Polley v Warner Goodman & Streat (a firm)

(As Approved by the Court)

Monday 30 June 2003

THE LORD CHIEF JUSTICE: I will ask Lord Justice Clarke to give the first judgment.

LORD JUSTICE CLARKE:

Introduction

1. In these proceedings in the Portsmouth County Court the appellant seeks damages for negligence and breach of contract against the respondents as his former solicitors, Warner Goodman & Streat. The proceedings were issued on 14 April 2000. On 8 April 2000, District Judge Sparrow ordered that there be a trial before a Circuit Judge of a preliminary issue, namely whether the claim form was issued outside the limitation period under the Limitation Act 1980 (“the 1980 Act”). That issue came before His Honour Judge Anthony Thompson QC on 23 October 2002 although, curiously in the light of the order of 8 September 2000, he appears to have treated it as an application to strike out the proceedings on the ground that they were time-barred. He held that they were time-barred and, as initially drawn up, the order made on 23 October 2002 provided that the action be struck out with costs. He refused permission to appeal.

2. There followed some confusion as to whether the proposed appeal was against an interlocutory order or a final order and indeed whether the appeal would be to a High Court Judge or to the Court of Appeal.

3. The appellant made an application for permission to appeal to David Steel J, who granted permission on 5 February 2003. However, by then the order of the judge had been varied on 11 November 2002 to make it clear that judgment was given for the respondents on the trial of the preliminary issue of limitation. It was then decided that any appeal would lie to this court and on 1 May 2003 Hale LJ gave permission to appeal.

The Chronology

4. The appellant was employed by Hydro Polymers Ltd (“the employers”). In about June 1990 he suffered personal injury while attempting to move a bag of polymer from a storage pallet in the course of his employment. He subsequently instructed the respondents to pursue a claim for damages against his employers. Legal aid was obtained on 13 January 1993. On 25 May 1993, the respondents issued County Court proceedings against his employers on his behalf. The three-year limitation period for such proceedings would have expired in June 1993. The limitation period is provided for by sections 2 and 5 of the 1980 Act.

5. Under the relevant provision of the County Court Rules the summons should have been served within four months of its issue. Time for service therefore expired on 24 September 1993. However, before that the respondents made an ex parte application on the appellant's behalf to extend the period for service. The application was not supported by any evidence. It was, however, nevertheless considered by District Judge Naylor on 29 September and an order was made extending the time for service for four months from 24 September. On 30 November the summons was served by post. On 16 December the employers' solicitors issued an application to set aside the order extending the time for service of the summons. That application was heard on 18 April 1994 by District Judge Bailey-Cox. The application succeeded. The order extending the time for service was set aside and the appellant was ordered to pay the respondents' costs, although because the appellant was legally aided the order for costs was not to be enforced without the leave of the court.

6. On 20 April 1994, the respondents wrote to the appellant. The letter included the following:

“.... The Order has been set aside and unless we appeal this latest Order, the reality is that your claim against Hydro Polymers can no longer be pursued.

I must advise you to seek independent legal advice which is lawyers' jargon for saying that you may have a claim against this firm ....

I am happy to recommend other local Solicitors that you can contact who deal with this type of work.”

These proceedings were issued on 14 April 2000.

The Appellant's Case

7. Paragraphs 11 and 12 of the Particulars of Claim are in these terms:

“11. The effect of the said order of 18 April 1994 was that the Claimant was unable to pursue further the litigation against Hydro Polymers Limited arising out of his said accident at work.

12. The effective termination of the Claimant's litigation against Hydro Polymers Limited and the making of the said order for costs against the Claimant was caused by the negligence or breach of contract or both on the part of the Defendants.

PARTICULARS

(1) Failed to serve the proceedings upon Hydro Polymers Limited or upon their authorised agents within four months of the date of issue of the said proceedings.

(2) Failed promptly to apply, whether on notice or otherwise, for an order extending the period of time within which the said proceedings could be served.”

