MALIK JAVID KHAN v R M FALVEY [2002] EWCA Civ 400

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEEN’S BENCH DIVISION

MCKINNON, J.

[2002] EWCA Civ 400

Case No Case No: A2/2001/1054

Venue Royal Courts of Justice, Strand,, London, WC2A 2LL

Between

MALIK JAVID KHANRespondent

R M FALVEYAppellant

Before

Lord Justice Schiemann

Lord Justice Chadwick

Sir Murray Stuart-Smith

A.R. NICOL (instructed by Pinsent Curtis Biddle for the Appellant)

A. RIZA Q.C. and B. ANGAMMANA (instructed by Singh & Co.for the Respondent)

[1]Sir Murray Stuart-Smith: Introduction. This is an appeal from the decision of McKinnon, J. handed down on 27 th April 2001 on a preliminary issue in which the learned judge held that the claimant’s causes of action were not statute-barred pursuant to Section 2 of the Limitation Act 1980.

[2]In this action the Claimant sought to recover damages for alleged professional negligence from his former solicitor. The Defendant was one of a number of solicitors instructed to act by the Claimant from time to time over a lengthy period in respect of several different disputes. In particular, from time to time the Claimant instructed the Defendant to act on his behalf;(a) In a High Court Action (1985 K No. 196) against a Mr Kanuga (“Case 1”);

(b) In a High Court Action (1986) M No. 1674) against Maurice Lay Distribution Ltd. (“Case 3”) and

(c) In a High Court Action (1989 K No. 1445) against a Ms Begum and Mr Hussain (“Case 4”); The Claimant’s retainer of the Defendant was not an entire contract because on occasion the Claimant would either act on his own behalf or instruct alternative solicitors to so act. The Claim Form in this action was issued on 2 nd June 1999. All the actions set out above were dismissed for want of prosecution; Case 1 on 11 th September 1997, Case 3 on 17 th July 1997 and Case 4 on 1 st March 1999.

[3]The Claimant’s pleaded case in respect of Case 1 is as follows:- The Defendant’s retainer commenced in early 1987 when the Defendant was asked to act for the Claimant to recover a trade debt which had allegedly arisen in 1984. The Claimant alleges that he has suffered loss and damage by reason of the Defendant’s defaults and specifically asserts that had the Defendant acted competently Judgment in Case 1 would have been entered in his favour by 31 st . December 1988. In this action the Claimant claims to recover the amount claimed in the earlier action £7,933.00 (plus interest thereon) and the total amounts paid to the Defendant and another firm of solicitors by way of costs and expenses.

[4]The Claimant’s pleaded case in respect of Case 3 is as follows:- The Defendant’s retainer commenced in March 1986 when the Defendant was asked by the Claimant to resist a claim made against the Claimant in respect of a commercial debt and to make a counterclaim. It is alleged that a payment on account of the Defendant’s fees was made in the sum of £1,747.50 and this total sum is claimed as damages in the current action. It is also alleged that the Claimant put the Defendant in funds to make a payment to his opponent’s solicitors of £11,200 on 2 nd August 1989 as a condition of being granted permission to defend, that this sum was so paid and this sum is claimed as damages in the current action. The Claimant also claims to recover as damages in this action the loss of the opportunity to recover in respect of his counterclaim in the earlier action damages in the sum of £51,000 plus interest thereon and asserts that judgment in the earlier action should have been entered in his favour by 31 st December 1989 had the Defendant acted competently.

[5]The Claimant’s pleaded case in respect of Case 4 is somewhat complicated and unclear, but it appears to be as follows:- The Defendant’s retainer commenced in 1989. The Claimant instructed the Defendant to act for him in an attempt to recover alleged arrears of rent which he claimed had arisen in respect of a property which he alleged he owned in Hounslow, Middlesex. The Claimant claims that the Defendant acted in breach of his duty by failing to recover possession of the premises on his behalf and asserts that possession should have been obtained by January 1990. Accordingly in this action the Claimant seeks to recover damages for the rent that he alleges he would have received for the property between January 1990 and November 1992 (when the property was repossessed) plus interest thereon but which he did not receive as a result of the alleged negligence of the Defendant. The Claimant also seeks to recover the total amounts paid to the Defendant in the sum of £1,800. It appears that the Defendant’s retainer was terminated sometime in 1992 but he was reinstructed in January 1993. During the period that the Claimant acted in person he obtained a judgment against the tenants for £22,344. But the judgment was subsequently set aside and the action, which included a claim for £16,500 for damage allegedly caused by the tenants, was transferred to the County Court. The arrears of rent and the damages were not recovered before the action was struck out on 1 st March 1999.

[6]The total claim against the Defendant is in the sum of £409,563, and is clearly calculated on the basis that the Claimant has been owed certain moneys by the Defendant’s since 1988, 1989, 1990 and 1992.

[7]The allegations of negligence against this Defendant are in substantially the same form mutatis mutandis in each Case, though those in respect of Case 4 are more elaborate. Thus in Case 1 the particulars of negligence allege:

“(1) Failing to take procedural steps, in particular discovery of documents, preparation of proofs and/or witness statements, taking out a summons for direction and setting the claim down for trial, in Case 1 after 18 th March 1988 and/or 30 th September 1994. (2) Failing to warn the Claimant’s expressly that if such steps were not taken his claim in Case 1 would be amenable, as it was, to be struck out for want of prosecution at any time after 1990.”

[8]In each case, in addition to the specific items of loss claimed, the Claimant claims the loss of opportunity to recover the sums claimed in the original action. Thus in Case 1 particulars of loss and damage include: (2) Loss of opportunity to recover £7,933.00 and interest thereon from the date of issue of the writ until an expected date of judgment, which ought to have been by 31 st December 1988. The Judge’s decision.

[9]The Judge held that none of the claims under Case 1 and Case 3 were statute barred. He also held that in Case 4 the claims to recover the Claimant’s own costs of £1,800 paid to the Defendant and the opportunity to recover the arrears of rent in the sum of £22,244.39 were not statute barred. In relation to the other claims under Case 4, he held that there was insufficient material upon which he could reach a decision as to when the cause of action arose. The judge held that he was bound by the decision in Hopkins v Mackenzie [1995] PIQR 43 (CA) to hold that the causes of action did not arise until the actions in each case were struck out for want of prosecution. Since all the actions were struck out within the six year limitation period before the issue of the claim, none was statue barred. The Defendants Submissions

[10]Mr Nicol on behalf of the Defendants/Appellants submits that the Judge was in error. He makes three submissions: 1. That each of the three cases are distinguishable from Hopkins v Mackenzie, because on the Claimant’s own pleaded case he sustained loss and damage due to the same alleged acts of negligence before 1 st June 1993 (the limitation date). Whereas in Hopkins v Mackenzie the only claim appears to have been for the loss of the opportunity to obtain damages for personal injury by reason of the strike out of the original action. 2. Alternatively that the ratio decendi of Hopkins v Mackenzie should be narrowly confined on the basis that the only pleaded case advanced was the loss of the chance to recover in the original action and that loss was sustained when the action was struck out and not before.. 3. That Hopkins v Mackenzie was wrongly decided and cannot stand in the light of the subsequent House of Lords decision in Nykredit Mortgage Bank PLC v Edward Erdman Group Ltd (No. 2)

[1997] 1 WLR 1627

. The first submission. The law.

[11]It is trite law that a cause of action in negligence does not arise until the claimant suffers damage as a result from negligent act of the defendant. But once real damage – as distinct from purely minimal damage is sustained - the cause of action arises, even though greater loss may later eventuate from the negligence. In Cartledge v E. Jopling and sons Ltd

[1963] AC 758

Lord Reid said at p. 771:

“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.”

