KENSLAND REALTY LTD v. TAI, TANG CHONG

FACV No. 11 of 2007

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 11 OF 2007 (Civil)

(ON APPEAL FROM CACV No. 44 of 2006)

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J U D G M E N T

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Mr Justice Bokhary PJ and Sir Noel Power NPJ :

1.  The Court has been shown a number of English decisions on s.14A of the Limitation Act 1980, which is the United Kingdom provision on which s.31 of the Limitation Ordinance, Cap.347, is modelled.  We do not consider an exhaustive discussion of those decisions essential to the disposal of this relatively straightforward appeal.  This is not to say that we have any quarrel with any of those decisions.  Indeed we consider them helpful.  Mr John Scott SC for Kensland has submitted that those decisions, or at least some of them, have put a gloss on the legislation concerned.  As to that, we would say this.

Purposive construction …

2.  Statutes of limitation seek to provide potential defendants with a measure of repose.  They seek to do that without unduly curtailing the right of would-be plaintiffs to pursue their claims.  So they always involve striking a balance between competing interests.  The balance struck by way of any given limitation provision would reflect a legislative policy.  We would not rule out the possibility of a limitation provision that is open to a constitutional challenge, for example, because it so favours defendants as to fall foul of the access to the courts clause of art.35 of the Basic Law.  But subject to that possibility, which is always remote and certainly does not arise in the present case, there can be no doubt as to the judiciary’s duty when a limitation provision calls for construction.  That duty is to construe such provision so as to promote its underlying legislative policy.  Construing a provision of course involves more than reciting its terms.  Considerably more is often needed, especially where there are substantial difficulties to be resolved in a purposive way.  Putting a purposive construction on a provision is not to be equated with putting a gloss on it.

3.  There is nothing unprecedented in the idea of purposive construction aimed at promoting underlying legislative policy.  Look at what the Barons of the Exchequer said in Stradling v. Morgan (2 Eliz. I) 1 Plowden 199. They said (at p.205) that “the sages of the law … have ever been guided by the intent of the Legislature, which they have always taken according to the necessity of the matter, and according to that which is consonant to reason and good discretion”.  The phraseology may be dated, but the idea is there.  Then there is the statement which Chief Justice Abbott famously made in R v. Hall (1822) 1 B & C 123 at p.136 when giving the judgment of the Court of King’s Bench.  He said that the meaning of a statutory provision “is to be found not so much in a strict etymological propriety of language, nor even in popular use, as in the subject or occasion, on which they are used, and the object that is intended to be attained”.  That statement now bears the imprimatur of the Privy Council, for Lord Romilly MR cited it with approval in The “Lion” (1869) LR 2 PC 525 at p.530 in the course of delivering their Lordships’ advice.  

… of statutes of limitation in particular

4.  We move now from the general to the particular.  It is well-known that statutes of limitation have been described as statutes of repose.  That description was first made famous by Story J in Bell v. Morrison 26 US (1 Peters) 350 (1828) at p.360 when giving the judgment of the United States Supreme Court.  It has been repeated in the House of Lords (by Lord Simon of Glaisdale in The Ampthill Peerage Case [1977] AC 547 at p.575H) and in this Court (by Chief Justice Li in Wong Tak Yue v. Kung Kwok Wai No.2 (1997-98) 1 HKCFAR 55 at p.67 D-E).  What we wish to draw attention to in particular is Story J’s statement on construction.  He said (at p.359) that the construction of a statute of limitation should “proceed upon principles … adapted to carry into effect the real objects of the statute”.

5.  The case of Haward v. Fawcetts  [2006] 1 WLR 682 has been made the subject-matter of a case commentary by Ms Janet O’Sullivan.  That commentary is to be found in PRFN 2006, 22(2) 127.  We will not conceal our admiration for the refreshing candour of Ms O’Sullivan’s observation at p.130 that “the words of the statute may require some bending when dealing with cases of negligent professional advice”.  That is of course not to deny the desirability of legislation free from any need of such treatment.  Hence the call at the conclusion of the commentary for legislative reform.  But such reform is another day and somebody else’s work.  Meanwhile the Court has the present case to deal with on current legislation.

Circumstances of the case

6.  Turning to the circumstances of the case at hand, they are shortly stated as follows.  On 13 January 2004 Kensland Realty Ltd (“Kensland”), now the appellant, commenced an action against its former solicitors Messrs Tai Tang & Chong (“TTC”), now the respondent.  The action is for damages sustained as a result of acting on legal advice tendered to Kensland by TTC, which advice Kensland complains against as negligent.  In striking-out proceedings taken out by TTC, the Court of Appeal (Rogers VP and Le Pichon JA) reversed the High Court (Deputy Judge Gill) and dismissed Kensland’s action as time-barred.  Kensland now appeals to this Court, seeking the reinstatement of its action.

7.  Kensland had entered into an agreement to sell certain shop premises to a company named Whale View Investment Ltd (“Whale View”).  Since Kensland was selling as a confirmor, the agreement not surprisingly provided for payment of the balance of the purchase price by such cashier’s orders or cheques in favour of such persons as Kensland may direct.  The agreement provided that completion was to take place between 10:00 am and 1:00 pm on 2 September 1997 and that time was of the essence.  Whale View did not tender the balance of the purchase price until six minutes after the 1:00 pm deadline.  But there was a question of whether the missing of that deadline was due to Kensland’s lateness in giving Whale View a split payment direction.  Nevertheless Kensland treated the missing of the 1:00 pm deadline as a repudiatory breach on Whale View’s part, refused to complete and forfeited Whale View’s deposit of $8.25 million.  According to Kensland, it took that course on TCC’s advice that such a course might result in Kensland being sued by Whale View for the return of its deposit but that such a suit’s chances of success would be very low.  As it turned out, the suit succeeded.  We will come to its details later.

Obviously out of time under s.4

8.  Where negligent advice gives rise to a cause of action, that cause of action accrues when the person who is given such advice acts on it.  So the cause of action on which Kensland’s action against TTC is based would have accrued on 2 September 1997.  As has been noted, that action was commenced more than six years after that date.  Section 4 of the Limitation Ordinance provides that an action founded on simple contract or tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.  Obviously therefore Kensland’s action against TTC is out of time under s.4.

Turning to s.31

9.  So the question becomes whether that action was commenced within the time allowed by the ameliorating effect of s.31 of the Limitation Ordinance.  This section reads :

“(1)     This section applies to any action for damages for negligence, other than one to which section 27 applies, where the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both­

(referred to in this section as the ‘date of knowledge’) falls after the date on which the cause of actionaccrued.

(2) The period of limitation prescribed by section 4(1) in respect of actions founded on tort shall not apply to an action to which this section applies.

(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4).

(4) That period is either –

(5) In subsection (1) ‘the knowledge required for bringing an action for damages in respect of the relevant damage’ means knowledge –

(6) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (1).

(7) For the purposes of this section or section 33 a person’s knowledge includes knowledge which he might reasonably have been expected to acquire –

but a person shall not be taken by virtue of this subsection or section 33 to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.”

Reverting to the circumstances of the case

10.  We now revert to the circumstances of the case.  Relevant to the question of whether Kensland’s action against TCC is within time under s.31, this is what happened in consequence of Kensland’s refusal to complete.  On the day following such refusal, Whale View took two steps.  One was the commencement of an action against Kensland by a writ endorsed with a claim for, among other relief, specific performance and damages in addition to or in lieu of specific performance.  The other was the registration of that action as a lis pendens (pending action) against the shop premises concerned, which step would so deter other purchasers as to block any attempt that Kensland might make to sell those premises to someone else.

11.  Initially Whale View’s sought specific performance.  But after the property market fell, as it had by November 1997, Whale View sought instead the return of its deposit and damages representing the profit which it would have made if the sale and purchase had been completed and it had then on-sold the shop premises within a few weeks of completion on 2 September 1997.

12.  Whale View’s action against Kensland proceeded to trial in the High Court.  It was dismissed by the High Court on 5 April 2000.  The matter then went on appeal to the Court of Appeal, and that appeal succeeded.  On 23 January 2001 the Court of Appeal entered judgment for Whale View against Kensland in the sum of $16.25 million (made up of a returned deposit of $8.25 million and damages of $8 million) with interest at the rate of 10.5% from the issue of the writ until the Court of Appeal’s judgment and with the costs of the action and of that appeal.  Kensland then appealed to this Court.  On 10 December 2001 this Court (by a judgment now reported at (2001) 4 HKCFAR 381) dismissed that appeal with costs nisi. 

13.  By 14 November 1997 if not before, Kensland realised that the fall in the property market had resulted in the shop premises becoming worth much less than the $55 million for which it had agreed to sell and Whale View had agreed to purchase those premises.  That is attested by the fact that on that day Kensland sought counsel’s advice on whether it could successfully reverse course so as to hold Whale View to that sale and purchase by admitting Whale View’s claim.

14.  It is also to be noted that by November 1997 Kensland had already been billed for $78,300 by way of costs incurred in defending Whale View action up to that time.

Knowledge

15.  One sees the reference in s.31(1)(a) to “the knowledge required for bringing an action in respect of the relevant damage”.  And one sees what s.31(5)(a) to (d) say as to what such knowledge means.  Mr Scott submits that Kensland did not have such knowledge until this Court gave judgment on 10 December 2001 affirming the Court of Appeal’s decision to enter judgment for Whale View.  Alternatively, Mr Scott submits that Kensland did not have such knowledge until, at the earliest, the Court of Appeal entered judgment for Whale View on 23 January 2001.  For the reasons which we are about to state, we are unable to accept either of those submissions.

16.  Among the decisions on s.14A of the Limitation Act 1980 which this Court was shown is that of the House of Lords in Haward v. Fawcetts (the case the subject-matter of the case commentary which we referred to earlier).  It was a case of allegedly negligent advice.  The advice was that of an accountant in reliance on which the claimant had acquired a controlling interest in a company.  And the House of Lords was concerned with the question of knowledge in the s.14A sense on the part of the claimant.  In regard to the degree of certainty required, Lord Nicholls of Birkenhead endorsed the guidance given by Lord Donaldson of Lymington MR in Halford v. Brookes [1991] 1 WLR 428 at p.443.  Doing that, Lord Nicholls said (in para.9) that “knowledge … means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence”.

17.  Lord Nicholls then turned to the degree of detail required, noting that questions as to that have mostly arisen in the context of the need for the claimant to know that the damage was attributable in whole or in the part to the act or omission which is alleged to constitute negligence.  In para.10 he considered what had been said in Wilkinson v. Ancliff (BLT) Ltd [1986] 1 WLR 1352 at p.1365, Hendy v. Milton Keynes Health Authority [1992] 3 Med LR 114 at pp 117-118, Nash v. Eli Lilly & Co. [1993] 1 WLR 782 at pp 797-799, Spargo v. North Essex District Health Authority [1997] PIQR 235at p.242 and Broadley v. Guy Clapham & Co. [1994] 4 All ER 439 at p.448.  He concluded (in para.11) that “paraphrasing, time does not begin to run against a claimant until he knows that there is a real possibility his damage was caused by the act or omission in question”.

18.  Statutory provisions are typically expressed in general terms which are sometimes far from happily worded.  But they always have to be applied with a view to doing practical justice in real life situations.  So they often call for construction, and the construction that they receive should be a purposive one.  It is in the nature of purposive construction to give practical guidance for the application of a statutory provision according to its true meaning and effect.  Giving such guidance is, in our view, precisely what Lord Nicholls did in Haward v. Fawcetts.

19.  As to the language of our s.31 (modelled on the legislation with which the House of Lords was there concerned), one sees what subsection (5) says “knowledge” means.  One sees what subsection (6) says about the irrelevance of knowledge that any acts or omission involve negligence.  And one sees what subsection (7) says about knowledge which a person might reasonably have been expected to acquire.  Lord Nicholls’s approach is, we think, amply accommodated by the language of the legislation read as a whole, in context and purposively.

Facts known and the knowledge to which they amounted

20.  By the end of November 1997 Kensland obviously knew that acting on TTC’s advice had (i) prevented it from on-selling the shop premises quickly, (ii) exposed it to the drop in value which those premises had undergone, (iii) involved it in already considerable costs and (iv) left it facing a substantial and triable claim.

21.  Knowing those facts must amount at least to knowing that there was a real possibility that it had suffered damage caused by TTC’s advice on which it had acted. 

22.  Although the agreement for sale and purchase provided for completion “between the hours of 10:00 am and 1:00 pm”, the correct split payment direction was not given until 11:48 am.  And when it was eventually given, it was for nine cheques and complying with it involved eight cheques and two cashier’s orders.  On Kensland’s case, the only thing which TTC warned that Whale View might sue for was the return of its deposit.  There was no warning that TTC might sue for specific performance and damages in addition to or in lieu of specific performance.  Nor was there any warning that Whale View might register its action as a lis pendens against the shop premises, effectively preventing Kensland from on-selling those premises to someone else.  And, despite the lateness of the split payment direction, TTC advised that a suit by Whale View would have no more than a very low chance of success. 

23.  Those omissions were highly material in themselves.  Moreover there was another dimension to them.  As soon as it appeared that there was much advice that should have been given but had been omitted, it became natural to wonder about the accuracy of such advice as had been given.  Rather like the thirteenth stroke of the clock that falsifies all that went before, the omissions called into question the accuracy of the advice which had been given.  In this case the thirteenth stroke of the clock sounded loud and clear on the following day.

Time barred on any approach

24.  By reason of the knowledge which Kensland had by the end of November 1997.  The limitation period for its action against TTC having expired long before Kensland commenced it on 13 January 2004, that action is plainly time-barred.  We have proceeded on the approach articulated by Lord Nicholls in Haward v. Fawcetts, but would reach the same conclusion on any of the approaches to be discerned from the speeches of the other Law Lords in that case. 

25.  For the purposes of our s.31, we would take the precaution of drawing attention to an observation which Lord Walker of Gestingthorpe made in para.56.  This is that “[t]he wide range of claims to which section 14A may extend suggests that general observations made by the court in one type of case may not be directly apposite in a case of another type”.  At the same time, we would point out that of the principles stated in Lord Nicholls’s speech, the ones which we have treated as the most significant come essentially from paras 10 and 11.  And in para.80 Lord Walker described those principles – accurately in our view – as “settled”.

Result

26.  In the result, we would dismiss this appeal with costs (the parties having accepted at the hearing that costs should follow the event).

Mr Justice Chan PJ:

27.  I have had the advantage of reading the judgment of Mr Justice Ribeiro PJ in draft. I entirely agree with his detailed and comprehensive analysis of the provisions in s.31 of the Limitation Ordinance, Cap 347 and the case law relevant to these provisions. For the reasons he has given, I agree that this appeal should be dismissed with costs.

28.  The purpose of having limitation provisions is to ensure on the one hand, that a defendant is not unduly vexed by stale claims to his disadvantage particularly when the relevant evidence has been lost and the memory of the witnesses has failed; and on the other hand, that a plaintiff is not unfairly prejudiced by a lack of knowledge of the relevant facts required to bring a claim until after it is time barred. This is what s.31 is aimed at achieving in relation to actions based on non-personal injury negligence.

29.  As Mr Justice Ribeiro’s analysis amply demonstrates, the construction of that section and its application to the facts of a particular case is by no means an easy task. The reason is that this provision (closely following the English equivalent in s.14A of the Limitation Act 1980 as amended by the Latent Damage Act 1986), to quote the words of Ms Janet O’Sullivan in her helpful and enlightening article, Limitation, latent damage and solicitors’ negligence, “which was enacted primarily with claims for property damage in mind and based closely on the drafting of the parallel provisions for personal injury claims, is not easily applied to claims for economic loss arising from the alleged negligence of solicitors” at p.219 of Professional Negligence, Vol. 20 No. 4, 2004.  This is evident from the increasing volume of jurisprudence purporting to apply this provision (or its equivalent) in professional negligence claims in England and Australia. No doubt, the legal and other professions here would also be anxious to have some clear guidance on how s.31 operates in practice. A legislative review of the relevant statutory provisions may well be necessary in future.

30.  Whether a plaintiff can invoke s.31 is a question of mixed law and fact. This involves an examination of a host of issues, such as, what was the defendant’s act or omission complained of, what is the cause of action relied on, when did the cause of action accrue, what was the damage caused to the plaintiff, how much did the plaintiff know about these facts or ought he reasonably to have known about these facts, would a reasonable person having such knowledge or imputed knowledge consider the damage sufficiently serious to justify instituting proceedings for damages, when did the plaintiff first have actual or imputed knowledge of such facts, did the plaintiff know or ought he reasonably to have known that the damage was attributable in whole or in part to the defendant’s act or omission, and if so, when did he first have actual or imputed knowledge of this. Needless to say, all the circumstances of the case have to be considered.

31.  Applying s.31 to the facts of this case, one cannot escape the conclusion that Kensland had acquired the necessary knowledge required to bring the present action at the latest by November 1997 and that the present action is clearly statute-barred. 

Mr Justice Ribeiro PJ:

32.  The appellant (“Kensland”) seeks to overturn the decision of the Court of Appeal striking out its action alleging professional negligence against the respondents, a firm of solicitors (“TTC”).  The action was struck out on the ground that it is statute-barred under the Limitation Ordinance, Cap 347 (“the Ordinance”). 

33.  In the courts below, Kensland conceded that its writ had been issued after expiry of the primary limitation period of six years under section 4 of the Ordinance.  However, Kensland was allowed to withdraw that concession without opposition so that on this appeal, the Court is asked to decide whether the action should be permitted to proceed on the basis either that it was started within the primary limitation period or that the secondary limitation period provided for by section 31 of the Ordinance applies. 

A.      The original proceedings

34.  The present action arises out of a property transaction which led to legal proceedings culminating in an appeal to this Court decided in 2001.[1]  The course of events was as follows. 

A.1    The underlying property transaction

35.  In June 1997, with TTC acting as solicitors on its behalf, Kensland agreed to purchase certain shop premises for HK$53 million and contracted to re-sell them to a purchaser named Whale View Investment Ltd (“Whale View”) for HK$55 million.  The solicitors acting for Whale View were Messrs Tam, Pun and Yipp (“TPY”).  Deposits totalling HK$8.25 million were paid by Whale View and completion was agreed to take place on or before 2 September 1997 between the hours of 10.00 am and 1.00 pm at TTC’s offices, with time made of the essence.  An important clause of the contract entitled Kensland to direct that payment should be by a specified number of cashier orders or solicitors’ cheques in stated amounts, designed to enable Kensland to pass on appropriately denominated cheques to the head vendor.  Unless payment was made in accordance with Kensland’s directions (referred to in the original proceedings as the “split cheque directions”) Whale View’s payment obligations would be deemed not to have been discharged.

36.  It was therefore necessary for Whale View to receive the split cheque directions in good time.  However, they were not received from TTC until 11.13 am (with a correction made at 11.48 am) on 2 September 1997, that is, until rather less than two hours before the 1.00 pm deadline for completion.  Whale View was keen to complete its purchase since the property market was very buoyant and, as the parties later agreed, the shop premises were then worth some HK$63 million.  But despite the urgent efforts of TPY and Whale View’s bankers, the 1.00 pm deadline was not met: the payment instruments arrived at TTC’s offices at 1.06 pm, six minutes late.