8. In paragraph 13 of the Particulars of Claim the appellant asserted “insofar as it may be necessary to do so”, that the period of limitation had not begun by reason of deliberate concealment of a relevant fact by the respondents within the meaning of section 32(1)(b) of the 1980 Act.

9. Since then the appellant has abandoned reliance on that section because of the decision of the House of Lords in Cave v Robinson Jarvis & Rolf [2002] 2 WLR 1107. However, that was done after the order was made that the issue of limitation be tried as a preliminary issue.

10. It may be noted that the appellant has at no stage relied upon section 14A of the 1980 Act or any discretion of the court to extend the time. That may be because of the contents of the letter of 20 April 1994, part of which I have quoted.

11. The loss and damage pleaded in 14 of the Particulars of Claim were:

(1) the loss of the chance of prosecuting the appellant's claim for damages against his employers to a successful conclusion;

(2) his liability for costs under the order of 18 April; and

(3) the physical injuries referred to in two medical reports dated 18 March and 26 November 1993.

The Defence

12. The defendants denied liability and asserted that the order was time-barred.

The Issue

13. The appellant having abandoned reliance upon section 32(1)(b) of the 1980 Act, the sole issue considered by the judge was whether the claim was time-barred when the proceedings were commenced on 14 April 1990. It is correctly accepted that the claim in contract is time-barred because no breach of contract is alleged after 14 April 1994. The question is whether the claim in tort is also time-barred. That depends upon whether the appellant's cause of action accrued on 18 April 1994, when the order of 29 September 1993 was set aside, or before 14 April 1994.

14. As I read the Particulars of Claim, and as has been confirmed this morning by Mr Ramsden on behalf of the appellant, all the alleged negligence took place before 14 April 1994. Thus it is not suggested that any relevant negligence or breach of duty occurred less than six years before the proceedings were commenced on 14 April 2000.

The Principles

15. In Hatton v Chafes (13.3.2003) [2003] EWCA Civ 341, in a judgment with which Peter Gibson LJ and Sir Anthony Evans agreed, I summarised the principles in this way in paragraph 12:

“(i) A cause of action in negligence does not arise until the claimant suffers damage as a result of the defendant's negligent act or omission.

(ii) The damage must be 'real' as distinct from minimal: Cartledge v Jopling [1963] AC 758 per Lord Reid at 771 and Lord Evershed MR at 773-4.

(iii) Actual damage is any detriment, liability or loss capable of assessment in money terms and includes liability which may arise on a contingency: Forsted v Outred [1982] 1 WLR 86 per Stephenson LJ at 94, approved by the House of Lords in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd No 2 [1995] 1 WLR 1627, per Lord Nicholls (with whom the other members of the appellate committee agreed) at 1630F.

(iv) The loss must be relevant in the sense that it falls within the measure of damages applicable to the wrong in question: Nykredit at 1630F.

(Propositions (i) to (iv) were confirmed by Sir Murray Stuart-Smith in Khan v Falvey [2002] EWCA Civ 400, [2002] PNLR 28, at paragraphs 11 and 12.)

(v) 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 damage from the same wrongful act outside that period: Khan v Falvey at paragraph 23, following Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172 per Hobhouse LJ at 184 and 187.”

16. Having regard to the submissions in the instant case I would add a sixth proposition, namely: damage often occurs before it can be crystallised, and difficulties of quantification do not prevent damage from being said to have occurred (see Nykredit at 1632).

17. In the light of those principles, and in particular proposition (v), the question in the instant case is whether any damage was sustained by appellant before 14 April 1994. The appellant's case is that no such damage was caused because the appellant only sustained loss when the order of 29 September 1993 was set aside on 18 April 1994, because it was only then that the appellant lost his chance of succeeding in his action against his employers.

