Su (aka Hsin Chi Su, Su Hsin Chi And Nobu Morimoto) v Clarksons Platou Futures Ltd & Anor

This is an application by the Defendants for summary judgment in respect of one of the Claimant’s claims. It is said that the claim is time barred so that the Claimant has no real prospect of the claim succeeding. The application was opposed.

The essential history of this matter is that Mr. Haji-Ioannou and Lakatamia Shipping Company Limited pursued a claim against the Claimant, Mr. Su, and companies controlled by him. It was said that Mr. Su and the companies were liable to Mr. Haji-Ioannou and Lakatamia in respect of the breach of an agreement whereby a freight forward agreement (“FFA”) position (600,000 mt/month in the calendar year 2009 on Route TD3) was sold by Mr. Su and his companies to Mr. Haji-Ioannou and Lakatamia on terms that it would be bought back at a higher price (higher by one world scale point equivalent, in the event, to US$1.8m). The deal was done in July 2008 and the “buy back” was to take place in August 2008. It was a method whereby Mr. Su and his companies improved their (very) short term liquidity. Mr. Su and his companies failed to buy back the FFA position. Due to movements in the shipping market Lakatamia suffered considerable losses when they closed the position in 2008 and 2009. Proceedings against Mr. Su and his companies were brought in 2011 (though initially the claim was brought in the name of Lakatamia alone). In August 2011 a freezing order was granted by Blair J. In October 2011 it was continued by Beatson J. and in July 2012 the Court of Appeal dismissed an appeal. Longmore LJ. said that that there was a good arguable case that Mr. Su was personally liable. The trial was heard before Cooke J. in October 2014 and in November 2014 he gave judgment holding Mr. Su personally liable on the FFA deal; see [2014] EWHC 3611 (Comm). Damages were assessed at some US$36m. Permission to appeal was granted by the Court of Appeal on terms that there was a payment into court. But there was no payment in and so the appeal lapsed. In November 2015 Mr. Su commenced the present action against the First and Second Defendants, Clarksons Platou Futures Limited and Mr. Karakoulakis who brokered the FFA deal. Mr. Su claims that the Defendants ought not to have bound him personally to the FFA deal. Mr. Su claims damages in respect of his liability to Lakatamia. The Defendants say that the claim, not having been brought within 6 years of July/August 2008, is time barred and, further, that the claim was brought more than 3 years after Mr. Su had knowledge of the claim, which was, at the latest, the date of the Court of Appeal’s judgment in July 2012, and so the claim is not saved by section 14A of the Limitation Act 1980. The defence based upon the 6 year limitation period requires the court to determine when Mr. Su’s cause of action accrued. The reliance placed by Mr. Su on section 14A requires the court to consider whether the Defendant has a real prospect of being able to bring himself within its terms.

Mr. Su’s claim has been pleaded in Particulars of Claim dated 3 March 2016. The first cause of action is described in these terms in paragraph 3:

“In breach of its warranty of authority the First Defendant acting by the Second Defendant committed Nobu Su to personal liability in respect of the agreement such that the burden of the Judgment Sum falls on him. ”

This is an unusual use of the term “breach of warranty of authority” which is usually used to describe the warranty given by an agent to a third party that he is duly authorised by his principal to make a contract on his behalf with the third party. In the present case what appears to be suggested is that the Defendants only had authority to commit Mr. Su’s companies and Mr. Haji-Ioannou’s company to the FFA deal and in breach of that authority the Defendants committed Mr. Su to FFA deal. The basis of Mr. Su’s right to sue in respect of that breach of warranty of authority is unclear.

The second cause of action is described in paragraphs 4 and 5 of the Particulars of Claim. In breach of a duty owed to Mr. Su the Defendants negligently failed to ensure that the FFA agreement would be made by companies in Mr. Su’s control and not with him personally.