The harshness of the rule has been mitigated by subsequent legislation. But the Claimant does not seek to rely on any of the provisions of such legislation.

[12]In Forster v Outred and Co.

[1982] 1 WLR 86

at p. 94 Stephenson LJ accepted counsel’s submission as to what was meant by actual damage which is a necessary ingredient in the cause of action for negligence:

“..... it is any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous provisions or covenants in leases. They are all illustrations of a kind of loss which is meant by ‘actual’ damage. It was also suggested in argument.....that ‘actual’ is really used in contrast to ‘presumed’ or ‘assumed’. Whereas damage is presumed in trespass and libel, it is not presumed in negligence and has to be proved. There has to be some actual damage.”

This has been accepted in a number of subsequent decisions of this Court and also in the House of Lords in the Nykredit case. Lord Nichols of Birkenhead, with whom the other members of the House agreed, approved this statement of the law. He added at p. 1630:

“I add only the cautionary reminder that loss must be relevant loss. To constitute actual damage for the purpose of constituting a tort, the loss sustained must be loss falling within the measure of damage applicable to the wrong in question.”

In other words the actual damage must be caused by the alleged negligent act in question and must not be too remote in law.

[13]In each of the cases with which we are concerned the Claimant sustained actual damage prior to 1 st June 1993. Thus in Case 1 £800 was paid by way of costs to the Defendant and £1,200 to the Claimants previous solicitors. Even in the unlikely event that some of these costs might have been recovered as a result of an order for costs in the action if it had succeeded, damage was sustained by the payment and interest would not be recovered. Secondly judgment in the action should, according to the pleading have been obtained in December 1988, so the Claimant had been kept out of his money since that date. In Case 3, £1,747.50 had been paid by way of costs to the Defendant, and £11,200 to the opposing solicitors as a condition of leave to defend, and the Claimant has been kept out of £51,000, the amount claimed in the counterclaim, for which it is alleged judgment should have been obtained by 31 st December 1989. In Case 4 costs of £1,800 had been paid to the Defendant, and the loss of opportunity to recover rent on a reletting was said to run from January 1990, when possession of the premises should have been obtained. All these losses are said to be caused by the dilatory and negligent prosecution of the actions by the Defendant, which thereafter continued.

[14]In his submissions to us Mr Riza QC for the Respondents accepted that these claims were statute barred. But he submitted the claims for loss of the chance of recovery of the sums claimed in the original actions were nevertheless not barred: that he submitted was the result of Hopkins v Mackenzie . This submission was accepted by the Judge. It was not clear from Mr Riza’s submissions whether he accepted that the Judge was wrong in holding that none of the claims referred to in paragraph 13 above was statute barred, or that, because the claims for loss of a chance were not barred until six years from the time the action was struck out, for some reason the claims in respect of the pre-June 1993 losses survived. The Judge appears to have thought this was the result of Hopkins v Mackenzie . I must now turn to consider that case, because in my judgment the Learned Judge was wrong in thinking that the decision obliged him to come to the conclusion he did.

[15]In that case the claimant brought an action for personal injury against the governors of a hospital alleging negligence in relation to an operation performed on him in 1979. He retained the defendant to act as his solicitor. A writ was issued in February 1982. On 4 th February 1986 the action was struck out for want of prosecution. On 27 th January 1992 the claimant issued a writ against the defendant who denied negligence and sought to rely on the defence of limitation. Allowing an appeal from the Deputy High Court Judge the Court of Appeal held that the claimants cause of action did not accrue until the action was struck out; the claimant sued in respect of the loss of his cause of action, which did not occur until it was struck out, and not in respect of some earlier depreciation of his cause of action.

[16]Saville LJ gave the leading judgment. After citing Forster v Outred and the cases that followed it he set out Mr Rupert Jackson QC’s submissions as follows at p. P45:

“The principal submission was that the medical negligence claim was one for economic loss. The cause of action had a value. Once there was a real risk that it would be struck out, that value was thereby materially diminished. The alleged negligence of the solicitors had therefore caused quantifiable economic loss to the plaintiff, long before the action was actually struck out. The alternative submission was that on the plaintiff’s own pleaded case it was by the beginning of 1986 at the latest inevitable, or at least highly probable, that the action would be struck out, so that from that time the plaintiff had, through the alleged negligence of the solicitors, lost the chose in action he had previously possessed, namely his cause of action for medical negligence. The difference in the two submissions is that the first does not require proof that the cause of action was lost, but only a real risk that it would be struck out, while the second depends on showing, as a matter of inevitability or on the balance of probabilities, that the chose in action would be lost through the negligence of the solicitors.”

[17]Saville LJ did not accept these submissions; he said at p. P45:

“It is convenient to deal with the second submission first. The underlying proposition, as it seems to me, is that loss or damage can be treated as having occurred if it can be shown, as a matter of inevitability or probability, that it will occur. I know of no authority to support this proposition. Indeed it seems to me that the authorities cited are to precisely the opposite effect, for all make clear that what must be shown is actual loss or damage, not future loss or damage, however likely it is that this will occur. Until February 4, 1986, the plaintiff has not lost his cause of action, for until that date it survived. Were Mr Jackson right in this submission, then as it seems to me, in all the cases cited the cause of action would have come into being at an earlier time than that held to be the case, i.e. when it became inevitable, or probable, that the plaintiff was going to execute the document in question or (in the case of Bell v. Peter Browne, when the solicitor was going to take steps to secure his client’s interest. In my judgment the first submission fails for much the same reasons. As at January 27, 1986, the plaintiff’s cause of action for his medical negligence claim remain in being. Certainly the plaintiff was by then potentially worse off as a result of the alleged negligence, since he was highly likely (if not foredoomed) to lose his cause of action. To my mind, however, he had not at that stage suffered that loss or damage. As Mr Whitfield Q.C. put it on behalf of the appellant, unlike the cases cited, before the action was struck out his client had not actually been affected by the negligence; since all that had happened was that there had arisen a risk, or probability, or even an inevitability, that in the future his client would be affected, i.e. would lose his cause of action. The essence of the first submission (and, as it seems to me, of the reasoning of the deputy judge) is that the plaintiff’s claim had an ascertainable value which could be, and in this case was, diminished through the negligence of the solicitors, long before the action was actually struck out. An action at risk of being struck out without the possibility of revival may well diminish the value of the claim being pursued in the action, since, apart from anything else, the settlement value of the claim is likely to be reduced. To my mind, however, the overwhelming difficulty with this submission is that it simply ignores the fact that the plaintiff is not suing for any earlier diminution in the value of his claim, but for the loss of cause of action, through his solicitor’s negligence, on February 4, 1986. As in Kyle v. Stormonth Darling [1993] SCLR 18 , what on the plaintiff’s case has been lost is the right to advance his medical negligence claim in a court of law. That loss was not sustained until the action was struck out. To my mind a cause of action for diminishing the value of a claim is not the same thing as a cause of action for losing the right to advance that claim in a court of law.”

[18]Saville LJ then considered Mr Jackson’s submission that it was not necessary for the action actually to be struck out before the client could bring tort proceedings against the solicitor for negligence. Mr Jackson gave the example of a case where solicitors had simply allowed the action to go to sleep for years. There he submitted, the solicitors could hardly defend themselves by saying that the claimant had no cause of action because there had been no striking out order. Saville LJ again rejected this submission. At p.46 he said:

“In my view, however, Mr Whitfield provided the answer to this point. If the plaintiff was claiming that his cause of action had been lost, then he would have to establish that fact, for otherwise, ex hypothesi , he would not establish any causal link between the conduct complained of and the consequences alleged: cf. Hotson v. East Berkshire Health Authority [1987] AC 750 .”

