Knapp & Anor v Ecclesiastical Insurance Group Plc & Anor [1997] EWCA Civ 2616

EWCA-Civ
Knapp & Anor v Ecclesiastical Insurance Group Plc & Anor
[1997] EWCA Civ 2616 · 1997-10-30
The writ in this action was issued on 16th October 1996. The Plaintiffs are Mr and Mrs Knapp who at the material time in 1990 lived at Lambournes Old Hall Farm near Colchester in Essex. The main farmhouse in which they lived was on one side of the road and on the other there was a group of outbuildings. On 16th October 1990 a fire seriously damaged these outbuildings and their contents. The value of the contents destroyed by the fire was, they say, in excess of £13,000. The Plaintiffs believed that the contents of the outbuildings were insured against fire and other risks by the Ecclesiastical Insurance Group Plc, the First Defendants in the action. They had a contents policy with the First Defendants dated 25th May 1989 which covered the period 12th April 1989 to 11th April 1990 and that policy had been renewed in April 1990 for another calendar year, expiring 11th April 1991. The renewal premium paid was £264.95. However, after the Plaintiffs had put in their claim to the Insurance Company and they had been visited by an assessor, they received a letter dated 4th April 1991 from the Insurance Company which said -"Following the fire damage to your property on 16th October 1990 we are advised by Loss Adjusters of the following:(a) You ran a business from outbuildings at the property.(b) The outbuildings were not in a good state of repair.(c) The sum insured on contents was inadequate on a "new for old" basis.(d) The building in which furniture and other contents were stored was open-ended and was not secure.Had we been aware of the above facts we would not have provided cover. This information was therefore material to the underwriting of this insurance and should have been disclosed to us.In view of the non-disclosure of facts material to the risk your policy is void ab initio (from the beginning). ...."The Insurance Company were thus electing to avoid the policy for non-disclosure. They returned the premiums.The Plaintiffs dispute that the Insurance Company, the First Defendants, were entitled to avoid the policy and the primary claim which they make in the action is a claim against the First Defendants for damages for failure to indemnify in accordance with the policy. The Second Defendant in this action is Mr David Smith who was the insurance broker who placed the original contents cover with the First Defendants on behalf of the Plaintiffs and was the person who renewed the cover on their behalf in April 1990. The Plaintiffs make an alternative claim against the Second Defendant for damages for breach of duty. The claim is made in the tort of negligence. The Plaintiffs' case against him is pleaded in their Amended Statement of Claim in the following terms -
"The proposal forms were completed by the Second Defendant who had acted for the Plaintiffs for many years and who was aware of the use and state of the insured premises.
The Second Defendant was under a duty to warn the Plaintiffs of the importance of the matters now complained of by the First Defendant, to advise the Plaintiffs how the forms should be completed and to ask sufficient questions to ensure that the Plaintiffs complied in full with their duties of disclosure. The Second Defendant owed duties as aforesaid in tort concurrently with its contractual duty to the Plaintiffs as clients to exercise reasonable care and skill.The Second Defendant did not so warn or advise the Plaintiffs or ask sufficient questions and was thereby in breach of contract, negligent or both.As a result of the Second Defendant's said breaches on 4th April 1991 the First Defendant was able to avoid the policy for non-disclosure and refuse to meet the Plaintiffs claim for losses resulting from the fire.As a result of the Second Defendant's said breaches, the Plaintiffs have suffered consequential loss and damage to the extent of £13,298 [and interest thereon], the sum to which they would have been entitled as against the First Defendant had it not been able to avoid the policy by the letter of 4th April 1991. Alternatively, as a result of the said breaches the Plaintiffs have suffered consequential loss and damage to the said extent having obtained a voidable as opposed to a valid policy."The Plaintiffs' claim against the Second Defendant raises a question of the limitation of actions. The Second Defendant has applied for an order striking out the Plaintiffs' claim against him on the ground that it is time barred. For this purpose the allegations made in the Amended Statement of Claim must (although disputed by the Second Defendant) be accepted as correct. The application succeeded before Master Turner, his being particularly impressed by the fact that the Statement of Claim originally served on behalf of the Plaintiffs disclosed no reasonable cause of action at all against the Second Defendant. The Plaintiffs appealed to the Judge in Chambers and took the opportunity to re-cast their Statement of Claim so as properly to formulate their claim against the Second Defendant and include the allegations of negligence and damage from which I have already quoted. The matter came before Sir Peter Webster sitting as a Judge of the Queen's Bench Division on 30th January of this year. He held that the action should proceed and that the Plaintiffs' claim against the Second Defendant was not bound to fail nor to be found to be time barred. With the leave of Sir Peter Webster the Second Defendant has appealed to this Court. The case has been argued in this Court by leading counsel for both parties to whom we are indebted for their careful exposition of the authorities. (The First Defendants are not affected by this part of the proceedings and have taken no part in them.)The issue is whether the Plaintiffs' cause of action in tort against the Second Defendant is time barred. The Second Defendant does not dispute that he owed to the Plaintiffs a duty of care in April 1990 at the time of effecting the renewal of the policy. He recognizes that the Plaintiffs' case is based upon alleged breaches of duty on his part that occurred shortly before 12th April 1990. There is in the present case no allegation of any breach of a continuing duty. Accordingly no later date than 12th April 1990 has to be considered for the breach of duty nor was any argument advanced before us on behalf of the Plaintiffs based upon later breaches of duty: cf Bell v Peter Browne [1990] 2 QB 495. (The point would have been academic anyway since the writ was not issued until the sixth anniversary of the fire and any causative breach of duty must have occurred outside the six year period.) The critical issue with which we are concerned is when did the Plaintiffs' cause of action first accrue, that is to say, when did they first suffer damage as a result of the Second Defendant's breach of duty so as to make that breach actionable. The Second Defendant submits that it was on 12th April 1990 when the renewal cover attached. The Plaintiffs say that it was not until 4th April 1991 when the First Defendants elected to avoid the