Gravgaard v Aldridge & Brownlee (A Firm)

On 29 April 2004, Mr Recorder Coleman sitting in the Bournemouth County Court dismissed an action brought by the appellant, Mrs Gravgaard, against the respondents, a firm of solicitors. Mrs Gravgaard alleges in the action that the respondents acted negligently when advising her on the remortgaging of her house, 85 The Grove, Moordown, Bournemouth, and the transfer of that property by way of a Deed of Gift into the joint names of her husband and herself. Mrs Gravgaard alleges that the respondents were retained by her from February to December 1988. The Recorder found that her action was statute-barred by virtue of section 14A of the Limitation Act 1980. Accordingly, this appeal is yet another case raising the question of the true interpretation and effect of that section.

The material facts are summarised in the skeleton argument of Mr Richard Edwards, who appears for Mrs Gravgaard. The statement of facts which follows is based substantially on that summary:-

The Recorder gave a carefully structured judgment dealing with a number of issues including causation and damage. As respects limitation, his conclusion was expressed in paragraph 47 of his judgment, which was in the following terms:-

At trial, the respondents admitted that Mr Bridle had not given the “core minimum advice” that should have been given by them: see Royal Bank of Scotland v Etridge (No.2) [2002] 2 AC 773, 807 to 808 per Lord Nicholls. On the basis of these admissions and the evidence, the Recorder found that Mr Bridle had been negligent in the following respects:-

This case turns on section 14A of the Limitation Act 1980:-

To summarise, section 14A provides rules for ascertaining the starting date for the purpose of the three year limitation period laid down in section 14A(4)(b). This is the relevant period where, as here, the six year period specified in section 14A(4)(a) has expired. Assuming that the claimant at all material times had the right to start proceedings, the starting date is when she first had “the knowledge required for bringing an action for damages in respect of the relevant damage” (section 14A(5)). For this purpose, subsection (6) provides that she must know both the material facts about the damage and the other facts relevant to the action mentioned in subsection (8), particularly the fact that the damage was “attributable to” the act or omission alleged to constitute negligence and, in addition, the identity of the defendant. The choice of the words “attributable to” makes it clear that it is inappropriate to apply any legal test of causation. The material facts are specified in section 14A(7). They are determined objectively, being those which would lead a reasonable person who had suffered the same damage to consider it sufficiently serious to justify instituting proceedings against a solvent defendant who did not dispute liability.

In this case, the act alleged to constitute negligence is the negligent advice which Mr Bridle gave in 1988 that Mrs Gravgaard had to execute the Deed of Gift. The claimant does not have to know why the act in question was negligent. This is because subsection (9) provides that knowledge that acts did, or indeed did not, involve negligence is irrelevant for the purposes of ascertaining whether a person has the required knowledge.

It is likewise clear from section 14A(8)(a) that the court must look at the acts which on the claimant’s case are alleged to constitute negligence. The court is not to consider simply the allegations which were subsequently upheld or admitted by the defendant. This is a comparatively unusual case where the question of limitation is being decided after the findings on liability have been made. Mrs Gravgaard’s case is put in several ways in the pleadings. I am prepared to proceed on the basis most favourable to Mrs Gravgaard, namely that the essential thrust of her case is that the advice that she had to execute the Deed of Gift was wrong.

Subsection (6) deals with actual knowledge. Subsection (10) provides for the imputation of constructive knowledge. For the purposes of constructive knowledge only, the question arises whether the claimant might reasonably be expected to have acquired knowledge of facts, and whether it was reasonable for him to seek advice. However, a claimant does not have constructive knowledge of facts simply because an expert, whom it was reasonable to expect the claimant to consult, could have obtained the knowledge or helped him ascertain facts. This is because, by virtue of the tailpiece in subsection (10), a person does not have constructive knowledge of matters which are ascertainable only with the help of an expert if he has taken all reasonable steps to obtain and, where appropriate, to act on that advice. If, therefore, he has timeously instructed an expert, it must be shown that he had actual knowledge of the facts specified in section 14A(6) or constructive knowledge on some other basis. This helps to prevent a claimant who acts properly from being penalised for shortcomings on the part of his expert. In the present case, however, Mrs Gravgaard did not instruct a solicitor until May 1999, and it may be that her solicitor was not instructed to advise her on possible claims against the respondents until sometime after that. Accordingly, if the court concludes that it was reasonable to seek expert advice before that date, and that she failed to take all reasonable steps to do so, the effect of subsection (10) is that the facts that she could have ascertained with the help of solicitors will be attributed to her as at that earlier date. On the other hand, if the court concludes that it was not reasonable to expect her to consult solicitors before May 1999, and that the solicitors could not have assisted her to ascertain the material facts before she did in fact do so (and the ascertainment of those facts required expert advice: see Henderson v Temple Pier Co Ltd [1998] 1 WLR 1540), she would not be treated as having acquired knowledge of the necessary facts until she did in fact do so.