[19]Mann LJ agreed with Saville LJ; he added at pages 46-47:

“I wish to reserve my position upon the question of whether the diminution in value of a cause of action through its susceptibility to a strike-out could constitute damage for the purposes of an action in negligence. A provisional view might be that it could, for the injurious affection represents an economic loss. However, the situation is not as Saville L.J. points out, this case. This case is kindred to Kyle v. Stormonth Darling [1993] SCLR 18 .”

[20]Nourse LJ agreed. He said:

“The plaintiff sues in respect of the loss or damage suffered by him by reason of the striking out of action 1982 H1161 on February 4, 1986. He does not sue in respect of the loss or damage suffered by him by reason of some earlier depreciation in value of his right of action against the defendants in that action. It cannot be assumed that the value of the right at the date of striking out was the equivalent of, or less than, its value at the earlier date. So the plaintiff’s cause of action against the present defendant did not fully mature until the later date. Since the plaintiff may rely on whatever cause of action is available to him, how can it be defeated by a defence to a cause of action on which he does not rely? There being no answer to that question, the limitation period could only have run from February 4, 1986. It did not run from some earlier date. All the authorities cited by the defendant are readily distinguishable. In each of them the plaintiff sued in respect of the loss or damage suffered by him by reason of his having been negligently advised or allowed to enter into a disadvantageous transaction. In each it was held that the limitation period ran from the date of the transaction and not from some later date. Thus if, before February 4, 1986, the plaintiff here had compromised action 1982 H1161 on terms rendered disadvantageous by the risk of striking out, the limitation period would have run from the date of the compromise and not from some later date. In the event which happened, it could only have run from the date of striking out.”

[21]In my judgment Mr Nicol is clearly right in his first submission that Hopkins v Mackenzie can be distinguished on the facts. In that case the only cause of action pleaded and the only damage and loss claimed to have resulted from the negligence was the loss of the chance of recovery in the previous action which is not finally lost until it was struck out. In the present case the pleadings themselves allege loss and damage occurring prior to 1 st June 1993 resulting from the same acts of negligence which caused the loss of the cause of action. On this ground alone I would allow the appeal and hold that the causes of action Cases 1, 3 and the claim with Case 4 insofar as it relates to a claim for loss of opportunity to recover rent on a re-letting arose before 1 st June 1993 and were therefore statute barred. As for the remainder of Case 4 I agree with the course proposed by my lords. The Appellant’s second and third submissions

[22]But because of the importance of Mr Nicol’s other submissions, and particularly his submission that Hopkins v Mackenzie was wrongly decided and cannot stand in the light of the Nykrdit case, I must consider them. In Knapp v Ecclesiastical Insurance Group PLC [1998] PNLR 172 the claimants had a fire at their home on 16 October 1990. They were insured with the first defendants and had renewed their policy on 12 April 1990 through brokers, the second defendants, who, the claimants alleged, knew all material matters and completed the proposal form on their behalf. The first defendants alleged non-disclosure of material facts, and avoided the policy. On 16 October 1996 the claimants issued a writ against both defendants. It was held by the Court of Appeal that, so far as the second defendants, the brokers, were concerned, on renewal of the violable policy on 12 April 1990 the claimants suffered actual loss. After reviewing the authorities, starting with Forster v Outred, Hobhouse LJ said at p.184E-G:

“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.”

[23]Hobhouse LJ then considered Hopkins v Mackenzie at p.187D he said:

“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 Mackenzie were clearly of the view that they were applying the principles to be derived from the earlier authorities.”

I share Hobhouse LJ’s difficulties. A claimant cannot defeat the statute of limitations by claiming only in respect of damage which occurs within the limitation period, if he has suffered actual damage from the same wrongful acts outside that period.

[24]In the Nykredit case the question arose as to the date from which interest should be paid. This in turn depended upon when the cause of action arose. Lord Nicholls, with whose opinion the other members of the House concurred said at p.1032E:

“The basic comparison gives rise to issues of fact. The moment at which the comparison first reveals a loss will depend on the facts of each case. Such difficulties as there may be are evidential and practical difficulties, not difficulties in principle. Ascribing a value to the borrower’s covenant should not be unduly troublesome. A comparable exercise regarding lessees’ covenants is a routine matter when valuing property. Sometimes the comparison will reveal a loss from the inception of the loan transaction. The borrower may be a company with no other assets, its sole business may comprise redeveloping and reselling the property, and for repayment the lender may be looking solely to his security. In such a case, if the property is worth less than the amount of the loan, relevant and measurable loss will be sustained at once. In other cases the borrower’s covenant may have value, and until there is default the lender may presently sustain no loss even though the security is worth less than the amount of the loan. Conversely in some cases there may be no loss even when the borrower defaults. A borrower may default after a while but when he does so, despite the overvaluation, the security may still be adequate. It should be acknowledged at once that, to greater or less extent, quantification of the lender’s loss is bound to be less certain, and therefore less satisfactory, if the quantification exercise is carried out before, rather than after, the security is ultimately sold. This consideration weighed heavily with the High Court of Australia in Wardley Australia Ltd. v. State of Western Australia (1992) 175 C.L.R. 514. But the difficulties of assessment at the earlier stage do not seem to me to lead to the conclusion that at the earlier stage the lender has suffered no measurable loss and has no cause of action, and that it is only when the assessment becomes more straightforward or final that loss first arises and with it the cause of action. Indeed, for the cause of action to arise only when the lender realises his security would be a highly unattractive proposition. It would mean that, however obvious it may be that the lender will not recover his money, he cannot start proceedings. He must wait until he manages to sell the property, a process which may be protracted. This would be a surprising stance for the law to take. It would be all the more surprising when one has in mind that a lender’s cause of action against his negligent valuer for breach of contract, as distinct from a claim in tort, arises when the negligent valuation is given. If disaster were evident and the lender were to sue his valuer for breach of contract without waiting until he had realised his security , it is inconceivable that the court would award only nominal damages. The court would do its best to assess the loss.”

[25]Mr Nicol submits that if there is an ‘inevitability of strike out’, as was accepted in Hopkins v Mackenzie , that is equivalent to ‘disaster being evident’ in the sense used by Lord Nichols. I agree. Moreover his observations appear to me to answer the point made by Saville LJ referred to in paragraph 18 above.

[26]In the course of argument Chadwick LJ suggested that while under the decision in Hopkins v Mackenzie , the claim for loss of the chance to recover damages in the previous action may not have been finally lost until that action is struck out, an application under CPR Pt 24(2) might well succeed, on the basis that there is no reasonable prospect of success in the negligence action. This is because the loss of an action which is liable to be struck out at any moment, is of no real value. But the corollary is also true; if the cause of action is then of no real value, it follows that damage must already have been sustained.

[27]In Kitchen v Royal Air Force Association [1958] 1 WLR at p.575 Lord Evershed MR described the nature of the court’s task in assessing damages in a solicitor’s negligence case where the claimant has lost the opportunity of pursuing his or her original action. He said:

“In my judgment, what the court has to do (assuming that the plaintiff has established negligence) in such a case as the present, is to determine what the plaintiff has by that negligence lost. The question is, has the plaintiff lost some right of value, some chose in action of reality and substance?”

And in Allied Maples Group PLC v Simmons and Simmons [1995] 1 WLR it was said that the chance of success in the original action had to be a real or substantial chance as opposed to a speculative one. (p. 1614C-D)

[28]A claim in tort is a chose in action and as such is assignable. But the value of the chose in action depends upon the prospect of success. If for whatever reason it is very likely or almost bound to fail, whether because it is liable to be struck out for want of prosecution, lack of merit or some other reason, it will have no value or no substantial value. In my judgment the Claimant in the present case could not have assigned his causes of action in Cases 1 and 3 for any real value for several years before they were actually struck out, because during that period there was an inevitability or at least a very serious risk that they would be struck out at any time. If this be right, as I believe it to be, it must follow that the claimant had already suffered damage by diminution in the value of his choses in action well before the actual striking out of the actions.

