United Kingdom House of Lords Decisions

HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

Haward and others (Respondents) v. Fawcetts (a firm) (Appellants) and others

[2006] UKHL 9

LORD NICHOLLS OF BIRKENHEAD

My Lords,

1.   In this case the claimant Mr Haward invested money in a company on the advice of his accountant Mr Austreng. The company failed, and Mr Haward lost his money. The issue before the House concerns a defence of limitation. This was tried as a preliminary issue in the action.
2.   Statutes of limitation seek to hold a balance between two competing interests: the interests of claimants in having maximum opportunity to pursue their legal claims, and the interests of defendants in not having to defend stale proceedings. Traditionally the limitation period for most claims is six years. This goes back to the Limitation Act 1623. On its face this period, with extensions in cases of fraud and mistake, is a generous, perhaps over-generous, period within which to be able to start court proceedings in respect of a wrong.
3.   However, with certain types of claims this six year period would be far from generous or even reasonable. The starting date for the six year limitation period is when a cause of action accrues. In claims based on negligence a cause of action accrues when real damage, as distinct from minimal damage, is suffered. This principle has been applied in limitation cases even where, at the date of accrual of the cause of action, the claimant did not know he had suffered damage. The injustices to which this harsh approach gave rise are well known. They were high-lighted in decisions of your Lordships' House in appeals such as the pneumoconiosis case of Cartledge v E Jopling & Sons Ltd [1963] AC 758 and the defective chimney case of Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1. There claimants were held to be statute-barred before they knew or could be expected to know they had suffered damage.
4.   Considerable difficulty has arisen in finding a satisfactory formula remedying this deficiency in the law. The relevant statutory provisions now current are sections 11 to 14B of the Limitation Act 1980. Section 11 made provision for special time limits in respect of personal injuries. Sections 14A and 14B, inserted into the 1980 Act by the Latent Damage Act 1986, made similar provision for other negligence claims. The present appeal is concerned with these latter provisions.
5.   Both sets of statutory provisions sought to remedy the deficiencies in the law by providing for an extended period of limitation to run from a date later than the date when the cause of action accrued. In the case of personal injuries claims the relevant later date, stated shortly, is when the person injured first knew his injury was significant, that the injury was attributable to the act or omission alleged to constitute negligence, and the identity of the defendant: section 14.
6.   Parliament subsequently adopted a similar approach to other negligence claims. The extended three-year limitation period starts when the claimant first had both 'the knowledge required for bringing an action for damages in respect of the relevant damage' and a right to bring the action: section 14A(5). Section 14A(6)-(10) then defines what constitutes knowledge for this purpose. Essentially knowledge means knowledge of certain facts, of which two are relevant in the present case. These two facts are, first, 'the material facts about the damage in respect of which damages are claimed' and, second, 'that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence': section 14A(6) and (8)(a). For convenience I shall henceforth confine my references to section 14A, but my observations apply equally to the corresponding provisions in section 14.
7.   By these provisions Parliament sought to identify the knowledge a claimant needs to possess before it is fair and reasonable that time should run against him. That is their purpose. This is made explicit in section 14A by its introductory description of the requisite knowledge as 'the knowledge required for bringing an action [etc]'. The claimant is to have a reasonable period, set by Parliament at three years, in which to start proceedings after he has the knowledge he reasonably needs for that purpose.

    The degree of knowledge required

8.   Two aspects of these 'knowledge' provisions are comparatively straightforward. They concern the degree of certainty required before knowledge can be said to exist, and the degree of detail required before a person can be said to have knowledge of a particular matter. On both these questions courts have had no difficulty in adopting interpretations which give effect to the underlying statutory purpose.
9.   Thus, as to the degree of certainty required, 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.
10.   Questions about the degree of detail required have mostly arisen in the context of the need for a claimant to know 'the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence': section 14A(8)(a). Consistently with the underlying statutory purpose, Slade LJ observed in Wilkinson v Ancliff [1986] 1 WLR 1352, 1365, that it is not necessary for the claimant to have knowledge sufficient to enable his legal advisers to draft a fully and comprehensively particularised statement of claim. Where the complaint is that an employee was exposed to dangerous working conditions and his employer failed to take reasonable and proper steps to protect him it may well be sufficient to set time running if the claimant has 'broad knowledge' of these matters. In the clinical negligence case of Hendy v Milton Keynes Health Authority [1992] 3 Med LR 114, 117, Blofeld J said a plaintiff may have sufficient knowledge if she appreciates 'in general terms' that her problem was capable of being attributed to the operation, even where particular facts of what specifically went wrong or how or where precise error was made is not known to her. In proceedings arising out of the manufacture and sale of the drug Opren Purchas LJ said that what was required was knowledge of the 'essence' of the act or omission to which the injury was attributable: Nash v Eli Lilly & Co [1993] 1 WLR 782, 799. In Spargo v North Essex District Health Authority [1997] PIQR P235 Brooke LJ referred to 'a broad knowledge of the essence' of the relevant acts or omissions. To the same effect Hoffmann LJ said section 14(1)(b) requires that 'one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based': Broadley v Guy Clapham & Co [1993] 4 Med LR 328, 333.
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.

    Irrelevance of knowledge that the act or omission involved negligence

12.   Difficulties may sometimes arise over the interaction of these 'knowledge' provisions and the statutory provision rendering 'irrelevant' knowledge that, as a matter of law, an act or omission did, or did not, amount to negligence: section 14A(9). By the latter provision Parliament has drawn a distinction between facts said to constitute negligence and the legal consequence of those facts. Knowledge of the former (the facts) is needed before time begins to run, knowledge of the latter (the legal consequence of the facts) is irrelevant. As Sir Thomas Bingham MR said in the clinical negligence case of Dobbie v Medway Health Authority [1994] 1 WLR 1234, 1242, knowledge of fault or negligence is not necessary to set time running. A claimant need not know he has a worthwhile cause of action.
13.   A linguistic point, which can give rise to confusion, should be noted here. Sometimes the essence of a claimant's case may lie in an alleged act or omission by the defendant which cannot easily be described, at least in general terms, without recourse to language suggestive of fault: for instance, that 'something had gone wrong' in the conduct of the claimant's medical operation, or that the accountant's advice was 'flawed'. Use of such language does not mean the facts thus compendiously described have necessarily stepped outside the scope of section 14A(8)(a). In this context there can be no objection to the use of language of this character so long as this does not lead to any blurring of the boundary between the essential and the irrelevant.
14.   This point is exemplified in Dobbie v Medway Health Authority [1994] 1 WLR 1234. The judge held the claimant had 'broad knowledge of sufficient facts to describe compendiously [1] that her breast had been unnecessarily removed, [2] that something had gone wrong, and [3] that this was due to the defendant's negligence': [1994] 1 WLR 1234, 1243. In the Court of Appeal this part of the judge's reasoning was criticised. These matters, it was said, were irrelevant. In my respectful view the Court of Appeal's criticism was well directed so far as it related to the third of these three matters, but not so far as it related to the other two. The essence of the claimant's case was that she had suffered injury by the removal of a healthy breast, that is, her breast had been removed unnecessarily and something had gone wrong. These were the acts and omissions she alleged constituted negligence. Under the statute time did not begin to run until she knew of these acts or omissions. Until she was aware of these matters she could not know her injury was attributable to them. I agree with the observations to this effect made by the Court of Appeal in Hallam-Eames v Merrett Syndicates Ltd [2001] Lloyd's Rep PN 178, 181.
15.   In many cases the distinction between facts (relevant) and the legal consequence of facts (irrelevant) can readily be drawn. In principle the two categories are conceptually different and distinct. But lurking here is a problem. There may be difficulties in cases where a claimant knows of an omission by say, a solicitor, but does not know the damage he has suffered can be attributed to that omission because he does not realise the solicitor owed him a duty. The claimant may know the solicitor did not advise him on a particular point, but he may be totally unaware this was a matter on which the solicitor should have advised him. This problem prompted Janet O'Sullivan, in her article 'Limitation, latent damage and solicitors' negligence', 20 Journal of Professional Negligence (2004) 218, 237, to ask the penetrating question: unless a claimant knows his solicitor owes him a duty to do a particular thing, how can he know his damage was attributable to an omission?
The present case
16.   This particular difficulty does not arise in the present case. The facts are set out fully by my noble and learned friend Lord Mance. Once Mr Haward knew enough for it to be reasonable for him to investigate whether Mr Austreng's advice was flawed, he would thereupon have known his losses might well be attributed in whole or in part to that flaw. He would have known this, because he had relied upon Mr Austreng's advice when investing money in the company.
17.   On the contrary, the present case calls simply for a careful application of section 14A(8)(a) as interpreted as summarised above. The judge's approach was that Mr Haward knew all the material facts as they occurred. He knew the terms of Mr Austreng's retainer, he knew the advice Mr Austreng gave him, and he relied on that advice, with the consequence that he lost his money. The causal connection between the advice and the damage was patent and obvious. The only thing Mr Haward did not know was that Mr Austreng's firm was (allegedly) negligent, or that he had a cause of action against the firm; but those matters are irrelevant.
18.   This approach treats knowledge that Mr Austreng's advice might well be flawed as irrelevant. The Court of Appeal held that in so doing the judge fell into error.
19.   I agree with the Court of Appeal. I agree with the Court of Appeal that the judge in the present case fell into the same error as the first instance judge in Hallam-Eames v Merrett Syndicates Ltd [2001] Lloyd's Rep PN 178. The language and intent of section 14A(8)(a) are clear. As already noted, in addition to having knowledge of the material facts about the damage, a claimant must know there was a real possibility the damage was caused by ('attributable to') the acts or omissions alleged to constitute negligence. The conduct alleged to constitute negligence in the present case was not the mere giving of advice. The conduct alleged to constitute negligence was the giving of flawed advice: Mr. Austreng did not give the advice appropriate to the true financial state of the company's affairs.
20.   This feature of the advice cannot be brushed aside as a matter of detail. Nor can it be treated, as it was by the judge, as a matter going only to particulars. Far from it. This feature is the very essence of Mr Haward's claim. Stated in simple and broad terms, his claim is that Mr Austreng did not do his job properly. Time did not start to run against Mr Haward until he knew enough for it to be reasonable to embark on preliminary investigations into this possibility.
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.
24.   Accordingly, although the judge made no finding on this point, it is evident that, not having directed evidence to the relevant issue, Mr Haward failed to discharge the burden of proof resting on him. It may well be that an investigation into a possible causal link between the losses and Mr Haward's advice, or the lack of it, did not begin until May 1999. Jonathan Parker LJ so held (paragraph 147). But it by no means follows from this that until then Mr Haward lacked sufficient knowledge for it to be reasonable for him to set about investigating the possibility that Mr Austreng had slipped up when giving his advice. After all, the disparity between Mr Austreng's advice and the company's disastrous losses stared Mr Haward in the face long before December 1998. And Mr Haward was an experienced businessman. In these proceedings Mr Austreng's firm did not rely upon section 14A(10). But this does not preclude the House from finding that this disparity confirms, if confirmation is needed, that Mr Haward failed to discharge the burden of proof resting on him. I would allow this appeal and restore the judge's order.

LORD SCOTT OF FOSCOTE

My Lords,

Background to section 14A of the Limitation Act 1980

25.   This is a case in which professional negligence is alleged. The defendant, appellant before your Lordships, is a firm of accountants, Fawcetts. Mr J. H. Haward, the first respondent in the appeal, was a client of theirs. In October 1994 Mr Austreng, a partner in Fawcetts, gave professional advice to Mr Haward regarding the proposed acquisition by Mr Haward of a company, then called Kings Stag Engineering Ltd but later re-named Haward Agriculture Ltd (henceforth "the Company"). On 9 December 1994, and in reliance on the advice of Mr Austreng, Mr Haward (or his family company W. J. Haward Ltd, the second respondent) subscribed for 60,000 newly issued £1 shares in the Company at par. This shareholding constituted a controlling interest. In addition a Haward family Trust (the third respondent) acquired the freehold of the leasehold premises from which the Company carried on business for a price of £100,000. Fawcetts were appointed auditors to the Company.
26.   It was contemplated at the time of this acquisition that additional money, £100,000 or thereabouts, would need to be put into the business in order to bring the Company to a state of reasonable profitability and so as to allow a reasonable return to be had from the Haward money that had been invested.
27.   But the notion that the Company could be brought to profitability by the injection of the originally contemplated sums turned out to be mistaken. The Company's Balance Sheet and Profit and Loss Account for the year ended 31 December 1994 showed a loss for the year of £46,049 and net assets of £34,806. The accounts for the year ended 31 December 1995 showed a loss for the year of £266,340 and an excess of liabilities over assets of £231,534. And in the course of 1995 one or other of Mr Haward, the family company and the family Trust invested a further £431,000 in the Company. But this substantial investment, too, failed to bring the Company to profitability. The accounts for the year ended 31 December 1996 show a loss of £27,276 for the year and an excess of liabilities over assets of £258,810, and those for the year ended 31 December 1997 show a loss of £400,062 for the year and an excess of liabilities over assets of £658,872. These continuing losses were financed by further investment from either Mr Haward, the family company or the family Trust of £102,985 in 1996, £509,525 in 1997 and £208,950 in 1998. The yearly accounts were all prepared by Fawcetts. All were signed by Mr Haward. The only reason the Company was not put into liquidation, for it was plainly insolvent in a balance sheet sense, was that the bulk of the family investment to which I have referred had taken the form of loans and the lenders, via Mr Haward, controlled the Company.
28.   In 1998 Mr Haward asked a Mr Peter Hughes, who specialised in corporate rescues, to look into the matter of the Company's ever-mounting losses. The involvement of Mr Hughes and associates of his in the Company's business affairs and fortunes led eventually to a claim for damages for professional negligence being made against Fawcetts. The proceedings were commenced on 6 December 2001.
29.   The professional negligence claim was both a contractual claim and a claim in tort. Fawcetts' defence denied the alleged negligence but raised also the defence that the claims based on breaches of contract prior to 6 December 1995 were statute barred and that tortious claims for losses accruing prior to 6 December 1995 were likewise statute barred. If this were so the negligence claim could proceed in respect of the 1996, 1997 and 1998 investments but not in respect of the initial £160,000 invested in 1994 nor in respect of the £431,000 invested in 1995.
30.   On 26 November 2002 a direction was given by Master Leslie that the issues of limitation be tried as preliminary issues.
31.   It has, of course, been common ground throughout this litigation that the basic period of limitation for both the contractual claims and the tortious claims brought in these proceedings is six years from the date on which the causes of action accrued. The respondents, however, rely on the three year extended time limit provided by section 14A of the Limitation Act 1980. The question is whether, in relation to the 1994 and 1995 investments, their action is saved by section 14A.