On this appeal, Mr Edwards submits that the alleged negligence consisted in the respondents advising Mrs Gravgaard that it was necessary for her to enter into the Deed of Gift. She was not aware of the vital fact that the Deed of Gift was not a necessary step until January 2001.

In addition, Mr Edwards submits that the judge was wrong to hold that Mrs Gravgaard should have taken legal advice prior to May 1999, and that the three years for the purposes of section 14A(4)(b) could not start to run before that date.

Furthermore, on Mr Edwards’ submission, Mrs Gravgaard had no defence to the claims of Lloyds. On that basis, it was unreasonable to expect her to take legal advice. In my judgment, this point is unsound. At all material times Mrs Gravgaard believed that she had a good claim against Lloyds. Indeed, she subsequently sought to raise her complaints against Lloyds in repossession proceedings where it was held that she had raised them too late. Accordingly, the fact that she was wrong in thinking that she had a good defence does not resolve the question whether she should have taken advice which would have caused the potential claim against the respondents to be exposed.

Mr Andrew Nicol, for the respondents, submits that the appellant’s case is artificial. Mrs Gravgaard contends that January 2001 is the crucial date whereas she had already been taking legal advice since 1999. This point was accepted by the Recorder: see paragraph 47(1) above.

Mr Nicol submits that Mrs Gravgaard knew in November 1988 that she had complaints about the March 1988 transactions. Accordingly, she had actual knowledge of her claims against the respondents from that time. Mr Nicol relies on Hallam-Eames v Merrett Syndicates [2001] Lloyds Law Reports 178. In that case, underwriting members of Lloyd’s made a number of complaints against the active underwriter of their syndicates, and their members’ and managing agents, alleging negligent conduct of the underwriting business, for example, that certain run-off policies had been written on inadequate terms. The relevant years of account had been closed and the outstanding liabilities transferred to the syndicates for the succeeding years. It was argued that the names had all the information that they needed to bring the action because the fact that substantial losses had been caused by writing the policies was disclosed in the syndicates’ annual accounts. The Court of Appeal held that knowledge had to be “causally relevant for the purposes of an allegation of negligence”, and that the knowledge which the names had was inadequate. The names had in addition to know that the run-off policies exposed them to potentially huge liabilities, and that these liabilities were incapable of reasonable quantification (and thus that the relevant years of account could not properly have been closed).

Accordingly, on Mr Nicol’s submission, in the present case all that was necessary for Mrs Gravgaard to know was that, as a result of the Deed of Gift, the share in the Property that she had given to her husband had become liable to meet Mr Gravgaard’s debts. In my judgment, this does not follow from the Hallam-Eames case because Mrs Gravgaard did not have the essential information that this consequence was attributable to Mr Bridle in the sense required by that case, that it is in the sense that it was caused by an act on his part which could constitute wrongful advice. Only if she had that additional information could it be said that she had knowledge of facts which were causally relevant to an allegation in negligence. This conclusion does not offend s.14A(9) since there is no question of Mrs Gravgaard’s having to know that Mr Bridle’s advice was negligent. In short, Mrs Gravgaard believed that Wessex had required her to execute the Deed of Gift and nothing that happened in the Autumn of 1988 affected her understanding in that regard.

Mr Nicol alternatively contends that Mrs Gravgaard had constructive knowledge. She should have taken legal advice about her claim against Lloyds in November 1988, and, if not then, when possession proceedings were threatened by Lloyds in 1992, alternatively, when proceedings were started by Lloyds in 1993, or alternatively, at the latest after the exchange of letters in December 1996. Mr Nicol submits that, just as a claimant who suffers several heads of damage cannot simply rely on the head of damage which is within time in order to claim that the limitation period has not expired, so, too, Mrs Gravgaard cannot confine her case to the allegation of negligence based on the failure to advise her that it was not necessary for her to execute the Deed of Gift, rather than on the more general allegation that she was not advised about the consequences of the Deed of Gift.

