Berney v Saul: No road to Damascus moment

Berney v Saul (t/a Thomas Saul & Co Solicitors) [2013] EWCA Civ 640

The Claimant's chose in action

A claimant’s chose in action represented by his claims in litigation is something which has a value, provided it is not certain or nearly certain to fail. Clients pay lawyers to take care of that chose in action by putting the claim forward in the proper way and by managing its progress in accordance with the rules and orders of the Court.

As something of value, the cause of action is also something that may be damaged. One may use the simile of a car making a journey along a road. The car is the claim; road is the path to an eventual success at trial.

The car may veer off the road entirely, and into a chasm to the side of the highway; such may be likened to the position where the claim is struck out and cannot proceed further. However, the car may also suffer lesser damage along the way. The car may develop a fault in its cooling system that means there is a risk of total engine failure later along the route. Such might be likened to the position where the prospects of a claim reaching the final destination (success at trial) are harmed by virtue of some deficiency in its handling by the litigation solicitor – a failure to obtain particular evidence, to comply with a Court order, or to render the claim vulnerable to being struck out.

The recent decision of Berney v Saul has considered a particular permutation of a perennial question for professional liability lawyers: the question of when “damage” is first suffered by a party for the purposes of section 2 of the Limitation Act 1980. In the litigation context, this means the question of when the party’s chose of action represented by his rights within that litigation – the car in my analogy – first suffers damage.

The established principles

Section 2 of the Limitation Act provides:

“An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.”

The following general principles are clear:

(i)    A cause of action in negligence does not accrue until a claimant suffers actual damage as a result of the defendant’s negligence: (e.g.) Nykredit Plc v Edwards Erdman Group Ltd (No 2) [1997] 1 WLR 1627.

(ii)    Actual damage means any detriment, liability or loss capable of assessment in money terms and includes liability which may arise on a contingency: Forster v Outred [1982] 1 WLR 86.

(iii)    To constitute actual damage, damage must also be real, as distinct from minimal: Cartledge v Jopling [1963] AC 758.

(iv)    A helpful question to ask is that posed by Lord Hoffman in Nykredit:

“when is the claimant worse off financially by reason of the breach of the duty of care than he would otherwise have been?”

(v)    That question is a question of fact to be answered by looking at all the circumstances of the case.

The particular issue in Saul

Limitation questions arising under section 2 commonly involve taking these relatively straightforward general principles, but then applying them to the difficult facts of a given case – and sometimes doing so in the face of apparently conflicting decisions on different types of case in the reported authorities. Saul is a good example of just such an exercise.  

The issue for decision was when the claimant, Mrs Berney, suffered damage in her underlying RTA claim, which was handled by the defendant solicitor, Saul.  He negligently failed to serve Particulars of Claim in time, meaning that:

(i)    she would need to apply for an order for permission to serve them out of time, and

(ii)    (correlatively) she was exposed her to the risk of her claim being struck out if that permission was not obtained, or (on the facts) that her claim might only be permitted to proceed under the original limitation of its value in the claim form, being up to £50,000.00.

She subsequently settled her RTA claim before that necessary application was made. Was damage sustained when she settled the case, or was it suffered when her claim (chose in action) became burdened by/damaged by/exposed to the risk that drove her to settle?

The facts

The relevant facts are best illustrated by means of a short chronology (the span of which indicates the leisurely pace at which the underlying claim trundled along):

20.04.99   Ms Berney suffered injuries in an RTA with a car driven by Mrs Liddell. It was a rear shunt leading, Mrs Berney contended, to neck and back injuries, but also to psychological sequelae, including claustrophobia.

May 99    Mrs Berney instructed the defendant, Saul.

19.08.99  Mrs Liddell’s insurers admitted liability for the RTA.

12.04.02    Claim Form issued, albeit naming the wrong defendant (Mr Liddell as owner of the vehicle rather than his wife, the driver).

20.04.02    Limitation in respect of the personal injuries action expired.

08.08.02    Service of a claim form was effected, naming the correct defendant; no point was taken by Mrs Liddell’s lawyers or insurers about the fact that this had been done outside the limitation period.