A limitation defence

32.   It seems to me desirable, before attempting to apply section 14A to the facts of this case, to review the nature of a limitation defence and the intended purpose of section 14A. It is important, in my opinion, to keep in mind that limitation defences are creatures of statute. The expression "statute-barred" makes the point. And, in prescribing the conditions for the barring of an action on account of the lapse of time before its commencement, Parliament has had to strike a balance between the interests of claimants and the interests of defendants. It is a hardship, and in a sense an injustice, to a claimant with a good cause of action for damages to which, let it be assumed, there is no defence on the merits to be barred from prosecuting the cause of action on account simply of the lapse of time since the occurrence of the injury for which redress is sought. But it is also a hardship to a defendant to have a cause of action hanging over him, like the sword of Damocles, for an indefinite period. Lapse of time may lead to the loss of vital evidence; it is very likely to lead to a blurring of the memories of witnesses and to the litigation becoming even more of a lottery than would anyway be the case; and uncertainty as to whether an action will or will not be prosecuted may make a sensible and rational arrangement by the defendant of his affairs very difficult and sometimes impossible. Each of the various statutes of limitation that over the years Parliament has enacted, starting with the Limitation Act 1623 (21 Jac.1.c.16) and coming down to the 1980 Act, represents Parliament's attempt to strike a balance between these irreconcilable interests, both legitimate. It is the task of the judiciary to identify from the statutory language and the purpose of each amending enactment the balance that that enactment has endeavoured to strike and to apply the enactment accordingly. It is emphatically not the function of the judges to try to strike their own balance, whether as a response to the apparent merits of a particular case or otherwise. In 1825 in A'court v Cross (3 Bing.329) Best CJ, commenting on the 1623 Act, said that he was "sorry to be obliged to admit that the courts of justice [had] been deservedly censured for their vacillating decisions" (p,330) and went on
"When by distinctions and refinements, which, Lord Mansfield says, the common sense of mankind cannot keep face with, any branch of the law is brought into a state of uncertainty, the evil is only to be remedied by going back to the statute …" (p.331)

I think these strictures need to be borne in mind in the present case.

33.   In reviewing the development of the statutory regime it is not necessary to delve deeper into history than the Limitation Act 1939. This Act prescribed a six year limitation period for both contract and tort actions but allowed an extended period for actions based on the defendant's (or his agent's) fraud or for relief from the consequences of a mistake (s.26). In fraud and mistake cases the six year period did not begin to run until the fraud or mistake had been, or with "reasonable diligence" could have been, discovered by the claimant. There was no extended period for cases where the damage had been suffered but had been undetectable by, and therefore unknown to, the claimant until after the six year limitation period had expired. Cartledge v Jopling & Sons Ltd [1963] AC 758 drew attention to this feature of the statutory regime and confirmed that the six year limitation period ran from the time the cause of action accrued, that is to say, in tort cases when the damage happened. Lord Reid at p.772 said:
"If this were a matter governed by the common law I would hold that a cause of action ought not to be held to accrue until either the injured person has discovered the injury or it would be possible for him to discover it if he took such steps as were reasonable in the circumstances. The common law ought never to produce a wholly unreasonable result … But the present question depends on statute, the Limitation Act, 1939, and section 26 of that Act appears to me to make it impossible to reach the result which I have indicated."

Cartledge v Jopling was a personal injury case and all their Lordships advocated amendment of the 1939 Act to cover the case of undetectable physical injury that only becomes apparent years later.

34.   Parliament was swift to respond and the Limitation Act 1963 was enacted. Section 1(3) of the 1963 Act enabled an action for personal injuries to be brought
"… if it is proved that the material facts relating to that cause of action were or included facts of a decisive character which were at all times outside the knowledge (actual or constructive) of the plaintiff until a date which … was not earlier than 12 months before the date on which the action was brought."

The meaning of "material facts relating to that cause of action" was defined in section 7(3):

"… any reference to the material facts relating to a cause of action is a reference to any one or more of the following, that is to say -

(a)  the fact that personal injuries resulted from the negligence, nuisance or breach of duty constituting that cause of action;

(b)  the nature or extent of the personal injuries resulting from that negligence, nuisance or breach of duty;

(c)  the fact that the personal injuries so resulting were attributable to that negligence, nuisance or breach of duty, or the extent to which any of those personal injuries were so attributable."

In Central Asbestos Co. Ltd v Dodd [1973] AC 518 a majority of this House rejected the proposition that knowledge of "material facts" for section 1(3) purposes included knowledge that the defendant's conduct entitled the plaintiff to a legal remedy.

35.   The Law Reform Committee in its 1974 Report on Limitation of Actions in Personal Injury Claims (Cmnd.5630) thought that the date of knowledge of material facts, when the applicable limitation period would start to run, should be the date "when the plaintiff has knowledge, actual or constructive, both of his injured condition and of its having been caused by acts or omissions of the defendant" (para. 55 and see para. 69(3)). This Report led to the 1975 Limitation Act which was later consolidated into the 1980 Act. Section 11 of the 1980 Act prescribes a three year limitation period for personal injury claims with the period commencing either when the cause of action accrued, i.e. when the damage occurred, or on "the date of knowledge" whichever be the later. Section 14 adopted the Law Reform Committee's recommendation in para.69 of the Report as to when "the date of knowledge" would occur (see s.s(1)). There is no reference in section 14 to knowledge of "material facts" as such. The facts of which knowledge is required are spelled out more precisely.
36.   But neither section 1(3) and 7(3) of the 1963 Act nor their replacement in the 1975 Act (which became part of sections 11 and 14 of the 1980 Act) dealt with damage to property or with economic loss. Attention was drawn to this feature of the statutory regime by Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1. Damage to a factory arose out of the use of a material in constructing a factory chimney that was unsuitable for the purpose. The chimney had been built in 1969 but the faulty condition of the chimney could not have been discovered with reasonable diligence until 1972 and was not in fact discovered until 1977. A writ was issued in 1978. The question was whether the six year period ran from the date the faulty chimney was built or from the date when the fault could have been or was discovered. This House, following Cartledge v Jopling, held that the former was the starting date. So the action was statute barred.
37.   The Law Reform Committee took the problem under advisement again and recommended the adaptation of section 14 of the 1980 Act so as to provide an extension of time where the negligence complained of had led to the creation of a latent defect in property. The Committee's Report (Cmnd.9390) resulted in the Latent Damage Act 1986 section 1 of which incorporated section 14A into the 1980 Act. Just as Cartledge v Jopling had led to an extension of the limitation period in personal injury cases so the Pirelli case led to an extension in latent damage cases. Section 14A and its intended purpose are critical to the outcome of this appeal and it is helpful, in my opinion, to bear in mind some of the Law Reform Committee's comments in its Latent Damage Report that led to the enactment of that section.
38.   In paragraph 4.2 the Committee formulated "three principles … of critical importance … ". They were:
"(i)  that plaintiffs must have a fair and sufficient opportunity of pursuing their remedy;

(ii)  that defendants are entitled to be protected against stale claims;

(iii)  that uncertainty in the law is to be avoided whenever possible."

In para.4.4 the Committee commented that "a plaintiff who has no means of knowing that he has suffered damage should not as a general rule be barred from taking proceedings by a limitation period which can expire before he discovers (or could discover) his loss". This comment is clearly directed at Pirelli type cases of latent damage. In para.4.8 the Committee recommended "the adaptation of section 14 of the 1980 Act to cases of latent defect other than those of personal injury".

39.   Section 14A applies to any action for damages for negligence other than personal injury actions (s.s(11)). So although the provenance of section 14A was the problem presented by cases of damage to property where the damage was not immediately apparent, the section applies also to cases, such as the present case, where the damage consists of economic loss. Here, too, it is reasonable to suppose that the mischief being addressed was that of loss that was not immediately apparent. Sub-section (4) of section 14A provides two alternative limitation periods, namely, the normal six year period from the accrual of the cause of action, or, alternatively, a three year period from "the starting date" as defined by sub-section (5). It is convenient to set out sub-sections (5) to (10) in full.
"(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 current 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 attributable 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)  Knowledge 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."

40.   It is to be noted that sub-sections (6)(a) and (7) refer to "material facts", an expression used in sections 1(3) and 7(3) of the 1963 Act but not found in sections 11 and 14 of the 1980 Act. In the 1963 Act, however, the reference was to the material facts "relating to that cause of action." (s.1 (3)). In section 14A(6)(a) the reference is more limited - "… the material facts about the damage". The limited character of the reference is underlined by the definition of the expression in sub-section (7). What is wanted is knowledge of "such facts about the damage" as would be expected to lead to the institution of a claim against a solvent defendant who had no defence to the claim. This demonstrates that the sub-section (6)(a) "material facts" of which knowledge is needed do not include any facts about the acts or omissions of the defendant that allegedly constitute the negligence.
41.   In addition, however, to knowledge of the sub-section (6)(a) "material facts", knowledge is needed also of the sub-section (6)(b) "other facts". These "other facts" are specifically described. They are facts of the three types specified in paragraphs (a), (b) and (c) of sub-section (8). Nothing for present purposes turns on the "other facts" specified in (b) or (c) but (a) is critical. Knowledge is required of the fact "that the damage was attributable" to the act or omission alleged to constitute negligence.
42.   Section 7(3) of the 1963 Act had required knowledge of the fact that the personal injuries were "attributable" to the negligence, nuisance or breach of duty constituting the cause of action. In Central Asbestos Co. Ltd v Dodd Lord Pearson examined the meaning of "attributable". He cited, at p.543, the definition of "Attributable" and "Attribute" given by the Oxford English Dictionary (1888) Vol.1 p.556, and continued:
"Thus 'attributable to' refers to causation but it has to cover cases of dual or multiple causation …"

43.   The statutory language in sub-section (8)(a) has been considered in a number of cases and raises the question whether a claimant, in order to obtain the extended period of three years, need show no more than a lack of knowledge of an allegedly negligent act or omission that is a link in the causation chain leading to the damage, and regardless of the importance of that link in the chain. In other words, a causative connection is a necessary part of attributability but is it necessarily sufficient to constitute attributability?
44.   In Nash v Eli Lilly & Co. [1993] 1 WLR 782, a personal injuries case, Purchas LJ, giving the judgment of the Court of Appeal, said, at p.799, that
"It was not … the intention of Parliament to require for the purposes of section 11 and section 14 of the [1980] Act proof of knowledge of the terms in which it will be alleged that the act or omission of the defendants constituted negligence or breach of duty. What is required is knowledge of the essence of the act or omission to which the injury is attributable." (emphasis added)

45.   Dobbie v Medway Health Authority [1994] 1 WLR 1234 was a case in which a patient had had a lump on her breast. The surgeon, without first subjecting the lump to a microscopic examination in order to determine whether it was cancerous or benign, removed the breast. This was in 1973. The lump was subsequently found to be benign. The patient knew very soon after the operation that the lump was benign but did not know until 1988 that that meant her breast need not have been removed. She began proceedings for negligence in 1989. Sir Thomas Bingham M.R. (as he then was) referred to the "knowledge" test formulated by Lord Donaldson of Lymington M.R. in Halford v Brookes [1991] 1 WLR 428 at 443 and continued at 1240:
"This test is not in my judgment hard to apply. It involves ascertaining the personal injury on which the claim is founded and asking when the claimant knew of it."

and, at 1243, expressed this conclusion

"The personal injury on which the plaintiff seeks to found her claim is the removal of her breast and the psychological and physical harm which followed. She knew of this injury within hours, days or months of the operation and she at all times reasonably considered it to be significant. She knew from the beginning that this injury was capable of being attributed to, or more bluntly was the clear and direct result of, an act or omission of the health authority. What she did not appreciate until later was that the health authority's act or omission was (arguably) negligent or blameworthy. But her want of that knowledge did not stop time beginning to run."

And in Hallam-Eames v Merrett Syndicates [2001] LlR PN 178, in which a number of members of Lloyd's facing re-insurance underwriting liabilities were alleging negligence on the part of the active underwriter, their members' agents and their syndicates' managing agents and where limitation defences had been raised, Hoffmann LJ (as he then was) emphasised the statutory words "attributable… to the act or omission which is alleged to constitute negligence" and gave this explanation at 181 (left hand column)

"In other words the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence … It is this idea of causal relevance which various judges of this court have tried to express by saying the plaintiff must know 'the essence of the act or omission to which the injury is attributable' (Purchas LJ in Nash v Eli Lilly & Co [1993] 1WLR 782 at 799) or 'the essential thrust of the case' (Sir Thomas Bingham M.R. in Dobbie [1994] 1WLR 1238) or that 'one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based' (Hoffmann LJ in Broadley [1993] 4 Med LR 328, 332)".

