Court of Appeal clarifies meaning of 'knowledge' for purposes of Limitation Act
In Su v Clarksons Platou Futures Ltd ( EWCA Civ 1115) the Court of Appeal upheld a decision granting summary judgment against a claimant on the basis that his claim in negligence was time barred.
In Su v Clarksons Platou Futures Ltd ( EWCA Civ 1115) the Court of Appeal upheld a decision granting summary judgment against a claimant on the basis that his claim in negligence was time barred. The Court of Appeal concluded that the claimant was out of time, even with the application of the special time limit for negligence claims under Section 14A of the Limitation Act 1980 (which applies where the facts relevant to the claim were not known at the time when the cause of action accrued). The judgment reiterates that the question of 'knowledge' to determine when time will start to run under Section 14A is not when the claimant first knew they might have a claim for damages against the defendant, but rather when they knew enough to make it reasonable to investigate further and, if necessary, obtain professional advice.
The appellant in this case was an individual businessman (Nobu Su) who was the sole or major beneficial owner of a number of companies which operated shipping and related businesses and traded together under the name TMT. The respondents to the appeal were Clarksons Platou Futures Ltd – a regulated company which acts as broker in relation to freight forward agreements (FFAs) and specialist commodity derivatives – and Mr Karakoulakis (a broker at Clarksons).
In July 2008 Karakoulakis had various discussions with the appellant and Polys Haji-Iannou, a shipping magnate and the principal of a shopping company called Lakatamia Shipping Company Ltd, which culminated in an oral agreement (the FFA contract) involving the sale and buy-back of an FFA position. In broad terms, various TMT companies agreed to sell FFAs to Lakatamia for a fixed price and agreed to buy back the same FFAs after one month at a slightly higher fixed price. The FFA contract was expected to benefit all parties; Lakatamia stood to make a profit amounting to $1.8 million, while the appellant and his TMT companies would improve their short-term liquidity.
Although Lakatamia performed its part of the agreement, the appellant and his TMT companies failed to buy back the FFAs. Lakatamia ultimately sold the FFA position at a loss and issued proceedings in the High Court seeking to recover losses of approximately $79.6 million from the TMT companies and the appellant personally.
In the course of those first proceedings, the appellant was found to be a party to the FFA contract and personally liable for its breach. Subsequently, the appellant issued a separate claim (to which this appeal relates) against Clarksons and Karakoulakis, claiming breach of contract and negligence on the basis that they had failed to ensure that the appellant was not personally joined as a party to the FFA contract. Clarksons and Karakoulakis successfully defeated that claim in a summary judgment application on the basis that it was time barred; this appeal concerned the limitation position in relation to the claim in negligence.
The procedural events in the first set of proceedings are relevant to the arguments on limitation in this appeal. The steps in those proceedings can be summarised as follows:
- In March 2011 Lakatamia issued proceedings in the High Court against the appellant and the TMT companies. It asserted in the particulars of claim that the appellant was himself a party to the FFA contract and was personally liable for the breach.
- On 22 August 2011 the High Court granted a freezing order against the TMT companies and the appellant personally. The application for that freezing order was supported by evidence from Lakatamia's lawyers, which asserted that the appellant was personally liable under the FFA contract. The freezing order was subsequently continued at an inter partes hearing on 6 October 2011.
- On 18 July 2012 an appeal regarding that freezing order was heard and dismissed at the conclusion of the hearing. The Court of Appeal held that the High Court had been entitled to find that Lakatamia had established a good, arguable case against the appellant.
- In October 2014 trial of the substantive action was heard and judgment was given on 5 November 2014. The appellant was found to be a very unsatisfactory witness and his evidence was said to reveal him to be a man with little regard for his obligations or the truth. The trial judge (Justice Cooke) found that the appellant was personally liable, along with his TMT companies, for breach of the FFA contract on a joint and several basis. Permission to appeal that decision was granted on the condition of a payment into court. Such payment was never made and the appeal therefore lapsed.
Claims issued against respondents
On 4 November 2015 the appellant issued proceedings against Clarksons and Karakoulakis on the basis that their authority had been limited to brokering an agreement between the TMT companies and Haji-Ioannou's companies respectively (and not the appellant personally). He claimed that in breach of that "warranty of authority", the respondents had bound the appellant personally to the FFA contract or, alternatively, that they had acted negligently in failing to ensure that only the TMT companies were party to the FFA contract.
