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26 June 2018
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:
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.
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:
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).
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.
For further information on this topic please contact Charlotte Henschen or Chris Ross at RPC by telephone (+44 20 3060 6000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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