Application of section 14A to the facts of this case

46.   What was the "damage" allegedly caused by Fawcetts' negligence of which the respondents complain? The damage was the investment of the Haward money first in acquiring the Company and its business premises in 1994 and subsequently in trying to bring the Company to profitability. The damage, as I think was common ground, was the making of a bad investment. The measure of the loss depended on the eventual worth of the Company but the damage allegedly caused by Fawcetts' negligence was the making of the investment. Mr Haward plainly had knowledge that the investment of Haward money in 1994 and 1995 had taken place. He knew the exact amount of money that had been invested. But, on the footing that it was indisputable that Fawcetts' advice in respect of the investment had been negligent, at what date did Mr Haward know that the investment was a sufficiently seriously bad one to justify suing them? Mr Haward needs to establish that he did not have this knowledge until after 6 December 1998. This is the sub-section (6)(a) issue.
47.   On this issue there cannot, in my opinion, be any doubt but that Mr Haward had the requisite knowledge well before 6 December 1998. He had made the initial investment in 1994 on the footing that a further £100,000 or thereabouts would need to be injected into the Company's business. But the Company had steadily made losses and £431,000 in 1995, £102,985 in 1996 and a huge £509,525 in 1997 had had to be put into the Company in order to keep it a going concern. The 1997 accounts showed a loss for the year of over £400,000 and an excess of liabilities over assets of £658,872. So far as the 1994 investment and 1995 investment are concerned it cannot, in my opinion, possibly be contended that there were any "material facts about the damage in respect of which damages are claimed" of which Mr Haward did not have knowledge by 6 December 1998.
48.   The critical issue, therefore, is whether by that date Mr Haward lacked knowledge that the "damage", i.e. the investment of Haward money in 1994 and 1995, "was attributable in whole or in part" to the acts or omissions of Fawcetts alleged to constitute negligence. This is the sub-section (8)(a) issue.
49.   As to this I would, for my part, accept and apply the opinions expressed in Nash v Eli Lilly, Dobbie v Medway Health Authority and the Hallam-Eames case that the requisite knowledge is knowledge of the facts constituting the essence of the complaint of negligence.
50.   The particulars of the breaches of contract and of negligence that the respondents rely on in the present case are set out in the Amended Particulars of Claim in sub-paragraphs (a) to (q). It is not necessary, in my opinion, to refer to all of them, for the essence of the complaint can be distilled from just a few. Thus, paragraphs
"(a)  failing to determine and to advise as to the proper value of the Company and the proper price to pay for a 60% shareholding in the Company",

"(e) failing to advise as to the true financial state of the Company and its financial prospects for the future in the light of the true financial position of the Company",

and

"(g) failing to advise as to the extent of investment that it would be necessary to make to keep the Company trading"

constitute to my mind the essence of the respondents' complaint against Fawcetts, namely, that Fawcetts, their financial advisers, did not give them the advice that the true state of the Company's affairs warranted and that, if given, would have warned them against a disastrous investment of their money. The other particulars are, in my opinion, essentially reasons why the failings alleged in paragraphs (a), (e) and (g) were negligent failings.

51.   As to knowledge, Mr Haward knew what advice had been given by Fawcetts and he knew what advice had not been given by Fawcetts. He knew by 6 December 1998 that the true financial state of the Company had required, if the Company were to keep trading, the very substantial additional investment that had to be made, and was made, to cover the losses incurred in the years 1995, 1996 and 1997. He did not know that the advice actually given or the pleaded failings involved negligence, but knowledge of that is not required (see s.14(A)(9)).
52.   Judge Playford QC summed up the situation very well in paragraph 20 of his judgment:
"… it is the basis of [the respondents'] claim that [Fawcetts] advised on-going investment and it is hard to see how [Mr Haward] could have failed to appreciate that he was spending money either on their advice or without their advice. So far as [Mr Haward] was concerned, there was nothing of a factual nature that was latent; all was patent. The only thing that he did not know was that Fawcetts had been, as he now alleges, negligent or that he had a claim against them but such matters are irrelevant."

In my opinion this summation was factually accurate and in accordance with the requirements of section 14A.

53.   In the Court of Appeal Jonathan Parker LJ reviewed the relevant authorities meticulously and correctly identified that the critical issue was whether by 6 December 1998 the section 14A(8)(a) requirement of knowledge of attributability was satisfied (para.148 of his judgment). But he went wrong in my respectful opinion in paragraph 168 of his judgment when he said that there were "on the evidence, a number of possible causes for the failure of the Company apart from Fawcetts' advice (or lack of it)" and that "[Mr Haward] did not know [in July 1998] that all or part of the damage was capable of being attributed to Fawcetts' advice (or lack of it)." The Lord Justice was, it seems to me, looking at the wrong event. The "damage" allegedly caused by Fawcetts' negligence was not the failure of the Company. The damage was the making by the respondents of loss-making investments. Fawcetts could not have been made responsible for the failure of the Company. The respondents were seeking in the action to make Fawcetts responsible for their losses consequent upon the making of the investments. Mr Haward needed to have knowledge that Fawcetts' acts or omissions were causative of the making of the investments. He plainly had that knowledge at the time the investments were made. And very soon thereafter, in relation to the 1994 and 1995 investments (which is all that this limitation issue is concerned with) he knew that the investments were loss-making. As Judge Playford QC said, all he did not know was that Fawcetts' advice (or the lack of it) had been negligent. But that lack of knowledge is irrelevant (sub-section (9)).
54.   A decision of your Lordships in favour of the respondents, enabling the action to be brought within three years of the discovery by Mr Haward of why it was that the advice he had received from Fawcetts was negligent (if that is what it was), or why it was that Fawcetts had not given him the advice that he alleges they should have given, would expand section 14A to cover cases that had nothing whatever to do with latent damage or losses. It would expose those who give advice on financial matters to potential liability not simply until the expiry of three years after the loss-making consequences of the advice are known but until the expiry of three years after all the reasons why that advice was negligent are known. This, in my opinion, is an unjustifiable extension of the scope of section 14A, substantially altering the balance between claimant and defendant that Parliament has struck. For these reasons, and also for the reasons contained in the opinions of my noble and learned friends, with all of which I agree, I would allow this appeal and restore the order of Judge Playford QC.

LORD WALKER OF GESTINGTHORPE

My Lords,

55.   Despite the best efforts of the Law Commission the law in this area still has many problems. Section 14A of the Limitation Act 1980, as inserted by section 1 of the Latent Damage Act 1986, is closely modelled on sections 11 and 14 of the Limitation Act 1980 (which apply to actions for damages for personal injuries based on negligence, nuisance or breach of duty). Whether a claimant has suffered personal injury is in principle a straightforward question of fact, and the fact that the claimant has suffered personal injury is a given once it comes to the application of section 14 (definition of date of knowledge).
56.   Section 14A, by contrast, covers a much wider field ("any action for damages for negligence, other than one to which section 11 of this Act applies"). Moreover the word "damage" (as used in the expression "relevant damage" in subsections (5) and (6) and elsewhere in subsections (6), (7) and (8)) must cover both latent damage to tangible property (as in Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1) and cases of pure economic loss, such as Hallam-Eames v Merrett Syndicates (1995) [2001] Lloyd's Rep PN 178 (and the present appeal). The wide range of claims to which section 14A may extend suggests that general observations made by the court in one type of case may not be directly apposite in a case of another type.
57.   This appeal turns largely on the interpretation, and the application to a rather confused set of facts, of section 14A (8)(a). The effect of that provision is that the claimant must know, before time starts to run, that "the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence." It is to be noted that this provision may involve an exercise in hindsight spanning a considerable period of time. Its function is as part of the process of ascertaining the "starting date" defined in section 14A (5)—that is, the date from which the alternative limitation period in section 14A (4)(b) is to run. As numerous reported cases show, the starting date may occur at a time when a claimant's knowledge about his claim is far from complete. Inquiries and investigations may have to be made, and expert advice may have to be obtained as to how the claim should be pleaded, and how special damages should be quantified. A claimant may have the requisite knowledge (as Slade LJ said in Wilkinson v Ancliff (BLT) Ltd [1986] 1 WLR 1352, 1365)
"even though he may not yet have the knowledge sufficient to enable him or his legal advisers to draft a fully and comprehensively particularised statement of claim."

    But by the time, often years later, that the limitation issue comes to be decided, whether as a preliminary issue or at trial, the claimant's case will have been pleaded, and the defendant's "act or omission which is alleged to constitute negligence" will (or at any rate should) have been clearly identified.

58.   There are, as Charles J recognised in the Court of Appeal in the present case, tensions arising from the juxtaposition of subsection (8)(a) with subsection (9), which is in the following terms:
"Knowledge 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.".

    Nevertheless section 14A (8)(a) requires, as already noted, something of an exercise in hindsight, looking back from the pleaded particulars of negligence. The Court of Appeal has made clear that section 14A (9) excludes not only considerations of negligence in the technical sense but also the vaguer concept of fault (first put forward, in relation to section 7(3) of the Limitation Act 1963, by Lord Pearson in Central Asbestos Co Ltd v Dodd [1973] AC 518, 543): see Broadley v Guy Clapham & Co [1993] 4 Med LR 328, 333 (Hoffmann LJ); Dobbie v Medway Health Authority [1994] 1 WLR 1234, 1242-1243 (Sir Thomas Bingham MR); and Hallam-Eames v Merrett Syndicates (1995) [2001] Lloyd's Rep PN 178, 181.

59.   I shall come back to these cases. But considering the matter for the present simply by reference to the statutory text, I think that it is clear that although section 14A(9) has the effect just mentioned, it cannot go so far as to free the section entirely of any hint of legal technicality. There are three pointers to this, all of which I have already mentioned: the word "damage" (which must in this context mean actionable damage, or at any rate what the claimant believes to be actionable damage, the cause of action being negligence); the words "attributable to" which are concerned in some way with causation, in the context of what becomes (once proceedings have been commenced and the claim pleaded) an allegation of negligence; and the words "acts or omissions alleged to constitute negligence." So although the claimant need not, at the starting date, know anything about the tort of negligence (not even its name) his or her state of knowledge cannot be assessed, with hindsight, without some reference to legal concepts, including what is causally relevant in the context of a negligence action.
60.   This point can be illustrated by the facts of a reported case which was discussed before your Lordships, HF Pension Trustees Ltd v Ellison [1999] Lloyd's Rep PN 489. The background to the case appears from the judgment of Knox J in Hillsdown Holdings Plc v Pension Ombudsman [1997] 1 AER 862. The matter arose from the takeover in 1983 of Fatstock Marketing Corp Ltd (FMC) by Hillsdown Holdings Plc (Hillsdown). The trustees of one occupational pension scheme (the FMC scheme), acting on the advice of solicitors, transferred the entire assets of the scheme to another occupational pension scheme (the HF scheme). Soon afterwards the trustees of the HF scheme made a transfer of funds to the principal employer, Hillsdown. That company received about £11.1m and a further sum of about £7.4m (that is 40% tax on the gross sum) was paid to the Inland Revenue. The Pension Ombudsman's decision, upheld by Knox J, was that the first transfer was an improper exercise of a fiduciary power and was therefore invalid. Hillsdown repaid the sum transferred to it but recovery of the tax was uncertain. The trustees of the FMC scheme sued the solicitors for damages for professional negligence. The first transfer was made in November 1989 in reliance on advice given in May 1989. The second transfer was made in two tranches in December 1989 and June 1990. The writ was issued in October 1997. On a striking-out application it was accepted that the claim was statute-barred unless the plaintiff trustees could rely on section 14A. The solicitors argued that the last date on which damage occurred was in June 1990 (when the second tranche of the second transfer was paid) and that the plaintiff trustees then knew all the facts relevant to the pleaded case in negligence. They knew the advice that the solicitors had given, and that they had acted in reliance on it. It was not necessary, the solicitors' counsel argued, for them to know that the advice was wrong. The case seems to have been decided on a concession, recorded (after a reference to Perry v Moysey [1998] PNLR 657) at p 495:
"In the instant case, by contrast, the plaintiff made the payments and thereby (to its knowledge) incurred the damage. The fact that at the time it did not realise that in making the payments it was suffering damage (in the sense of damage recoverable by legal action) is, as [counsel for the trustees] accepted, nothing to the point for present purposes."

61.   In my opinion that concession was wrongly made, and should not have been accepted. Until the FMC scheme trustees knew that they had received seriously incorrect advice which overlooked the need for propriety in exercising fiduciary powers, they did not know that the interests of their beneficiaries, the scheme members, were being prejudiced. This lack of knowledge did not mean merely that they were ignorant of having a cause of action in negligence against the solicitors; more fundamentally and more relevantly, they did not know that they (on behalf of the beneficiaries) had suffered any damage at all. They did not know that what had happened was not a more or less technical reorganisation of two pension schemes, but an improper abstraction of funds which might (if the tax was not recovered) deprive their beneficiaries of over £7m. In short, they knew the bare facts, but they were ignorant of their real significance. Their ignorance was at a different and more basic level than that addressed by section 14A(9).
62.   Hallam-Eames v Merrett Syndicates (1995) [2001] Lloyd's Rep PN 178 was another claim for pure economic loss. Hoffmann LJ delivered the reserved judgment of the Court (Sir Thomas Bingham MR, Hoffmann and Saville LJJ). It merits quotation at some length (at p 181):
"In our judgment this [the judge's view of what the claimants had to know] is an over-simplification of the reasoning in Broadley and Dobbie. If all that was necessary was that a plaintiff should have known that the damage was attributable to an act or omission of the defendant, the statute would have said so. Instead, it speaks of the damage being attributable to the act or omission which is alleged to constitute negligence. In other words, the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence. There may be many acts, omissions or states which can be said to have a causal connection with a given occurrence, but when we make causal statements in ordinary speech, we select on common sense principles the one which is relevant for our purpose. In a different context it could be said that a Name suffered losses because some member's agent took him to lunch and persuaded him to join Lloyd's. But this is not causally relevant in the context of an allegation of negligence.

It is this idea of causal relevance which various judges of this court have tried to express by saying the plaintiff must know the 'essence of the act or omission to which the injury is attributable' (Purchas LJ in Nash v Eli Lilly & Co [1993] 1 WLR 782, 799) or 'the essential thrust of the case' (Sir Thomas Bingham MR in Dobbie [1994] 1 WLR 1234, 1238) or that 'one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based.' (Hoffmann LJ in Broadley [1993] 4 Med LR 328, 332).

If one asks on common sense principles what Mrs Dobbie was complaining about, the answer is that the surgeon had removed a healthy breast. It would in our view be a seriously incomplete statement of her case to say that it was simply that the surgeon had removed her breast. This is not a matter of elaborating the detail by requiring knowledge of precisely how he had come to do the act complained of, such as this court rejected in Broadley. It was part of the essence of her complaint. Nor is it requiring knowledge of fault or negligence. The court's emphatic rejection of such a requirement is entirely consistent with characterising the act complained of (and of which knowledge was therefore required) as the removal of a healthy breast. But the judge, as it seems to us, has read Dobbie to mean that knowledge that the surgeon had removed her breast would have been enough.