37.  In an affirmation filed in the present proceedings by Yvonne Yeung Han Yi (“Ms Yeung”), one of Kensland’s directors, Ms Yeung states that shortly after 1.00 pm on that day, she was advised by TTC that Whale View’s tender of payment after the deadline entitled Kensland to rescind the contract and forfeit the deposits.  She affirms that Kensland acted on that advice.  It will be necessary later to consider more closely the exchanges between Ms Yeung, TTC and TPY surrounding that decision.

A.2    The original proceedings brought by Whale View

38.  Whale View issued proceedings against Kensland on the very next day, 3 September 1997, claiming specific performance and alternatively, return of the deposits with damages, interest and costs.  The writ was immediately registered against the property as a lis pendens. 

39.  The original proceedings were dismissed by the trial Judge on 5 August 2000[2] on the basis that sufficient time had been allowed for completion.  Whale View had sued  TPY in an alternative claim for negligence in their preparation of related banking documents.  That action succeeded with damages being awarded against TPY.  However, the Judge’s decision was reversed by the Court of Appeal on 23 January 2001.[3]  It held that Kensland was in breach of an implied term and had itself repudiated the contract.  It ordered Kensland to return the deposits and to pay damages of $8 million to Whale View with interest (agreed to run at the rate of 10.5% from 3 September 1997) and costs.  It also allowed TPY’s appeal.

40.  Kensland’s appeal to this Court was dismissed on 10 December 2001, for reasons differing in some respects from those of the Court of Appeal.  It was held that Kensland’s provision of the split cheque directions at such a late stage constituted breach of an implied term that such directions had to allow the purchaser’s solicitors a reasonable time to comply.  Kensland was therefore not entitled to take advantage of its own wrong by invoking the “time of the essence” clause and refusing completion.  It was held to have repudiated the contract, entitling Whale View to the relief granted by the Court of Appeal.

B.      The present proceedings

41.  After the Court of Appeal’s judgment in the original proceedings, Kensland went into compulsory liquidation and, on 23 November 2001, its liquidators were appointed.

B.1    The claims made by Kensland in the present proceedings

42.  The writ in the present proceedings was issued on 13 January 2004.  It is indorsed with claims for damages in the sum of HK$8 million (in respect of the damages paid by Kensland to Whale View); damages of HK$2,767,407.33 (representing legal fees incurred by Kensland); and damages in the sum of HK$17,980,000 in respect of “the diminution in value [of the premises] between 9 September 1997 and 19 May 1998”; all said to result “from negligent legal advice by” TTC.  Interest is claimed on all these sums.

43.  Kensland’s Statement of Claim alleges that the damage suffered was “a result of TTC’s negligent handling of Kensland’s affairs” particularised in terms of TTC :

B.2    TTC’s limitation defence and the striking-out application

44.  In its Defence TTC joins issue with many of the factual allegations of negligence but these do not require discussion.  Pertinently, it pleads limitation, contending that Kensland’s causes of action arose on 2 or 3 September 1997, more than six years before issue of the writ, and are statute-barred.

45.  TTC proceeded to issue the striking-out summons and evidence was filed.  At the hearing before the Judge, a “draft Reply” was handed up on Kensland’s behalf, pleading section 31 and putting the availability of the secondary limitation in issue.

46.  The striking-out application has proceeded on the basis of essentially undisputed evidence, in particular of Ms Yeung, regarding the circumstances in which Kensland refused to complete the sale agreement and consequential developments.  It has also proceeded on the assumption, made for striking-out purposes, that Kensland’s pleaded allegations, particularly regarding TTC’s negligence and the resultant damage suffered by Kensland, are made good. 

47.  At first instance, the Judge refused to strike out Kensland’s claim, holding that it was arguably not time-barred.[4]  But the Court of Appeal reversed the Judge, holding that knowledge relevant to section 31 was established so that Kensland’s action was not saved by the secondary limitation period.[5]

C.      Kensland’s claim and the primary limitation period

48.  The primary limitation period relevant to Kensland’s claim is laid down by section 4(1)(a) of the Ordinance which provides:

“The following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say ... actions founded on simple contract or on tort ...”

49.  While Kensland’s complaint against TTC may in principle be founded on concurrent breaches of contractual and tortious duties,[6] it is rightly accepted by Mr John Scott SC[7] on Kensland’s behalf that its contractual cause of action is time-barred.  In accordance with the general rule, that cause of action accrued on the date when the contract was broken,[8] that is on 2 September 1997 when TTC allegedly gave the negligent advice.  We are accordingly concerned only with Kensland’s claim in tort and, for the purposes of this first argument, with the date when Kensland first incurred damage.[9] 

C.1    Damage which completes the cause of action in tort

50.  Mr Scott seeks to argue that no damage was suffered “until the Court of Appeal handed down judgment in the [original proceedings]”[10] and therefore that the cause of action only accrued on 23 January 2001, putting issue of the writ well within the primary limitation period.  In the draft Reply, there is a suggestion that damage was only incurred even later, that is, when this Court handed down its judgment on 10 December 2001.  In my judgment, neither proposition is sound and Kensland’s argument must be rejected.

51.  A cause of action in tort accrues when the damage which results from the tortious conduct is real, as distinct from minimal or negligible[11] and is actual, as opposed to purely contingent.[12]  The concept of “damage” is given a broad meaning.  It encompasses damage consisting of “any detriment, liability or loss capable of assessment in money terms.”[13]  Where economic loss is involved, it includes loss suffered “by payment of money, by transfer of property, by diminution in the value of an asset or by the incurring of a liability.”[14]  Whether damage has been incurred in any particular case is a question of fact.[15]  Its precise quantification may only be possible at a later date, by which time it may have become more serious, but that does not detract from the earlier accrual of the cause of action.[16]  The damage must, however, be recoverable as falling within the measure of damages applicable to the defendant’s wrong in question.[17]

C.2    When damage was incurred in the present case

52.  Applying these principles, there can be no doubt that Kensland’s cause of action accrued on 2 September 1997.  The applicable measure of damages for negligence aims to put Kensland in the position that it would have occupied had there been no breach of duty by TTC.[18]  Kensland’s case is that it would have completed the sale but for TTC’s negligent advice.  If that had happened, then having purchased the property for HK$53 million, it would have on-sold to Whale View for HK$55 million, making a profit of HK$2 million less transaction expenses.

53.  Instead, acting upon TTC’s advice, it refused to complete and immediately incurred a liability in damages to Whale View, later quantified at HK$8 million. It also incurred a liability to pay interest on that amount which, as noted above, Kensland later agreed should run from 3 September 1997.  On that date, Kensland was made a defendant in the action brought by Whale View and began incurring legal costs in mounting its defence and prosecuting its counterclaim.  Kensland now claims damages from TTC in the sum of HK$2,767,407.33 representing accumulated legal costs.  It also found itself saddled with a property which was encumbered by the registration of a lis pendens in a volatile property market, effectively rendering it unsaleable until the encumbrance was vacated.  It now claims that it suffered a loss of HK$17,980,000 “between 9 September 1997 and 19 May 1998” representing “the diminution in value of the premises” during that period. 

54.  Mr Scott’s argument that no loss was incurred until the handing-down of the courts’ decisions is untenable in the light of the abovementioned facts.  Those decisions merely declared that the immediate legal consequence of Kensland’s refusal to complete on 2 September 1997 was the incurring of liability in respect of the heads of loss set out above.  Kensland’s proceedings were therefore commenced outside the primary limitation period and the concession made below was correct.

D. Legal principles applicable to the secondary limitation period

D.1    Section 31

55.  The secondary limitation period which Kensland relies on is provided for by section 31 of the Ordinance as follows: 

Actions in respect of latent damage not involving personal injuries

Section 31:   Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual

(1) This section applies to any action for damages for negligence, other than one to which section 27 applies, where the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both-

(referred to in this section as the “date of knowledge”) falls after the date on which the cause of action accrued.

(2) The period of limitation prescribed by section 4(1) in respect of actions founded on tort shall not apply to an action to which this section applies.

(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4).

(4) That period is either-

(5) In subsection (1) “the knowledge required for bringing an action for damages in respect of the relevant damage” means knowledge-

(6) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (1).

(7) For the purposes of this section or section 33 a person’s knowledge includes knowledge which he might reasonably have been expected to acquire-

but a person shall not be taken by virtue of this subsection or section 33 to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.

D.2    The effect of section 31

56.  The effect of being brought within section 31 is, at least for present purposes, uncontroversial: the plaintiff is enabled to rely on a three-year secondary limitation period which commences, not from the accrual of the cause of action, but from his “date of knowledge”, as defined in section 31(1).  The barring of the plaintiff’s claim is postponed to the extent, if any, that the secondary limitation period expires later than the six-year primary limitation period.  However, by section 32, the potential period of postponement is subject to an overall cap of 15 years from the occurrence of the last act or omission alleged to constitute negligence (whether or not the resultant damage has by then been incurred).

57.  Since the secondary limitation period allows a period of only three years from the “date of knowledge”, that is, the date when the plaintiff first acquired the relevant knowledge, for starting proceedings,[19] the section can only help a plaintiff who did not acquire such knowledge until over halfway into the six-year primary limitation period.  Earlier knowledge would not result in any extension of time for issuing the writ. 

58.  The controversial provisions which have given rise to some difficulties of construction are subsections (1), (5), (6) and (7) of section 31, setting out the conditions for applicability of the secondary limitation period.  They must be construed in the context of their statutory purpose.

D.2    The origins and purpose of section 31

59.  The objective of limitation periods is well known.[20]  A defendant who is forced to defend an action long after the events which gave rise to the plaintiff’s claim is likely to suffer injustice.  Evidence required in his defence may no longer be available or may, over time, have diminished in cogency.  From the court’s point of view, such cases are much more difficult to try.  The various statutes of limitation therefore require plaintiffs, in the public interest, to pursue their claims within a reasonable time.

60.  Limitation periods generally run from the date of accrual of the cause of action.  With the tort of negligence, as we have seen, this is when damage is incurred, “damage” being broadly defined as encompassing any detriment, liability or loss capable of monetary assessment.[21]  The great breadth of the concept means that the consequences which immediately follow upon a defendant’s breach of duty will often qualify as “damage” so as to set time running for limitation purposes.  This is so even if such damage is imperceptible at that stage and is not reasonably discoverable until much later – by which time the limitation period may already have expired.

61.  Plainly, a limitation statute works an injustice if it bars a plaintiff’s claim in such circumstances.  And well-known cases of such injustice have arisen.  As Lord Nicholls points out:[22]

“They were high-lighted in decisions of your Lordships’ House in appeals such as the pneumoconiosis case of Cartledge v E Jopling & Sons Ltd [1963] AC 758 and the defective chimney case of Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1.  There claimants were held to be statute-barred before they knew or could be expected to know they had suffered damage.”

62.  The legislative amendments introduced in England and Wales to remedy that injustice are now contained in the Limitation Act 1980 (“the Act”).  The provisions presently relevant derive from those amendments which were shadowed in our Ordinance.  Section 11 of the Act, which introduced a secondary limitation period in personal injury cases, is reproduced in section 27 of the Ordinance.  And section 14A of the Act, inserted by the Latent Damage Act 1986 in respect of non-personal injury negligence actions, is replicated in section 31. 

63.  The essential purpose of section 31 is therefore to redress the injustice of barring a plaintiff’s claim by limitation where the latency of the damage incurred has deprived him of the knowledge required to bring proceedings within the primary limitation period.

D.3    The main features of section 31

64.  I will begin by mentioning three features of section 31 which appear to me to be of importance.

D.3a  The method of approach under section 31

65.  First, section 31 provides an indication of how it should be approached from what it implicitly assumes.  It presupposes the existence of an action for negligence brought by a plaintiff, stating in section 31(1)(a) that it relates to an “action for damages for negligence.” [23]  Indeed, if there were no action being prosecuted, there would be no defendant raising a plea of limitation.  It also presupposes that the action is brought both after the cause of action has accrued and after the primary limitation period has expired since it is only necessary to consider the section if the six-year period has gone by.  Accordingly, section 31 assumes that in applying its provisions, the court will be able to refer to a pleaded negligence claim, in which the plaintiff has identified the defendant who is alleged directly or vicariously to be responsible for acts or omissions said to constitute negligence and to have resulted in specified damage.  What section 31 addresses is the question of when the plaintiff first acquired knowledge of the matters which he has since been able to set out in his pleadings.

66.  Section 31 focuses on the four aspects of knowledge set out in section 31(5).  These concern knowledge about the seriousness of the damage incurred;[24] the linkage between that damage and the acts or omissions alleged to constitute negligence;[25] and the identity of the defendant.[26]  Time does not begin to run until the plaintiff acquires all four aspects of knowledge.  But since the identity of the defendant is not in issue in the present case, I will confine myself to a discussion of the first two aspects, the seriousness of the damage and its attributability dealt with in paragraphs (a) and (b). 

67.  It is established[27] that where a defendant raises a limitation defence and the plaintiff invokes the section 31 secondary limitation period, it is the plaintiff who bears the burden of proving that he did not acquire the required knowledge until a point of time within the three year period immediately preceding the issue of the writ.

D.3b  The plaintiff’s actual and imputed knowledge are taken into account

68.  Secondly, the knowledge which sets time running under section 31 consists both of the plaintiff’s actual knowledge and knowledge which is imputed to him.  When sections 31(1)(a) and 31(5) speak of the plaintiff having knowledge of certain matters, they are naturally taken to be referring to the plaintiff’s actual knowledge.  However, an objective standard is clearly also applicable.  Section 31(7) provides that for the purposes of the section, “a person’s knowledge includes knowledge which he might reasonably have been expected to acquire (a) from facts observable or ascertainable by him; or (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek.”  It follows that the extended meaning given to “knowledge” by section 31(7) is part of the definition of that word wherever it appears in section 31.

69.  Of course, on the facts of a particular case, it may be unnecessary to resort to any concepts of imputed or constructive knowledge.  If the court finds that a plaintiff had actual knowledge of the matters set out in section 31(5), it needs to go no further.  But if a plaintiff lacked actual knowledge but could reasonably have been expected to have acquired the relevant knowledge in accordance with the provisions of section 31(7), then such knowledge is to be imputed to him. 

70.  I should mention one aspect of the House of Lords’ judgment in Haward v Fawcetts[28] that may at first sight appear puzzling.  Their Lordships approached their decision on the footing that it was not open to them to take into account any constructive knowledge within the meaning of section 14A(10) of the Act (the Hong Kong equivalent being section 31(7)).  Lord Walker of Gestingthorpe thought this an “unusual feature”[29] of the case and both Lord Brown of Eaton-under-Heywood[30] and Lord Mance thought that this hampered their decision-making.  Lord Mance stated:

“I have not found this an easy appeal to resolve on the facts, bearing in mind that all that is in issue is actual knowledge.  The difficulty I have found would have been unlikely to exist had the issue of constructive knowledge been squarely raised before the judge.  The House was not invited to depart from the Court of Appeal’s conclusion that it was not open to Fawcetts to assert constructive knowledge within section 14A(10).”[31]

71.  In my view, their Lordships should not be understood as suggesting that the applicability of section 31(7) (which is in terms materially identical to section 14A(10)) is somehow a matter dependent upon the attitude taken by one of the parties or indeed, by the lower court.  It is part of the statutory definition of what constitutes “the knowledge required for bringing an action” referred to in section 31(1)(a) as elaborated upon in the subsections following and it is obviously not open to a party to opt out of part of a statutory definition.  A plaintiff’s invocation of the secondary limitation period requires the court to construe the word “knowledge” wherever it arises in section 31 and in doing so, it inescapably takes into account what the statute, including section 31(7), says that term does and does not include.

72.  Their Lordships should, in my opinion, be understood merely to have been expressing regret that factual issues relevant to the application of the equivalent of section 31(7) had not been aired.  Consequently, they reached their decision on grounds which dispensed with any need to consider imputed knowledge.  They held that Mr Haward’s case for being allowed to rely on the secondary limitation period had been misdirected, the inquiry having been addressed not to knowledge of the relevant damage (the plaintiff’s loss of large sums invested) but to damage falling outside the proper measure of damages (the failure of the company acquired).  Accordingly, Mr Haward was held not to have properly addressed, and therefore not to have discharged, his burden.[32]  Nevertheless, their Lordships did indicate that even on the evidence as it stood, Mr Haward could have had imputed to him knowledge of the relevant damage and its attributability.  Thus, Lord Nicholls commented that the disparity between the advice received and the company’s disastrous losses had “stared Mr Haward in the face” well before the relevant cut-off date.[33]  And Lord Mance referred to “the obviousness of the company’s problems from the outset in contrast with the optimism of the 1995 business plan and of Fawcetts’ alleged advice and attitude” as supporting his decision to allow the appeal.[34]  Other members of the panel took a similar view.[35]

D.3c  The required knowledge relates to damage, not liability

73.  Thirdly, section 31 is concerned with the plaintiff’s knowledge relating to the damage incurred and not with the defendant’s liability.  This is in accordance with the statutory purpose of postponing limitation in cases of latent damage.  Section 31 centres on whether the plaintiff had “the knowledge required for bringing an action for damages in respect of the relevant damage”.  This is made to depend on the state of his knowledge, actual or imputed, regarding the damage incurred and its attributability, in other words, on whether the damage should in the circumstances be considered latent.

74.  Postponement of the limitation period has nothing to do with whether the plaintiff knew that the defendant’s conduct amounted in law to negligence or that he had a good claim against the defendant.[36]  Thus, in laying down the standard for deciding whether the damage is known to be sufficiently serious, section 31(5)(a) posits an objective test involving a defendant who does not dispute liability, so that negligence is hypothetically assumed.  And section 31(6) expressly provides that “knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant.”  This is consistent with the law’s general approach to limitation periods, dismissing a statute-barred action whether or not it would otherwise have been a good claim.

D.4    Section 31(5)(a) 

75.  Against this background, I turn to consider more closely the construction of section 31(5)(a) which materially provides as follows:

“In subsection (1) ‘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 his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment ...”

76.  Obviously, by the time the action is commenced and the case is pleaded, the plaintiff will have considered the damage to be of a sufficient magnitude to justify initiating legal proceedings.  However, the fact that the plaintiff needs to invoke the secondary limitation period means that he has only commenced the proceedings after expiry of the primary limitation period and accordingly that there has for some reason been a delay. 

77.  A legitimate reason recognized by section 31(5)(a) as justifying postponement involves the case where the plaintiff did not commence proceedings because he only realised the seriousness of the damage incurred at a late stage: a typical case of latent damage.  The other paragraphs of section 31(5) identify the other matters considered legitimate reasons for delay (up to the maximum of 15 years): lack of knowledge of the linkage between the damage and the relevant acts or omissions and ignorance of the identity of the defendant.

