England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT JUSTICE
QUEEN'S BENCH DIVISION
COMMERICAL COURT
Mr Justice Teare
CL-2015-000799, [2017] EWHC 337 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/05/2018

Lord Justice Kitchin: :

1. This is an appeal by the claimant, Mr Nobu Su, against the judgment of Teare J given on 24 April 2017 in which he gave summary judgment for the defendants, Clarksons Platou Futures Ltd ("Clarksons") and Mr Vassilis Karakoulakis, on the basis that Mr Su's claims against them in negligence and for breach of contract were time barred.
2. Mr Su appeals against that judgment on one ground only which concerns the interpretation and application of s.14A of the Limitation Act 1980 ("the 1980 Act"), and he does so with permission granted by Lewison LJ.

The background

3. Mr Su is a Taiwanese businessman and prior to the financial crash in 2008 was the sole or major beneficial owner of a number of companies which operated shipping and related businesses and traded together under the name "TMT".
4. Clarksons is a company which is regulated by the Financial Conduct Authority and conducts business as a broker of freight forward agreements ("FFAs") and specialist commodity derivatives. Mr Karakoulakis was employed by Clarksons as a broker.
5. In July 2008 Mr Karakoulakis had various discussions with Mr Su and with Mr Polys Haji-Ioannou, a shipping magnate and the principal of a shipping company called Lakatamia Shipping Company Ltd ("Lakatamia"), which culminated in an oral agreement ("the FFA Contract") involving the purchase and buy-back of an FFA position. In broad terms, various TMT companies agreed to sell to Lakatamia FFAs for the carriage of notional cargoes of 600,000 metric tons per calendar month in 2009 on route TD3 at a fixed price of 100.65 world scale points per metric ton; and buy back those same FFAs after one month at the fixed price of 101.65 world scale points per metric ton. It was anticipated that the FFA Contract would benefit all parties. Lakatamia stood to make a profit of one world sca le point per metric ton of notional cargo amounting in total to about US$1.8 million. Mr Su and his companies would improve their short-term liquidity.
6. Lakatamia performed its part of the bargain but Mr Su and the TMT companies failed to buy back the FFA position, although it is right to say that certain part payments were made.
7. Accordingly, on 24 March 2011 Lakatamia issued proceedings in the High Court against the TMT companies and Mr Su. It asserted in its particulars of claim that Mr Su was party to the FFA Contract, undertook on behalf of himself and the TMT companies to buy back the FFA position and was personally liable for the TMT companies' failure to do so. Lakatamia claimed that it ultimately sold the position at a loss of about US$79.6 million.
8. On 22 August 2011 Blair J granted a freezing order against the TMT companies and Mr Su personally. The application for that order was supported by two affidavits sworn by Mr Gardner, a partner in the firm of solicitors acting for Lakatamia, which set out the grounds upon which it was asserted that Mr Su was personally liable. The freezing order was continued by Beatson J at an inter partes hearing on 6 October 2011.
9. Permission to appeal to the Court of Appeal was granted on the issue whether Lakatamia had established a good arguable case that Mr Su was personally liable for breach of the FFA Contract and consequently whether it had ever been appropriate to grant a freezing injunction against him. That appeal came on for hearing before the Court of Appeal on 18 July 2012. The court dismissed the appeal at the conclusion of the hearing. Longmore LJ, with whom Sullivan LJ and Lord Neuberger MR agreed, held that Beatson J had been entitled to find that Lakatamia had established a good arguable case against Mr Su. In his words, there was "a good argument to be had which must be resolved at trial".
10. The substantive action came on for trial before Cooke J in October 2014. Mr Su gave evidence in person. The judge gave judgment on 5 November 2014. He found that Mr Su was a very unsatisfactory witness. Among other things, Mr Su rarely answered a question directly in cross-examination; when emails were put to him, he was generally evasive about their content or effect; his evidence revealed him to be a man with little regard for his obligations or for the truth; and he was neither honest nor credible. The judge found that Mr Su was personally liable along with his companies for breach of the FFA Contract and he was ordered, on a joint and several basis, to pay to Lakatamia the sum of US$37,854,310.24. Permission to appeal to the Court of Appeal was granted on terms that there was a payment into court but no such payment was ever made and so the appeal lapsed.
11. On 4 November 2015 Mr Su began the present proceedings against Clarksons and Mr Karakoulakis. In his particulars of claim he asserted that Mr Karakoulakis, on behalf of Clarksons, had brokered the FFA Contract. However, he continued, Clarksons' authority was limited to brokering an agreement between its principals such that any agreement should only ever have been made between companies under the control of Mr Haji-Ioannou and companies under the control of Mr Su. However, in breach of its "warranty of authority", Clarksons, acting by Mr Karakoulakis, bound Mr Su personally to the FFA Contract; alternatively, Clarksons owed him duties and in breach of those duties and negligently it, acting by Mr Karakoulakis, failed to ensure that only TMT companies were party to the FFA Contract.
12. Mr Su claimed that he had suffered loss and damage of three kinds: (i) the judgment sum for which he had been found liable in the Lakatamia proceedings; (ii) the costs he had incurred in those proceedings and interest on the judgment; and (iii) losses arising from the imposition of the freezing order.