If one asks what is the principle of common sense on which one would identify Mrs Dobbie's complaint as the removal of a healthy breast rather than simply the removal of a breast, it is that the additional fact is necessary to make the act something of which she would prima facie seem entitled to complain. She was suspected of having a cancerous lump and if this had been the case, the removal of her breast would not have been a matter for complaint. Likewise Mrs Broadley's complaint was the surgeon had caused damage to her foot when he was supposed to be mending her knee. Mr Clarke QC, for the auditors, and Mr Toulson QC, for the members' agents, protested that such a principle was a back-door way of introducing a requirement that the plaintiff must have known that the defendant had been negligent (which section 14A(9) expressly declares to be irrelevant) or was by some other criterion at fault (which this court rejected in Broadley and Dobbie.) We do not agree. The plaintiff does not have to know that he has a cause of action or that the defendant's acts can be characterised in law as negligent or as falling short of some standard of professional or other behaviour. But, as Hoffmann LJ said in Broadley, the words 'which is alleged to constitute negligence' serve to identify the facts of which the plaintiff must have knowledge. He must have known the facts which can fairly be described as constituting the negligence of which he complains. It may be that knowledge of such facts will also serve to bring home to him the fact that the defendant has been negligent or at fault. But this is not in itself a reason for saying that he need not have known them."

63.   Applying these principles, the Court of Appeal (reversing the judge) held that the claimants were not statute-barred because although they knew that they had lost large sums of money as a result of the run-off policies and RITC contracts entered into by their managing agents, they did not know that these heavy losses occurred because the business related to the US casualty market in which very large claims were being made for industrial pollution and asbestos-related risks. The claimants were ignorant of the real significance of the bare facts which they did know. The pollution and asbestos factors, which made it impossible to quantify incurred but not reported claims, were part of the essence of the complaint.
64.   It is no coincidence, I think, that both HF Pension Trustees and Hallam-Eames were cases of pure economic loss occurring in areas (occupational pensions and reinsurance at Lloyd's) which call for specialised technical expertise. Areas of that sort are those in which it is most likely that a claimant may know the basic facts, but not know what, to an expert, they add up to.
65.   Similar problems can arise in clinical negligence cases. In that area too the factual situations which may be contended for as cases of latent knowledge are extremely diverse, and some of them are very fact-sensitive (for instance Nash v Eli Lilly [1993] 1 WLR 782, drawing the distinction between acceptable and unacceptable side-effects of an anti-arthritis drug; Oakes v Hopcroft [2000] Lloyd's Rep Med 394, in which the claimant needed correct medical advice and legal advice before she knew that she had settled her original personal injury claim at too low a figure; and by way of contrast Davis v Ministry of Defence (26 July 1985, CA Transcript No 413 of 1985), in which the claimant received unsound medical and legal advice). But it is in the field of economic loss that a higher proportion of difficult cases is likely to arise, for reasons given by Janet O'Sullivan in an astute recent article (Limitation, Latent Damage and Solicitors' Negligence (2004) 20 JPN 218).
66.   Nevertheless the Court of Appeal has given clear general guidance as to the principle to be applied, even if its application raises, as it inevitably will, some difficult borderline cases. The general principle is set out in the second paragraph of the passage which I have quoted from Hallam-Eames. The Court is concerned with the identification of the facts which are the "essence" or "essential thrust of the case" or which "distil what [the claimant] is complaining about." Mr Palmer QC (for the appellant firm of accountants) submitted that your Lordships should not follow Hallam-Eames, and should revert to a more starkly reductionist view of the minimum core of facts that must be within the claimant's knowledge (actual or constructive). I am not entirely without sympathy for that submission, because this area of the law has become crowded with authority, and it is sometimes necessary to remind oneself that section 14A (introduced as it was by the Latent Damage Act 1986) was intended to cover cases of latent damage (other than personal injuries) alleged to have been caused by negligence, and not causes of patent damage, even if they call for a good deal of investigation and advice before proceedings can be launched. (This is not a case where there was ever any doubt about the identity of the putative defendant; the respondents put in the forefront of their case that Fawcetts were the Haward family's long-standing and trusted financial advisers.) There may well be scope for Parliament to clarify and simplify the law, and the Law Commission has put forward some radical proposals (Limitation of Actions, Law Com No 270 published in July 2001, following on the consultation paper published in January 1998). Nevertheless the body of Court of Appeal authority which culminates in Hallam-Eames provides a reasonably clear and coherent test, and I see nothing in the legislative purpose of the Latent Damage Act 1986, or in its scheme or language, to lead your Lordships' House to depart from that line of authority. Nor is it necessary to do so, in my opinion, in order to dispose fairly of this appeal.
67.   In her article ( p 236) Janet O'Sullivan makes this comment:
"A further problem with the reasoning in Hallam-Eames, as Hoffmann LJ recognised, is that it comes close to saying that which is forbidden by section 14A (9), namely that time does not start to run until the claimant has knowledge that the defendant was negligent."

    It is indeed a striking feature of the line of authority in the Court of Appeal that (with the modest exception of the reference in Hallam-Eames to cause for complaint) the Court has firmly rejected any language which suggests, even in the least technical terms, that some fault or mishap has occurred: see for instance Sir Thomas Bingham MR in Dobbie v Medway Health Authority [1994] 1 WLR 1234 at p1243 C-D, observing that the judge was open to criticism for using, not only the expression "negligence", but also "unnecessarily" and "something had gone wrong" (the Master of the Rolls nevertheless expressed complete agreement with the judge's conclusion); see also Steyn LJ at p1247H. I respectfully doubt whether the insistence on extremely non-judgmental language is required by section 14A(9), and I think that it may in some cases ignore the realities of the situation. I respectfully agree with the views expressed on this point by my noble and learned friend Lord Nicholls of Birkenhead in paras 13 and 14 of his opinion. But in any event there is a distinction to be made between two matters: (1) the generality or specificity (see Nash v Eli Lilly [1993] 1 WLR 782, 798-799) of the language in which the essence of the claimant's complaint is to be identified and expressed, and (2) the judgmentally colourful or non-judgmentally monochrome character of that language. So long as section 14A(9) is kept well in mind, the level of generality or specificity will often (as in this case) be the more important matter for the Court to address.

68.   My Lords, this is the first case on section 14A to reach your Lordships' House, and it is therefore appropriate to address, as I have tried to do, the issues of principle which have been raised in argument. As I understand it there is little (if any) difference in the House as to the principles. Such difference as there is relates to the facts of the case, which has the unusual feature that constructive knowledge is not an issue.
69.   In their amended particulars of claim the respondents pleaded that they had retained Fawcetts on two occasions: in September 1994 to investigate and advise on the acquisition of a controlling interest in the company which became Haward Agriculture Ltd ("Agriculture"); and from 9 December 1994 "to assess [Agriculture's] trading performance and to advise [the respondents] in respect of the same" and in particular to review monthly accounting information. The first retainer is elaborately pleaded in paragraph 7, as expanded by paragraphs 8 and 9, and the second retainer is less elaborately pleaded in paragraphs 23 and 24. Several parts of the elaborate pleading in paragraph 7, such as Fawcetts' agreement to undertake due diligence in respect of Agriculture and to negotiate for the purchase of shares, are expressly denied in Fawcetts' defence. But assuming for the purposes of the limitation issue that all the allegations in the particulars of claim can be proved, I regard the essence of Fawcetts' retainer as to give financial advice and assistance on the acquisition of a controlling interest in Agriculture, and on the subsequent state of that company's business and further investment in it; and the essence of the pleaded particulars of negligence (paragraph 43) that Fawcetts failed to carry out their retainer properly, or (in some instances) failed to carry it out at all.
70.   There was not in fact, in December 1994, any purchase of shares in Agriculture by the respondents. It seems that Mr Haward took up and paid for 60,000 newly-issued £1 shares at par (although the schedule of damages attributes the share purchase to W J Haward Ltd ("WJHL")). Mr Haward became chairman of Agriculture and soon after, in May 1995 (when Mr and Mrs Rose resigned) he became company secretary also. During 1995 he seems to have acquired a further 19,714 shares by purchase, presumably from Mr and Mrs Rose or Mr Coleman (a sales director who resigned in July 1995). Mr Haward remained as chairman and company secretary throughout the period with which this appeal is concerned. The respondents' pleaded case is that during this period a sum of over £1.5m was advanced to Agriculture by way of loan from the respondents and was lost, although the last balance sheet in evidence (as at 31 December 1997) shows a loan of about £1.022m from WJHL, and no loan from Mr Haward himself, or from the family trust, is apparent.
71.   It is not however necessary to pursue these apparent discrepancies between the pleadings and the accounts. The most salient points disclosed by the accounts are the figures for Agriculture's turnover, losses and the state of its shareholders' funds during the relevant period:

£000

Turnover	(Loss)	Shareholders' funds (deficiency)
1994	500	(46)	35
1995	1,439	(266)	(232)
1996	1,893	(27)	(352)
1997	1,652	(400)	(659)

72.   Before the judge it seems to have been accepted that by 6 December 1998 at the very latest it was known to Mr Haward and the other respondents that the payments made to Agriculture (whether on taking up shares or as loans) were for practical purposes lost. This point was however in issue in the Court of Appeal (after a change of counsel on both sides) and it was also relied on (though not, I think, very strongly) before your Lordships. It seems to me that on this point the respondents are stuck with their own pleading, which asserts that the entire investment in Agriculture is recoverable as damages with interest from the respective dates of payment of each component part of the investment. They are also faced with some indisputable facts which seem to have guided the judge to his conclusion. Mr Haward was a mature businessman, even though most of his work seems to have been practical work on building sites. He was chairman and company secretary of Agriculture throughout, and he regularly attended board meetings (at which Mr Austreng of Fawcetts was also present). He saw the accounts in draft and in their final form (indeed, he signed them). The judge was right to conclude that the respondents' investment was completely lost by 6 December 1998 at the very latest. Mr Haward also knew that it was (to adapt the language of Hoffmann LJ in Hallam-Eames) "something of which [he] would prima facie seem entitled to complain." The outcome was very different from what he had expected when he acquired his controlling shareholding in 1994.
73.   I am therefore inclined to think that (although his judgment is not without some defects and difficulties) the judge was basically right in his overall conclusion (para 20):
"In my judgment, Mr Haward clearly knew all the material facts and events as they occurred. Thus, he knew of the terms of Fawcetts' retainer and he knew what he expected of them; that emerges from his witness statement and I have already noted how he relied on them. He obviously knew that money was paid—indeed he did the paying. He knew, as he appeared to accept in evidence, that he relied on Fawcetts' advice when he acquired [Agriculture] and committed himself and the other claimants to a substantial investment. He read the reports of the directors and could see the encouraging views expressed by Fawcetts in regard to the need for investment. Although he had a distinctly poor recollection of advice given by Fawcetts, it is the basis of the claim that they advised ongoing investment and it is hard to see how he could have failed to appreciate that he was spending money either on their advice or without their advice. So far as he was concerned, there was nothing of a factual nature that was latent; all was patent."

74.   I do however think that the judge was wrong when he went on to say that he saw no material distinction between the present case and H F Pension Trustees Ltd v Ellison. That case was concerned with laymen's understanding and appreciation of legal advice on a highly technical subject, that is, the exercise of fiduciary powers under occupational pension schemes. This case is concerned with a mature businessman's understanding of financial advice on the trading activities of a small company carrying on a fairly straightforward sort of business. The relevant level of expertise is much lower. The judge made this point later in his judgment (at para 24):
"The Act requires knowledge that the damage was attributable to the act or omission and that means knowledge that the damage is capable of being attributed to the act or omission. But the causal connection between the advice or non-advice and the damage in this case is patent and obvious, especially to a mature businessman and company director."

    By this the judge did not of course mean that the accountants were obviously negligent. What he meant was that if the pleaded allegations were proved at trial, causation would be no problem at trial (and by the same token he had no problem with the "attributable" condition). Conversely if the allegations were not proved at trial, it would be because the claimants' loss from Agriculture's undoubted and obvious failure would have been shown to have been caused, not by negligent advice (or lack of advice), but by later events not foreseeable by a reasonably careful and competent financial adviser. But the judge had to assume that the allegations were capable of being proved.

75.   Why then did the Court of Appeal reach a different conclusion? Jonathan Parker LJ embarked on a very lengthy analysis of the authorities, much of which I would respectfully agree with. But then in paragraph 168 he made these observations:
"In the instant case there were, on the evidence, a number of possible causes for the failure of [Agriculture] apart from Fawcetts' advice (or lack of it). Those possible causes are set out in Mr Taylor's letter dated 1 July 1998, in the passage quoted in para 45 above. Of particular significance in this connection, as it seems to me, are the claims made against Mr Brunt. In my judgment, Mr Haward was at that stage (July 1998) in the same position as the man with the disabling cough (in the example given by Sir Thomas Bingham MR in Dobbie) or as the claimant in Ali v Courtaulds [Ali v Courtaulds TextilesLtd [1999] Lloyd's Rep Med 301]. He did not know at that stage that all or part of the damage was capable of being attributed to Fawcetts' advice (or lack of it)."

    The relevant paragraphs of the letter were as follows:-

"Mr Brunt as Sales Director has been responsible for the sales of tractors & equipment, the main area of the Company's activities. The decline in sales was thought to have resulted from a number of factors including the present uncertainties over the future of farm income, the effect of BSE, and the strong pound. Recently a further reason has come to light, namely the activities of Mr Brunt.

By Clause 3(2) of his Service Contract, Mr Brunt is expressly permitted to carry on his existing Plant hire business known as RSI. It now appears that he has been referring the Company's customers to RSI for the hire of equipment and that the Company has suffered serious financial losses as a result. In addition he has over the last 18 months neglected his duties at HAL and concentrated on the interest of RSI, again to the serious detriment of HAL sales."

    The Lord Justice went on to conclude that it was not until May 1999 that Mr Haward acquired knowledge of acts or omissions by Fawcetts which were causally relevant for the purposes of his allegations of negligence.

