England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM CROWN COURT
(HHJ ALTON)

		Royal Courts of Justice Strand, London, WC2A 2LL
		6 August 2003

Lord Justice Potter:

Introduction

1. This is an appeal from the judgment dated 24 January 2003 of Her Honour Judge Alton sitting as a High Court Judge at Birmingham on a preliminary issue, whereby she held that the claim of the claimant against the defendant in respect of negligent advice as to the causes of and recommendations for remedial works in respect of subsidence at the bungalow, Offchurch, Leamington Spa, Worcestershire was time-barred pursuant to s.14A(4)(b) of the Limitation Act 1980 ("the 1980 Act").
2. The remedial works were completed by August 1992. However further cracking in the structure of the bungalow became evident within a month thereafter, which later developed to the extent that further works of rectification were necessary, thus giving rise to these proceedings. Given the appearance of cracking in September 1992, the primary limitation period in respect of the claimant's cause of action expired well before proceedings were commenced on 14 July 2000. The question before the judge was whether or not, for the purposes of section 14A of the 1980 Act, the claimant was possessed of the requisite knowledge as to his cause of action prior to 14 July 1997. The defendant asserted that the claimant knew or ought reasonably to have known of the cause of the damage shortly after it allegedly occurred in 1992/3. The claimant asserted that the requisite knowledge was not available until he was aware of the final conclusions of experts appointed to advise his insurers' loss adjusters in September 1997.
3. The principal question raised by the appeal is whether a loss adjuster appointed by a claimant's insurers in a subrogated claim can have knowledge attributable to the claimant for the purposes of section 14A. A subsidiary question arises as to whether that loss adjuster should be deemed himself to have knowledge at a point prior to delivery of the report of an expert appointed by him to investigate the cause of the loss to which the claim relates.

The facts

4. In 1991, following the development of cracks in his bungalow, the claimant claimed upon an insurance policy with his insurers, The (Royal) Sun Alliance ("the insurers"). Since the insurers would only finance remedial work designed to rectify actual damage and would not bear the cost of additional works designed to prevent the risk of future damage to parts of the property not currently affected, the claimant obtained advice from Chmeil Overton, structural engineers on his own behalf. Chmeil Overton reported their view that the cracking was attributable to a combination of shallow foundations together with clay shrinkage exacerbated by the proximity of at least one oak tree which suggested to them that either mini-piling or traditional underpinning might be required.
5. The insurers retained Mr Handford, a chartered surveyor and loss adjuster to investigate the damage on their behalf. In April 1991 he reported to them the substance of Chmeil Overton's report.
6. The defendants, who are geotechnical engineers, were instructed. Between July 1991 and 6 August 1992 they made reports and gave advice supporting the installation of traditional underpinning to the foundations, which scheme was adopted by the claimant with the approval of the insurers, the claimant having decided not to finance the additional costs of installing underpinning to the property as a whole.
7. The remedial works were completed in August 1992. Within weeks, minor cracking appeared within that part of the property which had been underpinned. The claimant was initially advised that this might simply be 'bedding down' of the works; however monitoring was instituted under the supervision of Chmeil Overton. The monitoring confirmed that the property continued to be subject to subsidence movement in the area which had been underpinned and, by the end of summer 1995, it was clear that the cracking was significant and continuing.
8. Mr Handford was again instructed on behalf of the underwriters. He sought authority to investigate the suitability and adequacy of the works carried out, already being concerned that the works might not have been appropriate. He sought authority to appoint other structural engineers to investigate the further movement and to report upon the adequacy of the work carried out stating, in a letter to insurers dated 14 November 1995.

"There are two very large mature oak trees in close proximity to the property and, in hindsight, the scheme of stabilisation work with traditional underpinning may not have been appropriate.

We therefore propose to instruct the other engineers to investigate the cause of further movement, ascertain whether any further remedial work is required and finally to consider whether or not there has been any negligence on the part of the insured's own engineers."