[29]In many cases the application to strike out for want of prosecution may be made at the earliest opportunity that it is likely to succeed. In such cases it may be difficult to say that the claimants’ chose in action has sustained any diminution in value until that time. In which case the cause of action will not arise earlier than the strike out, absent any prior damage of the sort claimed here. But often, when an action has gone to sleep for years, the actual application to strike is not made until years after it might successfully have been done. In such cases it seems to me that the damage is caused when there has been such inexcusable and inordinate delay or non compliance with rules such that the Court would have struck out the action and pursuant to CPR Part 3.4, because the chose in action has so diminished in value to be of no real value.

[30]It might be said that in theory the value of the chose in action will deteriorate over a period of time prior to the date when an application to strike out would have succeeded, and therefore once the decline starts, damage is sustained. But in the words of Lord Evershed in Cartledge v Jopling at p.774 there must be ‘real damage as distinct from purely minimal damage’. It seems to me that a claimant does not suffer real damage in the form of diminution of the value of his chose in action until there is a serious risk that the original action could be dismissed for want of prosecution.

[31]While it is true that in Forster v Outred and the cases that followed, including Knapp v Ecclesiastical Insurance the original transaction that the claimant was advised to enter into was flawed so that damage was suffered at that time, it does not follow that damage cannot arise before the action in this type of case is struck out. Moreover the Nykredit case shows that the lender may sustain loss even before it can be finally quantified on the ultimate realisation of the security.

[32]Had Hopkins v Mackenzie been a case where the application to strike out had been made at the earliest opportunity there would, I think, be no difficulty. But in that case the strike out of the original action was on 4 th February 1986 and the writ in the action against the solicitor was issued on 27 January 1992, only about a week less than 6 years later. It was apparently accepted that there was in Feb 1986 an inevitability that the action would be struck out; it is difficult to think that that situation had not pertained for some time, at least before 27 January of that year. Both Mann and Nourse LJJ thought that if the original action had been settled before strike out on terms that reflected the risk of strike out, the cause of action would arise from the date of the settlement. I agree. But that is because the value of the Plaintiff’s chose in action has by then been diminished. It does not seem to me that that diminution in value has to be quantified by a sale or settlement provided it can be shown that it has been substantial.

[33]In my judgment therefore if and in so far as Hopkins v Mackenzie purports to hold that there can be no damage in this type of case prior to the actual strike out, I cannot agree that it is correct or is consistent with Nykredit . The mere fact that the claimant does not plead any damage prior to the strike out, does not necessarily mean that he has suffered no damage prior to that time. If it is clear that the value of his chose in action has been substantially diminished before the limitation date, the action will be statute barred. That is the position here at any rate in the first two cases. In Case 1 the claimant pleads in terms that the action could have been struck out at any time after 1990; and in Case 3, he pleads that it could have been struck out at any time after 1992. In Case 4 the dates are later; the claimant pleads that the action could have been struck out at any time after 1998; even if it had been susceptible to strike out before that, it would have been well within the limitation prior, so that this line of argument does not avail the defendant in case 4.

[34]For these reasons I would allow the appeal and hold on the preliminary issue that the claims under Case 1, 3 and the claim under Case 4 insofar as it relates to a claim for lost opportunity to recover rent on a re-letting are statute barred.

Lord Justice Chadwick:

[35]These proceedings were commenced by the issue of a claim form on 2 June 1999. By amended particulars of claim, dated 10 December 1999, the claimant, Malik Javid Khan, claimed damages against the defendant, a solicitor, in relation to the conduct of four actions, commenced by or against the claimant on various dates between 1985 and 1989. When the proceedings came before Mr Justice McKinnon in April 2001 he was invited to determine a preliminary issue formulated by the parties in these terms: “which of, and to what extent are, the claimant’s pleaded causes of action time-barred pursuant to the provisions of Sections 2 and/or 5 of The Limitation Act 1980”.

[36]Section 2 of the 1980 Act provides that:

“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.”

Section 5 of the Act contains a similar provision in relation to actions founded on simple contract. The judge recorded, at paragraph 2 of the judgment which he handed down on 17 April 2001, (i) that it was accepted by the claimant that his actions founded on contract were barred by section 5; and (ii) that his claim in relation to the defendant’s conduct of the second of the four actions was not being pursued. The question for the judge, therefore, was whether the causes of action pleaded in tort in relation to the defendant’s conduct of the first, third and fourth actions – described in the amended particulars of claim as case (1), case (3) and case (4) respectively – had accrued before 2 June 1993.

[37]It is trite law that, where a tort is actionable only on proof of damage, the cause of action is not complete and time does not begin to run for the purposes of statutory limitation until actual damage occurs. What is meant by “actual damage” in the context of a claim for purely financial (or economic) loss appears from a passage in the submissions of Mr Murray Stuart-Smith QC (as my Lord then was) to the Court of Appeal in Forster v Outred & Co

[1982] 1 WLR 86

. The passage was adopted by that Court, at

[1982] 1 WLR 86

, 94, 98; and has recently been approved by the House of Lords in Nyecredit Plc v Edward Erdman Ltd (No 2)

[1997] 1 WLR 1627

, 1630D-F. Actual damage means:

“. . . any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous provisions or covenants in leases. They are all illustrations of a kind of loss which is meant by ‘actual’ damage.”

Lord Nicholls of Birkenhead added the “cautionary reminder”, at

[1997] 1 WLR 1627

, 1630F, that the loss must be relevant loss – that is to say, it must be “loss falling within the measure of damage applicable to the wrong in question”. The claimant’s pleaded case

[38]The starting point, therefore, is an examination of the claimant’s pleaded case. Is the damage in respect of which he claims attributable to the acts or omissions which are said to be negligent? When is that damage said to have occurred? Case (1)

[39]The damage claimed in these proceedings in respect of the defendant’s conduct of case (1) – Khan v Kanuga (1985 K 196) – is (i) costs, amounting in aggregate to £2,000 and comprising £800 paid to the defendant and £1,200 paid to another firm of solicitors, Yoga & Co, and (ii) “loss of the opportunity to recover the £7,933.00 and interest thereon from the date of the issue of the writ (14 February 1985) until an expected date of judgment which ought to have been by 31st December 1988”. The claim in case (1) was for a trade debt in the amount of £7,933.63 which had become payable in 1984. So that debt had, itself, become barred by limitation at some date in 1990. The alleged negligence is said to be:

“(1) Failing to take any procedural steps, in particular discovery of documents, preparation of proofs and/or witness statements, taking out a summons for directions and setting the claim down for trial, in case (1) after 18 March 1988 and/or 30 September 1994; (2) Failing to warn the Claimant expressly that if such steps were not taken his claim in case (1) would be amenable, as it was, to be struck out for want of prosecution at any time after 1990.”

The significance of the first of the two dates referred to in paragraph (1) of the particulars of negligence, 18 March 1988, is that that was the date on which the second defendant to the action, Mrs Kiran Kanuga, had been joined as a party in place of her late husband, the first defendant. The significance of the second date, 30 September 1994, is that that was the date upon which a notice of intention to proceed with that action had been given on behalf of the claimant by the defendant to these proceedings. The defendant ceased to act for the claimant in relation to case (1) in or about November 1996. The action was transferred to the Brentford County Court on 10 March 1997. It was dismissed for want of prosecution, on the application of Mrs Kanuga, on 11 September 1997.