78.  Section 31(5)(a) imposes an objective standard to judge the plaintiff’s delay from the aforesaid perspective.  It postulates a reasonable person’s assessment of the facts known to the plaintiff about the damage and deems his knowledge sufficient to trigger the secondary limitation period at the point in time when a reasonable person would have considered the damage sufficiently serious to justify starting proceedings against a hypothetical solvent defendant who does not dispute liability.  Gaining such knowledge may of course involve a process during which additional facts become known over time.  It is a question of fact, applying the objective standard, when the plaintiff should be taken to have acquired the relevant knowledge.

79.  Section 31(5)(a) establishes a low threshold.  If a reasonable person knows that the defendant will not contest liability and will pay up, quite minor damage may be thought to justify the cost and effort of issuing a writ.  It follows that where a plaintiff becomes aware or has imputed to him knowledge of some actual damage, provided that it is not so trivial as to be not worth bothering about, the knowledge requirement of section 31(5)(a) is likely to be satisfied.

80.  In adopting this low threshold, section 31(5)(a) mirrors the rule concerning objective accrual of the cause of action in a negligence claim.  Thus, in Cartledge v Jopling,[37] Lord Reid held that the cause of action is complete where the injury suffered is “beyond what can be regarded as negligible” and Lord Evershed spoke of  “real damage as distinct from purely minimal damage.”[38]  Section 31(5)(a) treats knowledge of damage with similarly slight dimensions as sufficient for the purposes of section 31(1)(a). 

81.  A potential source of confusion involves the different contexts in which section 31 introduces separate objective standards which interact with the subjective knowledge possessed by the plaintiff. 

82.  As we have seen in Section D.3b above, one such objective standard, introduced by section 31(7), relates to the knowledge which is to be imputed to the plaintiff where he might reasonably have been expected to acquire knowledge about the damage and its attributability from facts observable or ascertainable by him, with appropriate expert help if necessary. 

83.  That standard obviously differs from the standard introduced by section 31(5)(a) just discussed.  The latter operates to assess the seriousness of the damage which the plaintiff knew about or is (pursuant to section 31(7)) taken to have known about.

84.  The distinction between these two standards was emphasised in Lord Hoffmann’s analysis of sections 14(2) and 14(3) of the Act (parallels of our sections 31(5)(a) and 31(7) in the English personal injury context) in the recent decision of the House of Lords in A v Hoare.[39]  His Lordship stated:

“The test for imputing knowledge in section 14(3) is by reference to what the claimant ought reasonably to have done. It asks whether he ought reasonably to have acquired certain knowledge from observable or ascertainable facts or to have obtained expert advice.  But section 14(2) is simply a standard of seriousness applied to what the claimant knew or must be treated as having known.  It involves no inquiry into what the claimant ought to have done.  A conclusion that the injury would reasonably have been considered sufficiently serious to justify the issue of proceedings implies no finding that the claimant ought reasonably to have issued proceedings. He may have had perfectly good reasons for not doing so. It is a standard to determine one thing and one thing only, namely whether the injury was sufficiently serious to count as significant.”[40]

85.  As we shall see, a third objective standard, performing yet another different function, has been introduced by the case-law.  That third standard is applied to assess the quality and scope of the plaintiff’s knowledge, as discussed below.  It is important that the different roles played by each of these different standards be recognized and kept analytically separate.

D.5    Section 31(5)(b)

86.  Section 31(5)(b) relevantly provides:

“In subsection (1) ‘the knowledge required for bringing an action for damages in respect of the relevant damage’ means knowledge that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence.”

87.  As noted in Section D.3c above, section 31 does not concern itself with any knowledge on the plaintiff’s part concerning the defendant’s liability.  The courts have emphasised that the words “knowledge that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence” do not invite any such discussion.  As Hoffmann LJ stated in Dobbie v Medway Health Authority:

“...the words ‘which is alleged to constitute negligence, nuisance or breach of duty’ serve to identify the facts of which the plaintiff must have knowledge without implying that he should know that they constitute a breach of a rule, whether of law or some other code of behaviour.”[41]

88.  Those words indicate the method of approach discussed in Section D.3a above, pointing the court in the direction of the plaintiff’s pleaded case regarding the acts or omissions alleged to constitute the defendant’s negligence. 

89.  Sir Thomas Bingham MR, in the Dobbie case, illustrated the way the equivalent of section 31(5)(b) works with the following example:

“Time starts to run against the claimant when he knows that the personal injury on which he founds his claim is capable of being attributed to something done or not done by the defendant whom he wishes to sue. This condition is not satisfied where a man knows that he has a disabling cough or shortness of breath but does not know that his injured condition has anything to do with his working conditions. It is satisfied when he knows that his injured condition is capable of being attributed to his working conditions, even though he has no inkling that his employer may have been at fault.”[42]

D.6    Further issues

90.  In most cases, the application of section 31 presents no difficulty. 

91.  However, the experience of the courts has been that in some cases, further issues arise for resolution.  These are issues concerning the quality and scope of the knowledge possessed by or imputed to the plaintiff.  Having gone through the process described in the preceding paragraph, the court may arrive at the conclusion that the plaintiff’s actual or imputed knowledge was incomplete or lacking in detail or involved a significant degree of uncertainty.  Does knowledge with such characteristics qualify as knowledge within section 31 so as to set time running?  What tests or standards should one apply for drawing the line between knowledge which is too uncertain or too vague and knowledge which suffices?

D.6a  The quality and scope of the knowledge

92.  These issues stem from the immense variety of possible types of damage and their interaction with the almost limitless permutations of conduct which may be alleged to constitute negligence.  They are issues which can arise in the context of both section 31(5)(a) and section 31(5)(b): To what degree of certainty must the plaintiff know (or be taken to know) that he has in fact suffered damage and that such damage is sufficiently serious?  How certain, complete and detailed must his knowledge (or imputed knowledge) be of the attributability of such damage to the acts or omissions subsequently alleged to constitute negligence?

93.  One example of a case where such issues arose in the personal injury context is Nash v Eli Lilly & Co,[44] which concerned wide-ranging side-effects experienced by users of a drug called “Opren”, licensed to be used in the treatment of arthritis.  Some plaintiffs suffered from photosensitivity and others from onycholysis, being a condition damaging to finger and toe nails.  Some suffered from conditions said to be “to a large extent subjective, eg irritation, pain, dizziness, etc,”[45] with little to be seen by way of organic damage.  Yet others suffered from serious complications such as liver and kidney failure, resulting in some cases, in death.[46]  Plainly, it would not have been easy for some of these plaintiffs to be confident of the fact and extent of the damage suffered or confident of attributing their particular side-effects to the drug.  There would in some cases have been difficulty in drawing a “distinction between an expected, or accepted, side effect, and an injurious and unacceptable consequence of taking a prescribed drug.”[47]  At what point is equivocal knowledge of this sort, located somewhere in a spectrum of suspicion and belief, sufficient to start time running under section 31?  I turn to consider the solutions developed in the case-law.

D.6b  Where knowledge has a significant degree of uncertainty

94.  It has, of course, always been acknowledged that the knowledge which triggers the secondary limitation period does not have to involve the plaintiff knowing anything “for certain”.  Life seldom lends itself to such certainty and such a high standard would in practice be likely to mean that the secondary limitation period is routinely extended to the limit of the 15 year cap under section 32.  Thus, in Halford v Brookes,[48] Lord Donaldson of Lymington MR stated (as to the degree of certainty of knowledge regarding the identity of the defendant):

“The word has to be construed in the context of the purpose of the section, which is to determine a period of time within which a plaintiff can be required to start any proceedings.  In this context ‘knowledge’ clearly does not mean ‘know for certain and beyond possibility of contradiction’.  It does, however, mean ‘know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence’.  Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.”

95.  Halford v Brookes was an unusual case.  A mother, suing as the personal representative of her daughter whom she had strong reason to believe had been murdered by either one or other of two defendants, could not be sure to which of these men’s actions her daughter’s death should be attributed.  The court held that “attributable” in the equivalent of our section 31(5)(b) meant “capable of being attributed”[49] and that this applied to both men who could be made defendants in the alternative, there being no need for the plaintiff to have any greater degree of certainty to start time running.  On the strict application of the secondary limitation period, the case was held to be time-barred since the mother had possessed the requisite knowledge at an early stage.  But as it was a personal injury claim, the court had, and decided to exercise, a discretion to override the limitation period and permit the action to continue.

96.  In Nash v Eli Lilly & Co, the “Opren” case, Purchas LJ proposed a standard of certainty similar to that suggested by Lord Donaldson MR:

“In applying the section to the facts of these cases, we shall proceed on the basis that knowledge is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice.”[50]

97.  The answer which their Lordships gave in these two cases was therefore a pragmatic one: the plaintiff’s knowledge is to be treated as sufficient for setting time running from the moment when a reasonable person would have regarded it as certain enough “to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice”.  He would then have three years to bring preparations to a stage when a writ could be issued.  However, a reasonable person could be expected to refrain from taking such steps while the knowledge remained too scanty or too vague or amounted only to speculation or unsubstantiated suspicion.  This introduces the third objective standard mentioned above.  It obviously plays a role different from the two objective standards previously discussed.  It is an approach which has often since been adopted.[51]

98.  It is my respectful view that this approach involves an entirely legitimate and necessary purposive construction of section 31.  That provision is centred around ascertaining when the plaintiff first had “the knowledge required for bringing an action for damages in respect of the relevant damage” as stated in section 31(1)(a).  That concept is defined in subsections (5), (6) and (7).  But those definitions have been found not to be exhaustive, leaving further issues concerning the quality and scope of the knowledge possessed by or imputed to the plaintiff to be dealt with.  In seeking to address the issue concerning the degree of certainty required, Lord Donaldson MR and Purchas LJ returned to the central concept of “the knowledge required for bringing an action.”  The pragmatic threshold of certainty which they adopted implements the basic statutory purpose of section 31, asking: At what point in time did the knowledge become certain enough objectively to justify taking the first steps in the bringing of an action? 

D.6c  Uncertainty in the context of legal liabilities

99.  As noted above, one form of damage which completes the cause of action in negligence is the incurring of legal liability.  This raises two particular issues in relation to the certainty of knowledge. 

100.  In the first place, since the incurring of such a liability is a legal construct and not in itself physically perceptible, there may be cases where the plaintiff has no knowledge whatsoever that he has incurred such damage and only finds out when he is visited with some palpably detrimental consequences, such as when a demand is made by mortgagees in respect of a debt which he did not previously know had been secured on the property in question.[52]  It was on this basis that the House of Lords in Haward v Fawcetts overruled HF Pension Trustees v Ellison,[53] a case where trustees of a pension scheme were wholly unaware that a reorganization and transfer of surplus monies effected under legal advice constituted an invalid exercise of a fiduciary power which attracted potentially irrecoverable tax liabilities.[54] 

101.  Secondly, even where a plaintiff knows that he has attracted a potential liability to a third person as a result of the acts or omissions of the defendant, uncertainty may exist as to whether such liability will ultimately crystallize in favour of that third person so as to be translated into actual financial loss.

102.  Issues of this kind are resolved by applying the pragmatic objective test referred to above.  If the potential for being made liable to the third party is real enough to lead a reasonable person to conclude that steps preliminary to the commencement of proceedings against the defendant ought to be taken, the plaintiff is taken to have sufficiently certain knowledge to set time running for the purposes of section 31.  Consistently with this approach, Lord Nicholls held that time does not begin to run against a claimant until he knows there is “a real possibility”that his damage was caused by the act or omission in question.[55]  And Lord Brown considered it sufficient if Mr Haward “knew that his loss might well have resulted from an investment made on Fawcetts’ advice.”[56]

D.6d  Where knowledge is incomplete or lacking in detail

103.  In the plaintiff’s pleadings, the acts or omissions alleged to constitute negligence are likely to have been particularised in a number of alternative ways aimed at covering a variety of findings that may be made at the trial.  Such particulars may have been fashioned for various legal purposes, such as for bringing the case within a precedent favourable to the plaintiff.  They are obviously not intended to describe what the plaintiff actually came to know about the attributability of the damage to the defendant’s acts or omissions now said to amount to negligence.  Nor should section 31 be construed as requiring the plaintiff to have detailed knowledge of the matters set out in such particulars before he is treated as having the knowledge required to set time running.  What matters is the plaintiff’s knowledge of what lies at the core of the pleaded case.

104.  That is the principle developed in the case-law.  As Hoffmann LJ put it in Broadley v Guy Clapham & Co:[57]

“Section 14(1)(b) [the equivalent for our purposes of section 31(5)(b)] requires that one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had, in broad terms, knowledge of the facts on which that complaint is based.”

105.  The requisite knowledge is not of the acts or omissions as pleaded, but knowledge of the facts constituting “the essence of the complaint of negligence” distilled from such pleading.[58]  Lord Nicholls summarises some of the authorities in the following terms:

“Consistently with the underlying statutory purpose, Slade LJ observed in Wilkinson v Ancliff (BLT) Ltd [1986] 1 WLR 1352, 1365, that it is not necessary for the claimant to have knowledge sufficient to enable his legal advisers to draft a fully and comprehensively particularised statement of claim.  Where the complaint is that an employee was exposed to dangerous working conditions and his employer failed to take reasonable and proper steps to protect him it may well be sufficient to set time running if the claimant has ‘broad knowledge’ of these matters.  In the clinical negligence case of Hendy v Milton Keynes Health Authority [1992] 3 Med LR 114, 117-118, Blofeld J said a plaintiff may have sufficient knowledge if she appreciates ‘in general terms’ that her problem was capable of being attributed to the operation, even where particular facts of what specifically went wrong or how or where precise error was made is not known to her.  In proceedings arising out of the manufacture and sale of the drug Opren Purchas LJ said that what was required was knowledge of the ‘essence’ of the act or omission to which the injury was attributable: Nash v Eli Lilly & Co [1993] 1 WLR 782, 799.  In Spargo v North Essex District Health Authority [1997] PIQR P235, P242 Brooke LJ referred to ‘a broad knowledge of the essence’ of the relevant acts or omissions ...”[59]

106.  These formulations make the important point that the section does not require the plaintiff to have had knowledge of the full-blown pleaded facts.  But it may well be said that notions like “the essence” of the complaint, “broad knowledge” of the facts, an appreciation of the problem “in general terms” and “a broad knowledge of the essence” are not very informative as standards to be applied.

107.  Once again, as Hoffmann LJ held in Broadley v Guy Clapham & Co, a purposive construction leads to application of the pragmatic objective standard discussed above for guidance as to when the plaintiff’s knowledge should be regarded as sufficiently complete and detailed.  His Lordship stated:[60]

“How does one determine the ‘essence’ of the act or omission? The purpose of s 14(1), as Lord Donaldson MR pointed out in Halford v Brookes [1991] 3 All ER 559 at 573, [1991] 1 WLR 428 at 443 is to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant. He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ. Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant. But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate.”

D.6e  The knowledge must extend to all the essentials

108.  The proposition that the plaintiff must know “the essence” of the complaint has two aspects.  We have seen that it means that he does not need to know all the pleaded details.  But it also means that he must know or be taken to know all the essential facts necessary to constitute the claim before time starts running against him.  That is not to say that he must know he has a good claim in law.[61]  Such knowledge is plainly made irrelevant by section 31(6).  What it does mean is that he must be shown to have actual or imputed knowledge of all the facts which are essential to the complaint which is eventually formulated as his negligence claim.

109.  As Lord Mance points out, this is indicated by the language of section 31(5)(b):

“Turning to the phrase ‘the act or omission which is alleged to constitute negligence’, the word ‘constitute’ is in my view significant.  It indicates that the claimant must know the factual essence of what is subsequently alleged as negligence in the claim.”[62]

110.  As Hoffmann LJ explains in Hallam-Eames v Merrett Syndicates,[63] it would be an over-simplification to read section 31(5)(b) as merely requiring the plaintiff to have known that his damage had been caused by an act or omission of the defendant.  That provision:

“... speaks of the damage being attributable to the act or omission which is alleged to constitute negligence.  In other words, the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence. ... He must have known the facts which can fairly be described as constituting the negligence of which he complains.  It may be that knowledge of such facts will also serve to bring home to him the fact that the defendant has been negligent or at fault.  But that is not in itself a reason for saying that he need not have known them.”[64]

111.  This passage has often been followed and was approved in Haward v Fawcetts.[65]  However, deciding what facts should be characterised as part of the essentials can give rise to difficulty.  This is illustrated by Dobbie v Medway Health Authority,[66] a case in which the plaintiff, who had detected a lump in her left breast underwent surgery, believing that this was in order to have the growth removed and diagnostically examined.  However, upon excising the lump, the surgeon thought it appeared to be cancerous and he proceeded, without her prior consent, to perform a mastectomy.  The growth was in fact found to be benign.  On coming round from the anaesthetic, the plaintiff was horrified to learn that her left breast had been removed but accepted the view of the surgeon and the nurse “that she was very fortunate that the growth had not proved to be malignant”.  But she was devastated by loss of her breast and suffered not merely that physical injury but also serious psychological harm in consequence.  It was not until some 15 years later that she realised, from hearing about a similar case, that the breast should not have been removed prior to a biopsy.  She issued the writ a year later.  The issue was whether her state of knowledge had been such as to have triggered the secondary limitation period long before it could save her action from being time-barred.

112.  Sir Thomas Bingham MR held that “the essential thrust of the case was that the breast should not have been removed until the lump had been microscopically examined and found to be malignant.”[67]  On this footing he found that she had, from an early stage, knowledge of all the essentials so that the secondary limitation period had long expired:

“The personal injury on which the plaintiff seeks to found her claim is the removal of her breast and the psychological and physical harm which followed.  She knew of this injury within hours, days or months of the operation and she, at all times, reasonably considered it to be significant.  She knew from the beginning that this personal injury was capable of being attributed to, or more bluntly was the clear and direct result of, an act or omission of the health authority.  What she did not appreciate until later was that the health authority’s act or omission was (arguably) negligent or blameworthy.  But her want of that knowledge did not stop time beginning to run.”[68]

113.  In Hallam-Eames v Merrett Syndicates,[69] Hoffmann LJ, illustrating by reference to the Dobbie case the need for the plaintiff to have actual or imputed knowledge of all the essential facts which constitute the claim, emphasised that it would not have been enough merely to assert that she knew, as she obviously did, that her left breast had been removed.  The essential additional fact which she had to know to constitute the required knowledge and to set time running was that it was a healthy and not a cancerous breast that had been removed :

“If one asks on common sense principles what Mrs Dobbie was complaining about, the answer is that the surgeon had removed a healthy breast.  It would in our view be a seriously incomplete statement of her case to say that it was simply that the surgeon had removed her breast.  This is not a matter of elaborating the detail by requiring knowledge of precisely how he had come to do the act complained of, such as this court rejected in Broadley.  It was part of the essence of her complaint.  Nor is it requiring knowledge of fault or negligence. The court’s emphatic rejection of such a requirement is entirely consistent with characterising the act complained of (and of which knowledge was therefore required) as the removal of a healthy breast.”