In my judgment, Mr Nicol’s primary submission on constructive knowledge is correct. Mrs Gravgaard knew, as a result of the Lloyds’ transactions, that the Property was exposed to risk of attachment for Mr Gravgaard’s debts. In my judgment, it was reasonable to expect that Mrs Gravgaard would take legal advice on her claims against Lloyds as soon as she had been prevailed on to execute the second guarantee in November 1988. She was outraged by the fact that she was placed in a position where she could not refuse the requests to grant the guarantees and execute a second charge. She had successfully resisted the Lloyds’ claim for an unlimited guarantee. She was undoubtedly faced with a very serious situation. She had three small children, and she, her husband and the children all lived at the Property. If further creditors could claim against the Property, the Property might have to be sold and then she and her family would be without a home. Her income was very small. She must have been concerned about the possibility of Lloyds seeking a further increase in her guarantee. In that very serious situation, it seems to me reasonable to expect her to have sought legal advice on her rights against Lloyds. I further agree with the Recorder that the Lloyds’ guarantees and second charge were so intimately bound up with the March 1988 transactions that anyone advising her would have realised that the former had to be investigated as well. If Mrs Gravgaard had turned to Mr Bridle for advice, and the question had arisen whether the advice in February and March 1988 was correctly given, he would have had to advise her to seek advice elsewhere. In my judgment, for the reasons given above, it is reasonable to expect that in those circumstances she would have sought that advice.

Mrs Gravgaard seeks to raise the point whether in fact Mr Bridle would have given her correct advice. However, Mrs Gravgaard having failed to take advice at all, section 14A(10) attributes to her matters which were ascertainable only with the help of “appropriate expert advice”. It seems to me that on the facts Mr Bridle would not necessarily have been the appropriate person to advise Mrs Gravgaard on her claims against Lloyds for the purpose of that provision. There is, moreover, a question of law here as to the meaning of the expression “appropriate expert advice” in section 14A(10), and as to whether that expression entitles the court to have regard to a specific individual in any event. Even, however, if Mr Bridle had been the appropriate person for this purpose, it is not open to Mrs Gravgaard to assert on this appeal that the matters ascertainable with his help would, in fact, have been more limited than the judge thought and, therefore, not within section 14A(10). Mrs Gravgaard would require a substratum of fact as a starting point for that submission, and those facts were not explored before the judge. Until the contrary is shown, there is no reason for the court to assume that Mr Bridle would necessarily have given inadequate advice. Furthermore, only if the facts had been found in Mrs Gravgaard’s favour would there have been an issue of law as to their relevance under section 14A(10). In the circumstances, that does not arise.

Mr Edwards submits that what Mrs Gravgaard thought was that she had a claim against Lloyds and that is the matter on which she would have taken legal advice. Further, section 14(10) is not, on his submission, wide enough to cover a case where the existence of claim B is discovered in the course of the investigation of claim A. I do not accept this submission. It involves reading a gloss into this section. The only question under section 14A is whether it was reasonable to expect her to take legal advice and whether it is reasonable to expect Mrs Gravgaard to acquire knowledge from the facts ascertainable by her with the help of a solicitor investigating the claim against Lloyds. For the reasons given by the Recorder, I consider that that test is met.

There is, of course, an issue as to whether the court should, in determining whether it is reasonable to expect a person to seek legal advice, take into account the surrounding circumstances and any special characteristic or attribute of the claimant. Section 14A(10)) is silent as to the matters which the court must take into account and leaves such matters to the courts to work out. The test, however, is clearly objective. In my judgment, the court should take into account external surrounding circumstances, such as the significance of the issues to a reasonable person in the position of the claimant.

The more difficult issue is whether the court should take into account matters such as the fact Mrs Gravgaard already had her hands full because she was a working mother and wife and was struggling hard, as the Recorder put it, “to keep her financial head above water”. These factors could make it more difficult for her to get advice (though, as regards Mrs Gravgaard’s financial position, no one has suggested that if she had sought to do so in 1988 she would not have been entitled to legal aid if she otherwise met the conditions for such assistance). Although Mrs Gravgaard does not rely on these matters, a court could not fail to observe the difficulty of her position and to admire her success at juggling the many pressures on her. She has survived her ordeal with her home and marriage intact, and she had gone on to further education and to hold public office in local government. Mr Gravgaard’s business continues to trade.

