscure consequences of a failure to file an objection in time without being told what they were. It is to be noted that the firm has not argued at any stage that the appellants are to be taken to have had any extended constructive knowledge as a result of section 14A(10) of the Limitation Act 1980. No doubt that was not argued for good reason, because whatever else might be said, Ms Scott and Mr Walker had, in April 2009 and before, taken reasonable steps to obtain expert legal advice. As a result the last part of section 14A(10) means that they should not “be taken … to have knowledge of a fact ascertainable only with the help of expert advice”. It seems to me, though we have not heard argument on the point, that it is likely that the consequences of the non-filing of the objection by the deadline were indeed a fact only ascertainable with the help of expert advice.

8. The second reason why, in my judgment, the judge was wrong to think that the material facts about the damage in this case was just the negligent advice or the failure to file the objection is that that the relevant material facts about the damage have to be such as would lead a reasonable person to consider it sufficiently serious to justify his instituting proceedings for damages against a solvent firm, not disputing liability. It is highly arguable on the evidence that Ms Scott did not know anything that would lead a reasonable person to sue. She had no reason to think she would be worse off. She understood that the costs were to be covered by the firm and not reclaimed from her, the case was going to be successful, and most crucially she appears to have had no inkling that the firm’s negligence had turned a clear right to have the Ireby Fell title closed into a matter for the discretion of the adjudicator.

9. In these circumstances, in my judgment, the judge was wrong to determine as a matter of law that the facts pleaded in the defence and counterclaim meant that that the starting date for limitation purposes had to be April 2009. In my judgment, a trial of the facts will be needed before that question can be properly decided.

SETTING ASIDE THE DEFAULT JUDGMENT

Issue 4: Should the default judgment against Mr Balchin be set aside?

1. Part 13.3 of the CPR provides as follows in relation to default judgments entered under Part 12:-

“(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if –

(a) the defendant has a real prospect of successfully defending the claim; or

(b) it appears to the court that there is some other good reason why –

(i) the judgment should be set aside or varied; or

(ii) the defendant should be allowed to defend the claim.

(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.”

1. Mr. de Waal’s main point before us was, as I have said, that the delay was excessive between Mr Balchin knowing about the judgment on 6^thFebruary 2014 and making his application on 14^th March 2014. The judge had simply said that a delay of more than a year from the default judgment itself was too much in the current post Mitchell climate. Mr de Waal also raised half-heartedly the suggestion that Mr Balchin’s estoppel defence arising from his adoption of the other appellants’ defence and counterclaim, could not succeed. The judge had described the defence as shadowy and had said that he could not guess whether it ultimately had any prospect of success.

2. It was common ground that the principles enunciated in Mitchell supra and Denton supra in relation to relief from sanctions are properly applicable to an application to set aside a default judgment. That said, I think one should start with the question under CPR Part 13.3(1)(a) of whether Mr Balchin has a real prospect of successfully defending the claim. It is noteworthy that the firm has not sought summary judgment against Ms Scott and Mr Walker on the grounds that the estoppel defence has no real prospect of success. In these circumstances, whilst I would not wish to be taken as deciding anything about how the defence may turn out at trial, I do not think it can be said that Mr Balchin has no real prospect of defending the claim for this very large sum in legal fees. Moreover, it would in my judgment be unjust if Mr Balchin were to be deprived of the right to defend the claim when his co-villagers are able to do so. Notwithstanding this view, it is necessary to approach the matter as the court laid down in Denton.

3. On the question of whether the delay was serious or significant, it plainly was. On the question of whether there was a reasonable excuse for that delay, there was, it seems to me, such an excuse for the period up to the date upon which Mr Balchin became aware of the proceedings and the judgment on 6^th February 2014. It may be commented, however, that, taken together with Mr Balchin’s personal difficulties, the news that he received on 6^th February 2014 must have been quite overwhelming. He was faced with a potential charging order over his former matrimonial home for an alleged debt that he was not expecting of some £627,000.

4. Nonetheless, Mr Balchin seems to have done the reasonable thing of trying to trace his former solicitor and instructing him to apply to set aside the judgment. The delay of which Mr de Waal complains seems to have been caused by Mr Balchin’s application for assistance with the costs because he was on benefits. In the exceptional circumstances of this case, I do not think that Mr Balchin’s 36-day delay prevents there being a reasonable excuse for the delay between the default judgment and the application to set it aside. He behaved with reasonable promptitude bearing in mind the time that already elapsed since the judgment itself. The comparison with the 14-day period allowed for an acknowledgment of service was an unrealistic one from Mr Balchin’s point of view. It is to be observed that it was he who decided that he should not wait any longer for funding and that he should raise the £80 necessary to issue the application himself.

5. The third stage of the Denton analysis is to consider all the circumstances of the case giving particular weight to factors (a) and (b). Applying that test, I have no hesitation in concluding that the default judgment should in this case be set aside. Mr Balchin was faced unexpectedly with a very difficult situation. Even having particular regard to the need for litigation to be conducted efficiently and at proportionate cost and to the need to enforce compliance with the rules, his delay was explicable and excusable in his very special circumstances. It would be unjust, as I have said, for the judgment to stand against him, whilst his co-defendants were allowed to proceed with their defence. Accordingly, in my view, the judge was wrong to refuse to set aside the default judgment against Mr Balchin.

Conclusions

1. For the reasons I have given, I would allow both appeals and set aside the judge’s orders for summary judgment against Ms Scott and Mr Walker in both actions, and the default judgment against Mr Balchin in the first action.