policy, alternatively on 16th October 1990 when the fire occurred. The Plaintiffs submit that it was not until those dates that they had actually suffered any loss. Until the Insurance Company elected to avoid the policy it was still a valid cover.Sir Peter Webster accepted the Plaintiffs' argument. He concluded that until April 1991 the Plaintiffs suffered no loss capable of assessment in money terms. His reasons were -"The policy, though voidable from its inception, was prima facie valid and was treated by all concerned as valid until the time when the First Defendant came to know of the alleged non-disclosure, and avoided the policy on that ground; and although I have used the legal expression, " prima facie valid", as a matter of fact, when we are looking at the facts, there was no reason on the part of anyone to doubt its validity until that date. And unless the Plaintiffs accepted the Second [ sic ] Defendant's avoidance of the policy, it would have remained prima facie valid until the First Defendant had sought to set it aside or had resisted a claim on it and had succeeded in doing so; and if they had not done both those things, it would have remained valid in fact - not just prima facie .I accept that once the First Defendant had sought to avoid the policy it would then have been possible to evaluate the Plaintiffs' loss because by that time it would have been possible to conclude that there was some actual diminution in its value, and to have assessed and expressed in money terms the Defendants' chance of successfully avoiding liability. But until the First Defendant knew of its voidability and sought to avoid it, I find it impossible to say that there was any actual diminution in its value which could be expressed in money terms, or even any nominal diminution. Even if it is to be assumed that, because it was voidable from inception, there was some diminution in value, I find it impossible to assess, certainly on the evidence before me, and to express in money terms, the degree of likelihood that the First Defendant would become aware of the alleged non-disclosure and decide to avoid the policy on that ground.But, in any event, I am unable to conclude that there was in fact even any nominal diminution in value. If the non-disclosure were never to become known to the First Defendant there would never be any even nominal diminution in the value of the policy, and I do not know how I should evaluate a chance of their becoming aware of the alleged non-disclosure and seeking to rely upon it."He distinguished the Court of Appeal decisions in Forster v Outred [1982] 1 WLR 86, Moore v Ferrier [1988] 1 WLR 267 and Bell v Peter Browne ; he declined to follow two first instance decisions, Iron Trade Mutual v Buckenham [1990] 1 AER 808 and Islander Trucking v Hogg Robinson [1990] 1 AER 826. He said:
"I must decline to follow them because I have concluded that in my judgment they were wrongly decided, for in neither case did the Court attempt to assess or evaluate in money terms the likelihood that the voidable policies in question would be avoided, and in failing to do so, in my respectful opinion, the Courts misdirected themselves. Moreover, had they done so it seems likely that they would or might have well reached the same conclusion as I have, namely that the Plaintiffs did not sustain any loss quantifiable in money terms until the insurers became aware of the non-disclosures in question and sought to avoid the policies."
He was not swayed by the fact that Saville LJ had referred to the Iron Trades decision with approval in First National Commercial Bank v Humberts [1995] 2 AER 673. Sir Peter Webster stressed that, as stated by Neill LJ in Moore v Ferrier (at p.278), "it is a question of fact in each case whether actual damage has been established".The relevant statutory provision is s.2 of the Limitation Act 1980 which reads:
"An action founded on tort shall not be brought after the expiration of 6 years from the date on which the cause of action accrued."
In the present case the Plaintiffs are not able to rely upon the Latent Damage Act 1986 or upon the amendments it introduced into the 1980 Act."A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person." (per Diplock LJ, Letang v Cooper [1965] 1 QB at 242). Thus, the Plaintiffs' cause of action accrued when facts existed which would have entitled them to a judgment for damages in tort against the Second Defendant. In the tort of negligence the plaintiff must show that the defendant's acts or omissions have caused him loss. Negligence which does not cause loss or damage is not actionable. In Cartledge v Jopling [1963] AC 758, a personal injury action, Lord Reid said:"It is now too late for the courts to question or modify the rules that a cause of action accrues as soon as a wrongful act has caused personal injury beyond what can be regarded as negligible, even when that injury is unknown to and cannot be discovered by the sufferer, and that further injury arising from the same act at a later date does not give rise to a further cause of action." (p.774)

Lord Evershed said:

"The cause of action for such a wrong accrues when the damage - that is, real damage as distinct from purely minimal damage - is suffered." (p.774)The law was reaffirmed by the House of Lords in Pirelli v Oscar Faber [1983] 2 AC 1, an action for damages for professional negligence against a firm of consulting engineers who had advised upon the design of a building. Cartledge v Jopling was followed and applied. The cause of action in negligence accrued as soon as damage was caused independently of whether or not at that time the plaintiff was aware of it. It was in the light of these decisions that the Legislature made additional statutory provision to deal with the cases of injustice and hardship which arose from the application of the primary limitation period. English law has therefore preserved the strict primary rules governing the accrual of causes of action but has sought to avoid or mitigate injustice by specific statutory provision.I mention this at the outset of this judgment because Mr Rupert Jackson QC for the Plaintiffs has reminded us that the approach in other Commonwealth jurisdictions has not been the same. For instance, in New Zealand the decision in Pirelli v Oscar Faber has not been followed. ( Invercargill CC v Hamlin [1996] AC 624 .) In Australia a similarly distinct approach has been adopted and the English cases such as Forster v Outred have not been followed. ( Wardley Australia v State of Western Australia 109 ALR 247). Both the Invercargill and the Wardley cases clearly demonstrate that those countries have adopted different solutions to the potential injustices which arise from the strict application of the primary limitation period. In those countries judicial solutions have been found. In England the approach has been different. Additional statutory provisions have been introduced designed to achieve similar results. These provisions are premised upon the prima facie application of the primary limitation period and introduce in a defined way certain relaxations of it so as to avoid injustice. Persuasive though the reasoning in the Wardley