9. The insurers then authorised Mr Handford to instruct engineers and Mr Turner, of Robert Turner and Partners, a civil/structural engineer was appointed, his letter of retainer making clear that he was instructed to undertake whatever investigation was required to determine the cause of the further movement and whether the rectification works undertaken were structurally sufficient, particularly in view of the proximity of two of the mature oak trees.
10. After visiting the site Mr Turner sought the advice of Mr Finch, an arboriculturist to advise on the influence of the oak trees. In his letter of instruction dated 4 March 1996 Mr Turner informed Mr Finch:

"I have not, as yet, written my report on the present condition of the building, as I would like you to visit the property, inspect the damage, and let me have your preliminary views concerning the possible influence of three mature oak trees that surround the structure."

11. On 4 June 1996 Mr Finch reported to Mr Turner, the report being copied to Mr Handford and the claimant.
12. In that report Mr Finch noted that, while extensive ground investigations and soil tests had been carried out by the defendants, their engineering report had made no reference to the likely effects of the adjacent trees and they had concluded that there was little evidence that the adjacent oaks were contributing to the movement. He noted that the underpinning depth recommended by the defendants for remedial works at the front of the property did not correspond with the guidance provided in NHBC Practice Note Number 3 (1985) Building Near Trees, which suggested that significantly greater foundation depths would be appropriate in the context of high water demand deciduous trees on medium shrinkability soil. He concluded:

"Based on the information to date it is highly likely the adjacent trees are involved in the movement that have led to the recurrence of structural damage.

It is vitally important for the cracks to be monitored together with the building level on a monthly basis for a period of at least 12 months and that the extent and depth of the underpinning is established.

When these facts are available I can then submit a tree management programme for your consideration."

13. Monitoring was instituted and maintained in accordance with Mr Finch's recommendation. Meanwhile, in July 1996, Mr Turner appointed Mr Eaton, a geotechnical engineer, to attend on site and open trial holes to enable an independent view of ground conditions to be given. Mr Eaton investigated in August 1996 but did not submit a report until November. Meanwhile, Mr Handford reported direct to the claimant, stating that no conclusions had been reached at the site meeting and that bore holes were required. On 12 September 1996 he reported to the claimant:

"Having recently discussed the matter with Mr Turner, we understand that he is awaiting receipt of the arboriculturist's and geotechnical reports but the suggestion is that possibly root growth from the rear oak trees is causing desiccation of the soil at a lower level than the depth of the underpinning, hence the need for bore-hole investigation."

14. Mr Eaton reported in November 1996 to Mr Finch the arboriculturist. The conclusion to his findings was as follows:

"It is impossible to escape the conclusion therefore that the principal cause of the distress of the perimeter elevations is, and always has been clay shrinkage due to the root water demands of the surrounding oak trees, in particular. It is inconceivable that this degree of desiccation could have imposed itself upon the foundation soil in the short period that had intervened since the completion of the underpinning."

15. His recommendation as to necessary further works of rectification was that further underpinning be undertaken based upon piles. He said the scheme would be structurally complex and costly as a result, which in turn placed doubt on the long term viability of the existing dwelling.
16. Mr Finch did not copy Mr Eaton's report to Mr Handford or submit a report of his own at that stage. However, the judge found that, Mr Handford having spoken to Mr Turner shortly after Mr Finch had sent his report to Mr Turner, he would have been told a summary of Mr Eaton's findings.
17. Mr Turner did not submit a written report to the claimant or the insurers at this stage, as he was continuing to await monitoring results from Chmeil Overton. Having received these in February 1997, he forwarded them to Mr Finch with a request to submit his report as soon as possible. Mr Finch reported on 8 April 1997. While concurring with Mr Eaton as to the most likely cause of desiccation, he concluded that, though he had no specific evidence, he suspected that the building was suffering from seasonal movement superimposed on heave as a result of root severance during the underpinning works. He recommended that level monitoring was continued and past results reviewed and recalculated.
18. Following further monitoring, on 17 July 1997 Mr Finch again reported, saying that:

"Based on the evidence to hand I consider the cause of the structural damage to this property is the result of the indirect actions of the adjacent oak tree on the clay soil supporting the foundation."

