England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE HOLLAND)

		Royal Courts of Justice The Strand London
		Tuesday 6 November 2001

Tuesday 6 November 2001

1. THE LORD CHIEF JUSTICE: This is an appeal from a decision of Holland J of 20 December 2000 when he decided a preliminary issue in the course of which he dismissed the defendants' contention that a claim which was being brought against them was statute-barred under section 14A of the Limitation Act 1980.
2. The claim was brought by Mr and Mrs Babicki who had purchased premises known as 271 - 273 Haslingden Old Road, Rawtenstall. They purchased the premises in November 1987 with the intention of running a hotel business. The vendor was a Mr Sharples. Whilst living at 273, he had converted 271 into a six-bedroom hotel. Subsequently, the premises at 271 and 273 were converted by him into an eleven-bedroom hotel which had a 42-seat restaurant and bar, together with the necessary licences to enable the premises to operate as an hotel. After Mr and Mrs Babicki purchased the premises they ran them as an hotel until there came a stage where they were desirous of selling it. In October 1995 a Mr Mullen went to stay at the hotel with the intention, if he found it satisfactory, of purchasing it. While there, he was shown the fire certificate issued to the hotel. He observed that the maximum number of persons permitted on the premises was 15. Furthermore, the certificate only referred to No 271 and not to No 273. Indeed there is a plan attached which makes it clear that the certificate refers only to No 271.
3. Mr Mullen having pointed out the position, the Babickis stopped using the premises as an hotel. They were advised by Mr Mullen that it would be unlawful for them to do so because the absence of a fire certificate meant that their licence to sell liquor on the premises was rendered invalid.
4. In November 1995, within weeks of learning of the position from Mr Mullen, the Babickis consulted solicitors. Following investigation the solicitors found that not only was the fire certificate defective, there was no planning permission which appropriately covered the changes which had been made to Nos 271 and 273. Furthermore, there were contraventions of the building regulations in relation to the premises.
5. Proceedings were commenced by the mortgagees for possession of the premises. On 2 October 1997, a possession order was obtained. Retrospective permission for an eleven-bedroom hotel and restaurant was then applied for. Planning permission was granted on 15 April 1998 for the running of the premises as an hotel.
6. In August 1998 a writ was issued by Mr and Mrs Babicki against their former solicitors, the defendants to these proceedings, in which they claimed on different bases fairly substantial damages. There is no dispute that the former solicitors had failed to discover the state of the planning permission in respect of the hotel; they had not observed the defects in the fire certificate; nor were they aware of the non-compliance with the building regulations. Therefore the claimants had every expectation of being able to establish that their former solicitors had not exercised the standard of care which they should have shown when they were acting on their behalf in respect of the purchase. However, the problem was one of limitation. The writ was not issued until August 1998, whereas the negligence had occurred at the time of the purchase just over ten years earlier.
7. The normal period of limitation for an action of negligence of this nature is six years. However, section 14A of the Limitation Act 1980 has two different approaches with regard to limitation. It ameliorates the situation so far as claimants are concerned from that which had previously existed so as to attach importance to the date on which a claimant knew or ought reasonably to have known of the material facts. The relevant provisions of section 14A are as follows:

"(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."

8. It is the starting date referred to in subsection (4)(b) that is relevant here. It is therefore necessary to look at subsection (5) which provides so far as relevant:

"(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 .... 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."

9. The relevant part of section 14A (5) is the earliest date on which the claimants had the knowledge required for bringing an action for damages in respect of the relevant damage. The meaning of those words appears in subsections (6) and (7):

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

10. We are not concerned with the other facts, but we are concerned with the material facts about the damage. Those are referred to in subsection (7), which is the critical subsection for the purposes of this appeal. That provides:

"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." (my emphasis)

11. Subsection (10) provides:

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

(a) from the 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."

12. Until Mr Mullen came on the scene the Babickis had no actual knowledge of the matters complained of in these proceedings. However, it is contended by the defendants, and by Mr Rowley QC on their behalf on this appeal, that the time had expired, namely the three years from the starting date, before the claimants had issued proceedings. The starting date is therefore important. Mr Rowley points to the date upon which the Babickis first received the fire certificate. It is his contention that by that date (or possibly by two later dates) the Babickis should have appreciated that they knew such facts about the damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify instituting proceedings.
13. In 1987 the hotel premises were visited by a fire officer who asked to see the fire certificate. At that time Mr and Mrs Babicki did not have the fire certificate. It was with the defendants. They therefore contacted the defendants and requested that the fire certificate be sent to them. Their response to obtaining possession of the fire certificate goes to the very heart of the judge's judgment and to this appeal. Although Mr and Mrs Babicki did not read the fire certificate, the judge made findings that they should as reasonable persons have done so, therefore they should as reasonable persons have been aware of the contents of the fire certificate. In view of the judge's findings, which for the purposes of this appeal I will assume are incapable of being challenged (although there is a cross-notice which is still alive as to one point in respect of that finding), there is no need to consider the alternative dates canvassed by Mr Rowley in argument. He cannot do better for the purposes of his argument than to rely on the judge's findings to which I have referred. In order to understand the significance of those findings it is necessary to consider what happened thereafter. In his judgment Holland J said:

"Once the claimants had the certificate in their possession there was no adverse comment made on this occasion by the fire authority. That is, they seemed content with the certificate as it then was. 1990: the claimants were minded to apply for a full on-licence and to that end instructed another solicitor, Mr Ibbotson. This application was inevitably a matter for consideration by the fire authority. Seemingly the authority, through its officer, spotted that the number of persons authorised to be on the premises within the contemplation of the existing fire certificate was absurdly low. By way of a letter to Mr Ibbotson the authority proposed amending the certificate to substitute a total of 80 persons, that is 80 persons in place of 15 persons. By reference to a contemporaneous file note made by Mr Ibbotson, it can be inferred that these figures were discussed with Mrs Babicki. That said, nobody appears to have noticed the limited physical ambit of the fire certificate and, further, in the event the fire authority did not make the amendment. As to why there was no such amendment does not appear from the fire authority's file and there is no evidence as to the matter. For their part and for various other reasons the claimants decided not to press the application for a Justices on licence.

April 1992: in the course of this month there was a further inspection of the premises by the fire authority represented by Leading Fireman Caton. Having found and given notice to the claimants of some defect requiring a rectification, he returned to the premises on 28 April. By that stage the problem had been rectified and he secured from Mr Babicki two signatures to a form. Those signatures purported, first, to acknowledge an application for a fire certificate and, second, to acknowledge receipt of such. The whole exercise is mystifying because in the event no new fire certificate was ever issued let alone received.

May 1995: there was a further inspection by the fire authority, this time represented by Leading Fireman Kelly. All that is known about this inspection is that it elicited no criticism, in particular there were no concerns over the fire certificate.

October 1995: a prospective purchaser of the hotel sought and perused the fire certificate."

14. The judge then referred to what Mr Mullen discovered, to which reference has already been made.

".... November 1995: .... This produced an admission of error on the part of the fire authority and for the first time an amended fire certificate. This latter covered the whole premises but, again mystifyingly, put the occupancy limitation not at 80 as proposed in 1990 but at 50, that is, at a level insufficient to allow the full conduct of the hotel facilities."

15. It is to be noted about the facts recounted so far that although the premises were regularly visited by fire officers whose responsibility it was to ensure that the premises were safe from the point of view of fire, as the law required, they made no criticism of the state of the premises. Furthermore, it is also to be noted that, even when Mr Ibbotson saw the certificate and saw the numbers covered by the certificate, he referred to that but he apparently did not notice or do anything about the fact that it only applied to one of the two premises which by then formed the hotel.
16. On the basis of the facts to which I have referred so far, the judge made the following findings which are particularly relevant in relation to section 14A of the Limitation Act, and are especially important in relation to subsection (7). The judge said:

"First, I accept Mr Rowley's submission to the extent that I am bound as a Judge to hold that upon receipt of the fire certificate in 1989 the claimants should have read it. Mr Rowley is entirely correct to point out that the certificate had safety implications and that there can be no excuse for not perusing that document to ascertain the nature and terms relevant to safety. That said, I cannot find that the unread content of the 1984 fire certificate provided sufficient constructive knowledge of the matters specified by section 14A serving to fix a starting date for Limitation Act purposes. As to this, the content of the unread fire certificate was only one amongst several factors that operated at the material time. Further factors were as follows. First, the hotel had been represented on behalf of the vendor as having full certification. That representation was wholly consistent, and indeed was a condition precedent to the existence of a liquor licence. That licence had been issued, it was valid, and there is no ready explanation as to how that state of affairs could be reconciled with an absence of full fire certification.

Another factor is the conduct of the fire authority itself. The fire authority when inspecting in 1989 rightly demanded sight of a fire certificate. When shown the fire certificate it in no way reacted, certainly in no way reacted adversely. Thus, in my judgment, whereas the content of the fire certificate is a factor, it is only one amongst several material factors; other such are those that I have just enumerated.