The judgment of Teare J

13. On 21 July 2016 Clarksons and Mr Karakoulakis issued an application for summary judgment against Mr Su on the basis that his claims in negligence and for breach of contract were time barred.
14. They argued that each of the cause s of action, if established, must have accrued on 7 July 2008 when Mr Karakoulakis concluded the FFA Contract and bound Mr Su personally to it. Accordingly, pursuant to ss.2 and 5 of the 1980 Act, the claim was time barred at the latest on 8 July 2014. But the present proceedings were not issued until 4 November 2015.
15. Alternatively, they continued, and to the extent that Mr Su was pursuing a claim in negligence and sought to rely on s.14A of the 1980 Act, he had the knowledge required to bring an action for damages by no later than 18 July 2012, that is to say more than three years before the issue of the claim form.
16. Mr Su responded that it was not until 5 November 2014, the date of Cooke J's judgment, that he knew he had a cause of action against Clarksons or Mr Karakoulakis; and further that it was not until that date that it could be said that he had suffered damage. Accordingly, this claim, issued as it was on 4 November 2015, was well within time.
17. Teare J considered first the question of when Mr Su's causes of action accrued. As for the claim in contract, the judge observed, correctly, that this required (i) a valid contract and (ii) a breach of the contract. He went on to hold that the alleged breach must have occurred in July 2008 when Mr Su was bound personally to the FFA Contract. Accordingly, that was when the cause of action accrued. The fact there was a dispute as to whether Mr Su was bound personally to the contract and that dispute was not resolved until November 2014 was irrelevant when deciding when the cause of action itself accrued.
18. As for the claim in negligence, the judge noted, again correctly, that such a claim requires (i) a duty owed by the defendant to the claimant, (ii) breach of that duty, and (iii) damage suffered as a result of tha t breach. The judge held that this cause of action also accrued in July 2008 for it was at this point that Mr Su suffered loss in that he incurred a personal liability which, on his case, he would not have incurred had Clarksons and Mr Karakoulakis performed the duty which they owed to him.
19. Finally the judge turned to s.14A of the 1980 Act. Here he held that Mr Su had no real prospect of establishing at trial that he only acquired the necessary knowledge of the damage he had suffered less than three years before commencing proceedings against Clarksons and Mr Karakoulakis on 4 November 2015. He held that he must have had the relevant knowledge, at the latest, by the date of the judgment of the Court of Appeal on 18 July 2012.

The appeal

20. Mr Su asked the judge for permission to appeal against all of his findings but that was refused. So Mr Su sought permission from the Court of Appeal where his application was dealt with by Lewison LJ on the papers. He refused permission to appeal against the judge's findings that Mr Su's causes of action accrued on 7 July 2008 but he granted permission to appeal on what he called the "date of knowledge" point arising under s.14A of the 1980 Act.
21. Section 14A provides a special time limit for negligence actions where facts rele vant to the cause of action were not known at the date of accrual. It reads:

"14A (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 per iod 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 b y 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 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.

(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 c urrent 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 attributab le 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) K nowledge 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."

22. A number of points emerge from this section which have a bearing on this appeal. First, it applies only to actions for negligence. It follows that it can provide no assistance to Mr Su in relation to his claim for breach of contract.
23. Secondly, it permits a claim to be brought within six years from the accrual of the cause of action or, if later, three years from the earliest date on which the claimant (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.
24. Thirdly, the knowledge required for bringing an action for damages in respect of the relevant damage means knowledge of two matters: first (by subsections (5), (6) and (7)), such facts about the damage in respect of which damages are claimed 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 judgment; and secondly (by subsections (5), (6) and (8)), knowledge that the damage was attributable to the act or omission which is alleged to constitute negligence and the identity of the defendant.
25. Fourthly, a person's knowledge includes knowledge which he might reasonably have been expected to acquire from facts observable or ascertainable by him; or from facts ascertainable by him with the help of appropriate expert advice which it was reasonable for him to seek.
26. Guidance as to what these "knowledge" provisions require was given by the House of Lords in Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682. Lord Nicholls said this about the necessary degree o f certainty at [9]:

"… Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443. He noted that knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: "Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice." In other words, the claimant must know enough for it to be reasonable to begin to investigate further. "