114.  One readily sees the necessity of requiring the plaintiff at least to know that the removed breast had not in fact harboured a cancerous growth and that there had been no diagnostic examination before its removal, if time was to run against her.  One can, however, also see the attraction of characterising the essentials of her complaint as having additionally to include the proposition that removal of a breast merely on the surgeon’s suspicion that the growth was cancerous and without a biopsy was not accepted medical practice – something that she did not discover until 15 years later.  However, it is understandable that such argument was rejected as shading too far into a requirement for knowledge that the surgeon had acted negligently, which is territory forbidden by section 31(6).  I venture to suggest that in the light of A v Hoare,[70] a similar case to Dobbie occurring in the future might well find the court more willing to exercise the personal injury discretion to override the limitation period, especially in the light of the plaintiff having been advised by the surgeon and the nurse that she had had a fortunate surgical outcome, thereby putting her off the scent and contributing greatly to her delay.[71] 

D.7    Legal advice and section 31(7)

115.  The position taken by both parties during submissions was that section 31(7), which deals with imputed or constructive knowledge, has no application to the taking of legal advice.  In my view, that is too broad and undifferentiated a proposition.

116.  Two matters might be suggested in favour of excluding section 31(7)’s application to the giving of legal advice, namely:

117.  To take the first of these, section 31(6) operates to make it clear that time may run against a plaintiff even though he has no idea that the acts or omissions of the defendant involved negligence as a matter of law.  It follows that it is never relevant to ask whether the plaintiff knew that such acts or omissions involved negligence on the defendant’s part.  It also must follow that it is never relevant to invoke section 31(7) with a view to establishing that the plaintiff ought to have such knowledge of the defendant’s negligence imputed to him.  But that is the limit of section 31(6)’s impact on section 31(7).  There is nothing in section 31(6) to suggest that it operates so that the expert advice of a lawyer on topics other than the defendant’s liability to the plaintiff can never be “appropriate expert advice” or advice “appropriate to act on” within the meaning of section 31(7)(b).

118.  The second matter centres on the word “facts” in section 31(7)(b).  A person, it might be said, goes to a lawyer for advice on the law and not about facts.  Accordingly, one would not expect the plaintiff to acquire knowledge from facts which he has ascertained with the help of expert legal advice since that is not the function of such advice.  Therefore, so the argument runs, section 31(7) has no role to play in connection with legal advice.  In my view, this argument over-simplifies the nature of the advice which a client seeks and obtains from his lawyer.

119.  Section 31(7) might of course have no application in a situation where the plaintiff seeks advice purely on some point of law, for instance as to whether under Hong Kong law a company can operate with only one director or whether we have the equivalent of American anti-trust legislation.  However, it must be very rare for advice to be sought purely on a point of law.  A client does not go to a lawyer for an academic seminar but to ascertain matters of factual relevance to himself.  He may for instance wish to find out, to use commercial rather than legal terms, what his “exposure” is or what financial consequences he faces in a particular situation: how much he might have to pay or be able to recover following a failed transaction; whether he may have difficulties realising security taken for a loan; or whether his insurers might refuse to indemnify him for a loss; or how much tax he has to pay; and so forth.  These are all factual matters and may constitute damage which has already occurred or which may be looming in the future.  Simply because the lawyer, in giving the advice is likely to refer to a statutory provision or principle of the common law in support of his conclusions, does not eclipse the factual dimensions of the advice given which may be important in a limitation context.  It is therefore my view that advice obtained from lawyers in such circumstances is capable of being characterised as advice about “facts ascertainable by [the plaintiff] with the help of appropriate expert advice”, although, as it happens, resort to such imputed knowledge is unnecessary in the present case.

E.      Kensland’s claim and the secondary limitation period

E.1    Kensland’s case on knowledge

120.  In Section B.1 above, the damages claimed by Kensland have been set out together with the factual basis of such claims: HK$8 million to recover the damages Kensland was held liable to pay to Whale View; HK$2,767,407.33 to recover legal fees incurred; and HK$17,980,000 to compensate for “the diminution in value [of the premises] between 9 September 1997 and 19 May 1998”.  They are all pleaded to be attributable to the “negligent legal advice by [TTC]” consisting of the particularised acts and omissions referred to above.

121.  Financial detriment of this magnitude is plainly sufficiently serious on the objective standard imported by section 31(5)(a).  Neither can there be any doubt that insofar as Kensland knew or is taken to have known that it had incurred such damage, it must have known or could be taken to have known that it was attributable to the advice given by TTC and acted upon by Kensland.

122.  So the crucial question is: When, as a matter of fact, did Kensland first have knowledge (or to the extent necessary, imputed knowledge) that it had incurred such damage?  Unless its date of knowledge fell within the three-year period immediately preceding 13 January 2004 when the writ against TTC was issued, the secondary limitation period does not save the claim from being statute-barred. 

123.  Kensland puts forward as its date of knowledge, 23 January 2001 which does fall within that three-year period.  That was when the Court of Appeal handed down judgment in the original proceedings.  Kensland argues that it did not have the required knowledge until it knew, as a result of that judgment, that the advice it had received from TTC was wrong:

“... it is necessary to know that the advice was wrong, because without that knowledge, there was no knowledge of a loss and so no knowledge of the facts which constitute the cause of action.”[72] 

E.2    The facts relating to Kensland’s actual knowledge

124.  To put Kensland’s argument in a proper context, the facts relating to its rejection of the tendered purchase monies and the events which followed must be examined.

125.  According to Ms Yeung, shortly after payment had been tendered by Whale View at 1:06 pm on 2 September 1997 she received a phone call from a Mr Tang of TTC who advised her that Whale View had repudiated the contract and that Kensland was entitled to rescind the agreement and to forfeit the deposit.  She adds:

“... Mr Tang said to me that if I decided to rescind the Agreement, the other side might argue that the late delivery of the cheques was caused by [Kensland’s] delay in giving the instructions on the split cheque arrangement.  However, he then said to me that he thought ‘one and a half hour’ would be regarded as sufficient time for the preparation of the split cheques.”[73]

126.  Ms Yeung records that when she went to Mr Tang’s office a little later that afternoon, he advised her that :

“... the other side might sue [Kensland] to get back the deposit.  However, he told me that the chances of their succeeding were very low.”

127.  Later that day, TTC received a letter from TPY (which TTC forwarded to Kensland) asking whether TTC had instructions to accept service of proceedings and stating:

“We … wish to place on record that [after a fax received at 11:12 a.m.] ... correct instructions were only given to us by telephone ... at around 11:45 a.m.  You have given us effectually one hour and fifteen minutes to arrange for the issue of cashier orders for completion. ... Your delay in advising us the manner in which the balance of the purchase price is to be paid has left us with an unreasonably short period of time to arrange the cashier order for completion.”

128.  On the following day, Whale View’s writ claiming specific performance and damages was served and a lis pendens registered.  In the Statement of Claim which followed on 16 October 1997, Whale View pleaded an implied term that the split cheque directions should be given within a reasonable time before the deadline for completion, that the time allowed was not reasonable and that Kensland was accordingly not entitled to rescind and was liable for the relief claimed.

129.  On 28 October 1997, Kensland filed a Defence stating: “If, which is not admitted, there was an implied term [to give the directions allowing a reasonable time] the defendant says that such reasonable time is 1 hour”.

130.  By mid-November 1997, the property market had collapsed and on 14 November 1997, reflecting Kensland’s realisation that the value of the property had fallen sharply, TTC wrote to counsel instructing him to advise on questions including the following:

“(1)      Can [Kensland] bind [Whale View] to purchase the said property at the price of HK$55,000,000 if we take out a Summons (or write a letter) admitting [its] claims or submitting to judgment as claimed?

(2)        In such event, can [Whale View] amend ... to avoid purchasing the property if [it] takes note that the property is now worth much less than HK$55 million? ...

(4)        If [Kensland] successfully admits [Whale View’s] whole claim and [Whale View] accepts such admission, what is the likely quantum of damages which [Whale View] can recover?

(5)        If [Whale View] withdraws its claim for specific performance, can [Kensland] successfully apply to vacate the lis pendens from the Land Registry?”

131.  By this time, some HK$78,300.00 in legal costs had been incurred.

132.  On 19 December 1998, Kensland changed its solicitors, TTC ceasing to act, although no evidence was filed as to why this occurred.

E.3    What Kensland knew

133.  On the foregoing facts, there can be no doubt that Kensland had actual knowledge of its having incurred serious financial damage from the outset and well before the start of the relevant three-year period in January 2001. 

134.  The first head of damage consisted of the liability to Whale View arising upon Kensland’s refusal to complete on 2 September 1997.  Kensland knew full well on that very day that in doing so, it ran the risk of being held liable for breach of the agreement.  That was what Ms Yeung was told by Mr Tang, even before Kensland decided to refuse the payment.  This is not one of those cases where the plaintiff contracted a liability without having any inkling that this has occurred. 

135.  The risk of being held liable to Whale View was manifestly brought home to Kensland by TPY’s letter delivered later on 2 September and by Whale View’s writ issued the next day.  The particulars of Whale View’s claim based on an implied term – essentially upheld in the Court of Appeal and in this Court – were set out in the Statement of Claim so that by 16 October 1997 Kensland knew in detail how it was at risk.

136.  What Mr Scott’s argument actually amounts to is the contention that Kensland was not fixed with the required knowledge because it did not know for certain that liability for breach of the agreement would be established until the court declared that such was the position.  But, as we have seen,[74] knowledge as a certainty is not the standard.  Rather, applying the objective standard developed by the courts regarding certainty of knowledge,[75] one must ask at what point in time the potential for being held liable to Whale View would have been regarded by a reasonable person as sufficiently real to lead him to conclude that taking steps preliminary to the commencement of proceedings against TTC would be justified.

137.  It is true that on 2 September 1997, Ms Yeung was being advised by Mr Tang that the risk was low.  But on any objective assessment, the risk ought to have been seen as very significant.  The precariousness of Kensland’s position is brought out by the plea in its Defence that a “reasonable time” for completion “is one hour.”  Bearing in mind that Whale View had written on 2 September complaining that 1 hour and 15 minutes had insufficiently been allowed, Kensland’s defence rested on the slim margin of about 15 minutes.  Concepts of “reasonableness” are obviously to some degree impressionistic and commonsense dictates that no one could be confident in drawing such a fine line to separate what would, from what would not, constitute a “reasonable time” in this context. 

138.  Moreover, whatever confidence might have been exuded in the advice received on 2 September, it is clear from the letter to counsel dated 14 November that, at least by then, Kensland fully appreciated that if it lost or admitted the other side’s case, an award of damages would be faced and was seeking advice as to its likely quantum.  Additionally, the possibility that the advice received may have been wrong and that the advising solicitors may have been negligent must have occurred to Kensland when they saw Whale View joining TPY as alternative defendants in their writ.  There can accordingly be no doubt that, so far as damage in the form of liability to Whale View was concerned, Kensland’s actual awareness was at an ample level of certainty and detail to qualify as knowledge within section 31.

139.  Furthermore, as we have seen, Kensland’s case is not merely that it had suffered damage in the form of such liability.  It also claims damages in respect of damage incurred by having to pay legal costs and in suffering the property’s fall in value.  By 15 November 1997, Kensland knew that it had already incurred legal costs totalling $78,300.00 and that the property was “worth much less than HK$55 million”.  There was no element of uncertainty or vagueness regarding such damage although the precise quantification of each head of loss was something for the future.  As noted above,[76] the need for quantification does not detract from the earlier accrual of the cause of action.  Moreover, as previously noted, Kensland agreed with Whale View that its liability to pay interest should date from 3 September 1997.  Additionally, in its own pleadings, Kensland crystallizes the loss in the value of the premises, presumably a matter within its own knowledge, in the sum of $17.98 million as at 19 May 1998, a date well before the start of the relevant three-year period.  There was, in brief, nothing latent about the damage incurred.

F.      Conclusion

140.  Kensland plainly had actual knowledge about the relevant damage with a sufficient degree of certainty for section 31 purposes commencing on 2 September 1997.  The damage and actual knowledge thereof were added to in the period leading to mid-November 1997 and supplemented further in the period up to 19 May 1998, all well before the secondary limitation period can make any difference.  It is unnecessary to consider any imputed knowledge.  Kensland’s case is that the damage flowed from its acting on TTC’s advice when it refused to complete the contract.  It obviously knew that it was acting on such advice.  It therefore knew that such damage was attributable to TTC’s acts and omissions representing the advice tendered.  Kensland’s claim is accordingly, in my view, statute-barred and the appeal must be dismissed.

141.  I would finally add that where a plaintiff’s reliance on section 31 is sought to be challenged in advance of the trial, this should generally be by trial of a preliminary issue so that all relevant evidence can be adduced and tested.  As it happens, the materials available to the court in the present case were sufficient to allow the claim to be struck out in the exercise of the court’s inherent jurisdiction.  However, even then, certain issues of possibly relevant fact were unresolved, such as why Kensland changed solicitors in December 1998 and on what basis the value of the property was said to have dropped by HK$17.98 million as at 19 May 1998.  Issues such as these ought to be investigated, with oral evidence if necessary, on the trial of a preliminary issue.  If the facts had been less unequivocal, adoption of the striking-out procedure would have involved a waste of time and costs since an arguable question of whether Kensland’s case was time-barred would have had to be examined afresh at the trial.

Mr Justice McHugh NPJ:

142.  Kensland Realty Limited (in compulsory liquidation) (“Kensland”) appeals against an order of the Court of Appeal which ordered that Kensland’s action for damages for negligence against Tai, Tang & Chong (“TTC”), the respondent be dismissed.  The first question in the appeal is whether Kensland’s action was commenced outside the six-year limitation period mandated by s.4 of the Limitation Ordinance, Cap. 347 (“the Ordinance”)?  If it was, two further questions arise.  First, when did Kensland know such facts about its damage as would lead a reasonable person who had suffered such damage to consider it sufficiently serious to justify instituting proceedings?  Second, when did it know that that damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence on the part of TTC?  If Kensland first obtained knowledge of either of these two matters within three years of commencing its action against TTC, s.31 of the Ordinance entitled it to bring the action, despite the action otherwise being barred by s.4 of the Ordinance.

143.  In my opinion, Kensland’s claim against TTC was barred by s.4 of the Ordinance, and it was not entitled to the benefit of s.31 of the Ordinance because, over three years before it commenced its action, it knew facts about its damage that would lead a reasonable person to conclude that the damage was sufficiently serious to institute proceedings against TTC and knew that that damage was attributable to the acts or omissions of TTC that it alleges constitute negligence.

The material facts

144.  TTC were Kensland’s former solicitors who had advised Kensland on 2 September 1997 that it could lawfully terminate a contract for the sale of premises on the ground that the purchaser of the premises had tendered payment of the sale price after the expiration of the time for completion.

145.  In June 1997, Kensland, which had agreed to buy shop premises from Delight Holdings Limited for HK$53 million, agreed to sell the premises to Whale View Investment Ltd (“Whale View”) for HK$55 million.  The contract with Whale View had to be completed by 1 pm on 2 September 1997 at the offices of TTC.  Under the contract, Kensland was entitled to direct how the balance of the purchase price was to be paid, and Whale View’s obligation to pay that balance was not discharged unless payment was made in the manner stipulated.  On three occasions – the last on the morning of 2 September 1997, Whale View’s solicitors asked TTC for the breakdown of the cheques and the persons in whose favour they should be drawn.  TTC did not answer any of the requests until 11:13 am on 2 September.  And it was not until 11:48 am that Whale View’s solicitors were finally informed of the correct amounts to be paid to various parties.  In all, eight cheques and two cashier’s orders were required to be drawn and paid.  Realising that they would not meet the 1:00 pm deadline, the solicitors for Whale View asked TTC for an extension of time to complete, but TTC, after saying that it would seek instructions, did not contact the solicitors for Whale View before 1:00 pm.  In the result, the solicitors for Whale View did not arrive with the required cheques and cashier’s orders until 1:06 pm.

146.  According to para.15 of Kensland’s Statement of Claim in the present action, TTC spoke to a director of Kensland shortly after this time and informed her that Whale View’s solicitors had failed to complete the purchase in time and that this constituted a breach of a material term of the agreement.  TTC advised her that, because Whale View had repudiated the contract, Kensland was entitled to rescind the contract and forfeit the deposit.  TTC also informed her that Whale View might challenge the rescission and seek the return of the deposit but its chance of succeeding in an action for these purposes was very low.  Relying on this advice, Kensland terminated the contract.

147.  On the following day, Whale View commenced proceedings against Kensland in which it claimed that the rescission was invalid, that the Court should order specific performance of the contract of sale and that the Court should assess its damages.  It registered the writ as a lis pendens against the property.  Kensland was kept fully informed of the progress of the action and the allegations made in Whale Views pleading and the terms of Kensland’s Defence to the action.  By November 1997 Kensland had been invoiced for HK$78,300 for the costs of defending the action brought by Whale View.

148.  On 14 November 1997, Kensland instructed TTC to admit Whale View’s claims.  It also sought counsel’s advice on the possibility of admitting those claims and requiring Whale View to complete the purchase.  This turnaround was motivated by the fact that “the property is now worth much less than HK$55 million”.

149.  The trial of the action came before Deputy High Court Judge Gill who held that Whale View had repudiated the contract and that Kensland was entitled to damages.  However, on 23 January 2001, the Court of Appeal allowed an appeal against these findings and held that it was Kensland who had repudiated the contract.  It ordered Kensland to repay the deposit of HK$8.25 million and damages of HK$8 million together with interest at the rate of 10.5% from 3 September 1997.  On 10 December 2001, this Court upheld the orders of the Court of Appeal but for different reasons.  It held that, in the absence of an express clause to the contrary, where a contract for sale contains a clause empowering the vendor to give a direction concerning the manner of payment, there is an implied term arising from business efficacy to the effect that, if a direction is given, it will allow the purchaser a reasonable time to do what has to be done to comply with the direction prior to the time for completion.  This Court held that the direction given at 11:13 am did not allow Whale View reasonable time to complete by 1:00 pm.  Accordingly, Kensland had breached the implied term.  Furthermore, because a party to a contract cannot take advantage of its own breach and because Kensland’s breach was the direct cause of Whale View’s failure to complete in time, Kensland could not treat that failure as a ground for terminating the contract.  To the contrary, Kensland’s failure to accept the tender at 1:06 pm was itself a repudiatory breach of the contract entitling Whale View to damages.

150.  Over two years after this Court’s decision and almost three years after the Court of Appeal’s decision, on 13 January 2004 the liquidators of Kensland commenced an action for damages and interest thereon against TTC for negligent advice.  Paragraph 19 of the Statement of Claim alleged that as a result of TTC’s negligent handling of Kensland’s affairs, it “has suffered damages”.  Paragraph 21 gave “the particulars as to damages suffered by Kensland as the result of TTC’s negligent handling and advice concerning the sale and purchase of the property”: (1) HK$8 million, payable “as damages pursuant to the judgment of the Court of Final Appeal”; (2) HK$2,767,407.33, “paid by Kensland as legal fees”; and (3) HK$17,980,000, “being the diminution in value of the property following the non-completion of the sale”.