[40]It is impossible to find in the claimant’s pleaded case, as supplemented by further particulars given in response to a request for information, any express allegation of a causal link between the negligence alleged and the payment of £1,200 on account of costs to Yoga & Co; nor between the negligence alleged and the payment of £800 to the defendant. Nor is there any information as to the dates when either of those payments were made. In my view the judge should have declined to answer the preliminary issue, as formulated, in relation to the claims for those sums on the ground that it was impossible to do so on the basis of the pleaded case. But, in this Court, it was accepted that the payments were made before 1993; and it was accepted, I think, that the claim in respect of those payments is barred by limitation. In any event, the claim in respect of those payments can be in no better position, in relation to limitation, than the other element of the claim under case (1).

[41]The other element of the claim, in relation to case (1), is “loss of the opportunity to recover £7,933.00 and interest thereon from the date of issue of the writ [14 February 1985] until an expected date of judgment which ought to have been by 31 December 1988”. I confess to some difficulty in understanding why the claim for loss of interest on the debt following the issue of the writ (if it could otherwise be sustained) is limited to the period ending with the expected date of judgment on 31 December 1988; but it may be that the claimant seeks interest on that interest from that date. If so, that element of the claim is plainly statute barred – whatever other difficulties it might face.

[42]The only real issue, as it seems to me, in relation to the claims made in these proceedings in respect of the defendant’s conduct of case (1) is whether the cause of action pleaded under the head “loss of the opportunity to recover £7,933.00” had arisen by the end of 1990 when – as alleged in the pleading of negligence – “the claim . . .would be amenable . . . to be struck out for want of prosecution at any time”; or whether the cause of action pleaded did not arise until the action was actually struck out on 11 September 1997. On that issue the judge held that the decision of this Court in Hopkins v MacKenzie [1995] PIQR 43 was determinative. Before turning to an examination of that decision, it is convenient to identify the issues which arise in respect of the defendant’s conduct of cases (3) and (4). Case (3)

[43]The damage claimed in respect of the defendant’s conduct of case (3) – Maurice Lay Distributors Ltd v Khan (1986 M 1674) – is(i) costs amounting to £1,747.50,

(ii) the sum of £11,200 paid to Maurice Lay Distributors Ltd as a condition of obtaining leave to defend, and

(iii) “loss of the opportunity to recover damages in the sum of £51,000 from Maurice Lay and interest thereon from the date of issue of the writ until an expected date of judgment which ought to have been by 31st December 1989.” The £11,200 was paid by the claimant in August 1989. The counterclaim arose in 1986; and so had become barred by limitation at some date in 1992. The alleged negligence is said to be:

“(1) Failing to take any procedural steps, in particular discovery of documents, preparation of proofs and/or witness statements, taking out a summons for directions and setting the claim down for trial, in case (3) after July 1988 or at any time until July 1997; (2) Failing to warn the Claimant expressly that if such steps were not taken his clam in case (3) would be amenable, as it was, to be struck out for want of prosecution at any time after 1992; (3) Failing to take proper care of the file in case (3) such that the same was lost from his custody on a date unknown to the Claimant during the retainer.”

The significance of the date, July 1988, referred to in paragraph (1) is, I think, that the defendant informed the claimant, by letter dated 21 July 1988, that he proposed making application to strike out the claim in the action (to which the claimant was defendant) for want of prosecution. The significance of the other date, July 1997, is that the claim and counterclaim in the action were struck out for want of prosecution on 17 July 1997. By that date the claimant was acting in person. Notice of his intention to do so was given in June 1997; but it is, I think, accepted that the defendant had ceased to act some considerable time before that date.

[44]The position in relation to case (3) is much the same as that in relation to case (1). The claim for interest on the amount of the counterclaim “from the date of issue of the writ [or, more aptly, service of the counterclaim] until an expected date of judgment which ought to have been by 31st December 1989” is plainly barred by limitation. There is no sufficient allegation of a causal link between the negligence alleged and the payment of costs or the payment made as a condition of obtaining leave to defend. But, in any event, it was accepted in this Court that the payments were made before 1993; and that, if the claim under case (3) in respect of lost opportunity is barred by limitation, the claims in relation to those payments must be barred also. The only real issue in relation to the claims made in these proceedings in respect of the defendant’s conduct of case (3) is whether the cause of action pleaded under the head “loss of the opportunity to recover damages in the sum of £51,000 from Maurice Lay” had arisen by the end of 1992 when – as alleged in the pleading of negligence – “the claim . . . would be amenable . . . to be struck out for want of prosecution at any time”; or whether the cause of action pleaded did not arise until the action was actually struck out on 17 July 1997. Case (4)

[45]Case (4) – Khan v Begum and Hussain (1989 K 1445) – was an action for the recovery of arrears of rent in respect of residential premises at 82 Grove Road, Hounslow. On 5 August 1992 judgment was obtained against the tenants for £22,344. Possession was recovered on 9 November 1992. In January 1993 the claimant re-instructed the defendant (whose earlier retainer in relation to the action had been determined). On 18 November 1993 Mr Justice May ordered that the action be transferred to the Uxbridge County Court. It is alleged that, by letter dated 15 July 1994, the defendant advised the claimant of the need to amend the statement of claim to include claims for rent falling due after the date of the issue of the writ, and for disrepair. It is not alleged that the claimant gave instructions for that to be done; but it is alleged (at least by implication) that those amendments were not made. The action was eventually transferred to the Uxbridge County Court on 11 October 1996. On 1 March 1999 the claim and counterclaim in the action were struck out. The damage claimed in these proceedings in respect of the defendant’s conduct of case (4) is(i) costs paid by the claimant to the defendant in the sum of £1,800,

(ii) loss of the opportunity to recover rent arrears, totalling £43,800 (less rent received of £19,133 - £24,667 net),

(iii) loss of the opportunity to recover on execution of the judgment for £22,344 (pleaded as £22,244.39),

(iv) loss of the opportunity to recover rent on a re-letting had a possession order been obtained “which the Claimant contends would have resulted in possession being obtained by January 1990, at a rent of £600 per month until November 1992 in the sum of £13,800” and

(v) loss of the opportunity to recover a claim for damage caused by the tenants in the sum of £16,500. The negligence alleged is particularised as follows:

“(1) Failing to take any procedural steps, in particular amended (sic) of the Statement of Claim as advised by the Defendant as aforesaid, discovery of documents, preparation of proofs and/or witness statements, taking out a summons for directions and setting the claim down for trial, in case (4) before 1992; (2) Failing to take any steps to transfer the action and prosecute the claim in case (4) as aforesaid at (1) at any time after 18 November 1993; (3) Failing to warn the Claimant expressly that if such steps were not taken his claim in case (3) (sic) would be amenable, as it was, to be struck out for want of prosecution at any time after 1998; (4) Failing to advise the Claimant in 1992, or at any subsequent time during the retainer, to make a fresh claim for all arrears which had accrued due since the issue of the writ in case (4), the same not being recoverable in that action; (5) Failing to advise the Claimant in 1989 or at any time during the first period of the retainer to serve a notice to quit and then make a claim for possession for the premises, relying on the arrears of rent.”

[46]As I have said, in order to address the preliminary issue, it is necessary to ask, first, whether the damage in respect of which the claimant claims is attributable to the acts or omissions which are said to be negligent. It is in the light of the answer to that question that the court can identify the pleaded causes of action; and can go on to consider whether those causes of action are barred by limitation. In relation to case (4) the “loss of the opportunity to recover rent on a re-letting had a possession order been obtained . . . by January 1990” is – at least prima facie – attributable to the failure “to advise the Claimant in 1989 or at any time during the first period of the retainer to serve a notice to quit and then make a claim for possession . . .”; but it is plain that the claim for lost rent under that head is barred by limitation. The damage had arisen, at the latest, by November 1992 when the claimant recovered possession of the premises without an order of the court. That head of damage apart, I find it impossible to identify any sufficient allegation of a causal link between the damage claimed and the allegations of negligence. In particular, as the judge recognised, there is no direct allegation of a causal link between the negligence alleged and either the “loss of the opportunity to recover rent arrears totalling £43,800” or the “loss of the opportunity to recover a claim for damages caused by the tenants in the sum of £16,500”. The necessary allegation cannot be found in the allegations that the defendant failed to take any procedural steps “in particular [amendment] of the Statement of Claim as advised by the Defendant [in the letter of 15 July 1994]” and failed “to advise the claimant in 1992, or at any subsequent time during the retainer, to make a fresh claim for all arrears which had accrued due since the issue of the writ”. There is no allegation that the claimant ever instructed the defendant to pursue those claims.