27. Then, a little later, Lord N icholls gave this assistance as to the meaning of the expression "attributable" in s.14A(8)(a):

"11 A similar approach is applicable to the expression "attributable" in section 14A(8)(a). The statutory provisions do not require merely knowledge of the acts or omissions alleged to constitute negligence. They require knowledge that the damage was "attributable" in whole or in part to those acts or omissions. Consistently with the underlying statutory purpose, "attributable" has been interpreted by the courts to mean a real possibility, and not a fanciful one, a possible cause of the damage as opposed to a probable one: see Nash v Eli Lilly & Co [1993] 1 WLR 782, 797-798. Thus, paraphrasing, time does not begin to run against a claimant until he knows there is a real possibility his damage was caused by the act or omission in question."

28. It is also helpful to see how Lord Nicholls applied these principles in the circumstances of the Haward case, concerning as they did allegedly negligent advice given by a partner in a firm of accountants. Lord Nicholls said this at [21] to [23]:

"21 There may be cases where the defective nature of the advice is transparent on its face. It is not suggested that was so here. So, for time to run, something more was needed to put Mr Haward on inquiry. For time to start running there needs to have been something which would reasonably cause Mr Haward to start asking questions about the advice he was given.

22 The judge made no specific finding about when that was in this case. The judge did express a view on a different question, namely, when Mr Haward first knew he had a "claim" against Mr Austreng's firm. On this question the judge held that Mr Haward had not discharged the burden of proving he first acquired this knowledge after 6 December 1998.

23 On the latter question the judge's reasons were subject to forceful criticism by Mr Haward's counsel. But that is beside the point. The relevant date was not when Mr Haward first knew he might have a claim for damages. The relevant date was an earlier date, namely, when Mr Haward first knew enough to justify setting about investigating the possibility that Mr Austreng's advice was defective. Mr Haward had the burden of proving that this date was after 6 December 1998. Mr Haward, it seems, did not attempt to discharge this burden. His evidence was not directed at this anterior issue. His evidence was directed at the date when he first knew he might have a claim for damages."

