High Court decision on “date of knowledge” under s14A Limitation Act and warehousing claims

Morris v Knights Solicitors and others, BPC Newcastle, 5 October 2022

This 49-page, 148-paragraph judgment is replete with practical lessons for all solicitors, and a must-read for solicitors dealing with professional negligence matters. It addresses, among other issues, the “starting date” under s.14A(4)(b) Limitation Act 1980 where a solicitor gives wrongly positive advice about the effectiveness of his own work, the dangers of “warehousing” claims, and the need for clear and intelligible pleadings. The full decision can be read here.

Is it reasonable for a client to seek his solicitor’s advice about the quality of the solicitor’s own work? This was one of the questions addressed by the decision handed down by the High Court today in Morris -v- Knights Solicitors and others, in which Andrew Butler KC acted for the claimant.

Mr Morris (M) retained Knights (K) to draft a sale and purchase agreement (“SPA”) for him. When the buyer declined to pay part of the price (claiming that the relevant part of the SPA was unenforceable), M went back to K, who advised him that the buyer had no leg to stand on.

As it turned out, however, the buyer was right; after lengthy litigation the clause was eventually held to be unenforceable, and M lost his claim for payment. He then brought a claim against K; but by this time well over 6 years had expired since the date of the SPA, and K applied for summary judgment on the claim, as well as strike-out on various other grounds. It was on this application that Andrew was instructed.

The principal issue so far as limitation was concerned was when time started running for the purposes of s.14A Limitation Act 1980 – in other words, the “starting date” within the meaning of that ss.14A(4)(b). Was it:

1. When the agreement was signed?
2. When payment was refused?
3. When payment was refused for a reason calling into question the quality of K’s work?
4. When that defence was formally pleaded?
5. When M was advised by K that he might lose the claim? or
6. When judgment was given against M?

Had it been any of the first five, time under s.14A would also have expired, and limitation would have been an unanswerable defence. However, the Judge (HHJ Kramer QC, sitting as a Judge of the High Court) acceded to Andrew’s submission that there was at least a real prospect of M showing that it was the last, and K’s application was accordingly dismissed.

An important element in the determination of this point was whether it had been reasonable for M to take (and follow) K’s consistently bullish advice about the strength of his position – since, under s.14A(10), time starts to run from the date when the claimant could have known about the damage suffered “with the help of appropriate professional advice which it is reasonable for him to seek”. The Judge rejected the defendants’ submission that it could never be appropriate or reasonable for a client to go back to, and be guided by, the same solicitor whose work was under attack, and that he should have instructed alternative solicitors.

Andrew also argued that there were in any event potential alternative claims (not yet included in the existing Statement of Case) arising from K’s failure to advise M of the potential conflict of interest, or – assuming, contrary to M’s primary case, that the limitation period for bringing an action against K had indeed expired – giving M timely advice that that was or might be about to happen.

K’s application also sought strike out on the basis of abuse of process, on the ground that M had “warehoused” his claim (i.e. issued it with no intention of advancing it) – a recognised form of abuse previously considered by the High Court in Alfozan v Quastel Midgen LLP [2022] EWHC 66 (Comm). The judgment therefore also dealt with that issue. Although HHJ Kramer held that M had warehoused his claim, and was thus guilty of an abuse of process, he acceded to Andrew’s submission that he should not strike the claim out, largely on the basis that (a) K and its fellow Defendants had always known what the essence of the case against them was; (b) the future conduct of the claim could be managed by lesser orders such as peremptory orders, should there be further default; and (c) a fair trial was still possible.

Accordingly, and save for the striking out of one or two peripheral allegations in the Particulars of Claim (not drafted by Counsel), K’s applications were dismissed.

If you would like any more information on the case, please contact Andrew Butler KC.