The respondents issued a successful application for summary judgment. The High Court (Justice Teare) accepted that each of the causes of action, if established, would be time barred pursuant to Sections 2 and 5 of the Limitation Act 1980. This was on the primary basis that the cause of action would have accrued on 7 July 2008 when the FFA contract was concluded and the appellant was personally bound to it.
In the alternative, if the appellant sought to rely on Section 14A of the Limitation Act 1980 in relation to the claim in negligence, the High Court held that he must have had the requisite knowledge by the date of the Court of Appeal judgment (18 July 2012) at the latest. As such, the claim had been issued more than three years after that date of knowledge and would still be time barred.
Scope of appeal
The appellant asked the judge for permission to appeal against all of his findings, but was refused. The Court of Appeal granted permission, on paper, to appeal the "date of knowledge" point as to the application of Section 14A, but refused permission to appeal against the finding that the appellant's causes of action would have accrued on 7 July 2008.
The Court of Appeal highlighted four key features on the application of Section 14A which had a bearing on the appeal:
- It applies only to actions of negligence and provides no assistance to a claimant's claims for breach of contract.
- It permits a claim to be brought within either:
- six years from the accrual of the cause of action; or (if later)
- three years from the earliest date on which the claimant (or any person in whom the cause of action was vested before them) first had both the knowledge required for bringing the action for damages in respect of the relevant damage and the right to bring such an action.
- The knowledge required for bringing an action for damages in respect of the relevant damage means knowledge:
- of such facts about the damage in respect of which damages are claimed as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify their instituting proceedings for damaged against a defendant who did not dispute liability and who was able to satisfy judgment (by subsections (5), (6) and (7)); and
- that the damage was attributable to the act or omission which is alleged to constitute negligence and the identity of the defendant.
- A person's knowledge in this context includes knowledge which they might reasonably have been expected to acquire from facts observable or ascertainable by them, or from facts ascertainable by them with the help of appropriate expert advice which it was reasonable for them to seek.
The Court of Appeal judgment also cites the authority in Haward v Fawcetts ( UKHL9), which provides useful clarification as to the requisite degree of certainty in determining whether a claimant has had sufficient knowledge to start time running under Section 14A. The decision in that case emphasised that 'knowledge' does not mean knowing for certain and beyond possibility of contradiction; rather, it means knowing enough with sufficient confidence to justify embarking on preliminaries to the issue of a claim (eg, beginning to investigate further, taking advice and collating evidence).
Court of Appeal decision
The appellant argued that he did not have the relevant knowledge for the purposes of Section 14A until November 2014, when Cooke gave his judgment in relation to the substantive claims. In particular, the appellant argued that until that judgment, there had been considerable uncertainty surrounding the question of whether he would be found to be personally liable for the FFA contract. For example, the FFA contract had been agreed orally; the contemporaneous documents did not suggest that the appellant was himself a party to the contract; and his lawyers had "indicated" to him that they did not expect the court to find him personally liable (although he did not waive privilege on such advice).
The Court of Appeal rejected that argument and noted that it appeared to be premised on a fundamental misapprehension about the knowledge requirements for Section 14A. In particular, the Court of Appeal emphasised that while it would require more than mere suspicion of the facts about the damage, it would be sufficient if the claimant knew enough for it to be reasonable to begin further investigation. The Court of Appeal accepted the respondents' position that the damage in this case was that the appellant had been bound personally to the contract, for which he could therefore incur personal liability. By the end of July 2012, Lakatamia had asserted that the appellant was a party to the FFA contract in its particulars of claim, and indeed two High Court judges had concluded that Lakatamia had a good arguable case that he was personally liable (and granted a freezing order against him personally on that basis). Therefore, the Court of Appeal accepted that by that time he knew enough for it to be reasonable to investigate further, start asking questions to investigate the possibility that he was indeed personally bound and liable for the FFA contract, and therefore appreciate that he had a claim against Clarksons and Karakoulakis.
While this decision does not establish new principles, it provides a helpful reminder and illustration of the limits and approach which will be taken to interpreting Section 14A. While every case will necessarily turn on its facts in this area, it is important for claimants to appreciate the need to initiate steps and investigate potential claims rather than waiting for certainty, which may cause their claim to be time barred – even with the benefit of the Section 14A special time period.