In respect of claims in contract and in tort time runs from the date on which the cause of action accrues; see sections 2 and 5 of the Limitation Act 1980. On behalf of the Defendants Mr. Millett QC submitted that the claim for breach of warranty of authority is a claim in contract and therefore the cause of action accrued on the date of the alleged breach which must have been when the FFA contract was made and bound Mr. Su, namely, 7 July 2008. With regard to the claim in negligence he submitted that the cause of action accrued when damage was suffered, namely, 7 July 2008 or 7 August 2008 (when Mr. Su failed to buy back the FFA position). On behalf of Mr. Su Mr. Crystal submitted that both causes of action accrued on 5 November 2014, the date on which Cooke J. gave judgment against Mr. Su.

There can be no dispute that the relevant date is the date on which the cause of action accrued. That is provided by sections 2 and 5 of the Limitation Act 1980. Mr. Millett’s submission that the date of breach is the date on which a cause of action in contract accrues does not need authority to support it. Equally his submission that the date on which damage is suffered is the date on which a cause of action in negligence accrues does not need authority to support it. By contrast Mr. Crystal’s submission that both causes of action accrued when Cooke J. gave judgment holding Mr. Su personally liable on the FFA deal is surprising.

Mr. Crystal submitted that there was an issue as to whether Mr. Su was personally liable on the FFA deal and that it was not until Mr. Su was recognised by the court as a party to the FFA deal that it could be said there was a cause of action. Similarly, he submitted that it was not until Mr. Su was recognised by the court as a party to the FFA deal that it could be said that Mr. Su had suffered damage.

Mr. Crystal’s submission that the cause of action accrued on the date when Cooke J. gave judgment is, in my judgment, untenable. A cause of action consists of those facts which give rise to a right of action at law. An action for damages for breach of contract requires (i) a valid contract and (ii) breach of that contract. Since the alleged breach must have occurred on 7 July 2008 when Mr. Su was bound personally to the FFA deal that is when the cause of action accrued. The fact that there was a dispute as to whether he was bound personally to the FFA deal and that that dispute was not resolved until November 2014 is irrelevant when deciding when the cause of action for breach of contract accrued. The court’s decision in November 2014 that Mr. Su was bound personally by the FFA deal was not a breach of the alleged warranty of authority. It merely declared that in July 2008 Mr. Su had been bound personally to the FFA deal.

In my judgment Mr. Su has no real prospect of establishing at trial that his claim for damages for breach of warranty of authority is not time barred pursuant to section 5 of the Limitation Act 1980.

An action for damages in negligence requires (i) a duty owed by the defendant to the claimant, (ii) breach of that duty and (iii) damage suffered by the claimant as a result of the breach of duty. The debate between the parties centred upon when damage was suffered.

Mr. Millett submitted that Mr. Su suffered loss when on 7 July 2008 he was subjected to a liability (the liability of a party to the FFA deal) to which he would not have been subjected had the Defendants performed the duty which it is alleged they owed not to commit him personally to the FFA deal. He submitted that the present case fell within the class of case recognised in Law Society v Sephton [2006] 2 AC 543 by Lord Hoffman at paragraphs 20-22 where he referred to:

“cases in which the damage was the difference between the plaintiff’s position as it was and as it would have been if the defendant had performed his duty and in which it was possible to infer that the plaintiff’s failure to get what he should have got from a bilateral transaction was quantifiable damage.”

To the same effect was the judgment of Lord Walker at paragraphs 44-45 and Lord Mance at paragraphs 67-70 and 80. Such cases were to be distinguished from cases where there was no more than a contingent liability without any immediate change in the claimant’s legal position.

Reliance was also placed on Axa Insurance Limited v Akther &Darby [2010] 1 WLR 1662 at paragraphs 73-75 where Longmore LJ said:

“The fact that the flawed transaction has been entered into will usually be damage from the claimant’s point of view. The fact that the recipient of the advice might have hoped for a better transaction or might have hoped to avoid any transaction makes no difference to the fact that he has entered into a flawed transaction which he would not have done if he had been competently advised. If such a flawed transaction has come into existence that will, in my view, usually be the damage which the recipient of the advice has suffered and that is more than the existence of a mere contingent liability.”