case is, the position remains that a different approach has been adopted in this country. This Court is in any event bound by the decisions in the Pirelli and Forster cases and what has earlier been said in the Court of Appeal.The inquiry which we have to undertake therefore is one which asks when the Second Defendant's negligence first became actionable. It was at that moment that the cause of action accrued. It is immaterial that at some later time the damage suffered by the Plaintiffs became more serious or was capable of more precise quantification. Provided that some damage has been suffered by the Plaintiffs as a result of the Second Defendant's negligence which was "real damage" (as distinct from purely minimal damage) or damage "beyond what can be regarded as negligible" that suffices for the accrual of the cause of action. The parties have accordingly focused their submissions upon the question whether on or immediately after 12th April 1990 the Plaintiffs had already suffered some loss or damage as a result of the Second Defendant's (assumed) breach of duty.The primary facts are not in dispute. At that time the Plaintiffs had disbursed the renewal premium and had received in return a confirmation of the renewal of the cover. They believed that the confirmation of cover was fully binding upon the Insurance Company. They were unaware that there had been any non-disclosure or that the policy was voidable at the election of the Insurance Company once the Insurance Company appreciated that there had been a non-disclosure.There was some disagreement between counsel as to how easy it would have been to remedy the non-disclosure and obtain binding cover if (which was of course not the case) it had at that time been appreciated by the Plaintiffs that there had been a non-disclosure. The true facts could undoubtedly have been communicated forthwith to the Insurance Company either direct or through the Second Defendant. The Insurance Company could have been put to its election whether to confirm or avoid the cover. In the event of the Insurance Company electing to avoid the cover, the premium would, no doubt, have been returned and substitute cover obtained. For present purposes I am prepared to assume that there would have been no difficulty in following through this scenario and that the Second Defendant would, on the instructions of the Plaintiffs, have been able, within a very short period of time - a matter of hours not days, to have arranged for the Plaintiffs to be held covered either by the Insurance Company or some other insurer, maybe at an increased premium. None of this has been the subject of evidence and indeed the debate was entirely hypothetical because the Plaintiffs were unaware of the true facts at the material times and the Second Defendant apparently was also unaware that full disclosure had not been made. If some further investigation of the facts or the resolution of factual issues were required before it could be said that the Plaintiffs' cause of action was time barred, it would of course be inappropriate to strike out the Plaintiffs' claim against the Second Defendant. I therefore assume for present purposes in favour of the Plaintiffs that once the error had been discovered it would have been possible forthwith and without relevant loss to the Plaintiffs to have obtained either a confirmation of the cover or substitute cover. The requirement of the payment of an additional premium would not be relevant for this purpose since this matter proceeds upon the hypothesis that the non-disclosure was material. It follows that upon the making of full disclosure, which is what ought to have happened and it was the duty of the Second Defendant to see happened, a higher premium might have been charged.The authorities which call for discussion in this judgment fall into two categories. The former consists of decisions of the Court of Appeal which are binding upon us relating to the accrual of the cause of action when a solicitor is sued in tort. They are distinguishable upon their facts from the present case but lay down the principles which are to be applied. The second category consists of decisions at first instance which are not binding upon us and which Sir Peter Webster declined to follow. It is not suggested that these first instance decisions should be distinguished from the present case. The two leading cases falling within this category were both decided in the Commercial Court, the Iron Trade case decided by Mr Rokison QC (sitting as a Deputy Judge) and Islander Trucking by Mr Justice Evans. Those two decisions have been followed in other cases at first instance. There have twice been favourable references by judges of the Court of Appeal, Mustill LJ in Bell v Peter Browne at 513 and by Saville LJ in First National Bank v Humberts . However this is the first case in which this Court has specifically had to consider the Iron Trade and Islander Trucking decisions.With this introduction it is convenient to turn to the authorities and to take them broadly in chronological order.In Forster v Outred the plaintiff had instructed the defendant solicitors to advise her about executing a mortgage which charged her freehold property as security for a loan made to her son. It was her case that she should have been advised not to execute the mortgage and that the solicitors were negligent. A question arose whether her cause of action in tort against the solicitors had accrued at the time she executed the mortgage or only later when her son became bankrupt and she had to pay off the loan. The Court of Appeal held that it was the earlier date. The case is readily distinguishable upon the facts because the plaintiff undoubtedly suffered a loss from the moment she encumbered her property with the mortgage. Her property was reduced in value by the encumbrance notwithstanding that it was not to be known at that time whether the son would default. Having considered the earlier authorities Stephenson LJ said at p.98:
"On the facts of this case the plaintiff has suffered actual damage through the negligence of her solicitors by entering into the mortgage deed, the effect of which has been to encumber her interest in the freehold estate with this legal charge and subject her to a liability which may, according to matters completely outside her control, mature into financial loss - as indeed it did. It seems to me that the plaintiff did suffer actual damage in this way; and subject to that liability and with that encumbrance on the mortgaged property was then entitled to damages, not, I would think an indemnity and probably not a declaration, for the alleged negligence of the solicitor which she alleges caused her that damage."
Dunn LJ and Sir David Cairns agreed. Dunn LJ stressed that "the value of the equity of redemption of her property was reduced" (p.100) and stated -
"I approach this case on the basis that it is sufficient that it is financial loss that should be foreseen and I would hold that in cases of financial or economic loss the damage crystallizes and the cause of action is complete at the date when the plaintiff, in reliance on the negligent advice, acts to his detriment."