151.  Paragraph 20 of the Statement of Claim pleaded six particulars of negligence.  The first alleged that “TTC, for no good reason, failed to provide the instructions to [Whale View] within a reasonable time”.  The second and third particulars alleged that TTC wrongly advised Kensland that Whale View’s late tender constituted a repudiation of the agreement and that instructions were given within sufficient time for the preparation of the cheques and cashier’s orders.  The fourth particular alleged that TTC failed properly to review and consider the agreement, failed properly to advise on the basis thereof and in particular failed to advise that in law Kensland would not be entitled to take advantage of its own breach of the implied term.  The fifth particular alleged that TTC failed to advise that, if Kensland’s delay in completion was due to its default, it would not be entitled to treat the agreement as repudiated.  The sixth particular alleges that TTC failed generally to inform Kensland of the impact of the late instructions in the circumstances and failed to point out and advise fully of the risks involved in refusing to complete and of the very real risk of having to compensate Whale View.

152.  On 26 May 2005, TTC issued a summons under RHC O.18 r.19 for an Order that the Statement of Claim be struck out on the ground that it was frivolous or vexatious or otherwise an abuse of the process of the Court.  By a subsequent order, the parties were given leave to file and serve evidence in support of or opposition to the Orders sought.  At first instance, Deputy High Court Judge Gill dismissed the Summons by TTC, but the Court of Appeal allowed an appeal by TTC and ordered that the action brought by Kensland be dismissed.  Subsequently, this Court by a determination of the appeal committee gave leave to appeal against the order of the Court of Appeal.

The application to strike out

153.  An order striking out a Statement of Claim, which is based on a limitation defence, can only be sustained if that defence is “manifestly and immediately destructive of the Plaintiff’s claim”: Ronex Properties v. John Laing Construction Ltd [1983] 1 QB 398 at 408A; Peconic Industrial Development Ltd v. Yu Ka Hong [2006] 4 HKC 406 at para.27.  However, once a limitation defence is raised, the onus is on the plaintiff to prove that the cause of action relied upon accrued within the limitation period.  In form, a limitation defence appears to be a defence of confession and avoidance.  If it were, the onus of proof would lie on the party raising it.  Indeed, the Full Court of the Supreme Court of Victoria has decided that, where the action concerns the occurrence of latent damage, the onus is on the defendant to plead and prove that the cause of action fell outside the period specified in the statute of limitations: Pullen & Another v. Gutteridge Haskins and Davey Pty Ltd [1993] 1 VR 27.  But courts in the United Kingdom and this Court have taken the opposite view.  They have insisted that, although the defendant must raise and plead the limitation defence, once the defence is pleaded, the onus is on the plaintiff to prove that the cause of action accrued within the limitation period: Darley Main Colliery Co. v. Mitchell (1886) 11 AC 127 at 135; Cartledge v. Jopling & Sons Ltd [1963] AC 758 at 784; London Congregational Union v. Harriss & Harriss [1988] 1 All ER 15 at 29; Bank of East Asia v. Tsien Wui Marble Factory (1999) 2 HKCFAR 349 at 384; Haward v. Fawcetts [2006] 1 WLR 682 at 688, HL.  Accordingly, Kensland carries the burden of proving that its claim fell within the limitation period.

The Limitation Periods

(a)     Section 4

154.  Section 4 of the Limitation Ordinance, Cap. 347 declares that an action founded on simple contract or tort “shall not be brought after the expiration of six years from the date on which the cause of action accrued”.

155.  Kensland contended that its cause of action had been brought within the six-year limitation period specified in s.4 of the Ordinance.  It pointed out that a cause of action in tort does not accrue until damage is suffered: Coburn v. Colledge [1897] 1 QB 702, CA.  Moreover, the damage must be damage in a “real and substantial sense”: Bank of East Asia v. Tsien Wui Marble Factory (1999) 2 HKCFAR 349 at 385, 388 and 390.  In the usual case of an action based on the negligent advice of a solicitor, the cause of action arises when the advice is acted upon: Forster v. Outred & Co. [1982] 1 WLR 86; D W Moore & Co. v. Ferrier [1988] 1 WLR 267.  However, Kensland contended that this was not the usual case.  It argued that the outcome of its action in acting on the advice of TTC was unpredictable and that it suffered no damage before the decision of the Court of Appeal on 23 January 2001.  Only then, so Kensland argued, could it or anyone else know that it had suffered damage.  Until then, its liability to pay damages was contingent, not actual.  Kensland sought to reinforce the argument by pointing out that it had succeeded at first instance in the High Court.  Hence, so Kensland argued, its damage had not occurred earlier than 23 January 2001.  Consequently, it contended that it could have commenced the present action at any time before 23 January 2007, and the present action, which was commenced on 13 January 2004, was well within the six-year limitation period specified by s.4 of the Ordinance.

156.  In the courts below, Kensland conceded that it suffered damage and its cause of action arose in September 1997 when it acted on the advice of TTC in refusing to accept the late tender of payment by Whale View.  In this Court, however, it sought to withdraw the concession.  TTC did not oppose the withdrawal provided that it could rely on an affidavit whose tender had been rejected by Deputy High Court Judge Gill because of the concession.  Kensland did not oppose TTC tendering and relying on the affidavit in question.  Because that is so and the question is one of law on undisputed facts, it is a proper case for the Court to exercise its discretion and allow Kensland to withdraw its concession, despite the disadvantage of not having the benefit of the judgments of the courts below on the point: Adams (Deputy Federal Commissioner of Taxation (Victoria)) v. Chas. S. Watson Pty Ltd (1938) 60 CLR 545 at 548.

157.  In my opinion, however, the concession made by Kensland in the courts below was correct.  A plaintiff suffers damage when that person incurs a liability to pay damages, and that is so even though the quantification of the damage is not then ascertainable: Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514 at 536 per Brennan J cited with approval by Lord Nicholls of Birkenhead in Nykredit Mortgage Bank Plc v. Edward Erdman Group Ltd (No.2) [1997] 1 WLR 1627 at 1634 and by Lord Hoffmann in Law Society v. Sephton [2006] 2 AC 543 at 551.  Thus, when a defendant’s negligent breach of a duty of care causes physical harm to the plaintiff or the plaintiff’s property, the defendant incurs a liability to pay damages from that moment.  The time for bringing the plaintiff’s action runs from the moment that the plaintiff suffers damage.  That the damage cannot be quantified, or is not known, at that moment is not relevant.  If the plaintiff acquires a benefit at the same time as acquiring the liability, however, it may not be possible to determine whether the plaintiff has suffered damage until an adverse balance is struck between the benefit and the burden of the liability: Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514 at 536 per Brennan J.  Similarly, if the damages are not payable until the happening of a further event, the plaintiff’s liability is contingent only and damage is not sustained until the event occurs: Wardley Australia Ltd v. State of Western Australia.  Personal guarantees are cases that usually fall within this category.

158.  Paragraph 21 of Kensland’s Statement of Claim sets out three heads of damage that it incurred as the result of TTC’s breach of duty.  They were the liability to pay the damages that Whale View ultimately received – HK$8 million, the loss that it suffered in the diminution of the value of the property following non-completion of the sale – HK$17,980,000 and the consequential loss of legal fees incurred – HK$2,767,407.33.  In acting upon the advice of TTC, Kensland did not obtain any benefit from Whale View or TTC.  So no question of balancing benefit and burden arises.  It is true that both the fact of its liability and the quantification of that liability had to await a judicial determination.  But once that determination was made, both the liability and its quantification were fixed as from the date when Kensland acted upon the advice of TTC – 2 September 1997.  Whale View was entitled to damages and interest thereon as from that date, and Kensland’s damage was incurred as at that date.

159.   In contending that it had suffered no damage before the Court of Appeal gave its decision, Kensland sought to rely on the decision of the High Court of Australia in Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514.  In Wardley, the High Court unanimously held that a claimant who had been induced by misleading conduct to give an indemnity did not suffer damage until it was called on to meet the indemnity.  The Court rejected the argument that the indemnifier suffered damage on entering into the indemnity agreement.  However in Wardley, the indemnifier did not, and could not suffer, damage until it was called on to make good the indemnity.  Until that time, its liability to pay damages was contingent only because it might never be called on to indemnify the party indemnified.  The principle of that case has no application to a case such as the present where the determination of liability and damages is dependent upon a judicial decision.  Judicial decisions determine the rights and liabilities of parties as at the date when the facts giving rise to those rights and liabilities arose.  If the contrary were true, no defence under limitation statutes could succeed.  Nor is there any valid analogy between the situation in Wardley and the present case.  The rights and liabilities of Whale View and Kensland were not fixed as at the date of the Court of Appeal’s decision or the date when this Court affirmed that decision.  The Court of Appeal and this Court declared the rights and liabilities of Kensland and Whale View as they existed as at 2 September 1997, not January 2001 or December 2001.  Neither the liability nor the damage suffered by Kensland arose on the handing down of those decisions which merely declared the pre-existing rights and liabilities of the parties.

160.  Accordingly, Kensland’s damage was suffered on 2 September 1997.  As from that date, it had a liability to pay damages and interest thereon to Whale View.  It was liable to pay nominal damages for its breach of contract as at that date even if Whale View had not suffered any actual damage.  The damage flowing from that breach increased as time passed and eventually included the three heads of damage to which I have referred.  However, for the purposes of s.4 of the Ordinance, Kensland suffered its damage on 2 September 1997, the date on which Whale View’s cause of action for damages arose.  The present action, having been commenced more than six years after 2 September 1997, is therefore barred by s.4 of the Ordinance unless the case falls within s.31 of that Ordinance.

(b)     Section 31

161.  Section 31 of the Ordinance ameliorates the stringency of the operation of s.4.  It provides:

“(1) This section applies to any action for damages for negligence, other than one to which section 27 applies, where the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both-

(referred to in this section as the ‘date of knowledge’) falls after the date on which the cause of action accrued.

(2) The period of limitation prescribed by section 4(1) in respect of actions founded on tort shall not apply to an action to which this section applies.

(3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4).

(4)        That period is either-

(5) In subsection (1) ‘the knowledge required for bringing an action for damages in respect of the relevant damage’ (就有關損害而提出損害賠償訴訟所需的知悉) means knowledge-

(6) Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (1).

(7) For the purposes of this section or section 33 a person’s knowledge includes knowledge which he might reasonably have been expected to acquire-

but a person shall not be taken by virtue of this subsection or section 33 to have knowledge of a fact ascertainable only with the help of expert advice so long as he has taken all reasonable steps to obtain (and, where appropriate, to act on) that advice.”

(c)     The history of s.31

162.  Section 31 is based on s.14A of the Limitation Act 1980 (UK) which was enacted to overcome the deficiencies in the law that existed in cases of latent injury or damage.  It applies only to actions for the tort of negligence; it does not apply to an action for breach of contract or misrepresentation: Societe Commerciale de Reassurance v. ERAS (International) Ltd [1992] 2 All ER 82; Laws v. Society of Lloyd’s [2003] EWCA Civ 1887.  Judicial exposition of the section is best understood by reference to the history of limitation legislation in the United Kingdom which led to the enactment of 14A of the Limitation Act 1980 (UK) through the medium of the Latent Damage Act 1986 (UK).

163.  The long journey to s.14A began with the decision of the House of the Lords in Cartledge v. Jopling & Sons Ltd [1963] AC 758 where the House held that a plaintiff who suffered pneumoconiosis as the result of the defendant’s negligence suffered damage as soon as he inhaled the noxious dust that caused the disease even though he did not become aware of the disease until long afterwards.  Consequently, the House held that the plaintiff’s action was commenced after the expiration of the limitation period and his action was statute barred.

164.  To overcome the injustice that arose from the decision in Cartledge v. Jopling & Sons Ltd [1963] AC 758, the United Kingdom Parliament enacted the Limitation Act 1963, whose meaning gave rise to controversy with various courts and judges interpreting it differently.  In 1975, Parliament made a second attempt to cure the injustice that arose from Cartledge.  To overcome the perceived ambiguities in the 1963 legislation, it enacted what later became s.14 of Limitation Act 1980, which was a consolidation Act.  As will appear, decisions on s.14 of that Act have been influential in interpreting s.14A.

165.  However s.14 was also deficient.  It applied only to actions for damages consisting of or including personal injuries or death.  It did not apply to actions for latent damage to property.  Consequently, in Pirelli General Cable Works Ltd v. Oscar Faber & Partners [1983] 2 AC 1, the House of Lords held that, because the plaintiff suffered damage when cracks first occurred in the chimney of its factory even though the plaintiff did not discover the damage until seven years later, the plaintiff’s action was commenced after the expiration of the limitation period.  Accordingly the House held that the action was statute barred.

166.  To overcome the injustice that the decision in Pirelli General Cable Works Ltd exposed, the Parliament enacted the Latent Damage Act 1986 (UK) which inserted s.14A in the Limitation Act 1980.  Although there are differences both in form and verbiage between s.14A and s.31 of the Ordinance, these differences are not material.  Consequently, decisions of the United Kingdom courts on s.14A would normally be persuasive authorities on the meaning of s.31 of the Ordinance.

167.  As often happens with a much litigated section, however, the United Kingdom courts now tend to apply the judicial exposition of s.14A rather than its words.  Unfortunately, as I see it, the judicial exposition in the United Kingdom has so far not been notably successful.  This Court is not bound by judicial expositions by Courts in other jurisdictions, no matter how eminent is the stature of those Courts.  That reminder is particularly important when the issue concerns the meaning of a statute.  It is the text of the enactment, not the judicial expositions on similar statutes in other jurisdictions, that is binding.  My preference would be to disregard the dicta with which the equivalents of s.31 have become encrusted, except in so far as they are helpful in applying it in particular circumstances, and apply what is to me, at least, the reasonably clear intention of the legislative text.  I would have preferred this Court to develop its own jurisprudence on s.31.  However, the parties conducted their cases within the framework of the judicial exposition of the equivalents of s.31.  Because that is so, it would not be proper on this occasion to look at the section, stripped clean of the judicial exposition on the statutory equivalents of s.31 in the United Kingdom. 

168.  However, it does not follow that this Court should automatically apply the United Kingdom decisions.  Judges develop the common law and interpret statutes against a background of the social, moral, economic and political values and assumptions of the societies in which they work.  Inevitably, these values and assumptions influence the development of the common law and the interpretation of legislative texts.  But the values and assumptions of societies are not necessarily the same.  This is the reason why the courts of former United Kingdom colonies have legitimately developed the common law of their countries so that it no longer retains its unity with the common law of the United Kingdom: Invercargill City Council v. Hamlin [1996] AC 624 at 640 – 644 per Lord Lloyd of Berwick.  It is also the reason that identical legislative texts may legitimately have different interpretations in different countries even in those countries that have inherited the rule of law and their legal systems from the United Kingdom: Geelong Harbor Trust Commissioners v. Gibbs Bright & Co. [1974] AC 810 at 818 – 820 per Lord Diplock.

169.  In interpreting s.14 and s.14A of the Limitation Act 1980 (UK), the United Kingdom courts have given those sections a restricted meaning with the result, as the great majority of the leading cases show, plaintiffs have difficulty in obtaining the benefit of those sections.  Whether or not these restrictive interpretations reflect an underlying assumption that justice requires that defendants should not have to litigate stale claims, as may well be the case, it does not follow that this Court should slavishly follow the reasoning and dicta in the United Kingdom cases.  Despite the parameters in which the parties litigated this case, the rational development of s.31 of the Ordinance requires this Court to depart from the reasoning and dicta of those cases when it is persuaded that their reasoning and dicta cannot be justified by the legislative text of s.31.

(d)     The construction of s.31

170.  As the opening words of s.31 show, neither that section nor its UK counterpart is confined to cases of physical injury or physical damage.  Cases of pure economic loss also attract the application of the section.  In Haward v. Fawcetts [2006] 1 WLR 682 at 698, however, Lord Walker of Gestingthorpe warned that the “wide range of claims to which section 14A may extend suggests that general observations made by the court in one type of case may not be directly apposite in a case of another type”.  Although, as reported cases on s.14A in the United Kingdom show, the section is sometimes difficult to apply in cases of physical injury or property damage, it is usually harder to apply in cases of economic loss.  This is especially so when the provisions of s.31(5)(a) and (b) have to be applied to cases of economic loss resulting from a solicitor’s negligence, as in the present case.

171.  Section 31(5)(a) is readily understandable and often easy of application when it has to be applied to the paradigm case of latent damage to property.  In that case, it usually poses no difficulty to determine whether the plaintiff’s knowledge of “facts about the damage” would lead a reasonable person to consider the damage sufficiently serious to institute proceedings against a defendant who would not dispute liability.  If the plaintiff knew that a chimney had cracks and also had constructive knowledge from “facts ascertainable by him with the help of appropriate expert advice”, s.31(7), that the chimney was liable to collapse, it is a simple matter of judgment as to whether a reasonable person would think those facts “sufficiently serious to justify his instituting proceedings”.  Cases of latent physical injury may sometimes be more difficult of decision, but s.31(5)(a) also readily applies to them.  The difficult cases are those of pure economic loss where the loss results from acting on professional advice.  In cases concerning the professional advice of solicitors in particular, s.31(7) often does not have the scope for the operation that it has in other situations: see O’Sullivan, Limitation, latent damage and solicitor’s negligence 20 PN 218 at 219, 225.

172.  The chief reason for this is that, in solicitors’ negligence cases, often there are no facts about the damage in any sense meaningful to a non-lawyer.  It is legal advice or the lack of it in conjunction with facts in their ordinary sense that brings about the plaintiff’s damage in many cases concerned with a solicitor’s negligence.  Without legal advice, facts – such as the contents of a document – may have no significance for the lay plaintiff.  For example, a plaintiff who suffers damage because she executed a mortgage document with an “all moneys” clause in it may have no idea that she has suffered damage until she learns either from legal advice or the enforcement of the mortgage that she has suffered damage.  And in such cases, it is the solicitor’s failure to give such advice that constitutes the case against him.  It is unrealistic to conclude that, because a plaintiff had read or ought to have read the mortgage, that person knew the facts about the damage that he or she has suffered.  As Janet O’Sullivan points out in Limitation, latent damage and solicitor’s negligence 20 PN 218 at 225:

“[I]n cases of solicitor’s negligence it is impossible to retain this sharp division between the facts and the law.  At its simplest, the claimant’s case may be that he suffered damage as a result of incorrect advice about the law: he cannot know he has suffered damage unless he knows that the legal advice was incorrect.  Or the claimant may have read a particular document revealing that he has suffered damage (and thus have knowledge of its contents), but may not have appreciated its meaning or its legal significance, primarily because his solicitor has not taken care to explain it to him.  Or a solicitor may fail to give advice in circumstances in which the claimant, quite reasonably, does not appreciate that the solicitor owed her any duty of care at all.

In a nutshell, the problem once again is that the ‘the fact v law’ distinction was first enacted to solve a personal injury issue, more particularly the problem of claimants suffering from asbestos related industrial disease, who knew the facts of their injury and that it had been caused by their working conditions, but had not been advised that they had a cause of action against their employer.  This wording was adopted wholesale for cases other than personal injury in the Latent Damage Act 1986, with no mention or discussion of it in the proceeding Law Reform Committee Report, and is, it will be suggested, wholly ill-suited to cases of solicitor’s negligence.”

