The appellant wanted to open a pizza restaurant. He and his partners acquired a company for the purpose, which was to take a lease of premises. They sought advice from the defendants who, they said, failed to advise them of the need to be aware of dilapidations and the risks of entering into possession before the lease was formally executed.
Held: The appeal was dismissed. When the claimant executed the guarantee he knew already of the risk of liability for dilapidations. The limitation period runs from when damage arises, in this case from the giving of the negligent advice to sign a guarantee. The requested addition of the new party did not arise from an earlier mistake but from the assignment to the plaintiff. The amendment should not be allowed.
Aldous LJ said: ‘Negligent advice which results in a person giving a security by way of a charge over property or a guarantee can cause damage even before the surety is called in or before the person comes to have to honour the guarantee. That can be demonstrated by taking a case which arose in argument, when a company guarantees the loans of another company. That guarantee would have to be disclosed in the company’s accounts as it would be a liability affecting the value of the shares. If the guarantee was entered into upon negligent advice, then the loans might well have to be paid and the guarantee honoured. Thus, the potential liability of the guarantor would be greater with consequent diminution of the value of the company. ‘
Schiemann LJ said: ‘A guarantor cannot be sued on the guarantee by the creditor until there has been default by the principal debtor. It does not follow that the guarantor has not got a right of action in tort against a solicitor who allegedly negligently advised him to enter into the guarantee prior to that time. He may prefer to wait and see whether he is in fact called upon to pay but, as it seems to me, he can sue his solicitor earlier. If he does the trial judge must do what he can to assess the chance of the surety being called upon to pay under the guarantee. If this is significant, then the judge will assess the damage on the basis of the degree of probability of the surety being held liable to pay a particular sum. ‘
Judges:
Hirst LJ, Aldous LJ, Schiemann LJ
Citations:
Times 14-Feb-1997, [1997] EWCA Civ 951
Jurisdiction:
England and Wales
Citing:
Cited – Welsh Development Agency v Redpath Dorman Long Ltd CA 4-Apr-1994
A new claim was not deemed to have been made until the pleading was actually amended for limitation purposes, and should not be allowed after the limitation period had expired. The date of the application for leave to amend was not at issue. The . .
Cited – Lep Air Services v Rolloswin Investments Ltd; Moschi v LEP Air Services HL 1973
The obligation of a guarantor under a contract ‘is not an obligation himself to pay a sum of money to the creditor, but an obligation to see to it that another person, the debtor, does something.’ When a repudiatory breach is accepted by the injured . .
Cited – DW Moore and Co Ltd v Ferrier CA 1988
A solicitor was instructed to prepare an agreement providing for the introduction of a new working director into an insurance broking business carried on by a company. His instructions called for the new director to enter into a restrictive covenant . .
Cited – Forster 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 . .
Cited – Baker v Ollard and Bentley CA 12-May-1982
The plaintiff and a Mr and Mrs Bodman agreed to buy a house. The plaintiff intended to live on the first floor and the Bodmans on the ground floor. The solicitor should have advised them to convey the freehold into their joint names and then to . .
Cited – Hancock Shipping Limited v Kowaski Heavy Industries CA 1992
Leave was sought by the plaintiffs to amend their points of claim in circumstances where it was common ground that the amendments would introduce new causes of action which, if brought in new proceedings, would have been statute-barred. Held . .
Lists of cited by and citing cases may be incomplete.
Limitation, Professional Negligence
Updated: 20 May 2022; Ref: scu.89686