This decision was followed and applied by the Court of Appeal the following year in Baker v Ollard and Bentley (unreported, 12th May 1982). That too was a case of solicitors' negligence. The plaintiff and two acquaintances (Mr and Mrs Bodman) agreed to purchase a house in Margate. The defendant's solicitors were instructed to handle the purchase and advise upon the documents which should be executed. The plaintiff and the Bodmans had each contributed to the purchase price. The Bodmans were to live on the ground floor and the plaintiff on the first floor. What ought to have happened was the solicitor should have advised them that the house as a whole should be conveyed into their joint names and then separate long leases granted of the ground and first floors to respectively the plaintiff and the Bodmans. Instead the solicitor simply had the house conveyed into their joint names on a trust for sale. The result of this was that the plaintiff obtained no security of tenure nor any interest which she could separately dispose of and, when subsequently the Bodmans decided to move out and sell the house, she had to expend further money purchasing the freehold.The Court of Appeal in a judgment delivered by Templeman LJ held that the plaintiff suffered the damage at the time of the original transaction, not at the later date when the Bodmans decided to enforce the trust for sale. The main point taken on behalf of the plaintiff was that until the attitude and the intentions of the Bodmans were known there was no certainty that she would be materially disadvantaged: as at the time of the original transaction it would be impossible to say what if any loss she would suffer. The Court of Appeal rejected this argument. They held that these matters went to the quantum of damages and did not affect the fact that damages were suffered at the earlier date."Damages were suffered on that date because the plaintiff did not receive the long lease and joint tenancy which the solicitors should have secured for her. She secured instead some other different interest. She has suffered damage because she did not get what she should have got." (p.6)The Court expressly approved the need to distinguish between "events which give rise to a cause of action in negligence and events which merely have to be taken into account when assessing the quantum of damages".These cases were followed in Moore v Ferrier by a Court consisting of Kerr, Neill and Bingham LJJ. The defendants were solicitors who had advised the plaintiffs in connection with setting up a broking business. One of the employees of the business (and a shareholder) was to be a Mr Fenton. In this class of business it is important that binding covenants restricting improper competition be taken from the principal employees. The covenants prepared by the solicitors were for practical purposes ineffective. Consequently, when some nine years later Mr Fenton decided to leave the business and set up in competition with the plaintiffs, there was nothing the plaintiffs could do to stop him canvassing the plaintiffs' clients. The Court of Appeal, whilst confirming that each case depended upon its own facts and that there was no presumption, held that the plaintiffs' claim was time barred because their cause of action had accrued at the time of the original execution of the defective covenants. This case too is distinguishable upon the facts because, as was stressed in the judgments, a business inadequately protected by employee covenants has less value than a business properly so protected. (pp.277 and 280) The argument was again advanced on behalf of the plaintiffs that no one could know at the outset what the likely future attitude of Mr Fenton would be, whether if ever he would decide to leave, let alone set up in competition with the plaintiffs. The response of the Court was that "the imponderables which future behaviour presented relate to the quantification of damages and not to the existence of a cause of action". (p.277) The Court applied what had been said in Baker v Ollard: "the plaintiffs suffered damage because they did not get what they should have got". (p.278)

Lord Justice Bingham tested the matter in a way that has been found useful in later cases.

"The matter may be tested. It is common ground, on the assumption that the plaintiffs' pleaded case is correct, that the defendants were in breach of contract when they negligently advised and settled documents in 1971 and 1975. A cause of action then arose. Suppose, per impossible , that the plaintiffs had sued at once and before the later difficulties with Mr Fenton arose. They would have been bound to succeed. If of the opinion that the plaintiffs had suffered no damage the judge would have awarded them nominal damages. But it seems to me plain that the judge would not have done that on these facts. He would have assessed as best he could on the available evidence the loss reasonably flowing in the usual course of things from the defendants' breach of contract, reaching a figure that might have been large or small but would not have been nominal. I think that the plaintiffs were in argument inclined to accept that. If, in a contractual claim for negligence, the Court would have awarded other than nominal damages, I do not see how it can be said that an action in tort based on the same negligence would have been bound to fail for want of any damage as an essential ingredient of the cause of action." (p.280)It is convenient to call this test the "Bingham" test. It is upon the application of this test to the facts of the present case that the main argument has focused.Bell v Peter Browne was heard by a Court consisting of Mustill, Nicholls and Beldam LJJ. The case arose out of the breakdown of the plaintiff's marriage and the advice which his solicitors then gave him. The matrimonial home was at that time registered in the joint names of the plaintiff and his wife. It was agreed that it should be transferred into the sole name of his wife and that when she should come to sell it he would receive one sixth of the gross proceeds of sale. The wife should have executed a trust deed in his favour and his interest should have been protected by lodging a caution. The solicitors negligently failed to do either of these things. Some nine years later the wife sold the house and spent all the proceeds thereby depriving the plaintiff of his one sixth interest in those proceeds. The plaintiff sought to sue the solicitors. The Court of Appeal held that the action was time barred because the plaintiff's cause of action in tort arose at the time of the original transaction when he did not get what he was entitled to, a declaration of trust and a caution on the register. The case is distinguishable because the plaintiff's property was involved and he lost this interest as a joint owner of the property without gaining the appropriate quid pro quo . But the court again stressed that the uncertainty surrounding the future intentions of his wife went only to the quantum of the plaintiff's loss not to when the plaintiff first suffered damage or the accrual of his cause of action.The particular interest of the case derives from the failure to lodge the caution. This was treated by Nicholls LJ and the other members of the Court as raising a separate question. Its significance was that at any time prior to when the wife actually sold the house this deficiency could have been remedied. The caution could have been lodged and no concurrence or co-operation from the wife was required to do so. If it had been lodged, the wife could not have sold the house without recognizing the plaintiff's one sixth interest from the proceeds of sale. The Court of Appeal, distinguishing Midland Bank v Hett Stubbs [1979] Ch 384 held that there was no continuing duty and that the fault had occurred at the time of the original transaction when the solicitor had failed to do what was required of him. But as will be appreciated the fact that at any time the failure to lodge the caution could have been remedied raised a question whether or not that failure gave rise to any loss or damage. This point is important to the present case because as I have already observed the failure to disclose could equally easily have been put right. I will therefore quote fully what Nicholls LJ said on this point at p.503. He called the failure to obtain the declaration of trust "failure (a)" and the failure to lodge the caution "failure (b)". He stressed that it "was within the plaintiff's own power to remedy failure (b) so long as the house continued to belong to his former wife" and that he did not need her consent. Nicholls LJ continued:
"I am unable to accept that remediability puts failure (b) on the other side of the line from failure (a). The solicitors' breach of duty in 1978 was remediable by the plaintiff, but that was only possible after he became aware that there had been a breach of duty. Apart from any other consideration, to treat the plaintiff's ability to remedy the breach himself without the concurrence of his former wife as a ground of distinction between this case and cases such as Baker v Ollard would be to disregard the unlikelihood in practice of the plaintiff ever being in a position to remedy the breach. Once the solicitors closed their file, it was unlikely that failure (b) would come to the notice of the plaintiff or the defendants, until the house was sold and it was too late. That, on the pleaded facts, is exactly what happened. The first the plaintiff knew was his one-sixth share was not properly protected was after it had gone beyond recall. So his ability to remedy the breach before the house was sold was a matter of more theoretical interest than practical importance.
In considering whether damage was suffered in 1978 one can test the matter by considering what would have happened if in, say 1980 the plaintiff had learned of his solicitors' default and brought an action for damages. Of course, he would have been entitled at least to recover from the defendants the cost incurred in going to other solicitors for advice on what should be done and for their assistance in lodging the appropriate caution. The cost would have been modest, but not negligible."At p.513 Mustill LJ said:
"As to the claim in tort, I have little to add. The transaction caused the plaintiff to exchange his valid legal estate for an equitable interest in the proceeds of sale which was dependent on the goodwill and solvency of the wife unless and until protected by a formal declaration of trust and the lodging of a caution. The failure to see that these steps were taken promptly meant that the plaintiff was actually and not just potentially worse off than if the solicitors had performed their task competently. The sale in 1986 simply meant that the breach and its consequences were unremediable. As Nicholls LJ has pointed out, the solicitors' negligence had two different aspects: the wife's participation in a formal instrument, and the failure to protect the interest by a caution, but I respectfully agree with his view that this characteristic forms no ground for distinguishing Baker v Ollard and Moore v Ferrier which are binding on this Court.
I would add that since the conclusion of the arguments a report has appeared of the decision of Mr Kenneth Rokison QC in Iron Trade Mutual Insurance Co Ltd v Buckenham where a similar point to the present arose in the context of claims against insurance brokers. After extensive discussion of the cases to which Nicholls and Beldam LJJ have referred the deputy judge arrived at a conclusion identical to our own."From these authorities it can be seen that the cause of action can accrue and the plaintiff have suffered damage once he has acted upon the relevant advice "to his detriment" and failed to get that to which he was entitled. He is less well off than he would have been if the defendant had not been negligent. Applying this to the present case, the Plaintiffs paid their renewal premium without getting in return a binding contract of indemnity from the insurance company. They had acted to their detriment: they did not get that to which they were entitled. The fact that how serious the consequences of the negligence would be depended upon subsequent events and contingencies does not alter this; such considerations go to the quantification of the Plaintiffs' loss not to whether or not they have suffered loss. The risk of loss existed from the outset and in the absence of better evidence would have to be evaluated and assessed as a risk and damages awarded accordingly.The ability to remedy the failure to lodge the caution was not treated by the Court of Appeal in Bell v Peter Browne as making any difference to the application of these principles. On a literal application of the "Bingham" test it can be argued that it should have. If the consequence of the defendant's breach of contract or negligent conduct can be immediately and easily remedied, the duty of the plaintiff is to take reasonable steps to avoid or mitigate his loss. It is thus possible to visualize a situation where the relevant fault can be so easily remedied that no more than nominal damages will be recoverable in an action in contract, and, as the Plaintiffs submit, any cause of action in tort fail. It is possible to detect three elements in the reasoning of Nicholls LJ and his rejection of the plaintiff's argument in relation to "failure (b)".Firstly he points out that the failure creates a risk and indeed it is this risk which forms the subject matter of the action. Secondly he points out that it is unreal to fail to take into account the fact that the plaintiff is unaware of the failure to lodge the caution. It only becomes possible for the plaintiff to remedy the breach "after he became aware that there had been a breach of duty". It is not right to make the assumption that the plaintiff knows of the breach. His ignorance of it is indeed one aspect of the failure of the defendant to perform his professional duty.In the present case the Second Defendant was under a duty, inter alia, to advise the Plaintiffs. The Second Defendant failed to advise the Plaintiffs that the renewal was not binding upon the insurance company and implicitly he advised that he had effected a binding renewal of the cover. It is a consequence of the Second Defendant's breach of duty that the Plaintiffs were unaware of the true position and that they were therefore deprived of the opportunity to remedy the nondisclosure. The formulation by Bingham LJ of his test in Moore v Ferrier needs to be read with this qualification. The hypothetical action and trial visualized by Bingham LJ cannot include a hypothetical outcome based upon knowledge which the plaintiff did not have at that time and which he did not have because of the breach of duty of the defendant.This consideration also provides the answer to a further argument advanced by Mr Jackson that the principle of mitigation and causation are inter-related and it can be said that there is no duty of care to protect a plaintiff from loss or damage against which he could in the ordinary course protect himself and which he could be reasonably expected to avoid. A plaintiff cannot reasonably be expected