19. He concluded there was no available tree management solution to the problem and supported Mr Eaton's proposal for sleeve piling.
20. Mr Turner finally reported to Mr Handford by letter dated 30 July 1997 which concluded:

"Quite independently the geologist, the arboriculturist and ourselves have come to the conclusion that the scheme of underpinning that was carried out did not properly address the problem of desiccation of the clay sub-soil caused by the presence of the mature oak trees, and this had led to the ongoing and progressive damage that started within a month or so of the work being completed.

In fact it is debateable in the view of the geologist and ourselves if any scheme of repair will be entirely successful due to the maturity and close proximity of the trees to the building."

21. Mr Handford reported back to the insurers. After further consideration it was decided that the cost of further piling work guaranteed to stabilise the building (if indeed a contractor could be found to guarantee the work) could not be justified and the claimant's bungalow was "written off". Accordingly when proceedings were eventually brought in July 2000 for the wasted costs of the original work of piling, they were brought by the insurers suing in the name of the claimant, the insurers having become subrogated to the claimant's rights of recovery upon payment of his original claim under his policy.

Section 14A of the 1980 Act

22. Section 14A(5) provides:

"For the purposes of this section, the starting date for reckoning the period of limitation under sub-section (4)(b) above [i.e. three years] is the earliest date upon which the plaintiff or 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."

23. Section 14A(6) provides:

"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."

24. For the purposes of this appeal we are not concerned with the "other facts mentioned in subsection (8)". However, section 14(7) 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."

25. Finally, s.14A(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 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."

The Judge's Decision

26. On the basis of the facts found by the judge as already summarised, she held that the claimant did not personally have the relevant knowledge for the purposes of time starting to run until he was given a copy of the Turner report. She observed:

"50 … Nor is it appropriate, ignoring for the moment questions of agency, to impute to the Claimant any further knowledge which the experts may have had but which had not as yet been communicated to him. The Act deals specifically with the question of constructive knowledge by section 14A(10) quoted above. Here the experts – a whole range of them – were instructed promptly. I accept that the final report of Mr Turner was delayed … It may well be that a point does arrive when it is no longer reasonable to tolerate delays by an expert instructed on a claimant's behalf. But I do not find that such point had been reached in this case such as to warrant the imputing of knowledge to the Claimant pursuant to section 14A(10)."

27. That finding is not challenged on this appeal.
28. The judge went on to find, however, that Mr Handford, as "an experienced loss adjuster with prior experience in the handling of subsidence claims" had the necessary knowledge well prior to July 1997, having been made aware of the contents of the report of Mr Eaton the geotechnical engineer in November 1996 (see paragraphs 14-16 above).
29. The judge stated:

"55. Whilst it does not appear that he was sent a copy of Mr Eaton's November 1996 report, I accept that as he spoke to Mr Turner shortly after its receipt that it was likely that he was informed at the time of Mr Eaton's conclusions although he does not now recall. I also accept that he would have understood those conclusions.

56. By this point I find that Mr Handford did have the necessary knowledge as to the material facts about the damage, attributability of that damage to the act or omission of the Defendants and the identity of the Defendants. True it was that he was waiting for and pressing for Mr Turner's final report and was being told that more monitoring results were wanted/expected, and later that a further report from Mr Finch was expected/had been received. But the reality was that no-one was anticipating that there would be some new information negating the findings already reported; rather that any further information would confirm those findings and assist in finally determining what if any scheme of remedial works should be adopted. Insofar as he needed that final report, it was also to provide the evidence to pursue a recovery and to reinforce any recommendations he might make. Given Mr Handford's knowledge of these facts, they were facts also ascertainable by the Claimant in the period pre-July 1997 had he chosen to enquire rather than to leave everything to Mr Handford and underwriters."