11.08.02    Time pursuant to CPR 7.5 expired for service of Particulars of Claim on the claim issued four months earlier. No Particulars had been served by this date.

23.10.02    Mrs Berney saw Mr Good, a jointly instructed consultant orthopaedic surgeon, for examination. He issued a report of the same date which was not particularly helpful to Mrs Berney’s case.

10.12.02    Questions were put to Mr Good in respect of his report.

2003    There were extended delays in the progress of the claim.

08.03.04    Mrs Berney instructed Martin Ross (“MR”) solicitors.

02.06.04    MR informed Mrs Berney that as no Particulars had been served in time under the CPR, she was vulnerable to her claim being struck out.

16.09.04    MR wrote to Mr Good, the surgeon, seeking answers to the questions posed as long ago as 10.12.02.

01.10.04    Mr Good advised his view had not changed.

Oct-Dec 04    MR sought to obtain further hospital records about Mrs Berney’s initial admission, with a view to providing these to Mr Good.

25.01.05    Mrs Liddel’s solicitors, DWF, wrote to MR stating that if he had not received Mrs Berney’s A & E admission records yet, then MR should apply for permission to file and serve the Particulars of Claim out of time.

25.02.05    After some chasing, Mr Good confirmed his view still had not changed.

05.04.05    Saul’s retainer was terminated.

11.05.05    Counsel for Mrs Berney advised her that she had no more than a 20% chance of obtaining permission to serve her Particulars out of time.

27.06.05    Mr Cass, a replacement expert, provided an opinion that was more favourable to Mrs Berney’s case.

13.07.05    DWF, for Mrs Liddell, made clear they would oppose an application for permission to serve out of time, but made an offer to settle of £10,000 plus costs.

Sept-Nov 05    There were further settlement discussions and negotiations.

01.11.05    Mrs Berney accepted the offer of £25,000.00 plus costs and concluded her underlying RTA claim (by means of a Tomlin order on 28.02.06).

10.01.11    Mrs Berney, acting in person, issued a negligence claim against Saul (“the Negligence Claim”).

It can therefore be seen that the Negligence Claim was issued comfortably within six years of the settlement date, but more than six years after the risk of the claim being struck out for the failure to serve Particulars of Claim had materialised.

Events prior to the hearing in the Court of Appeal

Saul applied to strike out the claim, or for summary judgment, on the basis that the claim was out of time.  At first instance, DJ Liston in the Brighton County Court gave judgment for Saul, holding that the claim was timed barred, and that Mrs Berney’s prospects of recovering more than her settlement figure were very limited indeed.

HHJ Simpkiss then dismissed Mrs Berney’s appeal, dealing only with the limitation issue, holding that her chose in action “had suffered a significant and quantifiable diminution in its value as a result of the negligence of the defendant” prior to January 2005.

Giving permission to appeal to the Court of Appeal, Sir Richard Buxton questioned whether certain dicta in Khan v Falvey [2002] EWCA Civ 400 were correct (or applicable in the present case), and also stated:

“I would be less than frank if I did not say that it is not entirely clear to me why actual damage is not suffered at the time when a possible future settlement is rendered vulnerable to undervaluation just as it is suffered when the case is rendered vulnerable to strike out…”

The terms of the permission given therefore neatly framed an interesting point of general principle to be considered, as well as the question of whether at least one passage within Khan was correct.

Unfortunately upon reading the Court of Appeal’s decision, one is compelled to observe that neither of these issues was the subject of much judicial decision-making.

The parties’ respective positions on appeal

Mrs Berney argued that she did not sustain damage until she settled her claim on 01.11.05. She sought to draw an analogy with decided authorities which found that loss occurred upon a party entering into a transaction after receipt of negligent advice, such as D W Moore & Co Ltd v Ferrier [1988] 1 WLR 267.

In contrast, Saul argued (without specifying a particular date) that Mrs Berney must have suffered loss far earlier than this, and certainly six years prior to 09.01.11 (the day before the Negligence Claim was presented), because well prior to that date, 09.01.05, Mrs Berney’s cause of action had been damaged in the following ways:

(i)    She would need to issue an application to extend time for service of the Particulars, which would involve her incurring costs and liability for adverse costs.