173.  But even if the fact v law distinction is glossed over, there are other problems.  The “facts about the damage” in pure economic loss cases are often not observable or ascertainable by the plaintiff and, because it is often reasonable for the plaintiff to rely on the advice of the solicitor, it cannot be said that the plaintiff “might reasonably have been expected to acquire” knowledge of facts “with the help of appropriate expert advice” even if legal opinions and predictions concerning legal or curial events are treated as “facts”. Because of the reliance factor, it is also often difficult to determine whether the plaintiff had knowledge “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence”.

The United Kingdom decisions

174.  The similarities in the terms and purpose of s.14 and s.14A are such that the United Kingdom case law on s.14 assists in considering the meaning of the comparable or identical terms in s.14A.  Indeed, the speeches in the House of Lords in the leading case of Haward v. Fawcetts [2006] 1 WLR 682 – a s.14A case – are replete with references to the case law on s.14.  Because of the high similarity in the language of s.14A and s.31 of the Ordinance, the United Kingdom cases do give guidance on the meaning and application of s.31.  But, as appears below, there are arguable difficulties in reconciling the judicial interpretation of the term “knowledge” with the text of the United Kingdom equivalents of s.31.

175.  In Halford v. Brookes [1991] 1 WLR 428 at 443 – a decision on s.14 – Lord Donaldson MR said that the purpose of the section was “to determine a period of time within which a plaintiff can be required to start any proceedings”.  In Broadley v. Guy Clapham & Co. [1994] 4 All ER 439 at 449, Hoffmann LJ agreed that this was the purpose of the section.  And, in my view, it is also the purpose of s.14A and s.31 of the Ordinance.

176.  As s.31(1) shows, the section is concerned with “the earliest date on which the plaintiff … had both … the knowledge required for bringing an action for damages in respect of the relevant damage; and … a right to bring such an action”.  In the present case, it is common ground that Kensland had a right to bring the action.  What is in dispute is whether it had the requisite knowledge.

177.  The “knowledge required for bringing an action” means knowledge of the four matters specified in s.31(5).  Time does not begin to run against the plaintiff for the purposes of the section unless that person had knowledge of those four matters: Dobbie v. Medway Health Authority [1994] 1 WLR 1234 at 1247 per Steyn LJ.  If the plaintiff can establish that he or she did not have knowledge concerning any one of these matters until a date within three years of the commencement of his action in cases where the cause of action accrued more than six years before the action was commenced, the plaintiff obtains the benefit of s.31(4)(b).  The legal onus is on the plaintiff to prove that he or she did not have knowledge of one or more of the matters in s.31(5) until a date within the three-year period in such cases.  Forensically, however, the defendant will seek to show the opposite for the purpose of rebutting the plaintiff’s claim or, if possible, to establish positively that the plaintiff knew of each of the four matters more than three years before the commencement of an action that is otherwise statute barred.

178.  In Halford v. Brookes [1991] 1 WLR 428 at 443, Lord Donaldson MR said that the term “knowledge” has to be construed in the context of the purpose of the section.  His Lordship went on to say:

“In this context ‘knowledge’ clearly does not mean ‘know for certain and beyond possibility of contradiction.’ It does, however, mean ‘know with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking legal and other advice and collecting evidence.’  Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.”

179.  In Haward v. Fawcetts [2006] 1 WLR 682 at 685, Lord Nicholls of Birkenhead said that this statement of Lord Donaldson MR “gave valuable guidance” “as to the degree of certainty required”.  “In other words”, Lord Nicholls said, “the claimant must know enough for it to be reasonable to begin to investigate further”.  In Dobbie v. Medway Health Authority [1994] 1 WLR 1234 at 1240, Sir Thomas Bingham MR said that Lord Donaldson’s test was not hard to apply.  It involved, he said, “ascertaining the personal injury on which the claim is founded and asking when the claimant knew of it”.

180.  In Nash v. Eli Lilly & Co [1993] 1 WLR 782 at 792, Purchas LJ, in giving the judgment of the Court of Appeal, said that it did not intend to lay down a definition for the purposes of the statute which Parliament had “left to speak for itself”.  However, he went on to say that knowledge:

“… is a condition of mind which imports a degree of certainty and that the degree of certainty which is appropriate for this purpose is that which, for the particular plaintiff, may reasonably be regarded as sufficient to justify embarking upon the preliminaries to the making of a claim for compensation such as the taking of legal or other advice.”

181.  In Broadley v. Guy Clapham & Co. [1994] 4 All ER 439 at 449, Hoffmann LJ expressed a view similar to that of Lord Nicholls and said that the purpose of s.14(1) was:

“… to determine the moment at which the plaintiff knows enough to make it reasonable for him to begin to investigate whether or not he has a case against the defendant.  He then has three years in which to conduct his inquiries and, if advised that he has a cause of action, prepare and issue his writ.  Ordinarily it will suffice that he knows that the injury was caused by an act or omission of the defendant.  But there may be cases in which his knowledge of what the defendant did or did not do is so vague and general that he cannot fairly be expected to know what he should investigate.  He will also not have reached the starting point if, in an unusual case like Driscoll-Varley v. Parkside Health Authority, he thinks he knows the acts and omissions he should investigate but in fact he is barking up the wrong tree.” (emphasis in original)

182.  The courts have taken a strict view of a plaintiff’s obligation to investigate.  In Forbes v. Wandsworth Health Authority [1997]QB 402 the plaintiff had two operations on his leg which was subsequently amputated.  Nine years later he consulted a solicitor who obtained an expert report which indicated that the leg could have been saved but for the negligent delay in carrying out the second operation.  The Court of Appeal held that the claimant was fixed with constructive knowledge from about 12 to 18 months following the operation.  Stuart-Smith LJ said (at 412):

“It seems to me that where, as here, the deceased expected, or at least hoped, that the operation would be successful and it manifestly was not, with the result that he sustained a major injury, a reasonable man of moderate intelligence, such as the deceased, if he thought about the matter, would say that the lack of success was ‘either just one of those things, a risk of the operation, or something may have gone wrong and there may have been a want of care; I do not know which, but if I am ever make a claim, I must find out.’

In my judgment, any other construction would make the Act unworkable since the plaintiff could delay indefinitely before seeking expert advice and say, as the deceased did in this case, ‘I had no occasion to seek it earlier.’  He would therefore be able, as of right, to bring the action, no matter how many years had elapsed.  This is contrary to the whole purpose of the Act which is to prevent defendants being vexed by stale claims which it is no longer possible to contest.”

183.  Nothing in s.14, s.14A of the Limitation Actor s.31 of the Ordinance expressly refers to the investigation of a plaintiff’s case.  But that requirement seems the inevitable construction of s.31(7) and its UK equivalents.  The reference in that sub-section to “knowledge which he might reasonably have been expected to acquire … from facts observable or ascertainable by him; or … from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek” necessarily implies that the plaintiff will be fixed with facts whose observation or ascertainment can be determined objectively when they could reasonably have been obtained.  And the words “which he might reasonably have been expected to acquire” imply a course of investigation by the plaintiff during which the plaintiff could be expected to observe or ascertain those facts.

184.  But judicial statements about investigating whether the plaintiff has a claim or has a case or statements about beginning to investigate need to be read with care.  They are relevant to the issue of constructive knowledge, not actual knowledge.  They are concerned with the process by which the plaintiff becomes fixed with knowledge of facts that that person ought to have known.  As will appear, I think that three of the Law Lords in Haward v. Fawcetts [2006] 1 WLR 682 overlooked this vital distinction and led them into error.  The questions posed by s.31(5)(a) – (d) are required to be answered by the actual knowledge of the plaintiff as supplemented by the deemed knowledge of those facts that “he might reasonably have been expected to have acquired”.  But questions about whether the plaintiff has or might have a claim or should embark on an investigation of the claim have nothing to do with answering the questions posed by those four paragraphs.  Not only does s.31(7) exclude negligence as an issue but s.31(5)(a) is concerned only with the extent of the damage being sufficient to institute proceedings on the hypothesis that the defendant does not dispute his or her liability.

185.  The knowledge of a plaintiff that is relevant for the purposes of s.31 is (1) his actual knowledge concerning the matters referred to in s.31(5)(a) – (d) and (2) the deemed knowledge of those matters that “he might reasonably have been expected to acquire” (i) from facts observable or ascertainable by him and (ii) from facts ascertainable by him with the help of appropriate expert advice which it was reasonable for him to seek.  The Court is then required to make a judgment as to whether the combination of actual and deemed knowledge constitutes “knowledge” of those four matters.  The fact that s.31(7) requires constructive knowledge to be taken into account means that the ultimate issue of knowledge does not depend on the mental state of the plaintiff.  Knowledge for the purpose of s.31(5) is a legal construct consisting of the plaintiff’s actual knowledge and the deemed knowledge that is imputed to that person.  Because that is so, to my mind, “knowledge” in s.31(5) simply means “awareness” or “recognition”.  In dealing with each paragraph in that sub-section, the Court asks itself whether it was more likely than not that the plaintiff was aware of or recognised the existence of the matters specified in that paragraph.

186.  Properly understood, I do not think that the statements of Lord Nicholls, Lord Donaldson MR, Purchas LJ or Hoffmann LJ to which I have referred were intended as an exhaustive description of the term “knowledge” in the United Kingdom equivalents of s.31(5).  Rather they should be read as referring to the point in time when the plaintiff is required to find out more about bringing an action.  In other words, they are directed to the s.31(7) situation; they are directed to the time when the plaintiff “might reasonably have been expected to acquire” (s.31(7)) further information about his or her case.  If their Lordships had meant that a plaintiff had “knowledge” for the purpose of s.31(5)(a) – (d) as soon the plaintiff knew “enough for it to be reasonable to begin to investigate further”, the constructive knowledge provisions of s.31(7) would seem superfluous.  It is hardly to be supposed that the plaintiff was to be fixed with knowledge of the facts referred to in s.31(7) before he had sufficient knowledge to require further investigation.  If that is so, the point at which the plaintiff has “knowledge” for the purpose of s.31(5) cannot be the point at which it was reasonable for the plaintiff to investigate further.

187.  Although a literal reading of what was said by Lord Nicholls, Lord Donaldson MR, Purchas LJ and Hoffmann LJ supports a contrary view, I do not think that their statements should be so read.  It would mean that time would run against a plaintiff not from when he or she had knowledge of all the matters specified in s.31(5)(a) – (d) but from the time when the plaintiff should begin to investigate whether those matters were present and whether he or she had a valid or arguable claim.  That seems contrary to what the legislature intended to be the case.

Knowledge “of such facts about the damage” – s.31(5)(a) 

188.  The first matter to which s.31(5) refers is 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 his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment”.  This paragraph draws a distinction between “the damage” and the “damages” that are claimed.  It is knowledge of the “facts about the damage” that is relevant for the purpose of this paragraph, not knowledge of the damages that the plaintiff claims in the action.  Section 31(5) also distinguishes between knowledge of “facts about the damage” in para.(a) and knowledge of “the damage” in para.(b).  

189.  It seems reasonable to conclude that “facts” in s.31(5)(a) include not only phenomena that are perceptible by or through the senses but also intellectual constructs such as systems, methods and expert opinions including predictions.  Whether “facts about the damage” are “sufficiently serious” is a value judgment, and it is not to be supposed that the “reasonable person” of whom s.31(5)(a) speaks must always make that judgment unaided by expert advice as to the seriousness of the facts concerning that damage.  It seems likely that s.31(7)(b), which refers to “facts ascertainable by him with the help of appropriate expert advice”, was enacted so that expert opinions that could reasonably be obtained would be considered in respect of the issues arising under s.31(5) whether the issue relates to the seriousness of damage under para.(a), attributability under para.(b) or identity under paras (c) and (d).  Much expert advice consists of opinion, and there is no reason to confine the facts of which s.31(7) speaks to those physical phenomena that only the expert can see or identify and relate to the plaintiff.  Section 31(5)(b), for example, raises the causal issue whether “the damage was attributable … to the act or omission which is alleged to constitute negligence”.  In many cases, the issue of attributability is one on which expert opinion is required.  Again, it is not to be supposed that the legislature intended this causal issue to be determined by reference only to the knowledge or judgment of a hypothetical reasonable person unassisted by expert opinion.  Furthermore, I see no reason to confine opinions to past or current matters or events.  In the context of the issues raised by s.31(5), there is no good reason for excluding “predictions” from the concept of “facts”.  Suppose a plaintiff learns or could have learned from an expert: (1) that the cracking of a building was caused by defective foundations; (2) that the cracking is continuing; and (3) that the foundations are so defective that the building is likely to collapse.  It would be astonishing if the legislature intended to exclude item (3) from the “facts” to be considered in determining whether the facts about the damage were sufficiently serious to justify proceedings.

190.  Speaking generally, in cases concerning physical injury or property, the only issue under s.31(5)(a) is whether what is accepted as damage and was known to the plaintiff was sufficiently serious to justify instituting proceedings.  As s.31(6) emphasizes, questions of whether any acts or omissions involve negligence is irrelevant to the s.31(5) issues, and s.31(5)(a) operates on the hypothesis that the defendant does not dispute that he is liable for the damage caused.  Cases concerning economic loss, however, do raise difficult questions as to whether the plaintiff knew that he or she had suffered damage.  Some cases of physical injury or property damage also raise questions as to whether the plaintiff knew that he or she had suffered damage.  These cases raise the question whether bare physical facts alone constitute the existence of damage of which the plaintiff knew or whether the existence of damage requires an evaluation of those physical facts, an evaluation which will require either expert advice or the existence of an additional fact.  The problem is illustrated by Dobbie v. Medway Health Authority [1994] 1 WLR 1234.

191.  In Dobbie, the plaintiff had had an operation to remove a lump in her breast.  Thinking that the lump was cancerous, the surgeon removed the whole breast without having the lump pathologically tested.  In fact, the lump was benign, which the plaintiff learned shortly after the operation.  Fifteen years passed before the plaintiff discovered that the surgeon should have had the lump tested before removing her breast. Dismissing her appeal against a lower court finding that the claim was statute barred, Sir Thomas Bingham MR said (at 1243):

“She knew of this injury within hours, days or months of the operation and she at all times reasonably considered it to be significant.  She knew from the beginning that this personal injury was capable of being attributed to, or more bluntly was the clear and direct result of, an act or omission of the health authority.  What she did not appreciate until later was that the health authority’s act or omission was (arguably) negligent or blameworthy.  But her want of that knowledge did not stop time beginning to run.”

192.  Beldam LJ said (at 1245):

“The injury in respect of which the plaintiff claims damages is the loss of her left breast and the severe psychological symptoms which followed.  The act or omission of the defendant on which she relies is the act of the surgeon in removing the breast and the omission to carry out a test before doing so which would have indicated that the removal of her breast was unnecessary.

Thus the plaintiff had actual knowledge as required by section 14 within a few days of the operation being performed.”

193.  The difficulty about this reasoning is that the damage that the plaintiff suffered was not the loss of her left breast, as Beldam LJ found.  If the breast had been cancerous, its removal would have caused her no damage.  No one could sensibly say that a person suffers damage when a cancerous growth is removed.  The plaintiff’s damage was the loss of a healthy breast.  Until she learned that her breast should not have been removed, she did not know “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence”.  The Court of Appeal subsequently recognised this in Hallam-Eames v. Merrett Syndicates [2001] Lloyd’s Reports PN 178 where Hoffmann LJ, giving the judgment of the Court, said (at 181):

“If one asks on common sense principles what Mrs Dobbie was complaining about, the answer is that the surgeon had removed a healthy breast.  It would in our view be a seriously incomplete statement of her case to say that it was simply that the surgeon had removed her breast.  This is not a matter of elaborating the detail by requiring knowledge of precisely how he had come to do the act complained of, such as this court rejected in Broadley.  It was part of the essence of her complaint.  Nor is it requiring knowledge of fault or negligence.  The court’s emphatic rejection of such a requirement is entirely consistent with characterising the act complained of (and of which knowledge was therefore required) as the removal of a healthy breast.  But the judge [ie in the present case], as it seems to us, has read Dobbie to mean that knowledge that the surgeon had removed her breast would have been enough.

If one asks what is the principle of common sense on which one would identify Mrs Dobbie’s complaint as the removal of a healthy breast rather than simply the removal of a breast, it is that the additional fact is necessary to make the act something of which he would prima facie seemed entitled to complain.  She was suspected of having a cancerous lump and if this had been the case, the removal of the breast would not have been a matter for complaint.”

194.  The analysis of Dobbie by Hoffmann LJ was directed at the United Kingdom equivalents of s.31(5)(b) “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence”.  The difficulty I have with the reasoning of the Court of Appeal in explaining Dobbie is that it re-writes the terms of s.31(5)(b).  It substitutes the plaintiff’s complaint in a broad sense for the words “act or omission which is alleged to constitute negligence”.  By referring to the “removal of a healthy breast”, the Court substituted a compound conception of s.31(5)(a) and s.31(5)(b).  I would have thought it was the failure to test the lump in her breast that was relevantly the “act or omission” and that losing a healthy breast was “the damage”.  Nevertheless, Lord Justice Hoffmann’s analysis indicates that Dobbie was wrongly decided on para.(a) of the UK equivalents of s.31.  

195.  In Haward v. Fawcetts [2006] 1 WLR 682 at 686-687, Lord Nicholls said the Court of Appeal in Dobbie had erred when it criticised the trial judge in that case for saying that the claimant had to have “broad knowledge of sufficient facts to describe compendiously (i) that her breast had been unnecessarily removed, (ii) that something had gone wrong”.  Lord Nicholls said (at 687) that the essence of the claimant’s case in Dobbie was that “she had suffered injury by the removal of a healthy breast, that is, her breast had been removed unnecessarily and something had gone wrong.  These were the acts and omissions she alleged constituted negligence.  Under the statute, time did not begin to run until she knew of these acts or omissions.  Until she was aware of these matters she could not know her injury was attributable to them”.  Lord Nicholls said that he agreed with the observations concerning Dobbie that the Court of Appeal made in Hallam-Eames v. Merrett Syndicates [2001] Lloyd’s Reports PN 178 at 181.

196.  These remarks of Lord Nicholls were also directed to the United Kingdom equivalent of s.31(5)(b) but they apply equally to the issue under s.31(5)(a).  It may be that his Lordship did not think his analysis of Dobbie applied to the United Kingdom equivalent of s.31(5)(a), but this seems unlikely.  In Haward v. Fawcetts [2006] 1 WLR 682 at 701, Lord Walker also agreed with the analysis by Hoffmann LJ of Dobbie.