to deal with a risk of which he is unaware. A defendant whose duty it was to inform the plaintiff of the existence of that risk cannot rely upon the ease of avoiding that risk when he has failed to inform the plaintiff of it.The third strand of the reasoning of Nicholls LJ is that he considered that, on the facts of Bell v Peter Browne, remedying the failure to lodge the caution would, although easily accomplished, have still involved the plaintiff in some modest "but not negligible" cost. For the reasons which I have given earlier in this judgment I consider that it would not be right in the absence of evidence to make any assumption one way or the other about whether the remedying of the non-disclosure would have been likely in the present case to involve the Plaintiffs in any additional expense. Therefore, in my judgment, insofar as Nicholls LJ has founded himself upon this third consideration, it does not avail the Second Defendant in the present case.The two leading first instance cases both arose from non-disclosure or misrepresentation at the time of placing relevant risk. The insurances were more complex and any question of remedying the non-disclosures or misrepresentations would have required careful investigation if they were thought to be critical to the limitation of actions issue. In the Iron Trade case the plaintiffs were an insurance company who were ceding risks to another insurance company under a quota share agreement. In the latter case, Islander Trucking , the policy appears to have been a liability policy which, whilst a form of direct insurance, would involve different market considerations from a simple domestic fire insurance. It is not necessary to quote from the judgments in those cases. They involved an application of the principles which I have already extracted from the Court of Appeal decisions and are in my judgment fully consistent with them -as clearly was also the view of Mustill LJ which I have already quoted. Similarly, in First National v Humberts Saville LJ referred to Iron Trade as involving an application of the same principle as the Forster and Bell cases. He said:"In all those cases, however, the court was able to conclude that the transaction then and there caused the claimant loss on the basis that, if the injured party had been put in the position he would have occupied but for the breach of duty, the transaction in question would have provided greater rights, or imposed lesser liabilities or obligations than was the case; and that the difference between these two states of affairs could be quantified in money terms at the date of the transaction." (p.679)The plaintiffs suffered loss as soon as they received an insurance contract which was not binding upon the insurers. The subsequent events, the question whether or not the insurers would thereafter avoid the policy and with what consequences, went only to the quantification of loss not to the identification of the first moment at which a plaintiff suffered loss and the tort became actionable. There is a reference to the "Bingham" test in the judgment of Mr Rokison at p.820 but the argument seems to have been put as a matter of causation rather than in the way it has been put by Mr Jackson in the present case; the references do not appear to assist for present purposes. It must also be borne in mind that Mr Rokison did not have the benefit of the discussion in Bell v Peter Browne .Accordingly, I consider that, on the law as laid down by the House of Lords and the principles upon which the Court of Appeal decisions are based, the first instance cases were correctly decided and, on the facts of the present case, it must be concluded that the Second Defendant's negligence became actionable at the suit of the Plaintiffs on about 12th April 1990 well outside the six year period. The loss which the Plaintiffs then suffered was the receipt of a purported cover which was not binding, a deficiency of which they were not aware, in return for the payment of the renewal premium. Had it been necessary to do so the Court could and should have put a monetary value upon that loss at that time. It would exclude the possibility at that time of remedying the deficiency because the Plaintiffs were in fact unaware of it and their state of knowledge arose from the breach of duty of the Second Defendant.We have been referred by Mr Jackson to certain additional authorities one of which I should briefly mention. In Hopkins v McKenzie [1995] 6 Med LR 26, a decision of the Court of Appeal, the plaintiff had been the plaintiff in an earlier medical negligence action against a health authority. His solicitors had failed to prosecute that action diligently. In 1985 he had changed his solicitors but shortly afterwards the health authority issued a summons to strike out the action. That summons was heard the following year and that action was then struck out. Just under six years after the date of the striking out order, the plaintiff started the action which was before the Court of Appeal; it was a solicitor's negligence action against the firm who had been responsible over six years earlier for the delay in the medical negligence action. The question was whether this claim was time barred and this in turn raised the question whether or not the plaintiff had suffered any actionable loss as a result of the defendant solicitors' negligence before the health authority had obtained the striking out order. The Court of Appeal held that he had not. The decision is difficult to reconcile with the earlier authorities and arguments similar to those which I have accepted in the present case were advanced on behalf of the solicitor defendants without success. However for the purposes of the present case it suffices to say that the Court of Appeal in Hopkins v McKenzie were clearly of the view that they were applying the principles to be derived from the earlier authorities. Saville LJ said at p.30:
"In all these cases the Court concluded that at the time of the allegedly negligent transaction the plaintiff had suffered actual loss or damage either through a diminution in the value of the plaintiff's property or through an increase in the plaintiff's obligations or through the plaintiff not securing the rights which should have been secured. In the words of Mustill LJ in the last of the cases cited (at p.513 of the report) the plaintiff was actually and not just potentially worse off than if the solicitors had performed their task competently"
Lord Justice Saville had previously approved the Iron Trades decision and he includes in the quotation which I have just made the words "through the plaintiff not securing the rights which should have been secured". I do not consider that Hopkins v McKenzie can be taken as qualifying the earlier decisions of the Court of Appeal or the principles to be derived from them.In my judgment Sir Peter Webster was wrong to treat the voidable policy as of the same value as a policy which was binding upon the Insurance Company and to say that no assessable damages had been suffered at the time of its renewal. His approach was inconsistent with the judgments of the Court of Appeal; he was wrong to decline to follow the first instance decisions. The Plaintiffs had correctly pleaded that they had suffered damage "having obtained a voidable as opposed to a valid policy". The fact that their damage might have had to have been assessed as a risk goes only to its quantification not to the accrual of the cause of action. The Second Defendant's negligence had become actionable. The Plaintiffs' claim is time barred and this appeal should be allowed.