(ii)    If her application succeeded, she would probably in any event be limited to the amount that had been claimed in her original claim form (“limited to £50,000.00”) rather than any larger amount which her later expert evidence might support.

(iii)    There was a real risk that the application might fail.

For all these reasons, Saul argued that the claim was worth less than it would otherwise have been but for Saul’s original negligence.

The Court of Appeal’s decision

The ratio of the decision emerges, somewhat unusually, from the two shorter judgments of Moses LJ and Rimer LJ (the longest judgment being given by Gloster LJ).

Moses LJ gave fairly brief reasons for allowing the appeal, with which Rimer LJ merely agreed without adding anything further. Rimer LJ did however note that he had also read Gloster LJ’s judgment – and then declined to express agreement with it. Thus, it would appear that the ratio of the decision is to be found in Moses LJ’s judgment, not the longer discussion of Gloster LJ.

Moses LJ approached the issue in this way:

(i)    The central question to ask in a solicitor’s negligence claim arising from litigation is the same as in any other case, namely Lord Hoffmann’s Nykredit enquiry: when was Mrs Berney financially worse off by reason of Saul’s negligence than she would otherwise have been?

(ii)    Moses LJ, unlike Gloster LJ, thought that although Mrs Berney had framed her Negligence Claim as arising from having had to settle the RTA claim in November 2005 for less than she should have done if competently served by Saul, the proper analysis of her claim might in fact be as one for the diminution in the value of her chose of action, brought about by the exposure of the claim to the risk of it being struck out. This was also an application of the principle of Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172, that a claimant cannot defeat their limitation problems by claiming only in respect of damage which occurs “in time” if they have in fact suffered damage from the same wrongful act outside the applicable limitation period.

(iii)    On the particular facts of the case, DWF for Mrs Liddell had given express assurances to Saul for Mrs Berney up until 25.01.05, to the effect that they would take no procedural point on the additional delay caused while Mrs Berney sought further medical evidence. Moses LJ considered that in light of this concession, there was up until 25.01.05 really no meaningful risk that the necessary application to seek permission to serve the Particulars out of time would have failed; it would have in effect have proceeded by consent.

(iv)    However, Moses LJ clearly felt that after 25.01.05 there was on the facts a real risk if the application had been made – and contested by DWF/Mrs Liddell – the outcome might have been that Mrs Berney was limited to pursuing a claim of up to the £50,000.00 she identified in her claim form, or to such lesser sum as the medical evidence disclosed at that time would support. In that sense, as soon as a real risk materialised (that is, from 25.01.05) that her claim might be exposed to proceeding only for the more limited sum, her chose in action suffered damage.

The Judgment of Gloster LJ

Gloster LJ’s judgment began from the same starting point, namely the fundamental principles mentioned above (Nykredit, Forster v Outred, and the identification of damage), and also specifically Lord Hoffmann’s overarching enquiry of when Mrs Berney was financially worse off.

However, she then referred to three decisions of the Court of Appeal in solicitors negligence claims that had arisen out of litigation:

(i)    Hopkins v Mackenzie [1994] PIQR 43;

(ii)   Khan v Falvey [2002] EWCA Civ 400, and

(iii)  Hatton v Chafes (a firm) [2003] PNLR 24.

It would appear that these decisions had been the subject of extensive argument before the Court of Appeal in Saul.

Those decisions had each considered when damage is suffered by a party to litigation if that party’s case:

(a)    is struck out; or

(b)    suffers a diminution in value by becoming exposed to a litigation risk it should not have to bear.

Gloster LJ saw Hopkins as a case of type (a): namely the plaintiff in that action had seen his claim struck out, and was therefore suing his solicitor for the complete loss of his right to present his original claim. The Court of Appeal in Hopkins held that such a claimant suffered damage when his claim was in fact struck out, and not earlier.