29. Returning now to the decision of the judge in this case, Mr Jonathan Crystal, who has appeared on behalf of Mr Su with Mr Rupert Beloff, submits that the judge fell into error in concluding that the "earliest date" on which Mr Su had the knowledge identified in s.14A(5) of the 1980 Act was, at the latest, 18 July 2012, that is to say the date of the decision of the Court of Appeal on Mr Su's appeal against Beatson J's order continuing the freezing injunction. In truth, argues Mr Crystal, Mr Su did not have the relevant knowledge until Cooke J gave his judgment on 5 November 2014 and Teare J fell into error in failing so to find. Alternatively, this is an issue which can only resolved at trial in light of oral evidence and cross-examination and so Teare J should not have decided the case summarily.
30. Mr Crystal has developed this submission in the following way. He contends first, the contract brokered by Mr Karakoulakis was agreed orally. It arose from discussions between Mr Karakoulakis and Mr Su and between Mr Karakoulakis and Mr Haji- Ioannou. So Mr Karakoulakis was the only person who was party to what both Mr Su and Mr Haji-Ioannou had said; and correspondingly, Mr Su had no means of knowing what Mr Karakoulakis had said to Mr Haji-Ioannou.
31. Secondly, there is no contemporaneous document suggesting that Mr Su was a party to the contract. To the contrary, there is one contemporaneous document, a guarantee of the obligations of the TMT companies under the FFA Contract but that was given by a company called Iron Monger 1 Ltd, and it is striking that it contains no express mention of Mr Su.
32. Thirdly, various TMT companies made payments to meet Lakatamia's exposure arising from the FFA Contract. Those payments amounted in total to over £32 million. No such payment was ever made by Mr Su, however.
33. Fourthly, Mr Gardner, Lakatamia's solicitor, made an affidavit dated 29 September 2011 in support of the ongoing proceedings concerning the freezing order in which he maintained that he had had a meeting with Mr Karakoulakis on 11 May 2011, and that in the course of that meeting Mr Karakoulakis made clear to him that Mr Su had contracted on his own behalf and on b ehalf of all relevant companies in the TMT group, and further that he had drafted the guarantee and that it referred to Lakatamia's contractual counterparty under the FFA Contract as "messrs TMT" so as to be sufficiently wide to embrace Mr Su. However, Mr Gardner continued, in September of that year Mr Karakoulakis changed his position completely and maintained through his solicitors, Cameron McKenna, in clear and unequivocal terms that he did not tell Mr Gardner that his understanding was that Mr Su had co ntracted on his own behalf. Mr Karakoulakis' position was therefore neither consistent nor certain.
34. Fifthly, it was not until August 2014 that Mr Haji-Ioannou was added as a party to the claim. Until that time it had not been asserted that both he and Mr Su were parties to the FFA Contract.
35. Sixthly, on 8 December 2014 a meeting took place between Mr Alex Gray, the managing director of Clarksons, and one or more individuals from Black Cube, an intelligence agency, in the course of which Mr Gray expressed the view that Cooke J's judgment was an "interesting interpretation" of events and intimated that Clarksons had not foreseen or anticipated the conclusion to which he came.
36. Finally, Mr Su explained in his first witness statement dated 22 September 2016 that, without waiving privilege, the solicitors acting for him in July 2012 "indicated" to him that, despite the decision of the Court of Appeal, "they were confident that the court would not find me personally liable".
37. Accordingly, submits Mr Crystal, there was, at its highest, considerable uncertainty surrounding the issue of Mr Su's personal liability and it was not until the delivery of Cooke J's judgment that matters became sufficiently clear and certain to meet the knowledge requirements of s.14A(5) of the 1980 Act.
38. I find myself quite unable to accept these submissions for it seems to me that they depend upon a fundamental misapprehension about what those knowledge requirements are. So far as subsections (5), (6) and (7) of s.14A are concerned, Lord Nicholls explained that these require more than mere suspicion of the facts about the damage, particularly if that suspicion is vague and unsupported. But it is sufficient that the claimant knew enough for it to be reasonable to begin to investigate further.
39. As Mr Richard Millett QC, who has appeared with Mr Willan on behalf of Clarksons and Mr Karakoulakis, submits, the damage in this case is the fact that Mr Su was bound personally to a contract to which he should not have been party and that he in that way incurred personal liability under it. By the end of July 2012 Mr Su knew that it was asserted by Lakatamia in its particulars of claim that he was a party to the FFA Contract and he also knew that two judges of the High Court, Blair and Beatson JJ, and the Court of Appeal considered that Lakatamia had a good arguable case that he was personally liable for up to US$48m in respect of its breach. It seems to me to be absolutely plain that by this time he knew enough for it to be reasonable to begin to investigate further and, to adopt the words of Lord Nicholls, to start asking questions and to set about investigating the possibility that he was indeed bound personally to the FFA Contract and so had a claim against Clarksons and Mr Karakoulakis. As Mr Millett also submits and I accept, this is particularly so given that subsection (7) requires it to be assumed that Clarksons and Mr Karakoulakis would not have disputed liability.
40. The position in relation to the knowledge requirements imposed by subsections (5), (6) and (8) of s.14A is exactly the same. By July 2012 Mr Su plainly knew enough to give rise to a real possibility that his personal liability under the FFA Contract was a direct consequence of and attributable to the acts of Clarksons and Mr Karakoulakis for they were responsible for negotiating and agreeing the terms of that contract.
41. None of the points relied upon by Mr Crystal causes me to alter this view. Of course I accept that Mr Su could not be sure of what Mr Karakoulakis had said to Mr Haji- Ioannou. Nor is there any contemporaneous document recording the terms of the FFA Contract beyond the guarantee. But Mr Su knew that proceedings had been commenced against him by Lakatamia and that the Court of Appeal and two High Court judges considered that the evidence before them, including that of Mr Gardner, gave rise to a good arguable case against him.
42. As for the other matters relied upon by Mr Su, it seems to me that they take him no further. I accept that Mr Su did not personally make any payment to mee t Lakatamia's exposure arising from the FFA Contract but the companies which he controlled did make such payments. I recognise too that it was not until August 2014 that Mr Haji- Ioannou was added as a party to the claim. However, Mr Su's potential liabilit y to Lakatamia was clear from the outset of the proceedings against him. Similarly, the comments made by Mr Gray in his meeting with Black Cube in December 2014, shortly after Cooke J had given judgment, have little or no bearing on whether Mr Su knew enough by July 2012 to look into the merits of the claim against him and to investigate whether he had a claim against Clarksons. Finally and as for the evidence of Mr Su that he was advised in July 2012 by the solicitors then acting for him that they were confident that the he would not be found liable at the trial, this seems to me to carry little weight. As Teare J observed, Mr Su has not waived privilege and has not disclosed any written advice that he received. But in any event, the test is objective and here the finding of the Court of Appeal that Lakatamia had a good arguable case is, to my mind, by far the most important consideration.
43. I have therefore reached the clear conclusion that Teare J was not only entitled but right to find that there was no real prospect of Mr Su establishing at trial that he only acquired the relevant knowledge less than three years before commencing these proceedings in November 2015. He had that knowledge, at the latest, by the date of the judgment of the Court of Appeal on 18 July 2012.
44. I would therefore dismiss this appeal.

Lord Justice Henderson: I agree