Hatton v Messrs Chafes (A Firm): CA 13 Mar 2003

The defendant firm appealed against a refusal to strike out the claimant’s claim for professional negligence, asserting that the judge should have considered the limitation issue in the light of Khan v Falvey.
Held: By the time that the negligence arose, the first claim was worthless. The claimant knew of the negligence of his solicitors at that time, both as to the existence of any damage, and of the possibility of a claim. The court summarised the principles as follows: ‘(i) A cause of action in negligence does not arise until the claimant suffers damage as a result of the defendant’s negligent act or omission. (ii) The damage must be ‘real’ as distinct from minimal: Cartledge v Jopling [1963] AC 758 per Lord Reid . . and Lord Evershed MR . . (iii) Actual damage is any detriment, liability or loss capable of assessment in money terms and includes liability which may arise on a contingency: Forsted v Outred [1982] 1 WLR 86 per Stephenson LJ at 94, approved by the House of Lords in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd No 2 [1995] 1 WLR 1627, per Lord Nicholls (with whom the other members of the appellate committee agreed) . . (iv) The loss must be relevant in the sense that it falls within the measure of damages applicable to the wrong in question: Nykredit at 1630F. (Propositions (i) to (iv) were confirmed by Sir Murray Stuart-Smith in Khan v Falvey [2002] EWCA Civ 400, [2002] PNLR 28, at paragraphs 11 and 12.)
(v) A claimant cannot defeat the statute of limitations by claiming only in respect of damage which occurs within the limitation period if he has suffered damage from the same wrongful act outside that period: Khan v Falvey . . following Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172 per Hobhouse LJ . .’ The claim now was time barred. Appeal allowed.
Clarke LJ said: ‘Khan v Falvey is authority for the proposition that it is not a condition precedent for any claim against defendant solicitors that the underlying action should have been struck out. That is because the claimant may have suffered relevant damage before an order is made striking the action out. The question remains by what criteria to judge when that moment arises. Although that question was discussed in the judgments in Khan v Falvey, as I read them it was not necessary to decide it for the purposes of the decision in that case. Nor is it to my mind necessary for it to be determined for the purposes of the decision in this appeal.
It seems to me that there are three possibilities as to when damage is caused by negligence in such a case so that the claimant’s cause of action has accrued and time begins to run against him. The first is when the claimant has no arguable basis for avoiding the claim being struck out, the second is when it is more probable than not that the claim will be struck out and the third is when there is a real (as opposed to a minimal or fanciful) risk of the claim being struck out. The reason why it is not necessary to determine which of those possibilities is correct here is that, in my opinion, this is an example of the first class of case on the facts.
As I read it, Khan v Falvey was also an example of such a case. This can be seen with particular clarity in the judgment of Schiemann LJ. He noted in paragraphs 65 and 66 that in both Case 1 and Case 3 (which were the first two of the cases being considered) the claimant had pleaded that by a certain date his claim (or in one case counterclaim) was ‘amenable to be struck out for want of prosecution’.’
Sir Anthony Evans agreed that at the relevant time, the action was already doomed to fail, and added: ‘This is clear, in my judgment, because any attempt to proceed with the action against the accountants in October 1994 would have been met with an application to dismiss the claim for want of prosecution, and the application would certainly have succeeded. The action was, on any view, ‘amenable to striking out.’ The fact that the striking out order was not made until June 1999, after an even more belated attempt to revive the proceedings in January 1999, does not alter the circumstances as they were in 1994.
It is unnecessary, therefore, in the present case to define the precise nature of the evidential burden which rests upon the claimant in cases of this sort. Nevertheless, an issue does arise, which was argued before us. Is it sufficient to prove that there was some chance – a ‘real’ or ‘substantial’ chance – that the claim would have been struck out at the relevant date, if an application had been made? Or must the claimant prove something more – perhaps, that an application would probably have succeeded, if one had been made?
The former view receives some support from statements which are found in the authorities to the effect that the relevant kind of loss is the diminished value of the claim. Some diminution occurs when a striking out application would have some prospect of success, though falling short of 50 per cent. Yet in such a case it could not be said that the application would probably succeed or that the claim was probably worthless.’
Lord Justice Peter Gibson Lord Justice Clarke Sir Anthony Evans
[2003] EWCA Civ 341, [2003] PNLR 24, [2007] Lloyd’s Rep PN 15
England and Wales
CitedKhan v R M Falvey and Co (a Firm) CA 22-Mar-2002
The claimant sought damages from his former solicitors for failing to act to avoid his case being struck out. The second action was itself delayed, and the defendants asserted that the cause of action occurred not when his claim was actually struck . .
CitedCartledge v E Jopling and Sons Ltd HL 1963
The plaintiffs were steel dressers who, in the course of their employment, had inhaled quantities of noxious dust which had caused them to suffer from pneumoconiosis. They issued proceedings on 1 October 1956 but were unable to show any breach of . .
CitedForster v Outred and Co CA 1981
A mother signed a mortgage deed charging her property to H as security for a loan to her son. She claimed the solicitor had been negligent in his advice. The solicitor replied that the claim was out of time. The loss accrued not when demand for . .
CitedNykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No 2) HL 27-Nov-1997
A surveyor’s negligent valuation had led to the plaintiff obtaining what turned out to be inadequate security for his loan. A cause of action against a valuer for his negligent valuation arises when a relevant and measurable loss is first recorded. . .
CitedKnapp v Ecclesiastical Insurance Group Plc and David Smith (Trading As David Smith Insurance Brokers) CA 30-Oct-1997
A claim in negligence was brought against insurance brokers for failing to advise the claimant of certain matters with the result that an insurance policy entered into by the claimant was voidable for non-disclosure.
Held: The claimant . .
CitedBirkett v James HL 1977
Exercise of Power to Strike Out
The court has an inherent power to strike out an action for want of prosecution, and the House set down the conditions for its exercise. The power is discretionary and exercisable only where (a) there has been inordinate and inexcusable delay and . .

Cited by:
CitedPolley v Warner Goodman and Streat (A Firm) CA 30-Jun-2003
A cause of action in negligence is complete once the claimant has suffered loss as a result of the negligence, even if the existence of the loss (and indeed of the negligence) is not, and could not be, known to him, and even where that loss is much . .
CitedThe Law Society v Sephton and Co and others CA 13-Dec-2004
The Society appealed dismissal for limitation of its claim against the defendant firm of accountants arising from alleged fraud in approval of a solicitor’s accounts.
Held: The liability did not arise until the Society decided to make . .
CitedLuke v Kingsley Smith and Company and Others QBD 23-Jun-2003
The claimant sued various of those who had represented him in a claim against the Ministry of Defence. He believed that he had had to accept an inadequate sum in settlement after being at risk of losing the claim for non-prosecution. The defendant . .

These lists may be incomplete.
Updated: 09 January 2021; Ref: scu.179741