This approach was doubted in Khan, which was a type (b) case. The Court of Appeal in that case identified that once a risk of a strike out materialises, it may be argued that the party at risk has suffered actual damage by the diminution in the value of his chose in action. The Court did not engage with how serious that risk had to be, merely stating that when a claimant brings a cause of action in respect of the diminution in the value of his claim by reason of the materialisation of that risk, his case was outside the very narrow ambit of Hopkins.

In Hatton, the Court then tried to grapple with the issue of how serious the adverse litigation risk, such as a risk of being struck out, had to be in a type (b) case, before damage could be said to have been suffered. Clarke LJ (as he then was) identified three options:

(i)    Option 1 was that the claimant has no arguable basis from which to resist the strike out application. In other words damage is only suffered when it is virtually certain that the sanction will be imposed

(ii)    Option 2 is that damage would be suffered when it is more probable than not that the claim would be struck out.

(iii)    Option 3 is that damage would be suffered when there was a real risk that the claim might be struck out

Clarke LJ felt he did not need to consider the answer this question more widely, because the Hatton case was so clear: there was no arguable way the claimant could have avoided having her claim struck out, and so she had clearly suffered damage. Evans J in the same case thought that proving that on the balance of probabilities, the claim was likely to be struck out, would be sufficient in other cases (Option 2), but his observations were obiter.

Having teed up these different authorities, and having teed up the prospect of seeking to rationalise the principles in them (which was surely in the contemplation of Sir Richard Buxton when he gave permission, see above), Gloster LJ expressly declined to do so:

“70. I agree with Sir Anthony Evans that cases of this sort are notoriously fact-sensitive. As I have already said, I see no reason in this case to attempt to reconcile what are the arguably inconsistent approaches of this Court in Hopkins v MacKenzie on the one hand, and Khan v Falvey and Hatton v Chafes, on the other, let alone to attempt to comment what, in any event, were the obiter statements about the appropriate criteria to adopt to a determination of the limitation issue. Nor do I consider it necessary to analyse the view apparently reached by Schiemann LJ in the underlined passage in paragraph 32 of his judgment in Khan, quoted above, that if the settlement reflected the risk of strike out, the cause of action would only arise from the date of settlement, even though (theoretically, at least) the value of the chose in action might well have been substantially eroded at a much earlier date. I prefer simply to answer the realistic and fact-dependent question formulated by Lord Hoffmann in Nykredit: when was Ms. Berney financially worse-off as a result of the Respondent's breach of his duty of care than she would otherwise have been?"

She then decided that on the facts, it was unreal to characterise Mrs Berney’s claim (as Moses LJ did) as being a claim for the diminution in the value of her claim. Her claim was that she had been forced to settle when she should not have been. Moreover, Gloster LJ went as far as to hold that it was “inconceivable” that Mrs Berney would not have been given the permission she needed if the application had been made, and there was no reason to assume that such permission would have been limited by reference to the original claim form value.  She therefore held that the first date when any damage was suffered was 01.11.05: the settlement date.

Comment

It is submitted that the following fundamental matters are underlined by the decision:

(a)    That ultimately one is seeking to ask: when did a claimant become financially worse off as a result of the defendant’s negligence?

(b)    That in posing and answering that question, it is vital to be clear about what the substance of the claimant’s complaint in negligence really is.

With point (b) above in mind, it is respectfully submitted that the judgment of Gloster LJ should be treated with caution. The most obvious reason for this is that the other members of the Court dissociated themselves from its approach. However, another reason is Gloster LJ’s characterisation of Mrs Berney’s claim as one founded upon being forced to settle on 01.11.05 when she would not otherwise have had to do so, and her Ladyship’s apparent view that therefore such a loss could not have been suffered until the settlement itself. (In this respect, her analysis was comparable with the Hopkins approach to a claim based on there having actually been a strike out, holding that no loss was suffered until that actual event.)

To characterise the damage as stemming only from the settlement seems rather to beg the question of what prompted the need to settle at all. What is odd about Gloster LJ characterising the claim in this way is that she specifically identified the gravamen of what prompted Mrs Berney to settle her case before the application for permission was heard: namely that Mrs Berney could not afford to take the risk – any risk – of her application failing, of her thereby losing any right to damages, and of her becoming exposed to adverse costs in favour of Saul. Mrs Berney earned only £15,000.00 per year, and the defendant’s offer of £25,000.00 plus costs, which she accepted, represented a serious advantage to her and a chance to lay off all risk associated with the case.