76.   I cannot, with respect, follow this reasoning. The respondents' pleaded case was that they had lost large sums of money invested in Agriculture. They lost that money because Agriculture became hopelessly insolvent and no one was prepared to throw any more good money after bad. The calamitous failure of the business no doubt had many causes, probably including all the factors mentioned in the letter quoted above. But the respondents' pleaded case was that Fawcetts had failed to perform their professional duty and that this was legally causative of the respondents' loss. Whether their case will succeed at trial, if it comes to trial, will depend on the judge's findings as to what the scope of the duty really was; whether Fawcetts performed it properly; and whether (or to what extent) the failure of the business (and the consequent loss of the respondents' investment) was caused by unpredictable factors which no reasonable professional person could have been expected to take into account in his advice. The need to investigate and determine these issues at trial cannot alter the identification of "the act or omission which is alleged to constitute negligence." It might have been different if (for instance) the respondents had engaged one professional to investigate and advise on the company's books, another professional to investigate and advise on the competence and honesty of the company's existing and proposed workforce (including Mr Brunt), and yet another professional to investigate and advise on the general state of the agricultural machinery market in the west country. But that is not this case.
77.   For these reasons I think that Jonathan Parker LJ erred in equating Mr Haward's position to that of the claimant in Ali v Courtaulds Textiles Ltd [1999] Lloyd's Rep Med 301 and that of the imaginary claimant described by Sir Thomas Bingham MR in Dobbie v Medway Health Authority [1994] 1 WLR 1234, 1240. In those two cases the claimant did not know whether his physical disablement was attributable to his working conditions, for which his employer was responsible, or to some more or less natural cause such as ageing. He was therefore in a state of ignorance on a fundamental point, and his ignorance could be dispelled only by a medical expert. I see no useful parallel with Mr Haward's situation. The relationship between a man's working conditions and his natural ageing as competing causative elements in his deafness is quite different, to my mind, from the relationship between a financial adviser's alleged professional incompetence and the various factors which eventually lead to the collapse of the business on which he advises.
78.   At the end of his judgment the judge referred (as I understand it, for completeness only) to evidence and submissions as to when the respondents first knew that they had a claim against Fawcetts. Mr Pooles QC (for the respondents) made some telling criticisms of this evidence, especially a draft letter dated 8 December 1998 (but never sent). But I regard these criticisms as irrelevant because the whole of this discussion was directed to the wrong question: knowledge of the existence of a claim in negligence. The whole of the respondents' written evidence (witness statements by Mr Haward himself, Mr Taylor and Mr Quinney) was directed to this (irrelevant) question. Thus the relevant part of Mr Haward's witness statement was headed in bold, "When I first became aware that I might have a claim against Fawcetts", and this is the theme reiterated in paragraphs 26, 28, 29, 30 and 31. The date when the respondents knew that they had a worthwhile cause of action against Fawcetts was not the starting date within the meaning of the statute.
79.   The respondents' last-ditch argument, as I see it, is that even if the respondents knew of the loss and knew what advice Fawcetts had or had not given, they did not know the reasons why Fawcetts had not given the right advice—for instance, whether it was because Mr Austreng had not gone into the books thoroughly enough, or had failed to verify trading stocks, or had failed to draw the obvious conclusions from information which was available to him. But the judge considered this point and dismissed it. He said (para 21),
"I do not accept that the act or omission referred to can include such matters as failing to do the necessary homework. That is not the act or omission of which a claimant has to have knowledge but is rather a particular, which may make the act or omission a negligent act or omission. As Purchas LJ put it at page 799 in Nash:

'It was not, in our judgment, the intention of Parliament to require for the purposes of s11 and s14 of the Act proof of knowledge of the terms in which it will be alleged that the act or omission of the defendants constituted negligence or breach of duty. What is required is knowledge of the essence of the act or omission to which the injury is attributable.'"

    The importance of isolating what is essential has of course been emphasised in later authority to which I have already referred.

80.   I see nothing wrong with the judge's assessment of this point. It does not seem to have received any attention in the Court of Appeal (see the fairly full summary of counsel's submissions in paras 131-144 of the judgment of Jonathan Parker LJ). Nor does it appear in the respondents' printed case in your Lordships' House. I would treat it as rightly abandoned. To require that a claimant had a detailed knowledge of how and why the defendant failed in his duty of care (for instance, why in Hallam-Eames the managing agents had plunged so deeply into the US casualty market) would go beyond the settled principles mentioned in paras 10 and 11 of Lord Nicholls' opinion, and would tilt the balance too far in favour of dilatory claimants.
81.   For these reasons I would allow this appeal.
LORD BROWN OF EATON-UNDER-HEYWOOD

My Lords,

82.   I am grateful to my noble and learned friends Lord Scott of Foscote, Lord Walker of Gestingthorpe and Lord Mance for their very full exposition of the facts of this appeal, the statutory provisions in play and the many authorities in this difficult area of law. This enables me to state my own opinion in the matter quite shortly.
83.   Shorn of all detail—indeed, simplified to the very limits of accuracy—the facts are these. In December 1994 Mr Haward acquired for £60,000 a controlling interest in an agricultural machinery company which he knew from the outset would require the injection of a further £100,000 or so before it turned to profitability but which in the event, despite the injection of some £431,000 in 1995, some £102,000 in 1996, some £509,000 in 1997 and some £208,000 in 1998, failed. Throughout the whole course of this disastrous enterprise Mr Haward had been advised by Fawcetts, a firm of accountants which had acted for him and his family since 1958. By, at latest, 6 December 1998 (three years before he issued proceedings against Fawcetts and thus the date at which Mr Haward's knowledge falls to be considered for the purposes of section 14A of the Limitation Act 1980) Mr Haward knew that these sums had become lost to him: the company was hopelessly insolvent. He believed, however, that his losses were to be explained, not by any deficiency in the advice he had received when making his investments but rather by a variety of damaging economic factors: initially adverse trading conditions such as the general agricultural recession and the effect of BSE, and later by a number of detrimental activities on the part of the company's sales director. It was not until May 1999 that Mr Haward for the first time began to question the soundness of Fawcetts' investment advice and only then did the investigations start which finally led to the issue of a negligence claim against them in December 2001.
84.   It is in these circumstances that the central question arises: at what date did Mr Haward know that "the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence" within the meaning of section 14A(8)(a) of the 1980 Act? If it was before 6 December 1998, section 14A cannot avail Mr Haward: his claim would then be restricted to the damage he sustained after 6 December 1995 (six years before the issue of proceedings, the primary limitation period). If, however, it was after 6 December 1998, then he can benefit from section 14A's alternative three-year period of limitation. This preliminary point accordingly concerns Mr Haward's initial investment of £60,000 made in 1994 and the further advances of some £431,000 made in 1995.
85.   "The damage" for the purposes of section 14A(8)(a) is "the damage in respect of which damages are claimed" within the meaning of section 14A(6)(a) which I take to mean the loss of the sums invested: a loss, as already stated, which was known to Mr Haward at latest by December 1998 and the loss for which he seeks compensation in his claim for damages. When, however, did Mr Haward know that this loss was "attributable in whole or in part to the act or omission which is alleged to constitute negligence"? That is the critical question.
86.   Is it enough that Mr Haward knew, as plainly he did, that Fawcetts advised him that this was a sound and suitable investment (both initially and as to the subsequent advancement of further funds to the company) and that it was on the basis of this advice that he went ahead with it? Or did he need to know more than that and, if so, what more? Clearly, for time to start running, he did not have to know that Fawcetts had, as a matter of law, acted negligently in the giving of their advice—see section 14A(9). On the facts of this case the question ultimately seems to me to come down to this: to set time running did Mr Howard need to know not only that the investment was made on Fawcetts' advice but also that that advice had not been based on the kind of investigations which must necessarily be undertaken before any such advice can be reliably tendered?
87.   As Lord Mance has pointed out, were Fawcetts able to rely upon section 14A (10) to assert constructive knowledge on Mr Haward's part, their case here would be a strong one even if the knowledge required was of their failure to make a preliminary investigation into the company before the advice to acquire it was given. Having regard to the huge scale of his losses from the outset, Mr Haward ought surely to have sought expert advice and set in train the consideration of a possible claim against Fawcetts long before he did. Given, however, that Fawcetts' case is based solely on Mr Haward's actual knowledge, to my mind it must fail if anything more is required than that Mr Haward knew that his loss might well have resulted from an investment made on Fawcetts' advice.
88.   Having, I confess, changed my mind upon the point, I have finally come to the conclusion that nothing more is needed. I had earlier been attracted to the view that the analogy here was with Dobbie v Medway Health Authority [1994] 1 WLR 1234, as thereafter analysed in Hallam-Eames v Merrett Syndicates (1995) [2001] Lloyd's Rep PN 178: unless and until Mrs Dobbie knew that her removed breast had in fact been healthy, time would not start running against her. So too here, it has been suggested: until the investment was known not merely to have been lost but to have been intrinsically unsound when made (i.e. an ill-judged and ill-advised investment from the outset rather merely than one which proved unsuccessful as a result of subsequent events) time should not run. I have come to recognise, however, a critical difference between the two cases. In Dobbie's case what was unknown was not the attributability of the damage to the defendant's act but rather the very fact of damage: Mrs Dobbie would clearly have suffered none had her removed breast in fact been unhealthy; she would have been better off without it. Similarly, as Lord Walker has explained, H F Pension Trustees Limited v Ellison [1999] Lloyd's Rep PN 489 should have been differently decided, not because of any doubts about attributability but rather on the basis that the trustees there did not know that they had suffered any damage until they learned of the impropriety of the payments made and the consequent likelihood of tax losses. In both those cases, however, there could have been no question but that, once the fact of damage was known to the respective claimants, time started running. It was not necessary for Mrs Dobbie also to have known that the reason her healthy breast had been removed was because the surgeon had failed first to carry out a sufficient examination of the lump to be satisfied of its malignancy; nor would it have been necessary for the trustees in the pension case to have known what underlay the incorrect advice they had received when making the payments.
89.   Here, by contrast with those two cases, it is now common ground that Mr Haward knew that he had suffered the relevant damage by the material date. Fawcetts' advice was more than merely the sine qua non of that loss. There is no parallel here with Hoffmann LJ's illustration in Hallam-Eames of the member's agent taking the Name to lunch and persuading him to join Lloyd's where he then suffered losses—an event which would clearly not have been causally relevant in the context of an allegation of negligence.
90.   What the claimant must know to set time running is the essence of the act or omission to which his damage is attributable, the substance of what ultimately comes to be pleaded as his case in negligence. That essence or substance here could no doubt be characterised in either of two ways: either as the act of recommending investment in the company (or omitting to caution against it—on the particular parts of this case these are two sides of the same coin), or, with greater particularity, the act of recommending investment without first carrying out the investigations necessary to justify such positive advice. Having at first preferred the latter characterisation, I have come to prefer the former. True, under the former the claimant knows nothing beyond the fact that his advisers led him into what turned out to be a bad investment; he does not know, as under the latter characterisation he would, that he has a justifiable complaint against his advisers. But he surely knows enough (constructive knowledge aside) to realize that there is a real possibility of his damage having been caused by some flaw or inadequacy in his advisers' investment advice, and enough therefore to start an investigation into that possibility, which section 14A then gives him three years to complete.
91.   If the other approach is adopted, time only starts to run once the claimant recognises that a fuller examination of the company's prospects should have been carried out than was in fact carried out, knowledge which Mr Haward only learned here at some unascertained date after the investigation into Fawcetts' conduct had itself begun in May 1999 (when another accountant first suggested to Mr Haward that a negligence claim might lie against Fawcetts). But what if that suggestion and the investigation which it prompted had themselves been made at a later date still, perhaps very substantially later? On this approach the limitation period would appear capable of almost limitless extension and for no sufficient reason: unlike the position in Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1— the decision which precipitated what is now section 14A of the 1980 Act—there is nothing latent here about the damage or, indeed, about the identity of the prospective defendant. I recognise, of course, that that does not foreclose the argument on attributability: it provides, however, the relevant context in which it falls to be resolved.
92.   For these reasons, which are not I think substantially different from those more fully set out in the opinions of my noble and learned friends, I too would allow this appeal and restore the order of Judge Playford QC.
LORD MANCE

My Lords,

Introduction

93.   Under s.2 of the Limitation Act 1980, the basic period within which a claimant must bring a cause of action for negligence is six years from the date when the cause of action accrued. S.14A provides, as its heading states, a "special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual". The period under s.14A(4)(b) and (5) for bringing an action for damages for negligence is three years from the date when the claimant first had "the knowledge required for bringing an action for damages in respect of the relevant damage", where that period expires later than a period of six years from the date when the cause of action accrued.
94.   This appeal raises for consideration the nature of "the knowledge required". Having regard to definitions and provisions contained in further subsections of s.14A., the "facts relevant to the current action" about which knowledge is required (subs.(6)(b)) include knowledge "that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence" (subs.8(a)), but not knowledge "that any acts or omissions did or did not, as a matter of law, involve negligence" (subs. (9)). What is involved in knowledge that damage was "attributable" to an act or omission alleged to constitute negligence? How and at what level of particularity is such an act or omission to be described? And at what point does it become a (statutorily irrelevant) matter of law whether such an act or omission involved negligence?
95.   The further subsections of s.14A read:
"(6) … '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.

(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 attributable 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)  Knowledge 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."

    The claim in outline

96.   In the present case the three claimants are Mr Haward, W. J. Haward Limited, a family firm of building contractors established in 1902 and under Mr Haward's control since his father's death in 1992, and W. J. Haward Family Trust No. 1, a family trust of which the trustees were Mr Haward and, until 1999, Mr Trevor Austreng of the defendants, Fawcetts. The focus for limitation purposes is on Mr Haward's knowledge, which it is agreed the other two claimants are to be treated as sharing. The claimants allege that Fawcetts, accountants acting as their advisers, were negligent in relation to advice given or not given both in late 1994 and at subsequent dates. They allege that, in reliance on such advice, on 9th December 1994 Mr Haward acquired for £60,000 a 60% shareholding in Kings Stag Engineering Limited (which changed its name in 1995 to Haward Agriculture Limited and which I shall call HAL throughout), and the Trust No. 1 acquired for £100,000 the leasehold of HAL's premises, and at later dates Mr Haward made substantial further investments in or loans to HAL, using monies advanced to him by the second claimant company.
97.   A business plan for 1995 was prepared before the acquisition of HAL, upon which plan it is alleged that Fawcetts were instructed to advise. The plan included this optimistic assessment:
"The Profit and Loss and Balance Sheet Forecasts look extremely promising, and have been carefully prepared in order to give an accurate picture for 1995. All the categories have been studied and I feel the end result is more than satisfactory".