[47]Further, as it seems to me, there is no sufficient allegation of a causal link between the negligence alleged and the payment of £1,800 to the defendant on account of costs; or between the negligence alleged and the “loss of the opportunity to recover on execution of the judgment for £22,244.39”. The judge thought that that judgment had been set aside on 19 March 1993; but that seems inconsistent with the pleading, at paragraph 31 of the amended particulars of claim, that: “Thereafter [that is to say, after 5 August 1992 when the judgment was obtained] application was made to set aside the judgment which was unsuccessful” and, at paragraph 33, that an application for leave to appeal out of time against the order of 5 August 1992 was refused. The position, as pleaded, is that the claimant had a judgment for £22,344 against the tenants; but took no steps to enforce that judgment. There is no allegation that he instructed the defendant to take any steps (or, if so, what steps) to enforce the judgment on his behalf. The issue on this appeal

[48]The only real issue on this appeal is whether the causes of action pleaded in relation to the defendant’s conduct in respect of cases (1) and (3) under the heads “loss of the opportunity to recover £7,933.00 [or £51,000, as the case may be] ” had arisen by the date (in each case before 2 July 1993) when – as alleged in the particulars of negligence pleaded in respect of each case – “the claim . . . would be amenable . . . to be struck out for want of prosecution at any time”; or whether the cause of action pleaded did not arise until the claims were actually struck out in 1997.

[49]The judge held that the decision of this Court in Hopkins v MacKenzie [1995] PIQR 43 required him to decide that issue in favour of the claimant. He held that the cause of action pleaded did not arise until the claim was actually struck out; so that the pleaded causes of action were not barred by limitation under section 2 of the 1980 Act. In my view the decision in Hopkins v MacKenzie does not compel that conclusion. If it did, that decision would be inconsistent with the later decision of the House of Lords in Nyecredit Mortgage Bank Ltd v Edward Erdman Group Ltd

[1977] 1 WLR 1627

and ought not to be followed.

[50]A summary of the facts which gave rise to the issue which this Court was required to decide in Hopkins v MacKenzie has been set out in the judgment of Sir Murray Stuart-Smith. It is unnecessary to rehearse those facts in this judgment. Nor is it necessary to set out, again, the passages in the judgments in that case which have already been cited. The essence of the decision, as it seems to me, can be found in three sentences of the judgment of

Lord Justice Saville at [1995] PIQR 43, 46:

“As in Kyle v Stormonth Darling [1993] SCLR 18 , what on the plaintiff’s case has been lost is the right to advance his medical negligence claim in a court of law. That loss was not sustained until the action was struck out. To my mind a cause of action for diminishing the value of a claim is not the same thing as a cause of action for losing the right to advance that claim in a court of law.”

Lord Justice Nourse made the same point at page 47 of the report:

“The plaintiff sues in respect of the loss or damage suffered by him by reason of the striking out of action 1982 H1161 on February 4 1986. He does not sue in respect of the loss or damage suffered by him by reason of some earlier depreciation in value of his right of action against the defendants in that action. . . . Since the plaintiff may rely on whatever cause of action is available to him, how can it be defeated by a defence to a cause of action on which he does not rely.”

[51]At first sight the logic of that approach is, if I may say so, unassailable. But it is based upon the premise, as stated, that the loss in respect of which the plaintiff claims is the loss which he suffers by reason of, and at the time of, the striking out of his earlier action; and upon the further premise, not perhaps stated in such clear terms as the former, that the striking out of the earlier action caused some actionable loss. The latter point is, I think, reflected in the two sentences which I have omitted from the passage in the judgment of Lord Justice Nourse which I have just cited:. “It cannot be assumed that the value of the right at the date of striking out was the equivalent of, or less than, its value at the earlier date. So the plaintiff’s cause of action against the present defendant did not fully mature until the later date.” It is, I think, implicit in those two sentences that Lord Justice Nourse was accepting, on the facts of Hopkins v MacKenzie, that the plaintiff’s right to pursue the earlier action did have some value at the time when that action was struck out. To put the point another way, all that the plaintiff could recover in an action based solely on the loss of the right to pursue the earlier action – and not on any diminution in the value of the claim in the earlier action resulting from the defendant solicitor’s dilatory conduct – would be the value of the claim immediately before the earlier action was struck out. If the plaintiff’s right to pursue the earlier action had become valueless by the time that that action was struck out, the striking out of the action caused no loss; and, ex hypothesi, there could be no cause of action in tort arising from the strike out.

[52]That Lord Justice Saville took the same view can be seen, I think, in his reference to the decision of the Court of Session (Inner House) in Kyle v Stormonth Darling

[1993] SCLR 18

. The defenders, solicitors and Writers to the Signet, had negligently failed to comply with peremptory requirements of the rules in relation to the prosecution of an appeal on behalf of the pursuer; as a result of which the appeal was held to have been abandoned. Lord McCluskey, giving the opinion of the Court, said this, at page 23:

“The negligent act consists of the agent’s neglect to take the peremptory step timeously. The loss consists of the inability to pursue the claim thereafter. The causal link between the act and the loss presents little problem in such a case. However, when it comes to a closer consideration of the loss itself, it must be clearly recognised that the solicitor’s negligence has not caused the would-be litigant to lose his claim against the third party; it has caused him to lose only the right to advance that claim in a court of law. Accordingly, in assessing the monetary value of what has been lost, the court has to ask two questions. (1) Did the right to advance that claim have any value at all at the time when it was lost? (2) If it did, how can that value be assessed? Obviously, if the right to advance the claim had no value at all at the time of the negligent act, then the would-be litigant would not be entitled to an award against the negligent solicitor; having lost nothing he would not be entitled to any compensation for any loss. If, however, the right to advance the claim did have a tangible value then the court would have to assess that value on the basis of the material placed in evidence before the court.”

As Lord Ackner put it, in his speech in Hotson v East Berkshire Health Authority

[1987] AC 750

(to which

Lord Justice Saville referred in Hopkins v MacKenzie in a different context ), at page 792G:

“The debate on the loss of a chance cannot arise where there has been a positive finding that before the duty arose the damage complained of had already been sustained or had become inevitable.”

[53]In the present case there is, of course, no finding to the effect that, by the time the claims in cases (1) and (3) were struck out in 1997, the claimant’s right to pursue those claims was already valueless; that is to say, that he had already suffered all the damage which he could suffer as a result of the defendant’s conduct of those cases. But there is a positive averment to that effect in his pleaded case. He makes the allegation, in relation to cases (1) and (3), that his claim “would be amenable, as it was, to be struck out for want of prosecution at any time after 1990 [or 1992, as the case may be]”. In the face of those allegations the decision in Hopkins v MacKenzie is of no assistance to the claimant. This is not a case where he can say that his “loss of the opportunity to recover £7,933 [or £51,000, as the case may be]” was caused by the striking out in 1997. His opportunity to recover those sums had been lost at a much earlier date – when, as he alleges, his claims had become amenable to being struck out for want of prosecution.