18. The respondents' case before the judge and in this court was and is that the appellant suffered loss and damage when the time for service of the summons expired on 24 September 1993. The judge essentially accepted the respondents' submissions. The respondents' principal submission is that the judge was right to do so on the basis that there was no good reason why the summons was not served in time and that an inter partes application for an extension of time for service would be bound to fail. Equally, Mr Charlwood submits on behalf of the respondents that if, as here, an ex parte application succeeded without the court considering evidence, an application to set aside the order obtained ex parte would be bound (a) to follow and (b) to fail.

19. In my opinion, if that is the correct analysis of the position on the facts, it follows that the respondents' submission is correct and the appeal must be dismissed. The position would in that event be closely analogous to both Khan v Falvey and Hatton v Chafes. I remain of the view expressed in paragraph 16 of Hatton v Chafes, namely that Khan v Falvey is authority for the proposition that it is not a condition precedent for any claim against the defendant's solicitors that the underlying actions should be struck out or come to an end. That is because the claimant may have suffered relevant damage before an order is made striking the action out or bringing it to an end.

20. In Hatton v Chafes it was held that where, in a striking-out for want of prosecution case, a claimant has no arguable basis for avoiding the claim being stuck out because of the defendant's solicitors' negligent delay, he has suffered loss as a result of the defendant's negligence and his cause of action has accrued. The question was left open whether a claimant might be held to have suffered damage as a result of the defendant's negligence at some earlier stage before it was doomed to failure. However that may be, to my mind it follows from the principles in Khan v Falvey and Hatton v Chafes that, if the appellant had no arguable defence to an application by the employers to set aside the order extending the time for service, the appellant suffered loss as a result of the alleged negligence when the time for service expired on 24 September 1993.

21. I therefore turn to that question on the facts. There is an agreed note of the judgment of the district judge of 18 April 1994, which is in these terms:

“I will look at the matter in two stages. Firstly as at 29 September 1993 and secondly as at today's date.

It is common ground that the order made on 29 September 1993 was to say, at the least, unfortunate and may well have had the effect of lulling the Plaintiff's solicitors into a sense of false security. Suffice to say that as at that date, no reason was shown.

Looking at the matter with the benefit of hindsight, the order should not have been made; not only was no good reason shown but there is no supporting evidence whatsoever.

Hopefully and as at today's date, having read the two Affidavits and hearing learned counsel, the Court is now seized of the facts and I have to decide whether good reason has been shown. I accept the submissions made by learned counsel for the Defendant as to the medical evidence. There are no substantial differences in the two medical reports save as to the dates. This matter could be corrected at any stage in the proceedings, without causing prejudice to the Defendant. That being so, there is no reason why the Plaintiff could not have served the proceedings with the original medical evidence.”

To my mind it is plain that that was the essential reason why the district judge made the order that he did in April 1994, although he added:

“I largely disagree with counsel for the Plaintiff when he indicates that the District Judge would have difficulties if no medical evidence was available. I acknowledge the rules of Court but rules must be made to work in a practical sense. It is far better for the Defendant to have notice of the claim, notice being by way of service of the writ and await for a reasonable period if necessary for the medical evidence rather than to suffer the shock of service after the limitation period has expired. I do not know other District Judges' practices but I also prefer to allow the Plaintiff time to obtain a medical report rather than to continue the writ beyond the period of limitation.

Therefore, I find as at today's date insufficient reasons have been shown and, therefore, the application should proceed.”

22. It seems from the district judge's judgment that the essential point advanced before him by the respondents on behalf of the appellant as good reason for not serving the summons was that the medical evidence was not sufficiently full and they were waiting for a second report. The district judge rejected that case. As I read his judgment, he held that there was no reason why the respondents could not have served the employers within the four month period because there was no significant difference between the two medical reports, ie the one dated 18 March 1993, which was considered by the respondents in the relevant period and indeed considered by counsel, and the second one which was subsequently made available in November 1993, except for dates, which could be corrected later. He thus held that there was no reason, let alone a good reason, for not serving the summons.