197.  In Dobbie, Sir Thomas Bingham MR had said that questions of evaluation do not enter into the question of a plaintiff’s knowledge in the United Kingdom equivalent of s.31(5)(a).  After referring to Broadley v. Guy Clapham & Co. [1994] 4 All ER 439 and Nash v. Eli Lilly & Co. [1993] 1 WLR 782, Sir Thomas Bingham MR said [1994] 1 WLR 1234 at 1241H:

“These decisions are, I think, consistent with and supportive of the construction of the statutory language set out above, subject to one possible qualification.  The requirement that the injury of which a plaintiff has knowledge should be ‘significant’ is in my view directed solely to the quantum of the injury and not to the plaintiff’s evaluation of its cause, nature or usualness.  Time does not run against the plaintiff, even if he is aware of the injury, if he would reasonably have considered it insufficiently serious to justify proceedings against an acquiescent and credit-worthy defendant, if (in other words) he would reasonably have accepted it as a fact of life or not worth bothering about…” (my emphasis)

198.  In Dobbie, Sir Thomas Bingham MR was construing s.14 which required knowledge “that the injury in question was significant”.  The term “significant” does not appear in s.14A or s.31 but Lord Mance in Haward v. Fawcetts [2006] 1 WLR 682 at 717 and Chadwick LJ in 3M United Kingdom Plc v. Linklaters & Paines (A Firm) [2006] PNLR 543 at 553-554 took the view that Sir Thomas Bingham’s remarks were equally applicable to the United Kingdom equivalent of s.31(5)(a).  In Haward, Lord Mance said (at 717):

“106 …Subsection (6) of section 14A distinguishes two aspects of the knowledge required.  The first aspect relates to the seriousness of the damage, the second to ‘the other facts relevant to the current action’ including in particular that such damage was attributable in whole or part to the act or omission alleged to constitute negligence and the identity of the defendant.  The seriousness of the damage is relevant because there may be cases where, although it is known that loss has been suffered due to the negligence of another person, the loss may appear for a time so minor that no one would contemplate instituting proceedings.  That is I think more likely in the area of personal injuries and fatal accidents, covered by section 14 on which section 14A (7) - (10) were modelled, than in the area covered by section 14A itself.  In both areas, the statutory language assumes that it is known that there has been some injury (under section 14) or damage (under section 14A).  But this too can give rise to difficulty.  If a doctor advises that it is necessary to operate, or to remove a breast, in order to remove a malignant tumour, one would not usually speak of the patient sustaining an injury until one knew that the diagnosis was misconceived and there was no such tumour.  Similarly, if a financial adviser advises in favour of an investment, one would not describe the making of the investment itself as ‘damage’ until one discovered that it had been a bad or unsound investment from the outset.

107.    In such cases, there is an interplay between knowledge of what would ordinarily be regarded as injury or damage and knowledge regarding the factual circumstances in which the operation or investment occurred.  Yet, the first aspect of the knowledge required relates to damage of sufficient seriousness ‘to justify [the claimant] instituting proceedings’ … whereas the knowledge required regarding the attributability of such damage to some act or omission of the defendants is, as will appear, not necessarily such knowledge as to justify proceedings.  To maintain a coherent scheme, the better view therefore appears to be to treat the first aspect of knowledge as relating solely to matters of quantum and all questions regarding the evaluation or classification of damage as such as falling within the second aspect of the knowledge required.  This is also the view taken in the authority: see Dobbie v. Medway Health Authority [1994] 1 WLR 1234, 1241 - 1242, per Sir Thomas Bingham MR.”

199.  These passages were cited by Chadwick LJ in 3M United Kingdom Plc v. Linklaters & Paines (A Firm) [2006] PNLR 543 at 553-554.

200.  No doubt s.31(5)(a) and its United Kingdom equivalents are directed solely to the issue of quantum (how serious is it?) but it does not follow that, in determining that issue, evaluation of the nature of the damage is irrelevant.  One must first identify the damage before one can assess the quantum issue, and evaluation of facts may be necessary in determining whether damage has been suffered.

201.  The difficulty of determining the issue of a plaintiff’s knowledge of damage in a solicitor’s negligence case is illustrated by Bowie v. Southorns [2003] PNLR 135.  It also shows that the United Kingdom courts meet this difficulty by looking at the issue of “facts about the damage” in very broad terms.  In 1988, the claimant and her husband had executed a charge in favour of a bank over their matrimonial home to secure the husband’s business debts.  Although a partner in the defendant firm of solicitors had signed an attestation clause confirming that he had explained the charge to the claimant, she alleged in an action brought in 2001 against that firm for negligence that he had not done so.  She further alleged that she did not believe that the solicitor was acting for her in 1988 and, although she had consulted solicitors and counsel in 1992 when she had unsuccessfully defended possession proceedings brought by the bank, she was not told that she might have an action against the defendant firm.  Nelson J held that the action against the defendant firm was statute barred.  He found (at 148) that the plaintiff knew that she had signed the legal charge over her home which secured repayment of some of the husband’s debts, that, when the bank commenced proceedings for possession, she knew there was a risk she might lose the home, that she thought that the solicitor acted for her husband’s business, that he had not explained the nature of the charge to her before she signed it, that she knew that the attestation clause was false and that she would not have signed the charge if he had explained what the document meant for her.  His Lordship said (at 152):

“What is required is that the claimant must have in broad terms knowledge of the facts on which her complaint is based.  She does not in my judgment have to know how a claim in damages might be presented by the lawyers.  If she knows that she has suffered damage or loss or potential damage or loss that is sufficient … Here [the plaintiff] knew that there was a risk that she might lose her home, that that risk would become a reality if the bank succeeded in its action, and that that loss arose from her signing a legal charge which, if [the solicitor] had explained it to her properly, she would not have signed.  I am satisfied on the evidence that she had this knowledge by November 1992.  She did not need expert advice in order to have that knowledge which was in my judgment sufficient to lead her to the view, after the bank had commenced possession proceedings, that she had suffered damage such as to consider it sufficiently serious to justify the institution of proceedings.  I am further satisfied that on the facts as I have found them, she knew that the damage was attributable in part to [the solicitor’s] failure to explain the charge to her, as but for that failure she would not have entered into the transaction.” (my emphasis)

202.  Just as in Dobbie,“an additional fact” was necessary to convert the facts that the plaintiff knew into “damage”, so, in Bowie v. Southorns, it is difficult to see how the bare facts that Mrs Bowie knew constituted knowledge of “facts about the damage” unless there was added an element of legal knowledge, an element that did not exist until 2000.  As Janet O’Sullivan points out in her comment on that case (Limitation, latent damage and solicitor’s negligence 20 PN 218 at 238):

“Unfortunately, justifying the result by reference to attribution in ‘broad terms’ does not explain how the solicitor’s omission to explain the charge to the claimant makes her damage attributable to the omission - unless you add that the solicitor was under a duty to her, he stands in the same position as ‘everyone else in the world’ who gave no advice about the charge!”

203.  However, not all cases concerning a solicitor’s negligence raise difficult questions concerning the plaintiff’s knowledge of damage in the context of s.31(5)(a).  In 3M United Kingdom Plc v. Linklaters & Paines (A Firm) [2006] PNLR 543, three related companies who were members of the 3M corporate group, held leases expiring in 2012.  Each lease contained a break clause, personal to the tenant, which allowed the tenant at a price to determine the lease on one year’s notice ending on 4 December 1997.  As part of restructuring the group in 1989, the defendant solicitors drafted assignments of the leases without noticing that the break clause in each lease was personal to the tenant.  The loss of the right to terminate came to the knowledge of the group’s in-house lawyer during negotiations on 30 August 1995 for an extension of the break date to 31 March 2001.  The landlord took the point that the option to terminate could no longer be exercised as a result of the assignments, and 3M lost the opportunity to move its operations penalty free to new premises it had obtained.  The 3M companies did not commence their action against the solicitors until 1999 but it was agreed that it should be treated as started on 1 September 1998.

204.  The Court of Appeal held that the action was statute barred.  The Court rejected the argument that 3M did not know that it had suffered damage before 1 September 1995 because it did not know until after that date that the landlord could and would rely on the fact that the option had been lost which was knowledge acquired after 1 September 1995.  Chadwick LJ said that the damage to the plaintiff was the loss of the options when the leases were assigned in 1989.  He said (at 557) that it was impossible to contend that, because the landlord had agreed in principle to defer the options before 30 August 1995 when it thought that they were exercisable in 1997 it could be taken as an indication that it would be willing to affirm the agreement in principle once it knew the options were not exercisable.  His Lordship said (at 557):

“The true position on August 30, 1995, as the judge appreciated, was that the claimant companies…well knew what they had lost by the assignments in 1989.  And they knew that that loss was serious, unless the problem could be solved.  The hope that [the landlord] would not receive informed advice as to the strength of its position has not been advanced: there could be no basis for a suggestion that the landlord would not be properly advised by its solicitors.  The hope that there could be a solution to the problem by negotiation was founded on sand: there was no basis for negotiation.”

205.  The foregoing discussion shows that there are difficulties in applying s.31(5)(a) in some cases, particularly when the case concerns a solicitor’s negligence and more so when it concerns a negligent omission. There is also, as I have indicated, judicial support for the view that s.31(5)(a) is concerned solely with quantum and does not concern itself with “questions regarding evaluation or classification of damage”, a view which I think is erroneous.

206.  The questions under s.31(5)(a) aided by s.31(7) then are:

Section 31(5)(a) and the present case

207.  Whatever difficulties may be present in some cases in determining whether the plaintiff had knowledge of the “facts about the damage” for the purpose of s.31(5)(a), no difficulties arise in this case.  Paragraph 19 of the Statement of Claim alleged that as a result of TTC’s negligent handling of Kensland’s affairs, it “has suffered damages”. Paragraph 21 gave “the particulars as to damages suffered by Kensland as the result of TTC’s negligent handling and advice concerning the sale and purchase of the property”: (1) HK$8 million, payable “as damages pursuant to the judgment of the Court of Final Appeal”; (2) HK$2,767,407.33, “paid by Kensland as legal fees”; and (3) HK$17,980,000, “being the diminution in value of the property following the non-completion of the sale”.

208.  Kensland almost certainly did not know the quantum of this damage until the litigation against Whale View had concluded.  But it knew each of the three heads of damage that are the basis of its claim for damages no later than the end of November 1997.  It knew on 3 September 1997 that it was being sued for specific performance of the contract and for damages as the result of acting on the advice of TTC that it could terminate the contract for the sale of the premises.  By November 1997, it had been required to pay HK$78,300 to defend the action brought by Whale View.  On 14 November 1997, it sought counsel’s advice on the possibility of admitting Whale View’s claim because “the property is now worth much less than HK$55 million”.  Thus, by the end of November 1997, it knew each of the three heads of damage that now form the basis of its action for damages against TTC, and these three heads of damage are “the facts about the damage” that are relevant for the purpose of s.31(5)(a).  

209.  Kensland’s knowledge of these heads of damage then raises the question whether they would lead a reasonable person to consider them sufficiently serious to justify his instituting proceedings for damages against TTC.  Section 31(5)(a) does not make time run when a plaintiff knows “the damage”; it makes it run when the plaintiff knows “the facts about the damage” which would lead a reasonable person to conclude that proceeding are justified.  On this aspect of the present case, it is not even necessary to adopt the approach of Nelson J in Bowie v. Southorns [2003] PNLR 135 and look at the facts about the damage in “broad terms” orlook at the “potential damage or loss”.  No later than the end of November 1997, Kensland had knowledge of the specific facts concerning the damage which is the subject of its damages claim. 

210.  Given the hypothesis upon which s.31(5)(a) proceeds – that the defendant does not dispute its liability and is able to satisfy a judgment against it – there can be no doubt that a reasonable person would have considered the facts about the damage in this case sufficiently serious to justify instituting proceedings by the end of November 1997.  As I have indicated, this paragraph is concerned with quantum.  What it requires is the judgment of a reasonable person as to whether the facts about the damage are sufficiently serious and therefore the likely amount of damages recoverable sufficiently large to justify bringing an action against a defendant who will not be disputing that he is liable for the damage and can satisfy the judgment obtained.  Thus, the s.31(5)(a) issue in the present case must be decided on the basis that TTC did not dispute its liability to Kensland for damages for the three heads of damage which is the basis of its damages claim.  Each of those heads of damage was substantial and exposed Kensland to a liability to pay large sums of money to Whale View.  To my mind, there can be no doubt that in these circumstances a reasonable person would regard the facts about the damage sufficiently serious to justify proceedings against a hapless defendant who cannot dispute its liability and can satisfy the judgment against it.

211.  Accordingly, in my opinion by the end of November 1997, Kensland had the relevant knowledge for the purpose of s. 31(5)(a).

Section 31(5)(b)

212.  Section 31(5)(b) raises the issue whether, by reason of actual or constructive knowledge or both, the plaintiff knew “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence”.  It is necessary that the plaintiff know the act or omission that allegedly constitutes negligence, but the plaintiff does not need to know “that, as a matter of law, such act or omission involve negligence”: Haward v. Fawcetts [2006] 1 WLR 682 at 719 per Lord Mance.  As I earlier indicated, this paragraph concerns “the damage” as opposed to para.(a)’s concern with the “facts about the damage”.

213.  If one simply examined the terms of s.31 and its United Kingdom equivalents, the meaning of s.31(5)(b) would seem clear enough.  By reason of the provisions of s.31(6), all that s.31(5)(b) requires is for the Court to identify the damage and the act or omission alleged to constitute negligence and ask whether the plaintiff had knowledge that the damage was attributable to that act or omission without its negligent quality.  Unfortunately, as I see it, the clear meaning of the paragraph has become encrusted with judicial dicta that have substituted judicial exposition for the meaning of the paragraph.  One of the best known expositions of the paragraph is found in the judgment of Hoffmann LJ in Hallam-Eames v. Merrett Syndicates [2001] Lloyd’s Reports PN 178 when he explained the operation of the United Kingdom equivalent of s.31(5)(b).  He said (at 181):

“In other words, the act or omission of which the plaintiff must have knowledge must be that which is causally relevant for the purposes of an allegation of negligence… It is this idea of causal relevance which various judges of this court have tried to express by saying the plaintiff must know the ‘essence of the act or omission to which the injury is attributable’ (Purchas LJ in Nash v. Eli Lilly & Co [1993] 1 WLR 782, 799) or ‘the essential thrust of the case’ (Sir Thomas Bingham MR in Dobbie [1994] 1 WLR 1238) or that ‘one should look at the way the plaintiff puts his case, distil what he is complaining about and ask whether he had in broad terms knowledge of the facts on which that complaint is based’ (Hoffmann LJin Broadley [1993] 4 Med L R 328, 332).”

214.  Lord Scott cited this passage with evident approval in Haward v. Fawcetts [2006] 1 WLR 682 at 695, as did Lord Walker at 700-701.  In the same case, Lord Nicholls cited with approval the above passage in the judgment of Hoffmann LJin Broadley v. Guy Clapham & Co. [1993] 4 Med L R 328, 332.

215.  The various tests to which Hoffmann LJ refers represent, with great respect to those that have formulated them, a departure from the statutory text.  What s.31(5)(b) and its United Kingdom equivalents require is knowledge “that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence”.  They do not require knowledge of the “essence of the act or omission”, “the essential thrust of the case” or “in broad terms knowledge of the facts on which that complaint is based”.  They require identification of the “act or omission” that the plaintiff says is negligent.  And the inference to be drawn from s.31(6) is that the “act or omission” must be stripped of its negligent quality.  If the plaintiff says that he was negligently advised, the act or omission is the advising.  The issue under para.(b) then becomes when, as in Haward v. Fawcetts [2006] 1 WLR 682, whether the plaintiff knew that the loss of money invested (the damage) was attributable to that advising.  If the plaintiff says that she lost a healthy breast by reason of the surgeon’s negligent failure to test the lump to see whether it was cancerous before removing it, as in Dobbie v. Medway Health Authority [1994] 1 WLR 1234, the issue becomes when the plaintiff knew that the loss of her breast was attributable to not testing the lump to see whether it was cancerous before it was removed.

216.  Three cases illustrate the operation of para.(b) in the United Kingdom.  The first is Broadley v. Guy Clapham & Co. [1994] 4 All ER 439 where the plaintiff sued her solicitor for negligence in failing to commence an action for negligence against Mr Lowy, a surgeon, who had operated on her to remove a foreign body from her knee.  As a result of the operation – which took place in August 1980 – the plaintiff “had left foot drop”.  In June 1983, she consulted the defendant who arranged for her to see another orthopaedic surgeon who told her that the operation on her knee might have been negligent, but the solicitor did not receive a report from that surgeon and he did not issue a writ against Mr Lowy.  It was not until 17 August 1990 that the plaintiff issued her writ against the defendant for negligence.  The solicitor defended the action by asserting that, if he was negligent, it caused the plaintiff no damage because her claim against Mr Lowy was barred by theLimitation Act when the alleged negligence occurred.  Hence, as Balcombe LJ said (at 442) “the plaintiff’s cause of action against the defendant is barred if her knowledge of her cause of action against Mr Lowy and the hospital existed before 19 August 1981”.  Strictly speaking, knowledge of a cause of action was not the issue.  At first instance, Turner J found (at 442 – 444) that, by reason of the plaintiff’s actual and constructive knowledge, she knew before the relevant date in August 1981 all the matters to which the United Kingdom equivalent of s.31 refer.  The Court of Appeal affirmed his decision.

217.  Hoffmann LJ said (at 449):

“In this case the plaintiff knew, or could have known with the help of the medical advice reasonably obtainable, that her injury had been caused by damage to the nerve resulting from something which Mr Lowy had done or not done in the course of the operation.  In my judgment this was all the knowledge or imputed knowledge which she needed to have.”

218.  With respect, this decision and this reasoning seem plainly correct.  Broadley and the facts in Forbes to which I earlier referred illustrate how the operation of s.31(7) with its constructive knowledge provisions works smoothly in most physical injury cases.

219.  The second case is the leading case of Haward v. Fawcetts [2006] 1 WLR 682 where, on 9 December 1994, relying on the advice of Mr Austreng, a partner in a firm of accountants, the claimants acquired a controlling interest in a company.  In addition, one of the claimants acquired the freehold of the company’s leased premises for ₤100,000.  Mr Austreng also forecast that, by investing about another ₤100,000, the company would be brought to reasonable profitability during 1995.  However, although the claimants invested further substantial sums in the company in 1995, 1996, 1997 and 1998, it failed to become profitable.  In 1998 the first claimant asked a specialist in corporate rescues to investigate the company’s losses.  On 6 December 2001 the claimants brought an action against the accountants for professional negligence.  The House of Lords unanimously held that, before 6 December 1998, the claimants knew with sufficient confidence that the damage was attributable to the acts or omissions of the accountants.  That was because they knew in broad terms the facts on which their complaint was based and of the accountants’ acts or omissions and knew that there was a real possibility that those acts or omissions had been the cause of the damage they had suffered.

220.  I must confess that there are parts of the reasoning in Haward which I find puzzling and which supports the comment of counsel for TTC – who relied on the decision - that their Lordships have put a “gloss” on the statute.  I think that some of the difficulties that I have with these parts of the reasoning arise from some of their Lordships equating “knowledge” with knowing enough to require further investigation.  I have already set out the reasons why that cannot be so, and I need not to repeat them.  The remaining difficulties that I have with parts of the reasoning is the re-writing of the equivalent of s.35(1)(b), a point to which I earlier referred.

