Law Society v Sephton and Co (a Firm) and Others: HL 10 May 2006

A firm of solicitors had a member involved in a substantial fraud. The defendant firm of accountants certified the firm’s accounts. There were later many calls upon the compensation fund operated by the claimants, who sought recovery in turn from the accountants. The accountants pleaded limitation.
Held: The Law Society faced a contingent liability on the fund, but that was insufficient to start the limitation period. Damage was an essential part of a claim for negligence, and the damages was not suffered until the Society received a claim.
Lord Scott said: ‘a cause of action in tort did not accrue in the Law Society’s favour against Sephtons until the Law Society first received a claim on the Compensation Fund from a Payne and Co client whose money had been misappropriated.’ The limitation period began at that point, and the claim could continue.

Lord Hoffmann, Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, Lord Mance
[2006] UKHL 22, Times 11-May-2006, [2006] 2 AC 543, [2006] 2 WLR 1091
Bailii, House of Lords
Limitation Act 1980
England and Wales
CitedLaw Society v KPMG Peat Marwick and Others CA 29-Jun-2000
The respondent accountants had certified accounts for a firm of solicitors whose dishonest defaults later lead to substantial claims on the compensation fund set up by the claimants.
Held: The Law Society who collected funds from the . .
Appeal fromThe 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 . .
At First InstanceThe Law Society v Sephton and Co and others ChD 2004
The Law Society claimed in negligence against the defendant firm of accountants who had wrongly certified the accounts of a firm of solicitors. The Society sought to recover the payments it had made from its compensation fund. The defendant pleaded . .
MentionedCartledge 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 . .
ApprovedWardley Australia Ltd v Western Australia 1992
(High Court of Australia) A claim was based on a statutory trade indemnity scheme. The insurers claimed damages from Wardley, on the basis that its alleged deceit induced them to grant an indemnity, which was subsequently called on.
Held: . .
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 . .
CitedBell v Peter Browne and Co CA 1990
Mr Bell asked his solicitors to transfer the matrimonial home into his wife’s sole name. He was to receive a one-sixth interest of the gross proceeds on a sale. His interests were to be protected by a trust deed or mortgage. The solicitor drafted . .
CitedD W Moore and Co Ltd v Ferrier CA 1988
The company took in a new director and shareholder, and relied upon their solicitors to draft a covenant to restrain him competing within a set time of leaving the company. The covenant turned out to be ineffective. The defendant solicitors replied . .
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 Another 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 . .
HelpfulFirst National Comercial Bank plc v Humberts CA 27-Jan-1995
The plaintiff loaned money on the basis of a negligent survey by the defendant. The borrower subsequently defaulted, and the lender issued a writ. The defendant said that the claim was time barred.
Held: The court allowed the plaintiff’s . .
CitedSouthern Railway of Peru Ltd v Owen HL 21-Jun-1956
When drawing up accounts where the company faces contingent laibilities and provision has to be made, the principles upon which such provisions are made does not depend upon (Lord Radcliffe) ‘any exact analysis of the legal form of the relevant . .
CitedClonard Developments Limited v Humberts (a Firm) CA 15-Jan-1999
A judge was right to acknowledge that a party’s expert witness might be biased, and assess accordingly. Where a surveyor’s valuation was negligent there was still no liability where the plaintiff did not show it had relied upon the valuation. . .
CitedHaward and others v Fawcetts HL 1-Mar-2006
The claimant sought damages from his accountants, claiming negligence. The accountants pleaded limitation. They had advised him in connection with an investment in a company which investment went wrong.
Held: It was argued that the limitation . .
CitedClonard Developments Limited v Humberts (a Firm) CA 15-Jan-1999
A judge was right to acknowledge that a party’s expert witness might be biased, and assess accordingly. Where a surveyor’s valuation was negligent there was still no liability where the plaintiff did not show it had relied upon the valuation. . .

Cited by:
CitedWatkins and Another v Jones Maidment Wilson (A Firm) CA 4-Mar-2008
The claimants alleged professional negligence by the defendant solicitors in advising them to agree to a postponment of a completion. The defendants raised as a preliminary issue the question of limitation. The claimant said that the limitation . .
CitedPegasus Management Holdings Sca and Another v Ernst and Young (A Firm) and Another ChD 11-Nov-2008
The claimants alleged professional negligence in advice given by the defendant on a share purchase, saying that it should have been structured to reduce Capital Gains Tax. The defendants denied negligence and said the claim was statute barred.
CitedAxa Insurance Ltd v Akther and Darby Solicitors and Others CA 12-Nov-2009
The court considered the application of the limitation period to answering when damage occurred when it arises under an unsecured contingent liability. The claimant insurance company had provided after the event litigation insurance policies to the . .

Lists of cited by and citing cases may be incomplete.

Limitation, Professional Negligence

Leading Case

Updated: 01 November 2021; Ref: scu.241654