    The plan contemplated that only £106,745 would need to be advanced to HAL during 1995. In the event, the sums advanced by the end of 1995 totalled £431,000. The business plan contemplated a loss in that accounting year of £5,520, whereas the loss in the event totalled £266,340. Further loans were made in 1996 totalling £102,985 and in 1997 totalling £509,525, and HAL made net losses in those years of £27,276 and £400,062. The general picture therefore during this period was one of repeated, unexpected requirements for cash injections. The annual directors' reports for HAL, prepared for signature by Mr Austreng, remained nevertheless optimistic that the company would turn round. The report for 1995, signed on 29th October 1996, said that:

"Following the re-structuring at the end of 1994 - and throughout 1995 - significant investment has been undertaken in order to put the company in a position from which it can expect to benefit from anticipated increases in turnover. This has resulted in a large trading loss in 1995 but profits are anticipated to be earned from the middle of 1996 and onwards."

That for 1996, signed on 20th October 1997, read:

"The re-structuring of the company … has continued during 1996. Losses continued until mid-1996 at which time the directors are pleased to report that monthly profits were achieved, albeit not sufficient to cover the previous losses. Trading conditions remain difficult and further losses are now anticipated throughout much of 1997. However the company has adequate resources to continue trading and the longer term outlook remains optimistic."

As this report records, HAL had been afflicted by difficult trading conditions, which included a general market decline, the BSE crisis and the strong pound. In mid-1998 issues also emerged about the conduct of its affairs by its day-to-day manager, Mr Brunt. By 6th December 1998, the judge found, Mr Haward knew that "the payments already made had gone" and had become effectively or at least largely a loss. This loss represents the damage which the claimants now claim to have been attributable to negligent advice on Fawcetts' part regarding investment in HAL.

98.   The agreed Statement of Facts and Issues put before the House records in paragraph 18 that
"The essence of the [claimants'] case was that Fawcetts gave advice that led to the original purchase or subsequent expenditure, alternatively failed to give advice when advice was needed, in consequence of which the original purchase or subsequent expenditure resulted".

    However, the Statement goes on to identify as critical issues in this case: "What did Mr Haward need to know in order to know, per s.14A(8)(a) of the Act, that 'the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence'?" and, secondly, "what in this case is/are the acts or omissions which is/are alleged to constitute negligence?". From this, it is clear that the claimants put in issue whether knowledge of the bare matters asserted in paragraph 18 (of which Mr Haward on any view knew, at least as regards advice actually given) was to be equated with knowledge of the acts or omissions now alleged by them to constitute negligence.

99.   Consistently with this, both before the judge in argument at first instance and before your Lordships, the claimants' submissions have referred to complaints that Fawcetts did not do their "homework" before advising the claimants in favour of the acquisition of, and the further investments in, HAL and/or in failing to advise them against further investments. In a note written to the judge with the consent of counsel for Fawcetts after the oral hearing, counsel for the claimants argued that, in addition to knowing that advice had been given or not given, Mr Haward "must at least have known that the advice or absence of advice was on the basis of inadequate investigation", although counsel accepted that it was not necessary to know "the detailed allegations with regard to what due diligence exercises or audits should have been undertaken". Finally, the claimants' written Case before your Lordships describes the complaint in paragraph 14 as being that there was "inadequate consideration of the underlying state of the Business by [Fawcetts] both prior to and following the purchase". Eliminating as far as possible any suggestion of negligence or fault, the claimants' claim may on this basis, in my view, be broadly categorised as being for loss flowing from advice or absence of advice in circumstances where Fawcetts had not done certain preparatory work or given any or full consideration to information available to them, and as a result did not identify (or therefore advise about) problems in HAL's affairs and accounts, affecting the soundness from the outset of HAL and investments made in HAL. In short, omissions on Fawcetts' part led them to an unsound assessment and inappropriate advice.
100.   The amended particulars of claim include detailed allegations of negligence which are to similar effect. Thus, they complain in paragraph 18 that Fawcetts failed "properly to carry out due diligence" in respect of HAL prior to 9th December 1994, in that they
"(1)  failed to carry out a stock-take …,

(2)  failed to consider at all/adequately the 1995 Business Plan, Profits Loss and Balance Sheet and failed to advise the Claimants at all/adequately as to its inaccuracies and Profits Loss and Balance Sheet forecasts;

(3)  failed to advise the Claimants at all/adequately as to the prospect of [HAL] making a profit as anticipated in the 1995 Business Plan; and

(4)  failed properly to advise in respect of financial and other information considered by Fawcetts".

There are also complaints that Fawcetts failed to advise the claimants as to the prospective acquisition generally and more specifically as to the prudence of acquiring a controlling interest in HAL and subsequent investment therein (paragraph 19); that they failed to advise as to the correct basis for an evaluation of HAL, as to its proper value and as to the proper consideration for a 60% controlling shareholding (paragraph 20), that they failed to advise as to the tax advantages of incorporating HAL as a subsidiary of the second claimant, so that HAL losses could be set against the second claimant's profits (paragraph 21) and that they failed to advise Mr Haward and the second claimant that the latter could (then) have planned its developments and disposals in a tax advantageous manner (paragraph 22). In paragraph 29 it is further alleged that
"Fawcetts failed to advise the Claimants in any Board Meeting or on any other occasion …:-

(1)  that there were fundamental errors in the accounting procedures utilised by the Company in the production of the Management Accounts;

(2)  that the monthly Management Accounts showed considerable and unacceptable swings in direct cost percentages;

(3)  that the Company was not operating as anticipated/in an "orderly and controlled manner"/at all; or

(4)  that the Company was running at a loss not anticipated upon 9 December 1994 or in the 1995 Business Plan."

101.   The first three points go to matters which it is said that Fawcetts should have discovered from materials available to them. The final point must have been obvious, and must no doubt be read in conjunction with the previous complaints about Fawcetts' failure to ascertain HAL's real financial position from work they should have done and material they saw or should have seen and on the basis of which, it is said, they should have advised the claimants or advised them differently. It is said that, had Fawcetts fulfilled their duties of skill and care, and as a result advised the claimants properly, HAL would not have been acquired or acquired on the same basis and further investments and loans would not have been made in HAL and to HAL after its acquisition.
The proceedings to date
102.   The basic six year period for any claim for damages in tort in respect of the acquisition of, or any subsequent investment in, HAL expired six years after such acquisition or investment (cf Forster v. Outred [1982] 1 WLR 86). Any claim in contract would also be time-barred by then, if not earlier. Proceedings were issued on 6th December 2001. So, in response to the claim, Fawcetts pleaded that any claims for breaches of contractual duty occurring, and any tortious claims for losses accruing, prior to 6th December 1995 were statute barred. In reply, the claimants pleaded that the earliest date on which they had the knowledge referred to in subsection (5) of s.14A of the 1980 Act was 17th December 1999 (a date modified in oral submissions to May 1999). Pursuant to an order made on 26th November 2002 by Master Leslie, the issues of limitation were tried as preliminary issues before HHJ Playford QC, who decided them in favour of Fawcetts on 15th April 2003. The Court of Appeal (Potter LJ, Jonathan Parker LJ and Charles J) allowed the claimants' appeal on 11th March 2004, and the House gave leave to appeal on 14th July 2004.
103.   On one view, HHJ Playford considered that the only knowledge required of the claimants was knowledge that (a) sums were invested; (b) that the investments were made either with or without the defendants' advice; and (c) that the investments so made had become lost; and that all such matters were patent, while everything else was either a mere particular of negligence (as he described the allegation of failure to do the necessary homework) or a matter of law irrelevant under subsection (9) of s.14A. HHJ Playford said that it was
"unwarranted, especially in cases of financial advice given to persons under no disability, to put a gloss on the Statute so that what is required is "knowledge that there is a real possibility that the damage sustained was caused by the acts or omissions said to constitute negligence, sufficient to make it reasonable to investigate whether or not there is a case against the defendant", … and I do not understand Brooke LJ to be saying that in Spargo v. North Essex District Health Authority (1977) PIQR 235)."

Earlier in the same paragraph in his judgment HHJ Playford said:

"Mr Black [counsel for the claimants] submits that 'the essence of a causally relevant act cannot simply be the giving or the not giving of advice'. With that I agree. The Act requires knowledge that the damage was attributable to the act or omission and that means knowledge that he damage is capable of being attributed to the act or omission. But the causal connection between the advice or non-advice and the damage in this case is patent and obvious, especially to a mature businessman and company director".

He did not however elaborate on what he meant by the "causal connection" which he thought was "patent". If (as I am inclined to think) all he meant was that it was clear that, but for whatever advice was or was not given, the investments would never have been made and so would never have been lost, that involved, as I shall show, a significant error regarding the statutory test for limitation. At the end of his judgment, HHJ Playford went on "for the sake of completeness only" to consider the claimants' factual case that they had no knowledge that they had any claim against Fawcetts until 1999, and found that the claimants had not discharged the burden on them to establish this. He also recorded that no question of constructive knowledge had been argued before him.

104.   The Court of Appeal took a different view on the law and the facts. After a full review of authority, Jonathan Parker LJ concluded that s.14A is concerned with knowledge of facts, rather than law, that the claimants' allegations of negligence were relevant under subsection 8(a) as identifying the acts or omissions claimed to have caused the loss or damage in respect of which damages are sought, and that "knowledge" in s.14A means "know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ", while "attributable … to" in subsection 8(a) means "capable of being attributed to". On the facts, Jonathan Parker LJ pointed to other "possible causes for the failure of the company", notably uncertainties over the future of farm income, the effect of BSE and the strong pound, as well as the alleged activities of a director, Mr Brunt. He took as a finding of fact, and himself also endorsed, a statement by HHJ Playford in his judgment that the claimants' investigation into a possible causal link between their losses and Fawcetts' advice or lack of it "did not even commence until May 1999". On that basis, he concluded that Mr Haward and hence the other claimants "did not acquire the requisite actual knowledge prior to 6 December 1998" (paragraph 170). He recorded at paragraphs 86 and 143-4 that Fawcetts had sought, by respondents' notice and in oral submissions, to raise issues of constructive knowledge on Mr Haward's part under s.14A(10), but he refused at paragraphs 170-171 to entertain any such issue, because it was not investigated and no cross-examination was directed to it at trial before HHJ Playford. Potter LJ agreed with Jonathan Parker LJ's analysis of authority and conclusion. Charles J also agreed, adding that in his view the act or omission alleged to constitute Fawcetts' negligence was not simply their advice, but rather that there were causes of the continuing losses and increasing deficit "which existed and should have been identified by Fawcetts at the times that the relevant purchase and investments were made", but of which the claimants did not become aware until May 1999.
105.   Before your Lordships Fawcetts as appellants have not sought to rely on any suggestion of constructive knowledge under s.14A(10). The case is thus a special, and I would think unusual, one, concerned only with the issue of Mr Haward's actual knowledge of the matters referred to in s.14A.

    The law

106.   Under s.14A the onus is on a claimant to plead and prove that he first had the knowledge required for bringing his action within a period of three years prior to its bringing. Subsection (6) of s.14A distinguishes two aspects of the knowledge required. The first aspect relates to the seriousness of the damage, the second to "the other facts relevant to the current action" including in particular that such damage was attributable in whole or part to the act or omission alleged to constitute negligence and the identity of the defendant. The seriousness of the damage is relevant because there may be cases where, although it is known that loss has been suffered due to the negligence of another person, the loss may appear for a time so minor that no-one would contemplate instituting proceedings. That is I think more likely in the area of personal injuries and fatal accidents, covered by s.14 on which s.14A(7) to (10) were modelled, than in the area covered by s.14A itself. In both areas, the statutory language assumes that it is known that there has been some injury (under s.14) or damage (under s.14A). But this too can give rise to difficulty. If a doctor advises that it is necessary to operate, or to remove a breast, in order to remove a malignant tumour, one would not usually speak of the patient sustaining an injury until one knew that the diagnosis was misconceived and there was no such tumour. Similarly, if a financial adviser advises in favour of an investment, one would not describe the making of the investment itself as "damage" until one discovered that it had been a bad or unsound investment from the outset.
107.   In such cases, there is an inter-play between knowledge of what would ordinarily be regarded as injury or damage and knowledge regarding the factual circumstances in which the operation or investment occurred. Yet, the first aspect of the knowledge required relates to damage of sufficient seriousness "to justify [the claimant] instituting proceedings", whereas the knowledge required regarding the attributability of such damage to some act or omission of the defendants is, as will appear, not necessarily such knowledge as to justify proceedings. To maintain a coherent scheme, the better view therefore appears to be to treat the first aspect of knowledge as relating solely to matters of quantum and all questions regarding the evaluation or classification of damage as such as falling within the second aspect of the knowledge required. This is also the view taken in authority: see Dobbie v. Medway Health Authority [1994] 1 WLR 1234, 1241G-1242A, per Sir Thomas Bingham MR. In the present case, the judge said that Mr Haward knew by 6th December 1998 that at any rate part of the large investments which had been made in HAL would not be recovered and had become lost, whatever happened to HAL. But that is not the same as saying that he knew that the investments were bad from the outset.
108.   The second aspect of knowledge required under s.14A is that the damage was attributable in whole or part to the act or omission which is alleged to constitute negligence. It is clear from both the heading and language of s.14A that this aspect deals with difficulties facing a claimant separate from those which are presented by cases where the fact or quantum of damage itself is latent. The background to s.14A confirms this. The 20th Report of the Law Reform Committee of May 1974 (Cmnd. 5630) led to the definition of knowledge in personal injury cases in the Limitation Act 1975, which became by consolidation s.14 of the Limitation Act 1980. In paragraphs 42, 49 and 54-55, the Law Reform Committee treated the two aspects as independent. In particular in paragraph 49 it said:
"It has not been suggested to us, and in our view could not reasonably be suggested, that the plaintiff's date of knowledge should arrive until he has knowledge (actual or constructive) both of his injured condition and of its having been caused by an act or omission of the defendant."

