Financial remedies: accrual of a cause of action of negligence against solicitors

Tom Gilchrist


When does a cause of action in negligence against solicitors in financial remedies proceedings actually accrue?


Holt v Holley & Steer Solicitors [2020] EWCA Civ 851

The Court of Appeal has made a recent decision regarding the liability of solicitors in negligence in financial remedies proceedings. The issue was: at what point does the cause of action in negligence actually accrue?


The basic facts


Ms Holt had instructed Holley & Steer (‘the Firm’) to act in her financial remedies proceedings. At the First Directions Appointment (‘FDA’), no directions were sought for some buy-to-let properties held by Ms Holt and her husband in their separate names, although there was an order for them in relation to completion statements.

At the Financial Dispute Resolution hearing (‘FDR’), the husband was ordered to provide evidence as to the existence and value of jewellery that he claimed Ms Holt had. The Firm did not seek any further order for valuation evidence.

Before the final hearing, the Firm asked estate agents to do a valuation of the investment properties on a ‘drive-by’ basis. A few days before the final hearing, the Firm asked the husband’s solicitors to agree to enter them into evidence. The husband’s solicitors refused. The Firm took no further action by way of application to admit the new valuation. The hearing then progressed as normal, by way of two blocks of two days, a circulated draft judgment and then a handed down judgment and corresponding order.

Ms Holt’s claim was essentially that the Firm negligently failed to adduce the valuation expert evidence.


Limitation and date of accrual


Section 2 of the Interpretation Act 1980 states:


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.

There were multiple dates on which the cause of action could have possibly accrued:


a. 01 July 2011 – at the FDA;

b. 11 October 2011 – at the FDR

c. 10 February 2012 – when the Firm asked opposing solicitors to agree to admit new valuations into evidence and they refused;

d. 16 February 2012 – the first day of the hearing

e. 16 March 2012 – the last day of the hearing;

f. 10 April 2012 – the day the judge circulated the draft judgment; and

g. 30 May 2012 – the day judgment was formally handed down and the order made.


In a pre-action letter to the Firm, the new solicitors for Ms Holt argued that the limitation might run to 10 April 2018. The Firm contended that the latest date for limitation was 16 March 2018, that being the last day of the hearing. Ms Holt’s new solicitors then argued limitation only started when Ms Holt became financially worse off, so the cause of action accrued on the day of judgment, i.e. 30 May 2012. They argued that at any point before this any party could have applied to the court to adduce further evidence.

Ms Holt commenced proceedings against the Firm on 05 April 2018. She would be outside the six-year limitation period if any of the dates from a. to e. were held to be the date of accrual.


Lower courts


After a summary judgment application by the Firm, District Judge Watkins held that contractual claim against them was time barred but the claim in tort was not. He found that the date the loss was suffered and damaged sustained was when the judgment was handed down and the order made, i.e. 30 May 2012.

On appeal His Honour Judge Ralton found that both causes of action were time barred. He found that the latest possible date of quantifiable damage must be 16 March 2012 – the last day of the financial remedy proceedings. This was as the parties would know the trial judge would have made up his mind up based on the values presented. He found that the loss to Ms Holt was measurable on that date in that it was the difference between the value of her properties and jewellery as presented and their true value.

Ms Holt appealed the decision of HHJ Ralton on the grounds that the correct date was 30 May 2012. The Court of Appeal dismissed her appeal.


Analysis of the Court of Appeal


It is trite law to say that, in tort, the cause of action accrues when the damage is sustained. But when is the damage sustained in negligence in financial remedies proceedings?

Ms Holt argued that financial remedy proceedings were a particular type of litigation and incomparable to other civil proceedings. It was argued that there was no ‘right’ to be valued, that the proceedings were effectively inquisitorial and that a hearing judge is not as confined by the parties’ approach to evidence as in other civil actions. It was submitted that the outcome was therefore contingent upon judgment.

While the Court analysed the authorities on ‘contingent’ losses, it found that in many cases, ‘the potential consequences of a negligent approach to valuation can be seen and, to some extent, it can be assessed before any judgment is delivered’. Therefore, Ms Holt’s situation was not a true ‘contingency loss’ case as the original judgment was based on the (arguably) inflated values.

It was made clear by the Court that there are two parts to a financial remedies decision: the computation stage (where the values of the parties’ assets are ascertained) and the distribution stage (where the split of those assets is determined).

The Court had no trouble quantifying the ‘loss’ Ms Holt suffered. If the asset values were higher, a higher balancing payment would have been ordered to make the 60/40 split between the spouses. Ms Holt had suffered a ‘loss of a chance’ when it realistically became impossible to adduce further valuation evidence. Effectively, Ms Holt suffered a ‘loss of a chance’ for the computation stage to be done correctly. This loss occurred before the end of the hearing.

The Court stated that just because the value of ‘rights’ in financial remedies proceedings may fluctuate over the course of a case, it does not mean that they do not have value at the start of a case or that they do not have value until there is a judgment. This also does not mean that the value cannot be damaged by negligence before judgment.

In a clear statement, the Court found that a ‘client’s rights can be sensibly evaluated, and can be damaged by negligence, at almost any stage of the proceedings; their lack of assignability, to my mind, is by the way.’

It was the real risk of Ms Holt’s assets being valued at what she said to be an inflated amount that meant the value of her ‘rights’ were diminished. The Court found that Ms Holt suffered measurable damage and was financially worse off on 16 March 2012 (the final day of the hearing) ‘and in all probability much earlier than that’.


Practical implications


This is welcome news for family solicitors and barristers as the Court of Appeal has taken a no-nonsense approach to the law of limitation and financial remedies. It found that there should not be a distinction between financial remedies cases and other civil litigation on a technical basis that one claim is assignable and the other is not.

The Court was slightly unclear about what the exact date of accrual was by saying that it was probably before the final day of the hearing. If the negligent act was not to seek to adduce the evidence (in a timely manner), then the realistic ability to adduce it must pass the point of no return and crystallise into a cause of action at some point before the end of the hearing. The Court has essentially pointed out the latest possible point for the that crystallisation on these facts.

It could be argued that the date of accrual was actually the FDA or FDR. On these occasions, the Firm failed to seek to adduce evidence as to the valuations. If they had made a (successful) application to adduce them at any point before the handing down of the judgment it would have merely remedied the damage they had already done and would have replaced the ‘loss’ Ms Holt had already suffered.

Conclusion


The court found that that these types of limitation questions are intensely fact specific and the highest authorities are only capable of giving board guidelines and stating applicable principles. While this case is a good guide for solicitors and litigants, every case will turn on its own facts. With financial remedies cases sometimes taking years from beginning to end, along with the current Covid-19 backlog, it will be important to assess all actions (or inactions) during the life of a case for potential liability.

This decision also creates a potential disadvantage to parties in financial remedies proceedings. As they are not legally trained, they might not be aware of what should (or should not) be done during proceedings and therefore not realise the loss and damage done to their ‘rights’ until judgment. If there is a significant time delay between the hearing and judgment, this will chip away at limitation period.

The most important point to take away from the case is a timely reminder to potential litigants (and those representing them) to be wary of limitation. It is best practice to investigate and/or bring an action as soon as possible.


Tom Gilchrist is a barrister at 2 Dr Johnson's Buildings, specialising in mainly family law, as well as criminal law. Prior to joining chambers, Tom was a barrister in New Zealand.