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Court of Appeal rules on relevant ‘knowledge’ required under s.14A of the Limitation Act

23 May 2018

Nobu Su (Aka Hsin Chi Su, Aka Su Hsin Chi & Aka Nobu Morimoto) v (1) Clarksons Platou Futures Ltd (2) Vassilis Karakoulakis [2018] EWCA Civ 1115

A recent Court of Appeal judgment on 16 May 2018 considered the test for relevant ‘knowledge’ within section 14A of the Limitation Act. The Appellant was appealing against a decision granting the Respondents summary judgment on the basis that the claims against them in negligence and for breach of contract were time barred.

Background

The Appellant, Mr Su, was the owner of a several companies running shipping and related activities. The Appellant and the Respondents had negotiated an agreement whereby the Appellant and his companies would sell freight forward agreements (FFA) to another company (L) in July 2008 and buy them back one month later at a higher price.

L performed its side of the agreement. The Appellant and his companies, however, failed to buy back the FFA position. In March 2011, L issued proceedings, asserting that the Appellant had undertaken the FFA contract on behalf of himself and his companies and was therefore personally liable for his companies’ failure to buy back the FFA position.  L claimed that, ultimately, it had sold the FFA position at a loss of about US$79.6m.

The High Court accepted that L had an arguable case that the Appellant was personally liable and in August 2011 granted a freezing order against the Appellant and his companies. This was extended by the High Court in October 2011 and upheld by the Court of Appeal in July 2012.

In November 2014, the Appellant was found personally liable, along with his companies, for breach of the FFA contract. He was duly ordered to pay damages to L in the sum of US$37.85m.

In November 2015, the Appellant issued proceedings against the Respondents, Clarksons (a company regulated by the FCA conducting business as a broker of FFAs) and also against Mr Karakoulakis (a specialist in commodity derivatives employed by Clarksons) alleging that, in breach of warranty of authority and duty of care, they had negligently failed to ensure that the FFA agreement would be made by the Appellant’s companies rather than with him in a personal capacity.

The Respondents applied for summary judgment on the basis that the claims were time barred under sections 2 and 5 of the Limitation Act 1980 or, alternatively, to the extent that the Appellant might seek to rely on section 14A in respect of his negligence claim, that the Appellant had the knowledge required to bring an action for damages back in July 2012 (over three years before the issue of the claim form).

Commercial Court decision

Mr Justice Teare held that the Appellant’s causes of action, in both contract and negligence, had accrued in July 2008 when he was bound personally to the FFA contract and when he had incurred a personal liability arising from the alleged breach of duty.

With regards to section 14A, he held that the latest date at which the Appellant would have had the relevant knowledge would have been in July 2012, on the date of the Court of Appeal’s judgment. The judge found that the Appellant had no real prospect of establishing that he had only acquired the necessary knowledge of the damage less than three years before November 2015.

Summary judgment was therefore granted to the Respondents. The Appellant appealed to the Court of Appeal.

Court of Appeal decision

The Court of Appeal dismissed the appeal.

The Court held that section 14A provided a special time limit for bringing claims in negligence where facts relevant to the cause of action were not known at the date of accrual. 

S.14A only applies to actions in negligence, it does not assist a claim for breach of contract.

S.14A permits a claim in negligence to be brought within six years from the accrual of the cause of action or, if later, three years from the earliest date on which the claimant had the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action.

The ‘knowledge’ required to bringing an action for damage means knowledge of two matters:

  1. such facts as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify commencing proceedings for damages; and
  2. knowledge that the damage was attributable to the act or omission which was alleged to constitute negligence and the identity of the party responsible.

A person's ‘knowledge’ includes that which might reasonably be expected to have been acquired from facts observable or ascertainable, or from facts ascertainable with the help of appropriate expert advice which would be reasonable to seek.

A claimant’s ‘knowledge’ would be sufficient if he knew enough for it to be reasonable to begin to investigate further (Haward v Fawcetts (A Firm) [2006] UKHL 9 followed (see paras 21-26, 38 of judgment), applied).

Applying those principles to the facts in this case, the Court of Appeal held that by the end of July 2012 the Appellant knew that:

  1. L asserted in its particulars of claim that he was a party to the FFA contract; and
  2. Two High Court judges and the Court of Appeal considered that L had a good arguable case as to the Appellant's personal liability.

It was therefore clear that that Appellant had enough knowledge by the end of July 2012 for it to be reasonable to begin to investigate further and to start asking questions as to the possibility that he was bound personally to the FFA contract and so had a claim against the Respondents.

Mr Justice Teare had been right to find that there was no real prospect of the Appellant establishing at trial that he had only acquired the relevant knowledge less than three years before commencing proceedings in November 2015. He had that knowledge, at the latest, by the date of the Court of Appeal's judgment in July 2012.

The Appeal was dismissed.

Comment

Although fact specific, the case is a useful reminder of how s.14A provides an extended three year period for bringing claims in negligence (not contract) and, importantly, the test to be applied for when a party has the requisite ‘knowledge’ to start that three year time period running.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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