109.   The Committee went on to consider whether there should be any further requirement that the plaintiff should know that he had a worthwhile cause of action, or (taking an intermediate possibility suggested, uniquely, by Lord Pearson in Central Asbestos v. Dodd [1973] AC 518) that he should at least be aware that his injury was attributable to some fault of the defendant. They rejected both possibilities. At paragraph 55, they therefore accepted as (they believed) "a date capable of precise definition and not presenting any particular difficulties of proof" the date "when the plaintiff has knowledge, actual or constructive, both of his injured condition and of its having been caused by acts or omissions of the defendant". In the later Law Reform Committee's 24th Report (Latent Damage) of November 1984, which led to the insertion by the Latent Damage Act 1986 of s.14A, applying to cases of negligence not involving personal injury, the Committee at paragraph 4.7 preferred to model s.14A on s. 14, rather than on s.11(3) of the Prescription and Limitation Act (Scotland) Act 1973, because it was arguable that s.11(3)
"does not cover lack of knowledge of its [the damage's] causation, or the identity of the person (or persons) liable. By comparison awareness of such matters, which could sometimes be difficult to ascertain in a latent damage context, is specifically included in the definition of knowledge contained in section 14 of the 1980 Act".

110.   The reference in parenthesis to awareness of causation being "sometimes … difficult to ascertain in a latent damage context" cannot mean that the Committee intended that it should only be where damage remained latent that knowledge of causation was to be relevant. Indeed, so long as damage remains latent, knowledge regarding causation cannot really arise as a problem. Another point in this Report which it is of interest to note is the Committee's recognition at the end of paragraph 4.7 - in contrast with the optimism of the 1974 Report - that an approach adapted from s.14 "does have its disadvantages too" and "is a complicated formulation".
111.   Under the terms of s. 14A (8)(a), it is relevant to consider what is meant by (i) "knowledge", (ii) "the act or omission which is alleged to constitute negligence" and (iii) knowledge that damage was "attributable" to such an act or omission. For the moment, I confine myself to actual knowledge.
112.   The degree of certainty of knowledge required under s.14 was considered by Purchas LJ giving the judgment of the Court of Appeal in Nash v. Eli Lilly (at p. 792C-D and also p. 796C-D. At p 791G-H Purchas LJ also quoted the conclusion of Lord Donaldson of Lymington MR in Halford v. Brookes [1991] 1 WLR 428, 443, that knowledge here "clearly does not mean 'know for certain and beyond possibility of contradiction'". Purchas LJ proceeded at p 792 C-D "on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice". In Broadley v. Guy Clapham & Co. [1993] 4 Med LR 328, 334, Hoffmann LJ re-phrased the purpose of s.14(1) as being "to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant". This was taken up by Brooke LJ in another case under s.14, Spargo v. North Essex District Health Authority [1997] PIQR P235, P242, where he said:
"(3)  A plaintiff has the requisite knowledge when she knows enough to make it reasonable for her to begin to investigate whether or not she has a case against the defendant. Another way of putting this is to say that she will have such knowledge if she so firmly believes that her condition is capable of being attributed to an act or omission which she can identify (in broad terms) that she goes to a solicitor to seek advice about making a claim for compensation.

(4)  On the other hand she will not have the requisite knowledge if she thinks she knows the acts or omissions she should investigate but in fact is barking up the wrong tree; or if her knowledge of what the defendant did or did not do is so vague or general that she cannot fairly be expected to know what she should investigate; or 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."

All such formulations seem to me relevant also under s.14A, provided that it is remembered that under subs.(8)(a) the requisite knowledge must be of the attributability in whole or part of the damage suffered to the act or omission alleged to constitute negligence. The passage from HHJ Playford's judgment cited in paragraph 103 above was therefore, in my view, incorrect in law.

113.   Turning to the phrase "the act or omission which is alleged to constitute negligence", the word "constitute" is in my view significant. It indicates that the claimant must know the factual essence of what is subsequently alleged as negligence in the claim. Once such knowledge has been acquired, it is under subs. (9) irrelevant whether or not the claimant knew that the relevant act or omission "did or did not, as a matter of law, involve negligence". So, there must be knowledge of the act or omission allegedly constituting negligence, but there need not be knowledge that, as a matter of law, such act or omission involved negligence. Whether an act or omission involves negligence is a matter of law for the court, even though a court may of course hear a good deal of evidence (e.g. about accountancy principles and practices) in order to determine it. Evidence of relevant accountancy principles or practices will commonly be deployed on the issue whether, as a matter of law, such act or omission involved negligence. The difficulty is that knowledge of such principles or practices may also in some cases be said to bear on the question whether a person suffering loss would attribute such loss to accountants who had advised or not advised him.
114.   As Charles J rightly observed, there are tensions arising from the inter-action of subs.(8)(a) and subs.(9) of s.14A. Under subs.(9) if a claimant knows the relevant circumstances, it is irrelevant that he does not appreciate that they, as a matter of law, involve negligence. And the history of the legislation, which I have already recited, shows that the aim was also to eliminate awareness of fault from the knowledge required. Yet in everyday life we may only be prepared to attribute responsibility if and when we appreciate what ought normally or properly to have happened, and so it is not surprising the authorities contain not only clear statements in line with the Law Reform Committee's intention in its 20th report, but also statements showing the difficulty of avoiding terminology which has some flavour of fault-based thinking.
115.   This problem, which can arise most acutely in relation to omissions in professional negligence cases, is closely examined by Janet O'Sullivan in Limitation, latent damage and solicitors' negligence (2004) 20 Journal of Professional Negligence 218, 233-244. It is, as she shows, most acute in a case of alleged negligence on the part of a solicitor or other adviser, where the negligence consists simply in omitting to do something which it was the adviser's duty in law to do (or in doing something that it was his duty not to do) and where the only reason why the client does not attribute any resulting damage to the adviser is that he does not know that the adviser would have been expected so to do (or not to do). Even in such a case, Hart & Honoré, in Causation in the Law (2nd Ed.) p. 38, demonstrate that the concepts of causation (dependent on knowing what is factually usual) and reprehensibility (central to the concept of breach of duty) are conceptually distinct, although on the particular facts coincident.
116.   Whatever the position in such case, it is in any event not on all fours with a case where an adviser causes or allows a client to enter into a transaction but the client has no reason to attribute loss suffered in the transaction to his adviser until he discovers that the transaction was from the outset intrinsically unsound. In such a case there is authority that knowledge that the transaction was from the outset unsound (giving rise to a prima facie right to complain) may be distinguished from the (under s.14A(9) irrelevant) knowledge that the adviser was negligent: see Hallam-Eames v. Merrett Syndicates [2001] Ll.R. Prof. Neg. 178, decided by a Court of Appeal consisting of Sir Thomas Bingham MR and Hoffmann and Saville LJJ (as they then were). The distinction may in such a case be narrow, as Hoffmann LJ giving the judgment of the court himself recognised at p.181 (right column) in that case and as Janet O'Sullivan points out in her article at p.236, but it is an important, and I think a just, one.
117.   I add that I do not consider that the focus of subss.(6)(b) and (8)(a) on facts and the irrelevance under subs.(9) of knowledge, as a matter of law, that such facts involve negligence mean that the decision in HF Pension Trustees Ltd. v. Ellison [1999] Ll.R. Prof. Neg. 489 was correct. The court there treated the impermissibility of transfers, which resulted from advice given by the defendants, as a matter of law. In my view, this impermissiblity should, in context, have been regarded as an (unknown) fact - an aspect of the acts or omissions alleged to constitute negligence - or possibly (as my noble and learned friend Lord Walker has suggested) as unknown damage resulting from such acts or omissions. In either case, it should not have been until the impermissibility was known to the claimants that time started running against them. The distinction between fact and law has never been that rigid (cf e.g Cooper v. Phibbs (1867) LR 2 HL 149 and, in the present field, the decision of Judge Raymond Jack QC, as he then was, in Perry v. Moysey [1998] PNLR 657), while subs.(9) of s.14A goes no further than to make irrelevant knowledge that acts or omissions involved negligence.
118.   For present purposes what matters is that it is, in my opinion, wrong to suggest that all a claimant needs to know is that he has received professional advice but for which he would not have acted in a particular way which has given rise to loss, or that he has not received advice when, if he had received it, he would have acted in a way which would avoided such loss. The defendants' primary contention to that effect was, I think, accepted by the judge at first instance (cf paragraph 103 above), and was advanced again before the House by counsel for Fawcetts. But it is, in my view, untenable, and could lead to unjust results. Mere "but for" causation is insufficient. This was pointed out by Hoffmann LJ in Hallam-Eames v. Merrett Syndicates [2001] Ll.R. Prof. Neg. 178, 181. The decision in that case illustrates the point, since it was not the writing of the run off policies or of the reinsurances to close ("RITCs") or the certification by the auditors of the accounts which were alone regarded as the acts or omissions alleged to constitute the negligence. Rather it was those facts plus the fact that they exposed the Names to potentially huge liabilities (and in the case of the accounts also attributed values to incurred but not reported losses - "IBNRs") none of which were capable of reasonable quantification: see especially at p.181 (top right and the whole left column). A claimant who has received apparently sound and reliable advice may see no reason to challenge it unless and until he discovers that it has not been preceded by or based on the investigation which he instructed or expected. A claimant who has suffered financial loss in a transaction entered into in reliance on such advice may not attribute such loss to the advice unless and until he either makes the like discovery about the inadequacy of the work done, or at least discovers some respect in which the transaction was from the outset unsound giving him (as Hoffmann LJ said) prima facie cause to complain. Such a scenario may well occur where there are other causes of loss which appear to him capable of explaining the whole loss.
119.   On the other hand, as counsel for the claimants accepted in his note to the judge (paragraph 99 above), a claimant cannot postpone the running of time almost indefinitely by reference to detailed factual points which often only become known in the course of investigation of a possible claim, or during litigation itself. The Court of Appeal was right in Broadley v. Guy Clapham & Co. to disapprove a test adopted by Hirst J in Bentley v. Bristol & Weston Health Authority [1991] 2 Med LR 359, in so far as it would have required a claimant to know all factual matters necessary to establish negligence or to draft a fully and comprehensively particularised claim.
120.   The authorities have thus adopted as the relevant test when the claimant acquired "knowledge of the essence of the act or omission to which the injury is attributable": see Nash v. Eli Lilly & Co. [1993] 1 WLR 782, 799C per Purchas LJ and Hallam-Eames v. Merrett Syndicates [2001] Ll.R. 178, 181. The Court of Appeal in Hallam-Eames thus distinguished between, on the one hand, "elaborating the detail by requiring knowledge of precisely how he had come to do the act complained of" (which is irrelevant) and, on the other, knowledge of facts which are "part of the essence of [the] complaint". An example given of the latter was the fact in Dobbie v. Medway Health Authority [1994] 1 WLR 1234 that the breast removed by the surgeon had been healthy. In Hallam-Eames, the essential facts of which knowledge was required were of a reverse character - viz that the run-off policies and reinsurances to close and the certified accounts were in effect unsound (or "unhealthy"). Hoffmann LJ explained:
"… the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence. There may be many acts, omissions or states which can be said to have a causal connection with a given occurrence, but when we make causal statements in ordinary speech, we select on common sense principles the one which is relevant for our purpose.

… .

It is this idea of causal relevance which various judges of this court have tried to express by saying that the plaintiff must know the 'essence of the act or omission to which the injury is attributable' (Purchas LJ in Nash v. Eli Lilly [1993] 1 WLR 782, 799) or 'the essential thrust of the case' (Sir Thomas Bingham MR in Dobbie [v. Medway Health Authority] [1994] 1 WLR 1234, 1238) or that 'one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based' (Hoffmann LJ in Broadley [v. Guy Clapham & Co.] [1993] 4 Med LR 328, 332).

…

    He [the claimant] must have known the facts which can fairly be described as constituting the negligence of which he complains. …"

121.   Hoffmann LJ continued:
"What, on these principles, are the facts which constitute the negligence of which the Names complain? It would in our view be incomplete to say that it was the writing of the run-off reinsurance policies or the RITCs or the certification of the syndicate accounts. These facts in themselves do not amount to acts of which the Names would even prima facie be entitled to complain. It is necessary to add the allegation that the run-off policies and RITCs exposed the Names to potentially huge liabilities and that the certified accounts attributed values to IBNRs [incurred but not reported losses], none of which were in fact capable of reasonable quantification."

122.   The third element is what is meant by damage being "attributable" in whole or part to the act or omission allegedly constituting negligence. The authorities establish that the word "attributable" means here "capable of being attributed", rather than "caused by": Guidera v. N.E.I. Projects (India) Ltd. (30 January 1990, CA Tr. No. 60 of 1990) per Sir David Croom-Johnson, Nash v. Eli Lilly at pp.797-8, per Purchas LJ and Dobbie v. Medway Health Authority at p.1240, per Sir Thomas Bingham MR. Consistently with the clear wording of the statutory language, the authorities also emphasise that s.14A is concerned with knowledge in this sense of the attributability of the damage suffered to the act or omission allegedly constituting negligence: see e.g. Halford v. Brookes [1991] 1 WLR 428, 443D per Lord Donaldson MR, Dobbie v. Medway Health Authority [1994] 1 WLR 1234, 1240E-H per Sir Thomas Bingham MR and Spargo v. North Essex District Health Authority [1997] PIQR P235, P242, per Brooke LJ in the passages quoted in paragraph 112 above. This is, of course, of particular relevance in cases where there is another possible cause (cf Irshad Ali v. Courtaulds Textiles Ltd. [1999] Lloyd's Rep. Medical 301), though it must always be remembered that all that s.14A requires is knowledge that loss is "capable" of being attributed in whole or "in part" to the act or omission alleged to constitute a particular defendant's negligence. It has indeed been held that a claimant may have the requisite knowledge although he faces alternative possible defendants, one or other but not both of whom may be liable (cf Halford v. Brookes [1991] 1 WLR 428, 443G-H).
123.   The singularity of the present case is, as I have indicated, that it concerns only actual knowledge. The authorities show the importance of the constructive knowledge which may arise under s.14(3) and s.14A(10): see e.g. Nash v. Eli Lilly at pp.796F-G and 799E-801A, Broadley v. Guy Clapham & Co. at pp.333 per Leggatt LJ and 333-4 per Hoffmann LJ and Hallam-Eames at pp.180-2. In Broadley the claimant went into hospital for the removal of a foreign or loose body in her knee, but came out with what she was, within a relatively short period, told was permanent foot drop. Leggatt LJ said at p.333 that knowledge of the mechanics of damage to a nerve was not required, and that she had "constructively" within just over a year of the operation "such specific knowledge of an act or omission which might amount to negligence as would have enabled her to investigate it timeously". Hoffmann LJ said at pp.333-4 that:
"In this case Mrs Broadley knew, or could have known with the help of the medical advice reasonably obtainable, that her injury had been caused by damage to the nerve resulting from something which Mr Lowy had done or not done in the course of the operation. In my judgment that was all the knowledge or imputed knowledge which she needed to have. …"

He considered that the relevant knowledge was either possessed by Mrs Broadley, or could have been ascertained by her from any doctor whom she chose to consult, "within a few months of the operation", and that was "quite enough to make it reasonable for her to commence an investigation into whether or not the acts in question gave rise to a cause of action". A similar explanation of Broadley was given in Hallam-Eames where Hoffmann LJ said at p.180 that

"A patient who goes into hospital for an operation on her knee and comes out with something wrong with her foot can reasonably be expected to ask her doctor why this should be so. If she had asked, she would have been told that the operation must have caused damage to the nerve."