In my view, if one examines the critical negligence, Saul exposed Mrs Berney to a risk she should not have had to bear: namely the risk of her claim being struck out. If competently served by her solicitors, her claim would not have been exposed to that risk, a risk which she found so unpalatable.

Going further, I consider it seriously arguable that a claim which is saddled with such a risk should be presumed to be of less value than one which suffers no such risk (and that therefore, it should be presumed to have been damaged). One may test the proposition by imagining the position at a mediation. If a claim suffers from a risk of being struck out for any reason, a defendant would seek to make considerable leverage of that risk in driving down the settlement value. This reflects the practical reality that the settlement of professional liability claims is centrally concerned with the analysis and distribution of risk. Whether one uses the language of value or of damage seems not ultimately to matter, though damage is perhaps more precise:

(a)    The chose in action which has a risk of being struck out is less valuable; or

(b)    The chose in action which has through negligence become saddled with a risk of being struck out has been damaged, when compared to its state without that risk attached.

Alternatively, to return to the analogy of the car, one would readily say that the car which suffers from the coolant system problem has been damaged in a way which affects the risk of it getting to its destination. Once that fault develops, the driver is making the journey burdened with the risk of breaking down. So it goes with a claim that suffers a risk of being struck out.

On a related note, one cannot help but feel that the Court of Appeal has passed over an opportunity to provide some helpful clarification of the dicta in the cases referred to in Gloster LJ’s judgment.

In particular, the obiter dicta in Khan and Hatton regarding the extent to which an adverse litigation risk must have materialised before a chose in action will be damaged by that risk, could usefully have been more fully considered by the Court in the present case. It would appear from Moses LJ’s judgment (with which Rimer LJ agreed) that the standard he was applying was the Option 3 approach from Hatton, namely, when there was a “real risk” that Mrs Berney’s application might have succeeded only to the extent of obtaining limited permission to proceed. However, Moses LJ did not address his use of the language of “real risk” to the terms of the Hatton judgments. In my view, the real risk option has more to commend it than either the “certainty” (Option 1) or balance of probability (Option 2) analyses, not least because it would tend to serve the general policy of the law of advancing rather than retarding the accrual of a cause of action where the contractual and tortious limitation dates may otherwise widely diverge: see Haward v Fawcetts [2006] UKHL 9.

Stepping back, Gloster LJ seemed to think there was little purpose in seeking to set out guiding principles for solicitors negligence cases arising from litigation that were any more specific than the general principles on the meaning of damage. This may be because of her view that the limitation enquiry in any matter is ultimately so fact sensitive.

It cannot be doubted that the question is factual one. But this has not stopped the Courts developing “rules of thumb” in the context of other sorts of case that prove a very useful evaluative tool for those seeking to advise on limitation. Examples include:

(a)    Transaction cases, where damage will generally be suffered at the point when a client enters into a disadvantageous transaction due to negligence: such as D W Moore, Baker v Ollard & Bentley (a firm) 12.05.82 (unrep), or Knapp v Ecclesiastical.

(b)    Lender claims against valuers or solicitors: damage is suffered by the lender when the value of the burdens he bears from the transaction exceeds the combined value of the security and the borrower’s covenant; this will often mean no loss is suffered prior to default on the mortgage (though not immutably): Nykredit.

(c)     Pure contingent liability cases: such as Law Society v Sephton [2006] UKHL 22, which deals with losses which simply do not arise until the happening of a particular contingency.

A further rule of thumb might have been that where in litigation, a solicitor’s negligence exposes a claim to a real risk of being struck out or otherwise disposed of prior to trial, then the chose in action represented by the claim has been damaged and the litigant’s cause of action against the solicitor accrues.

In the end, however, we are left with a very much narrower decision confined to its particular facts and a lingering sense of a missed opportunity to provide valuable judicial guidance for those trying to assess the merits of limitation defences.