Mr. Crystal submitted that the present case was not to be equated with Longmore LJ’s “flawed transaction”. The present case, he submitted, involved the right transaction but the wrong person being made party to it. He relied upon observations by me in British Telecommunications PLC v Michelle Luck and others [2014] EWHC 290 (QB) at paragraphs 14 and 15 that determining when economic or financial damage has been suffered as a result of negligence is not a simple task and that the question is a fact sensitive matter. In a “right transaction, wrong party” case the claimant does not know to what he has been committed. He only knows when judgment is given against him and it is then that damage is suffered. In the period leading up to judgment he only has a liability contingent upon a determination that he was a contracting party.

In my judgment Mr. Crystal’s submissions are mistaken. It is true that there is a factual difference between a case where the right party enters into a flawed transaction and a case where the wrong party enters into the right transaction. But I accept Mr. Millett’s submission that the distinction is immaterial. In both cases the claimant is subjected to a liability to which he would not have been subjected had the defendant performed its alleged duty. Indeed, the transaction brokered by the Defendants in this case was very much a flawed or wrong transaction from Mr. Su’s point of view. On his case the FFA deal ought not to have subjected him to personal liability but it did. That liability is his damage and it was suffered on 7 July 2008. It was not contingent upon any future event (though the quantification of the damage might have been) and was certainly not contingent upon a judgment holding that he was personally liable on the FFA deal. Cooke J.’s judgment did not cause the damage to be suffered. It was suffered in July 2008. I accept that these questions are fact sensitive and that determining when the loss was suffered can sometimes be difficult. But in this case all the facts (or rather the assumed facts - because the allegations in the Particulars of Claim are assumed to be true for this purpose) are known and the court in as good a position as it will be at trial to determine this question. Although the question can sometimes be difficult to decide it is not in the present case. The Claimant’s knowledge that he is personally liable is not a necessary fact to be established when determining when a cause of action in negligence has accrued for the purposes of section 2 of the Limitation Act 1980.

In my judgment Mr. Su suffered damage in July 2008 when he was made personally liable on the FFA deal. It follows that, subject to the effect of section 14A of the Limitation Act 1980, he has no real prospect of establishing at trial that his claim for damages for negligence is not time barred pursuant to section 2 of the Limitation Act 1980.

This section provides as follows:

“14A Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual.

(1)

This section applies to any action for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued.

(2)

Section 2 of this Act shall not apply to an action to which this section applies.

(3)

An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below.

(4)

That period is either-

(a)

six years from the date on which the cause of action accrued; or

(b)

three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above.

(5)

For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff of any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.

(6)

In subsection (5) above “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge both-

(a)

of the material facts about the damage in respect of which damages are claimed; and

(b)

of the other facts relevant to the current action mentioned in subsection (8) below.

(7)

For the purposes of subsection (6)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment.

(8)

The other facts referred to in subsection (6)(b) above are-

(a)

that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and

(b)

the identity of the defendant; and

(c)

if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant.

(9)

Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5) above.

(10)

For the purposes of this section a person’s knowledge includes knowledge which he might reasonably have been expected to acquire-

(a)

from facts observable or ascertainable by him; or

(b)

from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek;

but a person shall not be taken by virtue of this subsection to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.”

Thus, where the claimant acquires the knowledge required for bringing an action for damages after he has acquired the right to bring such an action the claimant must bring his action within 3 years of the date on which he acquires the relevant knowledge. That knowledge consists of two types. First, he must know those facts about the damage as would lead a reasonable person who had suffered the damage to consider it sufficiently serious to justify instituting proceedings. Second, he must know that the damage is attributable to the act or omission which is alleged to constitute negligence and the identity of the defendant. In Haward v Fawcetts [2006] 1 WLR 682 Lord Nicholls explained at paragraph 9 that “knowledge meant knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such a submitting a claim to the proposed defendant, taking advice and collecting evidence…………….In other words, the claimant must know enough for it to be reasonable to begin to investigate further.”