LORD JUSTICE BUXTON:

I agree that this appeal should be allowed. Since we are differing from the very experienced judge below, and since there has been some difference of opinion at first instance on the issues involved in cases of this type, I venture to add some words of my own.The law in this jurisdiction remains as set out in Cartlidge v Jopling and Pirelli General Cable Works v Oscar Faber . The sole issue in the present case is therefore the date upon which relevant damage occurred; and, more particularly, whether that damage occurred on the inception of the policy on 12 April 1990. It was conceded by the respondent that on that date the plaintiffs received a policy that was not valid but voidable. The short answer to the appeal would therefore seem to be that the plaintiffs were then, and thereafter, suffering actual damage in legal terms. The quantification of that damage might be difficult, and might depend on contingencies that had not arisen, either on 12 April 1990 itself or indeed at the date of trial. That, however, does not affect the existence of damage at the date of the defendants' failure of duty. As Templeman LJ put it in Baker v Ollard & Bentley at p.6C:
"the fact that the quantum of damages suffered by the plaintiff on [the date of the breach of duty] could immediately thereafter, or at any time thereafter, only be established by ascertaining the attitude and intentions of [a third party] only goes to quantum of damages and does not affect that fact that the damages were suffered on [the date of the breach of duty]. Damages were suffered on that date because the plaintiff did not receive the long lease and joint tenancy which the solicitors should have secured for her. She secured instead some other and different interest. She suffered damage because she did not get what she should have got."
By the same token, the plaintiffs in our case did not get what they should have got on 12 April 1990: that is, an insurance policy that was binding on the insurer.The plaintiffs sought to resist this simple approach by a variety of arguments, the substance of which however centred on what has come to be called "the Bingham test". This test is taken from a passage in the judgment of Bingham LJ in Moore v Ferrier [1988] 1 WLR 267 at p.280 C-F, that has been set out by Hobhouse LJ in his judgment. For reasons that I shall seek to develop, I think that it is not correct to treat that passage, as the plaintiffs sought to treat it, as a universal criterion applying to determine all issues as to the date of accrual of damage; and indeed that it is unhelpful to approach the passage as incorporating a "test" at all.In Moore v Ferrier , as in this case, the plaintiff needed immediately effective legal protection against a possible future danger, and because of the incompetence of his advisers on whom he had relied to secure that protection had failed to achieve it. The appellant plaintiff in Moore v Ferrier argued, by analogy with the building cases, that a defective covenant or similar legal document was a mere defect or weakness, that only ripened into relevant damage when the client actively and unsuccessfully sought to rely upon it. Bingham LJ agreed with Neill and Kerr LJJ in rejecting that argument, they citing inter alia the analysis of Templeman LJ in Baker v Ollard & Bentley that I have ventured to refer to above: see [1988] 1 WLR at pp.278F and 281B. Bingham LJ then turned to deal with a further and alternative argument raised by the plaintiff, that there had been no evidence before the trial judge in Moore v Ferrier that had entitled him to conclude that at the date of the breach of duty there had been any damage suffered by the plaintiffs which was capable of quantification : see [1988] 1 WLR at p.273F.Bingham LJ agreed that the task of quantification would be difficult, but he did not accept that it would be impossible, pointing out that judges are well accustomed to attributing a money value to the possibility of various future events. He then continued with the passage already set out by Hobhouse LJ.It is important to note a number of features of this part of Bingham LJ's judgment. First, he was very far from suggesting that the "test" was the only or conclusive guide to whether damage had occurred at a particular point in time. Second, Bingham LJ saw this part of his judgment as following and applying the orthodox and accepted law as to the accrual of damage, as is shown by the next passage in the judgment:
"I do not think that there is, on the straightforward application of familiar principles, any escape from these conclusions. I am not therefore surprised to find that other courts have also reached the same conclusions; see Forster v. Outred & Co [1982] 1 W.L.R. 86; Melton v. Walker & Stanger 1 July 1981; Baker v. Ollard & Bentley (unreported), Court of Appeal (Civil Division) Transcript No 155 of 1982; Aikman v. Hallett & Co., 20 March 1987. It is pointed out, necessarily correctly, that the facts of those cases are different from those of the present, and in some of the damage suffered by the claimant at the time of the execution of the agreement in question is perhaps more obvious than in the present case. Each of the cases is, however, in my view inconsistent in principle with the plaintiffs' contention in this case that they suffered no damage in 1971 and 1975."