23. It is common ground, as I understand it, between the parties that the test under the relevant County Court Rules, as indeed the test under RCS Order 6, rule 8, which was applied when deciding whether or not to extend the time for service of proceedings was that good reason had to be shown why the proceedings had not been served. It is correctly recognised by Mr Ramsden on behalf of the appellant that the courts had held that difficulties with legal aid and difficulties in obtaining evidence, including medical evidence, would not amount to good reason. However, he submits that, looking at the matter in the round, some district judges might have taken a different view from the district judge in question. He therefore relies on the affidavit of Mr Dobson of the respondents put before the district judge for the purposes of the application. Essentially the point that he relies upon is in paragraph 12 of that affidavit, where the deponent said:

“I appreciate the criticisms made in Miss Welsh's Affidavit as to the conduct of my firm. With hindsight, it might have been more prudent to seek leave to serve the proceedings without accompanying medical evidence. However, this would have necessitated greater expense to the Legal Aid Fund and, I anticipate, to the Defendant who would have had to have dealt with the litigation on a piecemeal basis rather than as a single entity.”

24. Mr Ramsden submits that those considerations potentially amount to good reason. For my part I would not accept that submission. In this case full legal aid was granted before the expiry of the four months, so that there was no reason why the service should not have taken place because of the absence of sufficient legal aid. More importantly, neither of the reasons advanced there seems to me to be capable of amounting to good reason why this summons should not have been served within the four months. As we have seen, the real basis of the debate, as we have seen, before the district judge depended upon the medical evidence. Yet the first medical report was considered sufficient by counsel to advise the Legal Aid Fund to support the proceedings and the later report added nothing or nothing of significance which could not be corrected later.

25. In all these circumstances it appears to me that the district judge was driven to conclude that there was no good reason for not serving the summons and that the application must succeed. I note in passing that it is an essential step in the appellant's case against the respondents that the respondents were negligent in failing to serve the proceedings in time. In order to succeed in that claim the appellant would have to satisfy the proposition that no reasonable solicitor would have failed to serve the proceedings in time. I recognise, as Mr Ramsden submits, that that is a slightly different test from the doomed to failure test, the application of which I am considering for the moment. But I have reached the clear conclusion that the judge was right. The application to set aside the order of 24 September 1993 was bound to succeed. The appellant had accordingly already suffered loss as a result of the alleged negligence of the respondents. Applying the principles in Khan v Falvey and Hatton v Chafes, the appellant's cause of action accrued on about 24 September 1993 and not after 14 April 1994, namely on 18 April 1994.

26. In these circumstances it is not necessary for us to consider whether the “doomed to failure test” is necessarily correct. I left that question open in paragraph 17 in Hatton v Chafes. I would also leave that question open for the future for decision in a case where it is necessary for the decision. For the reasons which I have given I have reached the clear conclusion that the judge was correct and I would dismiss the appeal.

LORD JUSTICE AULD: I agree that the appeal should be dismissed. I do so in the light of the authorities guiding the approach of District Judges under the County Court Rule corresponding with RSC Order 6, rule 8(2) at the material time, to the exercise of their powers to extend the validity of the plaint or writ to facilitate service within the four-month period of extension. In my view, the District Judge who granted the extension, if he had acted in accordance with the guidance given by those authorities, would not and should not have regarded the reasons subsequently advanced for Mr Polley against the application to set it aside as a good reason for the grant of it.

27. That being my view, the damage, it seems to me, occurred at the time when the first District Judge wrongly granted the extension. The high vulnerability -- certainty if the law and practice of the courts was to be properly applied -- of the extension being set aside on application being made as it was, at the very least doomed the claim against the solicitors to failure, thus causing the actionable damage at that first hearing.

28. THE LORD CHIEF JUSTICE: I agree that the appeal should be dismissed for the reasons given in both judgments.

ORDER: (Not part of judgment)

Time extended for respondents' notice; appeal dismissed with costs, not to be enforced without the permission of the court; Legal Services Commission assessment of the appellant's costs.