124.   In Hallam-Eames, the Court also responded to a submission that "requiring knowledge of whether potential liabilities were capable of reasonable quantification was to introduce dangerously imprecise criteria" by pointing out (at p.182) that
"under subs.(10) the Names will be deemed to have the necessary knowledge if on the facts known to or ascertainable by them, it would have been reasonable for them to instruct an expert who could have discovered the circumstances in which the run off policies and RITCs were concluded and the syndicate accounts certified."

Whether the Names knew sufficient to put them over this threshold was, Hoffmann LJ pointed out, a question of degree. On the facts, the Court concluded that the issue "of what the plaintiffs knew or could reasonably have ascertained" could not be decided on a summary basis, because, although the accounts showed that "over successive years, the RITC premium was on each occasion substantially larger than in the year before":

"We do not however think that this should necessarily have led a Name to infer that the estimate in the previous year was wrong: it could have been because of business written in the pure year or for other reasons. And in any case, even if the previous estimates had been wrong, the fact that until 1985 was left open, RITCs continued to be written on the basis of certified accounts would have led Names to believe that IBNRs were regarded as reasonably quantifiable."

125.   As regards the run off policies, a letter written by the underwriting agents had described them as "outside the traditional scope of our business" and as representing "in hindsight … poor underwriting judgment"; the court in Hallam-Eames said that it was "well arguable" that this should have prompted Names to investigate, but was ultimately unwilling on a summary judgment application to hold that "it amounted to constructive knowledge that the risks reinsured were not reasonably quantifiable".
126.   The language of s.14A thus recognises a range of different states of mind: (a) actual knowledge of the material facts about the damage and other facts relevant to the action (including therefore knowledge that the loss was capable of being attributed to an act or omission alleged to constitute negligence); (b) knowledge that a claimant might reasonably have been expected to acquire (from facts observable by himself or ascertainable by him or with the help of appropriate expert advice which it would have been reasonable for him to seek); and (c) ignorance. Actual knowledge within (a) involves knowing enough to make it reasonable to investigate whether or not there is a claim against a particular potential defendant: see paragraph 112 above. Constructive knowledge within (b) involves a situation where, although the claimant does not yet know sufficient for (a) to apply, he knows sufficient to make it reasonable for him (by himself or with advice) to acquire further knowledge which would satisfy (a).
127.   Because the present case is concerned only with actual knowledge, the claimants have to do no more than negative actual knowledge on Mr Haward's part that the damage suffered was capable of being attributed to the act or omission now alleged to constitute negligence on Fawcetts' part. I therefore turn to the facts to consider the difference in analysis and result between the judge and the Court of Appeal on this essentially factual point.

    The facts and the evidence

128.   I have in paragraph 96 above summarised in very broad outline the history of the years 1995 to 1998, during which the claimants made the initial and subsequent unexpectedly large investments and it eventually became apparent that they had become lost. The question is when Mr Haward actually knew both enough of the acts or omissions now alleged to constitute negligence and that the loss suffered was capable of being attributable thereto to make it reasonable for him to begin to investigate whether or not the claimants had a claim against Fawcetts. That would be the case, taking the reasoning in Hallam-Eames, once he realised that he had prima facie cause to complain of unsoundness from the outset of the investments; this would in turn suggest unsoundness in the advice given or not given by Fawcetts. In relation to the issue raised by this question, the onus was on the claimants. It was for the claimants to displace the basic limitation period by showing, if they could, that Mr Haward did not have the requisite knowledge prior to 6th December 1998.
129.   Mr Haward's witness statement and evidence were however focused on a different matter, which was when he was first made aware that he might have "a claim for damages in negligence" against Fawcetts and when he "might first have been in a position to commence proceedings in respect of such a claim". Mr Haward's statement merely recited the losses sustained by HAL from A1995 to 1997, before moving to detailed discussion of events from February 1998 when - "faced with ever mounting losses", as he put it - he instructed a business adviser, Mr Peter Hughes. It was, he said, not until Mr Peter Hughes suggested it in May 1999 that he became aware of the possibility of pursuing a claim against Fawcetts; some time thereafter investigations into Fawcetts' advice were begun, leading eventually to a positive opinion from counsel in February 2001. In response, it was suggested on Fawcetts' behalf in cross-examination and submissions that serious thoughts were being given to pursuing a claim in negligence against Fawcetts at earlier dates pre-dating 6th December 1998. It was to this issue, as I see it, that the findings made by HHJ Playford at the end of his judgment "for the sake of completeness only" were directed, Like HHJ Playford, but for the different reasons I have already explained, I think that these findings were not directed to the right test. However, so far as they may be material, I see the force of, and would for my part accept, the criticisms directed by Mr Pooles QC on behalf of Mr Haward at the judge's finding that the claimants had not even established that it was only after 6th December 1998 that Mr Haward actually thought of pursuing a claim in negligence against Fawcetts. I can in the circumstances state my reasons briefly.
130.   First, the judge himself said, as part of his recital of the background, that "It was not until May 1999 that Mr Hughes first suggested to Mr Haward that a claim might lie against Fawcetts for negligence …" and, later, that "That investigation [viz "to isolate the causal link between the acts and omissions alleged against Fawcetts and the losses"] did not even commence until May 1999 - apparently as a consequence of Mr Hughes' involvement …" These statements are, as the Court of Appeal thought, in apparent tension with the judge's later conclusion that the claimants had not established that they first knew that they had any claim against Fawcetts after 6th December 1998.
131.   Secondly, bearing in mind evidence about Mr Hughes's litigiousness, impetuosity and disinclination to hold back, it is hard to think that, if Mr Hughes had formed adverse views about Fawcetts' conduct of the affairs of Mr Haward and the other claimants in relation to HAL at an earlier date, Mr Hughes would not given these clear expression in documents, investigation and a claim. The judge placed weight on the fact that Mr Hughes would have told Mr Haward at once of any such views. Not only did Mr Haward deny that he was ever told of any such views, but, if he had been, one would have expected him to have told Mr Taylor, a solicitor with whom he shared an office who had also been introduced to and was acting for Mr Haward. Yet Mr Taylor gave detailed evidence about how the idea of a claim in negligence against Fawcetts in respect of HAL first occurred to him in the context of discovery in the claim involving Mr Brunt in May 1999, and how - far from Mr Hughes mentioning it to him - he mentioned it to Mr Hughes.
132.   Thirdly, Mr Hughes prepared some instructions to counsel in February 2001, which purported to record a meeting in March 1998 at which Mr Austreng admitted not carrying out a full and proper audit of HAL's "stock or its overall financial position". But this account was not supported by the oral evidence given by Mr Haward and was contradicted by that given by Mr Taylor. It seems implausible that a professional man in Mr Austreng's position would react as he is reported to have done, or would admit, at least without saying something by way of excuse or explanation, "that he had at no time carried out a full and proper audit of either the company's stock or its overall financial position". The absence of any follow up by way of investigation, if any such statement was made, would also be striking. Mr Haward and Mr Taylor gave evidence that Mr Hughes' advice leading Mr Haward to move from Fawcetts to another accountant, Mr Patel, in Spring 1998 was not based on any concern about Fawcetts' conduct in relation to HAL, but rather (Mr Taylor said) because Mr Patel was a tax specialist.
133.   Fourthly, the judge's treatment of a draft letter dated 8th December 1998, also prepared by Mr Hughes, failed to take account of the unchallenged evidence regarding both its background (consisting in the discussions and fears about the potential tax penalties relating to the Form IHT 200) and the absence of any relevant follow up to it, save in relation to tax penalties and Mr Austreng's position as trustee. Mr Hughes' impetuousness is evident in the language of the draft, in the inability of Mr Haward's then solicitor, Mr Quinney, to see any basis on which to send such a letter and in the fact that none was sent.
134.   Accordingly, if the issue had been when Mr Haward first considered the possibility of pursuing a claim in negligence against Fawcetts, I would not disagree with the Court of Appeal's decision. But that is not the critical issue, which is identified in paragraph 128 above.

    The critical issue

135.   Mr Haward was described in an unchallenged part of Mr Taylor's witness statement as "not very sophisticated in complex financial matters, and … very trusting of his professional advisers". Even so, there was a very remarkable discrepancy between the very limited cash injections contemplated as necessary by the 1995 business plan and the actual investments required in 1995 and succeeding years, and concomitantly between the expected profit and loss position and the actual outturn in such years. Mr Haward in his statement did not address his state of mind in the years 1995 to early 1998 regarding the causes of HAL's losses. In cross-examination he was unable to give a coherent account of his thinking or of any discussion which he might have had with Mr Austreng in these years. He said that he could not remember whether he had asked Mr Austreng about the unanticipated position which emerged. He recalled only saying to Mr Austreng at one stage, in the light of the continuing losses, "I can't keep going on like this", as well as being "very surprised" at a board meeting at Mr Austreng's optimism; so, Mr Haward added, they "went on a bit more, but it was only a matter of time before you …. ran out of money". Mr Haward did briefly mention, as causes which "all contributed to making losses", the recession, the consideration that "farmers are bad payers" and the problem with Mr Brunt. But he did not say that he, at any point, believed that all or any of these factors accounted for the whole or even the greater part of HAL's unanticipated losses and the extra injections of cash thereby necessitated. In re-examination he described the situation in 1997 in these terms: "…basically, Mrs Vauxhall would say, 'John, I want some money, you know, to pay the bills'. And ….. either you paid the cheque or you just got the company closed down, and you thought all that money you've put in you've lost. You thought you might, there might be a chance of trading out of it so you, you paid them the money."
136.   Mr Palmer QC for Fawcetts submits that Mr Haward must have realised that the investment losses he sustained by 6th December 1998 were capable of being attributed to some unsoundness in the venture, particularly in the business plan on which Fawcetts advised, or in Fawcetts' advice, giving prima facie cause for complaint, or at least that Mr Haward's evidence failed to establish the contrary. Friendship or loyalty, or indeed ignorance of the law of negligence, would not, as such, matter if this was Mr Haward's state of mind. There is in the answer quoted at the end of the preceding paragraph a possible indication that, despite the obvious discrepancy between the expected position allegedly confirmed by Fawcetts' advice and the loss-making outcome, Mr Haward was prepared to hope for the best, and why he might thus have been prepared to overlook, or at least not to pursue for the time being, obvious question-marks over the advice allegedly received from Fawcetts. Fawcetts were after all long-standing family accountants and financial advisers and he was on friendly terms with Mr Austreng.
137.   In response to such points, Jonathan Parker LJ drew attention to the other problems which affected HAL's business. However there are difficulties about this response. First, I have already drawn attention to Mr Haward's very limited evidence about such other problems and their impact on HAL and on his thinking. Secondly, Jonathan Parker LJ referred to "a number of possible causes for the failure of the Company", but possible additional causes of damage would not be relevant, if one contributing cause was, to the claimants' knowledge, also the defendants' act or omission. Thirdly, and more fundamentally, the present claim is not for damage resulting from failure of HAL. Rather, it proceeds on the basis that, whatever happened to HAL, the claimants were induced by Fawcetts' negligence to invest monies which they would not otherwise have invested and which were before 6th December 1998 known to be lost; and that this process started with the initial acquisition in December 1994 and continued thereafter from year to year, on the basis of Fawcetts' original advice and (as Mr Haward put it in his evidence) their failure to advise to the contrary thereafter. Fourthly, while "the best-laid schemes o'mice an' men gang aft agley", it is hard to see that the undoubtedly difficult trading conditions which HAL experienced during the relevant period could have been regarded as explaining the hugely and on its face disastrously different position - when compared with that projected by the 1995 business plan - which emerged as soon as Mr Haward had taken over HAL and continued thereafter. One would have thought that there was, on its face, something unsound with the whole venture, and almost inevitably therefore, on the claimants' case, something unsound about any advice given with regard to its viability and advisability. On this basis, Mr Palmer submits that the present case is comparable to Dobbie, where, once Mrs Dobbie knew that a healthy breast had been removed, then, as Hoffmann LJ said in Hallam-Eames, she knew sufficiently that the operation was an act of which she would seem prima facie entitled to complain.

    Conclusion

138.   I have not found this an easy appeal to resolve on the facts, bearing in mind that all that is in issue is actual knowledge. The difficulty I have found would have been unlikely to exist had the issue of constructive knowledge been squarely raised before the judge. The House was not invited to depart from the Court of Appeal's conclusion that it was not open to Fawcetts to assert constructive knowledge within s.14A(10). Ultimately however, bearing in mind the limitations and weakness of Mr Haward's evidence, the obviousness of the company's problems from the outset in contrast with the optimism of the 1995 business plan and of Fawcetts' alleged advice and attitude, I would decide the appeal on the simple basis that the claimants failed to discharge, or even satisfactorily to address, the onus on them of proving that Mr Haward did not have the requisite knowledge identified in paragraph 128 above. On that basis I agree that the appeal succeeds.