Third, the "test" is clearly seen by Bingham LJ as involving the use of an extreme and hypothetical example, deployed to try to test to destruction (in the event unsuccessfully) the conclusion that he had already reached that it would have been possible on the facts before him to quantify the plaintiffs' damage at the date of the breach of duty in more than nominal terms.In my view, therefore, the significance of this part of Bingham LJ's judgment in Moore v Ferrier is not, as was urged on us, that it lays down a general test, to which the court should go first when deciding whether on a particular date damage had already occurred. Rather, it is a reminder that if damage has been caused in, for instance, Forster v Outred terms, a negligence action is thereafter very unlikely to fail on the ground that that damage is unquantifiable. To give this part of Bingham LJ's judgment wider significance than that is bound to produce great artificiality, as indeed the case before us demonstrated.The appellants urged that if an action such as hypothesised in Bingham LJ's judgment had been brought in this case at the time of the breach, the plaintiffs would have recovered nothing. That would have been because, on being informed of the true facts, the defendant brokers would have reported those facts to the insurance company and, the policy merely being voidable and not void, the company would either have waived the breach and continued the insurance or would have cancelled the policy and returned the premium. The plaintiffs would have been no worse off in the latter case, since they could use the premium to obtain other insurance, which would no doubt have been secured for them by the brokers at no further fee. I leave aside the question of whether in those circumstances there would nonetheless have been some what might be called collateral loss to the plaintiffs, even if only in terms of inconvenience, though I am far from persuaded that that would not be a factor to be taken into account. The reason for using an insurance broker is, after all, to obtain insurance without fuss or trouble. Rather, however, I turn to the difficulties of applying the test in our case.First, if it is to work at all in the way in which it was sought to be used by the respondents, the test has to assume not merely one impossibility, an action at the time of the breach, but also another impossibility, that that action took place, and made available the hypothesised reactions on the part of the broker and the insurance company, at the very same moment as the breach. If there were any period of time, any scintilla temporis , between the failure to warn the plaintiffs on the inception of the policy and the putting right of the mistake as the result of the action, then there would have been a period during which the plaintiffs had a voidable rather than a valid policy. A hazard of short duration might be quantifiable only in a very small amount, but the fact that an award of damages is small does not mean that it is nominal: see per Lord Halsbury LC in The Mediana [1900] AC 113 at p.116.Second, as counsel for the defendants pointed out, the hypothesised action requires it to be assumed that the plaintiffs were aware of the defendants' failure: otherwise, they would have no reason to think of suing. But in our case, in contrast to Moore v Ferrier , part of the plaintiffs' complaint is that they were given no warning by the defendants of the importance of the matters that had been omitted. The hypothesised action therefore requires the assumption of a matter, knowledge on the part of the plaintiff, that if established would be fatal or seriously damaging to the plaintiffs' claim.Third, the "test" can only succeed in displacing a claim based on prima facie damage if it can be used to show that it would be impossible for that damage to result in any loss. That is because it is to be assumed, as Bingham LJ and the rest of the Court of Appeal assumed in Moore v Ferrier , that damage can be quantified in terms of future events, and therefore that exercise is only impossible if no such future events can be expected. As I have sought to demonstrate, that impossibility can only be demonstrated in this case by making assumptions that leave the real world far behind.I have ventured to go into this matter in some detail because it was the main ground on which it was urged that we should not adopt the commonsense view that a person whose adviser causes him to receive a voidable policy when he was led to expect a valid policy is thereby suffering damage. Properly understood, reference to Moore v Ferrier does not displace that view in this case.I should further say something about the Australian case of Wardley Australia Ltd v State of Western Australia (1992) 109 ALR 247 [" Wardley "]. I do not accept the contention of counsel for the respondents that, in a striking out application, the court should take note of the law of other jurisdictions not directly to apply it, but as some sort of indication that the present law in this jurisdiction may in due course be altered to follow views expressed elsewhere. In striking out, as in any other type of case, we have to apply the law as it now is. But any view of the High Court of Australia is important for a quite different reason. Where that court has commented on English authorities, we will wish to look anxiously at what they have said, to test whether the conclusions that we have reached as to the present bearing of those authorities is in fact correct.In Wardley the complaint was that negligent representations had been made by D to P about the financial standing of R. That caused P to guarantee R's debts, a guarantee that was eventually called. P issued his writ against D at a time that was outside the limitation period if the cause of action accrued when P entered into the guarantee, but within the limitation period if the cause of action accrued when the guarantee was called.The leading judgment of the court in Wardley was quite clear that the effect of the English decisions is that
"where the plaintiff is induced by a negligent misrepresentation to enter into a contract and the contract, as a result of the negligence, yields property or contractual rights of lesser value, the plaintiff first suffers financial loss on entry into the contract, notwithstanding that the full extent of the plaintiff's financial loss may be incapable of ascertainment until some later date."
See Mason CJ at 109 ALR p.257 and n34, citing Baker v Ollard, Moore v Ferrier, Islander Trucking and Bell v Peter Browne.The court however rejected, or at least doubted, the argument put to it that those decisions establish that the plaintiff necessarily suffers loss on entry to an agreement notwithstanding that the loss to which the plaintiff is subjected by the agreement is loss upon a contingency: what is required is actual loss on entry, quite apart from the contingent loss threatened at a later date (see Mason CJ at 109 ALR p.257, 1136-44). Since P's guarantee only "generat[ed] an executory and contingent liability upon the part of [P], [P] suffered no loss until that contingency was fulfilled and time did not begin to run until that event": see 109 ALR at p.260, l4.None of these propositions seem to me, any more than they seemed to the High Court of Australia, to be inconsistent with the current English law. True it is that some further passages in the leading judgment in Wardley , 109 ALR pp.258, l40-259, l35, suggest that in some cases that court might take a different view from the English courts when identifying what it calls actionable actual loss (as opposed to a mere potential for loss). That does not however displace the conclusion that, on the English authorities applied by the High Court, actionable actual loss is suffered by an insured when he receives a voidable policy.

LORD JUSTICE BUTLER-SLOSS:

I agree.

Order

Appeal be allowed; order of Sir Peter Webster (sitting as a High Court Judge) dated 30 January 1997 be set aside; order of Master Turner be reinstated; the plaintiffs' application for leave to appeal to the House of Lords refused; second defendant's costs of appeal and in the court below and of the action be paid by the plaintiffs; plaintiffs' liability for the costs in the lower court be adjourned for determination under Regulation 127(a) of the Legal Aid Regulations; an order under section 18 of the Legal Aid Act be made against the Legal Aid Board; plaintiffs' contribution assessed at nil.

Cited in 1 later judgment