Section 14A(10) does not state that a person’s knowledge includes knowledge “which a reasonable person might be expected to acquire” but rather that a person’s knowledge includes knowledge “which he [she] might reasonably be expected to acquire” (contrast s. 14A(7)). In my judgment, this choice of wording is significant. It means, in my view, that in general the court must have regard to the characteristics of a person in the position of the claimant, but not to characteristics peculiar to the claimant and made irrelevant by the objective test imposed by subsection (10). This conclusion is consistent with the general approach of section 14A. Section 14A attaches importance to the claimant having actual knowledge. Constructive knowledge applies only if the conditions of section 14A(10) are fulfilled. Moreover, as I pointed out earlier, section 14(10) does not automatically impute the knowledge of an expert instructed by a claimant to the claimant.

Applying the foregoing, the court is entitled under section 14A(10) to assume that Mrs Gravgaard would have been concerned to know the reasons for her mistake as to the consequences of the Deed of Gift: see Adams v Bracknell Forest BC [2004] 3 WLR 89 per Lord Hoffmann at [47] to [52]. In fact, Mrs Gravgaard’s outspoken reaction to the request by Lloyds to give the second charge and guarantees marks Mrs Gravgaard out as having a sharp appreciation of the situation, even in the autumn of 1988. Her reaction supports the point that she ought reasonably then to have taken legal advice.

On the basis that section 14A(10) requires the court to have regard to the position of the actual claimant, not some wholly hypothetical claimant, in my judgment, it is appropriate to take account of Mrs Gravgaard’s belief that she had a claim against Lloyds. In my judgment, this is not inconsistent with the objective test in section 14A(10). Nor is it inconsistent with the conclusions of the House of Lords in the Adams case. That case was concerned with section 14(3) rather than section 14A(10) but the two provisions are similar. The issue relevant for present purposes was the particular problem of applying the test for constructive knowledge in section 14(3) to a claimant with dyslexia. The claimant’s case was that he had been inhibited from taking advice because of his disability. Indeed, this is the usual situation: the claimant seeks to persuade the court to take some characteristic of his into account so as to prevent the attribution of constructive knowledge. The speeches in the Adams case indicate the difficulties in the court’s drawing a hard and fast rule for this purpose. However that may be, this case is not that situation. Mrs Gravgaard seeks to rely on section 14A(10) in order to justify the court leaving out of account a belief that she actually had. In my judgment, there is nothing in the Adams case which should lead this court to ignore the actual belief of Mrs Gravgaard. In my judgment, this is so even if her belief happened to be unfounded in law.

If I am wrong on that point, Mrs Gravgaard was clearly put on notice that she might have a claim against the solicitor who advised her in 1988 by the terms of the bank’s reply to her letter of 6 December 1996. It may well be that Mrs Gravgaard was so ill-disposed to Lloyds that she did not trust the reply they had given. Nonetheless, this was their reply. Mrs Gravgaard’s situation was serious. As the Recorder points out she was having difficulty keeping up with the agreed schedule of repayments: see his judgment, paragraph 47(8)(b)). Given the seriousness of her situation, in my judgment, it was reasonable for her to consult a solicitor about her possible claim against Mr Bridle.

In those circumstances, it is not necessary for me to come to any conclusion on the alternative dates of 1992 and 1993 relied on by Mr Nicol.

For these reasons, I consider that the Recorder came to the correct conclusion. His reasoning is clear and carefully put. With the exception of the events of 1993 (on which I have not expressed a conclusion) I only differ from him in the emphasis I give to the events of the autumn of 1988 and in the approach to the construction of section 14A(10) in so far as the Recorder proceeded on a different view. Accordingly, I would dismiss this appeal.

When this judgment was circulated in draft in accordance with Practice Note (Court of Appeal: Handed Down Judgments) [2002] 1 WLR 344, Mr Edwards sought to raise new points on section 14A(10) and to make submissions for the first time based on Adams v Bracknell Forest Borough Council. I have exceptionally made some amendments to my draft judgment to reflect these new points. The points raised by Mr Edwards should have been raised in the course of the appeal. As this court explained in Robinson v Fernsby [2003] EWCA 1820, the purpose of circulating judgments in draft is to enable formal amendments to be made, for example, typographical corrections. It is not an occasion for making new submissions on matters of substance which ought to have been made during the appeal itself.

I agree.

I agree that this appeal should be dismissed for the reasons given by Lady Justice Arden.