30. Finally, the judge held that Mr Handford's position as loss adjuster was that of an investigator appointed as agent of the insurers to investigate and progress the claim rather than himself being an expert whose help was sought and awaited in order to ascertain the facts upon which a claim might be based, and that, as such, Mr Handford's knowledge was knowledge which was to be imputed to the claimant for the purposes of section 14A of the 1980 Act. She made that finding on the following grounds.
31. The judge stated:

"39. The Defendant's case is not so much that knowledge of persons such as Mr Handford or Mr Turner should be regarded as knowledge of the Claimant on the basis that their knowledge was to be attributed to the Claimant pursuant to Section 14A(10)(b) but that where, as here, the original advice, though addressed to the Claimant was passed to underwriters who thereafter proceeded to finance the work in reliance thereon and hence … [were] … responsible for ensuring that any works be redone or that appropriate compensation was given to the insured and … [were] … subrogated to the claim as a consequence, then one should treat the knowledge of underwriters' expert loss adjuster as the Claimant's knowledge for the purposes of Section 14A(10)(a). Effectively, counsel was submitting that underwriters should be treated as being tantamount to the Claimant or at least the Claimant's agents for the purposes of acquiring knowledge. According, it was submitted that the knowledge of Mr Handford the loss adjuster was the relevant knowledge on the basis that Mr Handford had in turn been appointed by underwriters to investigate the claim as their and their Claimant's agent and not as an expert and hence his knowledge was both their knowledge and the Claimant's knowledge.

40. In factual terms, it to a very great extent reflects the reality of what was happening if the court were able to treat underwriters through Mr Handford as 'the Claimant' for the purposes of the Act. Underwriters had paid/reimbursed the cost of the original design and underpinning works, although it would appear that the contract was in the name of the Claimant himself. Apparently, and I derive this from the evidence of Mr Handford, where potential problems arise in respect of rectification works funded by insurers, they do hold the claim/book open and hence regard themselves as responsible for ensuring that any further losses to the insured are made good … Indeed it was plain that Mr Handford's approach was not to consider whether the Claimant could pursue a claim but whether his 'principals' (i.e. underwriters) could pursue recovery … It appears to have been treated as a foregone conclusion that underwriters would make whatever payment was necessary to reimburse the Claimant's losses and would themselves make whatever decisions as to who should be sued for what and when. As a consequence of this … the Claimant … left matters very much in the hands of loss adjusters and underwriters to deal as they thought fit. There was no conflict between him and underwriters; it was their problem what to do, not his.

…

43. …. where as here, the Claimant … [leaves] … all decisions about any potential claim, whether it existed, against whom and what investigations ought to be pursued to establish the strength of the claim and whether or not legal proceedings should be commenced, to others in circumstances where the Claimant would, in the event of proceedings be a Claimant in name only, there is powerful argument for construing the section, if the wording permits, as embracing the knowledge of the real Claimants and treating that as the knowledge of the Claimant. That result would give effect to the spirit of the Act by concentrating upon the knowledge of the person or body who in reality had the right and interest in pursuit of the claim. It can be achieved without doing violence to the wording of the section as it would be appropriate to treat underwriters' (and their loss adjuster charged with investigating and reporting on the claim) knowledge of facts as facts ascertainable by the Claimant for the purposes of Section 14A(10)(a) in the same way as a solicitor's knowledge derived from investigations carried out on behalf of a client must surely be treated as the client's knowledge: see Mirza v Birmingham HA (1998 A No.04592) at para 39 to 40."

The Grounds of Appeal

32. Two grounds of appeal have been argued in this case. As originally drafted, the first ground asserted that the judge erred in law in finding that Mr Handford, the loss adjuster appointed by the claimant's insurers was the plaintiff/claimant for the purposes of section 14A of the Limitation Act. However, as argued by Mr Sampson for the appellant, this resolved into a submission that Mr Handford was the agent of the insurers and not of the claimant and that therefore his knowledge could not be attributed to the claimant for the purposes of s.14A. Albeit the claimant relied upon the information acquired and reported on by Mr Handford as the de facto investigator of the claim, that was a matter of convenience only. Nor was Mr Handford, as opposed to the insurers, the person subrogated to the claimant's claim. Nor, finally, was he a person in a position analogous to that of a solicitor to the claimant (c.f. Mirza v Birmingham Health Authority above), being in no contractual or other agency relationship with the claimant for the purpose of investigating the claim.
33. I accept as a matter of analysis that Mr Handford was not the agent of the claimant. He was the loss adjuster appointed by the insurers for the purpose of investigating the claim upon their behalf and, as such, his responsibility was to report to the insurers. It is true that, at one point in his evidence, Mr Handford spoke of his "primary function" as being "to deal with the claim and to assist the policy holder". However he summed it up in this way:

"I believe that we have a duty of care to the policyholder. As I said at the beginning, loss adjusters are bound to deal with the claim impartially and assist the policyholder as best we can. But at the end of the day our client is the insurer and it is from them that we take instructions."