[54]That would be sufficient to dispose of this appeal. But I should go on to explain why, if the decision in Hopkins v MacKenzie had been thought to have any wider effect than that which, as I have sought to explain, it does have, it could not stand with the decision of the House of Lords in the Nyecredit case. In that context it is, I think, important to distinguish those cases, all too familiar before the advent of the Civil Procedure Rules, where proceedings were struck out for want of prosecution – that is to say as a consequence of inaction by the plaintiff or his solicitors over many months, if not years – and cases where the proceedings are struck out under CPR 3.4(2)(c) by reason of some failure to comply with a rule, practice direction or court order.

[55]In the latter class of case it is likely to be possible to identify, with some precision, the date at which the claim became liable to be struck out. The date will be that upon which there was a failure to comply with the relevant procedural requirement; and, as it seems to me, it will usually be on that date – and not on the date of actual strike out – that the opportunity to pursue the claim is lost. I find it difficult to conceive of circumstances in which, after there has been a failure to comply with a procedural requirement of sufficient gravity to justify striking out under CPR 3.4(2)(c), the claim will have any residual value between the date of the failure and the date of actual strike out; so as to leave scope for the application of the decision in Hopkins v MacKenzie. But, if such circumstances do arise, then the effect of that decision is that, in an action based solely on the loss, on the date of actual strike out, of the right to pursue an earlier action, the damage recoverable will be that residual value.

[56]In the former class of case – now likely to become increasing rare if the principle of active case management embodied in the Civil Procedure Rules is given effect by the courts – it may be much more difficult to identify with any degree of precision the date at which the claim became vulnerable to being struck out. Typically, the effect of cumulative delay has been that it becomes increasingly difficult to resist an application to strike out based on the contention that it is no longer possible to have a fair trial. Although it may be possible to say, in such cases, that, before a certain date, the claim was not vulnerable to being struck out and that after another, and later, date it was so vulnerable, there will usually be a period of some months in respect of which there is room for a legitimate difference of view. But what can be said, with some confidence, is that during that period the value of the claim is diminishing as its vulnerability to strike out increases. It seems to me that, once the action has entered that period, it is impossible to say that damage has not occurred as a consequence of the previous delay. It is no answer that the damage may be difficult to quantify – see the observations of Lord Nicholls in the Nyecredit case at

[1997] 1 WLR 1627

, 1632E-F. And, if measurable damage has arisen from the delay, then the cause of action is complete. To hold that further delay will give rise, day by day, to a further cause of action – on a rolling basis – would seem to me inconsistent with the principle in Cartledge v Jopling & Sons Ltd

[1963] AC 758

. There may, of course, be cases where there is some new and supervening act or omission. But, otherwise, as Lord Justice Hobhouse put it in Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172 , at page 178: “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”.

[57]If the decision of this Court in Hopkins v MacKenzie is understood, as I think it should be, as limited to those cases in which the only loss on which the claimant seeks to found his cause of action is the loss of his right to pursue the earlier action by reason of the strike out – measured by, and confined to, the residual value of the claim immediately before actual strike out – then it cannot, in my view, be held to be inconsistent with the later decision in the Nyecredit case. But the circumstances in which a claim can be advanced on that limited basis are likely to be rare. As soon as the claimant seeks to found his cause of action on the diminution in the value of his claim arising from a period of delay, the decision in Hopkins v MacKenzie is of no assistance. Conclusion

[58]I would allow this appeal in so far as it relates to the claims under case (1) and case (3) and to the claim, under case (4), in respect of the loss of opportunity to recover rent on a re-letting. For the reasons which I have sought to explain, I think it impossible to decide (on the present state of the pleadings) whether the other claims in relation to case (4) are, or are not, barred by limitation. My present view is that the pleadings (as they stand) disclose no cause of action in relation to those other claims. But, as Lord Justice Schiemann points out (in the judgment which I have had the advantage of reading in draft) we have not been asked to strike out those claims under the power conferred by CPR 3.4. I agree that we should not do so without giving the parties an opportunity to make submissions on that point. Lord Justice Schiemann:

[59]McKinnon J. was trying a preliminary issue which was formulated as follows “which of, and to what extent are, the claimant’s pleaded causes of action time-barred pursuant to the provisions of Section 2 of the Limitation Act 1980”.

[60]He expressly records that he was concerned solely with limitation. The notice of appeal is concerned solely with limitation issues. There is no respondent’s notice.

[61]The only questions before us are whether in respect of the three cases identified by my Lords the cause of action had arisen by 2 June 1993, which was six years before the present action in negligence was started.

[62]The judge decided the preliminary issue on the basis that(1) no right of action in negligence arose until the claimant had suffered damage as a result of the solicitor’s negligence and

(2) that he was bound by Hopkins v MacKenzie to hold that the claimant had suffered no loss until the various underlying claims had been struck out.

[63]For the reasons given by my Lords, I do not consider that the decision in Hopkins v MacKenzie obliged him to come to that conclusion. Like them I consider that it is manifest that circumstances can exist when a claimant, who has an action against a tortfeasor which is not pursued with due diligence by his solicitor, suffers loss as a result of that lack of diligence before the underlying action is struck out. Indeed it is not a condition precedent for any claim against the solicitor that the underlying action be struck out. To insist on this formal step in all cases would be to impose a further costs expenditure upon parties who are unhappy enough as it is with the legal process. The relevance of striking out is that it removes any possible argument to the effect that the claimant has not mitigated his damages by pursuing the original tortfeasor.

[64]As regards Case 1 the claimant pleads that his action was “amenable to be struck out for want of prosecution at any time after 1990”. By that date it was too late to start a new action against the debtor : it was statute barred. By the phrase “amenable to be struck out” the pleader intended to convey that after 1990 there was no arguable defence to an application to strike out. This is common ground. On that basis the claimant had suffered damage from the defendant’s negligence by, at the latest, 1.1.1991 and his cause of action had arisen then. What had been (let us assume) a right of action against the debtor which was worth something, had become a right of action which was worth nothing. All the alleged negligence by the solicitor had occurred by then. The present action was not started until more than 6 years later. In those circumstances it is time barred. I agree with Chadwick L.J. that the pleadings do not reveal when the payments to the Defendant and Yoga were made or how their payment is connected with the negligence pleaded. However I understood Mr Riza to concede that the claim in respect of these two payments was statute barred on the basis that they were made prior to 1993. In any event it seems that the claimant contends that they resulted from the same alleged negligence as has led to the loss of his chance of recovering the underlying debt. For my part, I would be content to declare the claimants pleaded cause of action in relation to Case 1 to be time barred.

[65]As regards case 3, the claimant pleads that his counterclaim was “amenable to be struck out for want of prosecution at any time after 1992”. By that time it was too late to start another action against the other contracting party. What had been a cause of action which (let us assume) was worth something had become a cause of action which was worth nothing. On that basis the claimant had suffered damage from the claimants’ negligence, at the latest, by 1.1.1993. So far as the money paid as a term of getting leave to defend or as payment on account is concerned all the acts of negligence which caused that payment (in so far as they can be discerned from the pleadings) seem to have occurred before June 1993. The same goes for the costs. On that basis the judge should have declared that the present action in respect of Case 3 was time barred.

[66]As regards case 4 the case is pleaded in a manner which is thoroughly confusing. The substance of the claimant’s underlying complaint appears to have been that the claimant landlord was faced with tenants who did not pay the rent and for damage to the premises and for disrepair. He initially instructed the solicitor to obtain an order for possession and for the payment of arrears of rent. The solicitor issued a writ. He was then disinstructed. The claimant himself obtained possession on 9.11.1992. Thereafter he reinstructed the solicitor. It is not clear when this is alleged to have taken place – paragraph 29 of the Particulars of Claim suggests January 1993, paragraph 32 suggests November 1993. Paragraph 64 of the claimant’s witness statement of 10.11.2000 says that the true date was about June 1993. It does not seem that the precise dates matter since there is no suggestion of any negligence by the solicitor between those dates.