The further matter that weighs with me is as follows: even if one had read and appreciated the content of the fire certificate, and even if one had inferred from that that there had been a lack of reasonable care on [the] part of the defendants, then there is still the problem as to the identification at that stage of 'the relevant damage', that is the damage that fits the specification provided by section 14A(7). In my judgment, anyone reading the fire certificate against the background that I have identified, and appreciating that it is limited in its content, would immediately assume that what was required and what would be forthcoming would be an appropriate fire certificate, that is a fire certificate that would match and account for the issue of a liquor licence. It is noteworthy, having regard to the chronology already set out in the judgment, that one such amended fire certificate was seemingly potentially available in 1990 and arguably may have been available in 1992, hence the requirement that Mr Babicki should sign that particular form in two places. Yet further, when in November 1995 the issue was finally thrashed out with Leading Fireman Kelly, an amended certificate was forthcoming. That amended certificate might indeed have resolved the whole problem but for the bizarre limitation of 50 Persons and but for other factors, for example, the financial position of the claimants and their concern to sell it to a person who was rightly involved in trying to assess the viability of the hotel.

In short, I emphasise that the reaction to a proper reading of the fire certificate would, in my judgment, almost inevitably have been not to identify the relevant damage that is the basis for this litigation, but to identify the simple need to get the fire authority to do what on the face of it, it should be done.

In the event, the relevant damage, that is the crucial material for the purposes of identifying the starting date, only comes to light, as the chronology reveals, when after November 1995 the claimants do not go on as before, do not seek to rely on the amended fire certificate, but continue further investigations so as ultimately to reveal the peculiar combination of interlocking problems...."

17. The judge went on to indicate that in his judgment the starting date for the purposes of section 14A is a date after 21 August 1995, which means that the proceedings were instigated in sufficient time not to be statute-barred.
18. As was indicated to Mr Rowley in the course of argument, it seems to me inevitable that if the judge was entitled to come to the conclusions to which I have just referred, then this appeal must be dismissed. The judge made the finding which is material for the purposes of subsection (7) as to the date upon which the material facts about the damage are taken to have been known by the claimants.
19. Was the judge entitled to come to the conclusion which he did? In considering this, first, it is right to make it clear that it is not in issue that there is only one cause of action here under consideration. The claimants may have different heads of damage, but there is only one cause of action. Either they are entitled to proceed with the whole of the present claim or they are entitled to proceed with no part of the claim.
20. Mr Rowley submits that the way in which the claimants have pleaded their claim and the findings of the judge do not stand together. The claimants say that the whole of that damage arose out of among other things the non-receipt of a proper fire certificate and the receipt of a fire certificate which was defective. However, I do not accept that it follows that the receipt of an inaccurate fire certificate necessarily leads to the conclusion that there is a danger that the premises may not have proper planning permission and may not conform to the appropriate building regulations. Mr Rowley submits that the discovery of the terms of the fire certificate should have set the claimants on a trail of inquiry which would have led them to discover the whole of the problems in the premises in question. If that were so, the claimants would be unable to say that they were ignorant of the material matters for the purposes of section 14A(7). However, in my judgment the judge was perfectly entitled to reach the conclusion which he did on the basis of the evidence which was before him. Indeed, had I been in his position I would have reached exactly the same conclusion.
21. Mr Rowley relies on the judgment of Brooke LJ in North Essex District Health Authority v Spargo [1997] 8 Med LR 125, in which Brooke LJ gave some very helpful guidance; not as to section 14A with which we are concerned, but section 14. That guidance may be of value in some cases in resolving issues of the sort which are before this court. However, in the present case I consider the better approach rather than seeking to place a gloss on the language of the section is to turn to the language of the section itself and in particular to subsection (7) which I have read. On the language of that subsection it seems to me that the judge has to reach a factual conclusion as to the reaction of a reasonable person to instituting proceedings. That is the approach which the judge adopted in this case. He came to a conclusion on the facts. In my judgment, unless it can be show that the judge has misapplied the evidence, those are findings which it is not possible to challenge. I do not accept that the claimants are "blowing hot and cold", as Mr Rowley contends. The test under section 14A is an objective test. Once the claimants have actual knowledge, they can then investigate and decide upon the damage they allege they have suffered in consequence of the negligence on which they rely. That is a different question from that posed by section 14A. There are two different standards to be applied. There is nothing inconsistent in the stance adopted by the claimants.
22. In not detailing the other arguments advanced by Mr Rowley, I intend no discourtesy. They largely depend, first, on the pleaded case of the claimants, to which I have already made reference; and secondly, on his challenge to the findings of the judge. In neither respect do his complaints have any substance. Accordingly, I would dismiss this appeal.
23. LORD JUSTICE SIMON BROWN: I agree.
24. LORD JUSTICE BUXTON: I also agree.
ORDER: Appeal dismissed with costs to be subject to detailed assessment.