34. In acknowledging that loss adjusters owe a duty of care to the policyholder when acting in the course of their retainer for the insurance company, Mr Handford was making a concession which was neither necessary to the issues nor, as yet, recognised by English law: c.f. the view of the New Zealand Court of Appeal in Mortenson v Laing [1992] 2NZ LR 282 and the discussion in Clarke: The Law of Insurance Contracts (3^rd ed) pp 842-845. However, that is by the way. If Mr Handford had reported to the claimant information sufficient to endow the claimant with the requisite knowledge to start time running, then the claimant would have been fixed with that knowledge; however, the judge held that Mr Handford did not do so and that finding is not the subject of appeal.
35. More pertinently however, upon my reading of the judgment, it appears that Mr Sampson's fire is misdirected. Its seems clear that in paragraphs 39, 40 and 43 of the judgment quoted in paragraph 31 above, the judge was not attributing knowledge of Mr Handford to the claimant, but was treating it as the knowledge of the insurers and was going on to treat the insurers' knowledge as being knowledge of the person 'who in reality had the right and interest in pursuit of the claim'.
36. In the course of the appeal before us, Mr Sampson eventually conceded that, in relation to a subrogated claim, for the purposes of consideration of the date upon which the plaintiff acquires the relevant knowledge under s.14A so as to start time running for limitation purposes, the nominal plaintiff/claimant is fixed with the knowledge of the insurer for whose benefit the action is brought. In my view Mr Sampson was right so to concede. Like the judge, I consider that the spirit and purpose of the Act is to concentrate upon the knowledge of the person who has the right and interest in pursing the claim.
37. S.14A(5) treats the starting date for reckoning the period of limitation under subsection (4)(b) as the earliest date on which the plaintiff "or any person in whom the cause of action was vested before him" first had the requisite knowledge. That provision would appear to have particularly in mind the situation where a plaintiff sues as the assignee of another. However, it plainly contemplates that, at any given time, it is the knowledge of the person in whom the cause of action is vested which is relevant. The effect of the doctrine of subrogation in relation to contracts of indemnity by way of insurance is similar to that of an assignment of the assured's rights of action against a tortfeasor. The doctrine confers upon the insurer, on payment of the loss, the right to receive the benefit of all rights and remedies of the assured against third parties which, if satisfied, will extinguish or diminish the ultimate loss sustained. Accordingly the insurer is entitled to exercise in the name of the assured whatever rights he possesses to seek compensation for the loss from third parties. One of the differences between subrogation and assignment is that an insurer exercising rights of subrogation against third parties must do so in the name of the insured. However, this does not detract from the fact that the subrogated rights of the insurer vest in him by operation of law upon the payment of the assured's loss and, if an assured is uncooperative in this respect, the court will act to compel him to lend his name to proceedings brought by the insurer provided the insurer tenders an indemnity as to costs. In those circumstances, as it seems to me, it is plainly appropriate to construe the words "the plaintiff" in clause 14A(5) as meaning/extending to a plaintiff whether suing in his own name or the name of another by way of subrogation. That, as I understand it, is the construction favoured by the judge and it is one which I would adopt.
38. I would also hold that the knowledge of a loss adjuster investigating and advising on a claim on behalf of insurers for the purpose of pursuing a subrogated claim by those insurers, is to be treated as the knowledge of the insurers for the purposes of s.14A(5). In the course of argument, Mr Sampson acknowledged that it is the custom of many insurers to investigate claims through their own 'in house' loss adjusting department. He was unable to suggest any logical reason for distinguishing between the position of such an insurer, who plainly would be fixed with the knowledge of his employee, and the position of an insurer who, for purposes of economy or business efficiency, delegates the task to an independent loss adjuster such as Mr Handford.
39. Accordingly, I would reject the first ground of appeal.
40. The second ground of appeal is that the judge erred in law and fact in concluding that Mr Handford had obtained sufficient knowledge for the purposes of s.14A(10) when he was still awaiting a report from an expert consulting engineer whom he had instructed to report on the cause of the subsidence. As a general proposition, Mr Sampson submitted that a claimant (in this case the insurers suing by way of subrogation) who properly seeks the advice of an expert to establish grounds of claim against a defendant, he or they should not be fixed with knowledge prior to the delivery of that expert's report. Mr Sampson relied in support of that proposition upon the observations of Purchas LJ in Nash v Eli Lilley & Co [1993] 4 All ER 395 at 396c-d when, in considering the almost identical provisions of section 14(3) of the 1980 Act, he stated:

"It is to be noted that a firm belief held by the plaintiff that his injury was attributable to act or omission of the defendant, but in respect of which he thought it necessary to obtain reassurance or confirmation from experts, medical or legal or others, would not be regarded as knowledge until the result of his inquiries was known to him or, if he delayed in obtaining that confirmation, until the time at which it was reasonable for him to have got it … "

41. He relies also upon various other observations in cases of personal injury in which the court has made clear that belief or suspicion is not sufficient to establish knowledge: see for instance Spargo v North Essex District Health Authority [1997] PIQR 235, 242 per Brooke LJ:

"(4) On the other hand she will not have the requisite knowledge … if her state of mind is such that she thinks her condition is capable of being attributed to the act or omission alleged to constitute negligence, but she is not sure about this, and would need to check with an expert before she could be properly said to know that it was."

42. Mr Sampson submits that, given that it was reasonable for Mr Handford to seek expert advice, it follows that it was reasonable for him to wait for delivery of a final report from Mr Turner, rather than reporting back to the insurers with what he understood would be the effect of that report when received, but which had not yet been confirmed.
43. In my view there is no substance in this ground of appeal. So far as the general submission is concerned, it does not seem to me that any broad rule of thumb can be applied in cases of this kind. Nor does it seem to me that the observations of the court in relation to the state of knowledge of, or appropriate inferences to be drawn by, claimants in personal injury cases who lack experience of claims or dealing with experts, are of real assistance in relation to the position of an experienced loss adjuster investigating a case of the instant kind on behalf of an insurance company. Between paragraphs 51 and 56 of her judgment, the judge looked with care at the state of knowledge of Mr Handford based upon the series of experts' reports which he received. I have already quoted her findings at paragraph 29 above. The judge, having studied the reports and heard the witnesses, made findings of fact which cannot be open to successful challenge on this appeal and which were plainly apt to imbue Mr Handford with the requisite knowledge well before the final report of Mr Turner was to hand by the end of July 1997. Even when those facts were confirmed in July 1997, for reasons which are obscure, the claimants nonetheless delayed for a period of some three years before issuing proceedings.

Conclusion

44. For the reasons set out above, I would dismiss this appeal.

Lord Justice Chadwick:

45. I, too, would dismiss this appeal. I agree that, for the purposes of section 14A(5) of the 1980 Act, the relevant knowledge is the knowledge of the insurers; and that, in the circumstances of this case, the knowledge of the loss adjuster, Mr Handford, is to be treated as the knowledge of his principals, the insurers. I agree, also that the judge's finding that Mr Handford had the requisite knowledge by November 1996 – after speaking to Mr Turner – was a finding of fact which she was entitled to make on the evidence. For my part I would treat that as a finding of actual knowledge: I do not think that section 14A(10) is engaged in this case.

Mr Justice Cresswell:

46. I agree that the appeal should be dismissed for the reasons given by my Lord, Lord Justice Potter. I also agree with the additional observations of my Lord, Lord Justice Chadwick.
Order: Appeal dismissed with costs here and below, to be assessed if not agreed. (Order does not form part of the approved judgment)