[67]The heads of damage pleaded are(i) loss of the opportunity to recover rent on a re-letting had a possession order been obtained, which the claimant contends would have resulted in possession being obtained by January 1990,

(ii) loss of opportunity to recover rent arrears

(iii) loss of opportunity to recover a claim for damages caused by the tenants in the sum of £16,500,

(iv) Loss of the opportunity to recover on the execution of judgment in the sum of £22,244.39 and

(v) costs of the action including the claimant’s own costs and expenses paid to the Defendant of £1,800. The judge held that the court was unable to determine the preliminary issue in relation to the first, second and third of these heads of damage. He held that so far as the fourth and fifth head of damage were concerned they were not time barred.

[68]Loss of opportunity to recover rent on a re-letting . The Judge held that this was a claim in relation to which he could make no determination. I respectfully disagree. Since the claimant had obtained possession by 9.11.1992 the failure must refer to a period before that or at any event before June 1993. I agree with my Lords that a cause of action in relation to that was clearly time barred when the present action for negligence was started in 1999.

[69]Loss of opportunity to recover rent arrears . Paragraph 29 of the Particulars of Claim asserts that the solicitor was instructed in January 1993 to recover arrears of rent. Typical of the muddled Particulars of Claim in the present action is the beginning of the next paragraph. “The Defendant duly issued a writ in case 1989 K number 144 on behalf of the claimant claiming arrears of rent then due …”

[70]How they issued a Writ in 1989 pursuant to instructions given in 1993 does not appear.

[71]The judge said in paragraph 51 of his judgment “the loss of opportunity to recover rent arrears totalling £43,800 is in no way related to the striking our of any action. The claimant’s complaint is that well before 2 June 1993 the Defendant failed to advance any claim in respect of rent arrears… It is not clear to what period the alleged arrears totalling £43,800 relate. I have not been told what the respective parties’ cases are in relation to the date at which it is said that a cause of action arose against the defendant for his failure to take any steps to recover the arrears. It is quite impossible for the court to reach any conclusion as to whether this part of the claimant’s claim is statute barred.”

[72]I have every sympathy for the Judge. It seems from paragraph 33 of the Particulars of Claim that the claim for rent was transferred to the Uxbridge County Court in November 1993. It seems from paragraphs 30 and 34 that this claim for rent was made in the writ issued in 1989. In part [if not in whole] this must comprise the rent for which the claimant himself obtained judgment on 5 th August 1992 for £22,244.39. I assume that it is the claimant’s case that this judgment did not exhaust the whole claim for the pre 1990 rent. So far as this rent is concerned it is alleged in the particulars given under paragraph 39 (2) and (3) that the solicitor failed to prosecute this claim for arrears of rent which led to the striking out of the claim and that this was the result of the solicitor’s negligence. For my part, I consider that it is not clear that this part of the claim is statute barred. I am far from clear as to how any claim for negligence in pursuing the action for the pre 1990 rent can survive the judgment which the claimant obtained himself.

[73]A further element of the claim for arrears of rent concerns rent or mesne profits accruing between 1989 and 1992. This was not claimed in the proceedings which were struck out in 1999. According to paragraph 34 of the Particulars of Claim in the present action, the solicitor advised in July 1994 that the Particulars of Claim in the action against the tenants should be amended so as to include a claim in respect of rent accruing after 1989. According to paragraph 39 (1) of the Particulars of Claim in the present action the solicitor negligently failed to amend as he himself had advised. The claimant’s case, as I understand it, is that the solicitor was negligent in not amending the writ after 1994. If that is the basis of the claim, it does not appear to me to be statute barred whatever its other defects.

[74]There is however no express pleading on behalf of the claimant that he had instructed the solicitor to amend. This part of the claim is very badly pleaded and may well be liable to be struck out on that basis. As to this I indicate below under the heading “the way ahead” what I propose.

[75]Loss of opportunity to recover on a claim for damages against the tenants. The judge said this in paragraph 33 of his judgment “The claimant’s complaint is that the defendant failed to take steps to sue the relevant defendants to recover these damages. Again it is quite impossible for the court to determine whether this part of the claim under case 4 is statute barred because I have not been told when it is said that the cause of action against the defendants in respect of this matter accrued.”

[76]According to paragraph 34 in the present Particulars of Claim, the solicitor advised the amendment of the Particulars of Claim in the action against the tenants so as to claim for damage to the premises. This part of the action does not appear to me to be statute barred. However paragraph 39 of the present Particulars of Claim, while alleging that the solicitor’s negligence caused the inability of the claimant to recover arrears of rent, does not allege that the solicitor’s negligence caused the failure to recover for damage to the premises. As to this I indicate under the heading “the way ahead” what I propose.

[77]Loss of the opportunity to recover on the execution of judgment in the sum of £22,249.39. The claimant pleads that on 5 August 1992 he obtained judgment in person for this sum being part of the rent outstanding. Nothing is expressly pleaded suggesting that the solicitor was given instructions to execute this judgment. No negligence is pleaded in relation to any failure on his part to execute the judgment.

[78]The judge said this in paragraph 49 of his judgment in relation both to this part of the claim and in relation to the last item – costs. “Whatever the difficulties of pursuing [these claims] it does seem to me that the claimant had a perfectly good case against [the tenants] which was eventually struck out on 1 March 1999. What the claimant has lost on his case is the right to advance that claim for £22,244.39 in a court of law. That loss, applying Hopkins v MacKenzie , was not sustained until the action was struck out. It makes no difference as it seems to me that the claimant has claimed as well the costs of the action including sums paid to the defendant amounting to some £1,800. ”

[79]I do not disagree with the Judge’s view that it did not appear that this claim was statute barred. I indicate below under “the way ahead” what I propose.

[80]Costs in the action . It is not clear from the pleadings to what expenditures the costs referred to are attributable. Nor is it clear to me what negligence is alleged to be responsible for the incurring of what wasted costs. I do not disagree with the Judge’s view that it does not appear that this part of the claim is statute barred. However, the lack of clarity in the pleadings is again such that there is a serious case for striking out this part of the claim. I indicate under “the way ahead” what I propose. The way ahead

[81]I would allow this appeal in relation to the claim under case 1, case 3 and as to the item in case 4 :Loss of opportunity to recover rent on a re-letting. As to the remaining items in case 4 I entertain serious doubts as to whether any case in relation to them arises on the pleadings as they stand. It may well be that they ought to be struck out on grounds other than limitation. It may well be that the whole or part of one or more of them, if clearly pleaded should be struck out on limitation grounds. There is no doubt that this court has jurisdiction in pursuit of the overriding objective of the Civil Procedure Rules to strike out these parts of the Particulars of Claim : see CPR Rule 3.4. Such a course was not in terms urged upon us and was not considered by the judge who, at the parties request, confined himself to the limitation issues.

[82]In these circumstances, although I am currently minded to strike out the remainder of the particulars of claim as previously formulated as disclosing no presently maintainable cause of action, I think it right to give Mr. Riza an opportunity of making submissions on this point. This judgment will be handed down on Friday 22 nd . March at 9.45 a.m. If Mr. Riza wishes to apply for leave to re-amend the Particulars of Claim, he may apply then. Such an amendment should contain all the relevant allegations fully particularised. Any proposed amendment and accompanying submissions by him should be served on the appellant and the Court by Friday 15 th March.

Order

Appeal allowed; Respondents do pay appellant’s costs of the action (including costs incurred below); costs to be assessed in Accordance with Community Legal Service (Costs) Regulations 2000). (Order does not form part of the approved judgment)

Cited in 18 later judgments

and 9 more of the most senior