In the present case Mr. Su was aware in July 2012 that not only a Commercial Court judge but also the Court of Appeal considered that there was a good arguable case that he was personally liable for breach of the FFA deal and that very substantial damages were being sought against him. In my judgment that knowledge would, in the language of section 14A(7), lead a reasonable person to regard the matter as sufficiently serious to justify instituting proceedings for damages against the Defendants, who on his case were never authorised to bind him personally to the FFA deal. Mr. Su also had knowledge that the damage was attributable to the act or omissions which he said constituted negligence (namely, binding him personally to the FFA deal) and also of the identity of the Defendants.

Mr. Su has provided a witness statement in response to this application by the Defendants in which he says that he did not issue a Part 20 claim against the Defendants because he considered the prospect of his being found personally liable remote and because he was conducting the litigation under severe financial constraints, in part because of the freezing order and in part because the Part 20 claim would have been heavily defended by the Defendants.

It is to be noted that section 14A(10) provides that knowledge includes knowledge which a person might reasonably have been expected to acquire from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek. He had legal advice at the time. He states that his solicitors “indicated” to him that they were confident that the court would not find him personally liable and that the risk was remote. Mr. Su has not waived privilege and has not disclosed any written advice that he received. Although this is a Part 24 application rather than the trial of the action I am unable to attribute any weight to his evidence. Faced with the fact that Beatson J., sitting in the Commercial Court, and Lord Neuberger MR, Longmore LJ and Sullivan LJ, sitting in the Court of Appeal, all considered, notwithstanding submissions from counsel instructed by Mr. Su’s solicitors, that there was a good arguable case that Mr. Su was personally liable on the FFA deal, I do not consider it credible that experienced solicitors such as Ince and Co. advised Mr. Su that they were “confident” that he would not be held personally liable. But in any event the test is objective and the judgment of Longmore LJ rejecting Mr. Su’s appeal provided Mr. Su with material which, in my judgment, would lead a reasonable person to consider it sufficiently serious to justify instituting proceedings against the Defendants. Certainly, it would cause a reasonable person to begin to investigate further.

Section 14A(7) states that when deciding whether a claimant had knowledge which would lead a reasonable person to consider it sufficiently serious to justify instituting proceedings against the defendant the defendant is assumed to be one “who did not dispute liability and was able to satisfy a judgment”. It is therefore irrelevant that Mr. Su feared that a Part 20 claim against the Defendants would be heavily defended. Mr. Su also relied upon the effect of the freezing order. But it was always open to him to apply to the court for permission to use his resources to expend on the Part 20 claim. His evidence ignores this ability. There is no reason to suppose the court would have refused any such application.

Mr. Crystal referred to a statement by the First Defendant’s solicitors in 2011 that the Second Defendant had denied saying that Mr. Su had contracted on his own behalf and to statements made by the Second Defendant on 1 December 2014 and by Mr. Gray of the First Defendant on 8 December 2014 which were said to support Mr. Su’s belief that he was not bound personally by the FFA deal. Mr. Crystal submitted that in the face of the conflicting evidence prior to the trial and, viewed retrospectively, the statements made on 1 and 8 December 2014 it could not be said that Mr. Su had the relevant knowledge by 3 November 2012. I disagree. By that date Mr. Su had had the judgment of the Court of Appeal for over three months.

I have reached the conclusion that there is no real prospect of Mr. Su establishing at trial that he only acquired the relevant knowledge less than 3 years before commencing proceedings against the Defendants on 4 November 2015. He must have had that knowledge, at the latest, by the date of the judgment of the Court of Appeal, namely, 18 July 2012.

The Defendants are therefore entitled to summary judgment.