221.  Lord Nicholls said (at 688) that the conduct alleged to constitute negligence “was the giving of flawed advice”.  He went on to say:

“20 …This feature is the very essence of [the first claimant’s] claim.  Stated in simple and broad terms, his claim is that Mr Austreng did not do his job properly.  Time did not start to run against [the first claimant] until he knew enough for it to be reasonable to embark on preliminary investigations into this possibility.

21.       There may be cases where the defective nature of the advice is transparent on its face.  It is not suggested that was so here.  So, for time to run, something more was needed to put [the first claimant] on inquiry.  For time to start running there needs to have been something which would reasonably cause [the first claimant] to start asking questions about the advice he was given.”

222.  Lord Nicholls said that the claimants had the burden of proving that they were not put on inquiry until after 6 December 1998 but had not attempted to discharge this burden.  Accordingly, their claim for an extension of the limitation period failed.

223.  With great respect, I find two features of this reasoning difficult to accept.  The first is the reference to being put on inquiry.  In Haward, the accountants did not rely on the claimants’ constructive knowledge, as Lord Nicholls acknowledged. So no question of investigation or inquiry arose.  It follows that the reference to start asking questions or an inquiry was irrelevant.  Because the accountants did not contend that the claimants had constructive knowledge of any facts, the only issue was whether, on the facts actually known to the claimants, they had knowledge of each of the four matters referred to in the United Kingdom equivalent of s.31(5).  Of those four matters, the only live issue concerned whether before 6 December 1998 they knew “that the damage was attributable in whole or in part to the act or omission” that constituted the alleged negligence.  If they had that knowledge, their claim was barred.  Lord Nicholls did not address the issue posed by the United Kingdom equivalent of s.31(5)(b) in these terms.  Instead of asking whether the claimants knew that Mr Austreng had advised investment in the company (which was the relevant act or omission when stripped of its negligent quality), his Lordship asked whether [the first claimant] “knew enough for it to be reasonable to embark on preliminary investigations into this possibility”.  That was a question that would be relevant if constructive knowledge was an issue in Haward, but it was not an issue in that case.  The second feature is the characterization of the act or omission as flawed advice.  In substance, that seems to reintroduce by another name the element of negligence which the United Kingdom equivalent of s.31(6) renders irrelevant.

224.  With great respect, and independently of this last point, what his Lordship did inHaward was to apply the process for ascertaining facts that are imputed to the plaintiff’s store of knowledge to a case where facts constructively known were not an issue.

225.  Lord Scott said (at 696) that the damage that the claimants had suffered “was the making of a bad investment”.  He went on to say (at 696) that the essence of the claimant’s complaint against the accountants was that they did not give them the advice that the true state of the company’s affairs warranted and that, if given, would have warned them against the disastrous investment of their money.  Lord Scott said (at 697) that the first claimant knew what advice had been given and what advice had not been given by the accountants.  He “knew by 6 December 1998 that the true financial state of the company had required, if the company were to keep trading, the very substantial additional investment that had to be made, and was made, to cover the losses incurred in the years 1995, 1996 and 1997”.  Lord Scott said that the trial judge had summed up the situation accurately and in accordance with the requirements of the United Kingdom equivalent of s.31 when he said:

“it is the basis of [the claimants] claim that [the accountants] advised ongoing investment and it is hard to see how [the first claimant] could have failed to appreciate that he was spending money either on their advice or without their advice.  So far as [the first claimant] was concerned, there was nothing of a factual nature that was latent; all was patent.  The only thing that he did not know was that [the accountants] had been, as he now alleges, negligent or that he had a claim against them but such matters are irrelevant.”

With respect, I think that Lord Scott’s and the trial judge’s approach was the correct one.  The damage was the loss of the moneys invested, and the “act or omission” was the advice that was given or not given.

226.  Lord Walker also thought that, although the trial judge’s judgment was “not without some defects and difficulties”, he “was basically right in his overall conclusion”.

227.  Lord Brown said (at 710):

“90.     What the claimant must know to set time running is the essence of the act or omission to which his damage is attributable, the substance of what ultimately comes to be pleaded as his case in negligence.  That essence or substance here could no doubt be characterised in either of two ways: either as the act of recommending investment in the company (or omitting to caution against it - on the particular parts of this case these are two sides of the same coin), or, with greater particularity, the act of recommending investment without first carrying out the investigations necessary to justify such positive advice.  Having at first preferred the latter characterisation, I have come to prefer the former.  True, under the former the claimant knows nothing beyond the fact that his advisers led him into what turned out to be a bad investment; he does not know, as under the latter characterisation he would, that he has a justifiable complaint against his advisers.  But he surely knows enough (constructive knowledge aside) to realise that there is a real possibility of his damage having been caused by some flaw or inadequacy in his advisers’ investment advice, and enough therefore to start an investigation into that possibility, which section 14A then gives him three years to complete.

91.      If the other approach is adopted, time only starts to run once the claimant recognizes that a fuller examination of the company’s prospects should have been carried out than was in fact carried out, knowledge which [the first claimant] only learned here at some unascertained date after the investigation into [the accountants] conduct had itself begun in an May 1999 (when another accountant first suggested to [the first claimant] that a negligence claim might lie against [the accountants]).  But what if that suggestion and the investigation which it prompted had themselves been made at a later date still, perhaps very substantially later?  On this approach the limitation period would appear capable of almost limitless extension and for no sufficient reason…”

228.  With great respect, for the reasons that I gave in discussing Lord Nicholl’s speech, I find part of the reasoning in these paragraphs puzzling.  Because the claimants did not have constructive knowledge of any facts, the only issue was whether, on the facts known to them, they knew before 6 December 1998 “that the damage was attributable in whole or in part to the act or omission” that constituted the alleged negligence.  Lord Brown held that, for the purpose of the United Kingdom equivalent of s.31(5)(b), the claimant had that knowledge although he knew “nothing beyond the fact that his advisers led him into what turned out to be a bad investment”.  Earlier, Lord Brown had said (at 709) that “[g]iven, however, that [the accountants] case is based solely on [the first claimant’s] actual knowledge, to my mind it must fail if anything more is required than that [the first claimant] knew that his loss might well have resulted from an investment made on [the accountants’] advice”.  With respect, this analysis of the relevant act or omission was correct.

229.  However, his Lordship then went on to comment that “he surely knows enough (constructive knowledge aside) to realise that there is a real possibility of his damage having been caused by some flaw or inadequacy in his advisers’ investment advice, and enough therefore to start an investigation into that possibility, which s.14A then gives him three years to complete”.  In Haward, the accountants did not rely on the claimants’ constructive knowledge. So no question of investigation arose, and the reference to the starting of an investigation seems irrelevant unless Lord Brown is speaking hypothetically of a case whose facts are similar to those in Haward.  Having correctly identified the relevant act or omission, I find it difficult to see why his Lordship thought that the case turned on the issue of investigation.  The claimants either had knowledge of that act or omission or they did not have it.  Lord Brown’s reasons show that they had that knowledge.  That, in my opinion, was enough to defeat their claim.

230.  Lord Mance, like Lord Nicholls, saw the issue as being when the first claimant knew enough to make it reasonable for him to investigate whether the claimants had a case against the accountants.  Lord Mance said (at 725):

“The question is when [the first claimant] actually knew both enough of the acts or omissions now alleged to constitute negligence and that the loss suffered was capable of being attributable thereto to make it reasonable for him to begin to investigate whether or not the claimants had a claim against [the accountants].  That would be the case, taking the reasoning in Hallam-Eames’s case, once he realised that he had prima facie cause to complain of unsoundness from the outset of the investments; this would in turn suggest unsoundness in the advice given or not given by [the accountants].  In relation to the issue raised by this question, the onus was on the claimants.  It was for the claimants to displace the basic limitation period by showing, if they could, that [the first claimant] did not have the requisite knowledge prior to 6 December 1998.”

231.  Lord Mance went on to hold (at 728) that the claimants had not discharged the onus that lay on them.  Lord Mance’s approach was similar to that of Lord Nicholls and, with respect, open to the same criticism.  Perhaps the source of his Lordship’s error was reliance on Hallam-Eames which turned on the potential availability of constructive knowledge.

232.  Thus, the reasoning of three of their Lordships is predicated on the assumption of a need to find that it was reasonable for the claimants to have begun an investigation.  As I have indicated, this was not an issue in a case where constructive knowledge of facts was not a relevant issue.  It also led to the curious conclusion that time ran against the claimants not from when the claimants had knowledge of the four matters specified in s.14A but when they should have commenced to investigate those matters.

233.  Fortunately, as will appear, the present appeal can be disposed of without the necessity of invoking the reasoning of the House of Lords in Haward. Whether this Court should apply that reasoning should be left for another day.  Indeed, it is unlikely that future courts will need to apply its ratio decidendi and principal reasoning, helpful as much of its dicta is.  That is because much of what their Lordships said would be applicable in cases where constructive knowledge was in issue, which it was not in Haward.

234.  The third case is Hallam-Eames v. Merrett Syndicates [2001] Lloyd’s Reports PN 178 which shows the difficulty of striking out a statement of claim on the basis of the plaintiff’s knowledge when the facts known or imputed to the plaintiff are not clearly admitted or established.  The claimants in that case were Lloyd’s Names who suffered losses when syndicates of which they were members became liable to meet a number of large claims.  The defendants contended that all the plaintiffs could reasonably have been expected to acquire the knowledge required for bringing an action in respect of the relevant damage from documents that had been sent to them or their agents more than three years before the issue of the first group.  The issue for decision was whether they knew that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence.  At first instance, Gatehouse J found that the documents supplied would have told the Names that they had suffered losses sufficiently serious to justify instituting proceedings and struck out the Names actions.  However, the Court of Appeal held that the Gatehouse J had “unduly restricted the facts which s.14A(8)(a) [the equivalent of s.31(5)(b)] requires to be known and the material before him did not enable him or this court to decide … as a preliminary issue that the plaintiff’s claims was statute barred”.

Section 31(5)(b) in the present case

235.  The issue in this case under s.31(5)(b) is whether Kensland knew that the damage it suffered “was attributable in whole or in part to the act or omission which is alleged to constitute negligence”.  As I have indicated it knew the heads of damage that are the basis of its action against TTC.  Paragraph 20 pleaded six particulars of negligence.  The first alleged that “TTC, for no good reason, failed to provide the instructions to [Whale View] within a reasonable time”.  The second and third particulars alleged that TTC wrongly advised Kensland that Whale View’s late tender constituted a repudiation of the agreement and that instructions were given within sufficient time for the preparation of the cheques and cashier’s orders.  The fourth particular alleged that TTC failed properly to review and consider the agreement, failed properly to advise on the basis thereof and in particular failed to advise that in law Kensland would not be entitled to take advantage of its own breach of the implied term.  The fifth particular alleged that TTC failed to advise that, if Kensland’s delay in completion was due to its default, it would not be entitled to treat the agreement as repudiated.  The sixth particular alleged that TTC failed generally to inform Kensland of the impact of the late instructions in the circumstances and failed to point out and advise fully of the risks involved in refusing to complete and of the very real risk of having to compensate Whale View.

236.  So the question under this part of the case is whether Kensland knew before 13 January 2001 that its liability to pay damages to Whale View was attributable in whole or in part to each of these six particulars of negligence.  Kensland bears the onus of establishing that it did not know before that date that its damage was attributable to one or more of these acts or omissions of TTC.  In determining that question, it is necessary in accordance with s.31(6) to disregard so much of these particulars as “involve negligence”.  Hence, the use of terms such as “no good reason”, “wrongly” and “properly” must be disregarded.

237.  In my opinion, by the end of November 1997, Kensland knew that its damage was attributable to the particularised acts and omissions that are alleged to constitute negligence on the part of TTC.  Once the descriptions of negligence are stripped from the particulars, Kensland’s claim is that TTC gave it or failed to give it advice concerning the termination of the contract of sale or its construction and failed to advise it of the risks involved in terminating the contract and that this led to the damage that it has suffered.  However, Kensland knew what advice TTC had or had not given it.  By the end of November, it even knew from the Statement of Claim served by Whale View and correspondence between the parties the respects in which this advice or lack of it was the basis of Whale View’s claim for damages.  By the end of November, Kensland knew that its liability to pay damages and costs and the drop in the valuation of its property was the result of the advice and lack of advice that TTC had given it.  What it did not know was whether that advice or lack of it was negligent, but, for the purposes of s.31(5)(b) that is irrelevant.  Consequently, Kensland knew by the end of November 1997 that the damage that is the subject of its action for damages against TTC “was attributable…to the act or omission” of TTC.

Conclusion

238.  It follows that TTC has established that by the end of November 1997, Kensland had knowledge of each of the four matters referred to in s.31(5) (two of them not being in dispute), that it cannot obtain the ameliorating benefit of s.31 and that its claim against TTC is statute barred.

Order

239.  The appeal must be dismissed with costs.

Mr Justice Bokhary PJ:

240.  The Court unanimously dismisses the appeal with costs.

[1]          Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381.

[2]          HH Judge Gill, sitting as a Deputy High Court Judge [2000] 2 HKLRD 261.

[3]          [2001] 2 HKLRD 342.

[4]          HH Judge Gill sitting as a Deputy High Court Judge, HCA 74/2004 (9 November 2005).

[5]          CACV 44/2006 (18 October 2006) Rogers VP and Le Pichon JA.

[6]          Hendserson v Merrett Syndicates Ltd [1995] 2 AC 145.

[7]          Appearing with Mr Charles Manzoni.

[8]          Nykredit v Edward Erdman (No 2) [1997] 1 WLR 1627 at 1630 per Lord Nicholls of Birkenhead.

[9]          Cartledge v E Jopling & Sons Ltd [1963] AC 758; Pirelli General Cable Works Ltd v. Oscar Faber & Partners [1983] 2 AC 1.

[10]        Appellant’s Case, §35.

[11]        Cartledge v Jopling [1963] AC 758 at 771-772 per Lord Reid and 773-4 per Lord Evershed; Haward v Fawcetts [2006] 1 WLR 682, §3 per Lord Nicholls.

[12]        Wardley Australia v State of Western Australia (1992) 175 CLR 514 at 531 per Mason CJ, Dawson, Gaudron and McHugh JJ and 544 per Deane J; Law Society v Sephton [2006] 2 AC 543 at 549-550 per Lord Hoffmann.

[13]        Forster v Outred [1982] 1 WLR 86 at 94; approved in Nykredit v Edward Erdman (No 2) [1997] 1 WLR 1627 at 1630 per Lord Nicholls.

[14]        Wardley Australia v State of Western Australia (1992) 175 CLR 514 at 536 per Brennan J; Law Society v Sephton [2006] 2 AC 543 at 549-550 per Lord Hoffmann.

[15]        UBAF v European American Banking [1984] 1 QB 713; D W Moore v Ferrier [1988] 1 WLR 267 at 278 per Neill LJ; Nykredit v Edward Erdman (No 2) [1997] 1 WLR 1627.

[16]        D W Moore v Ferrier [1988] 1 WLR 267 at 277 per Neill LJ; Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172 at 178 and 184 per Hobhouse LJ.

[17]        First National Commercial Bank plc v Humberts (a firm) [1995] 2 All ER 673; Nykredit v Edward Erdman (No 2) [1997] 1 WLR 1627 at 1630 per Lord Nicholls.

[18]        First National Commercial Bank plc v Humberts (a firm) [1995] 2 All ER 673 at 676 per Saville LJ.

[19]        As no issue arises concerning Kensland’s right to bring the action, the second requirement for establishing the “date of knowledge” under section 31(1)(b), it needs no discussion in this judgment.

[20]        See, for example, Cave v Robinson Jarvis & Rolf [2003] 1 AC 384 at §§6 and 7 per Lord Millett; Haward v Fawcetts [2006] 1 WLR 682 at §§2 and 3 per Lord Nicholls.

[21]        As discussed in section C.1 above.

[22]        Haward v Fawcetts [2006] 1 WLR 682 at 684, §3.

[23]        It does not apply to contract claims: Iron Trade Mutual Insurance v Buckenham [1990] 1 All ER 808; Société Commerciale de Réassurance v ERAS [1992] 2 All ER 82 ; Laws v Society of Lloyd’s [2003] EWCA Civ 1887.

[24]        Section 31(5)(a).

[25]        Section 31(5)(b).

[26]        Sections 31(5)(c) and 31(5)(d).

[27]        London Congregational Union v Harriss & Harriss [1988] 1 All ER 15 at 30 per Ralph Gibson LJ; Nash v Eli Lilly [1993] 1 WLR 782 at 796 per Purchas LJ; Haward v Fawcetts [2006] 1 WLR 682 at §23 per Lord Nicholls.

[28]        [2006] 1 WLR 682.

[29]        At 703, §68.

[30]        At 709, §87.

[31]        At 728, §138.

[32]        Haward v Fawcetts [2006] 1 WLR 682 at 688, §24 per Lord Nicholls; at 697, §53 per Lord Scott; at 706, §76 per Lord Walker; at 728, §§137-138 per Lord Mance.

[33]        Ibid at 688, §24.

[34]        Ibid at 728 §138.

[35]        Ibid at 697, §§51-52 per Lord Scott; at 704-705, §§72-73 per Lord Walker; at 710, §§89-90 per Lord Brown.

[36]        Broadley v Guy Clapham & Co [1994] 4 All ER 439 at 448 per Hoffmann LJ; Hallam-Eames v Merrett Syndicates [2001] Lloyd’s Rep PN178 at 181 per Hoffmann LJ.

[37]        [1963] AC 758 at 772.

[38]        Ibid at 774.  This was echoed by Lord Nicholls in Haward v Fawcetts [2006] 1 WLR 682 at 684, §3.

[39]        [2008] 2 WLR 311.

[40]        At 325, §38.  See Lord Carswell to like effect at 332, §68.

[41]        [1994] 1 WLR 1234 at 1241.

[42]        Ibid at 1240.

[43]        Such as affidavits and testimony on the trial of a preliminary issue.

[44]        [1993] 1 WLR 782.

[45]        [1993] 1 WLR 782 at 808.

[46]        Ibid at 788.

[47]        Ibid at 791.

[48]        [1991] 1 WLR 428 at 443.

[49]        Ibid at 433-434. 

[50]        [1993] 1 WLR 782 at 792.  As pointed out in A v Hoare [2008] 2 WLR 311, the idea that the intelligence and other personal characteristics of the plaintiff are taken into account (adhered to by Purchas LJ) should be rejected.  Accordingly the words “for the particular plaintiff” in this citation should be ignored.

[51]        Eg, Broadley v Guy Clapham & Co [1994] 4 All ER 439 at 449 per Hoffmann LJ; Fennon v Anthony Hodari [2001] Lloyd’s Rep PN 183 at 188 per Otton LJ; Haward v Fawcetts [2006] 1 WLR 682 at 685, §9 per Lord Nicholls; 709, §87 per Lord Brown; 718-719 §112 per Lord Mance.

[52]        As in Forster v Outred [1982] 1 WLR 86; and Fennon v Anthony Hodari [2001] Lloyd’s Rep PN 183.  A plaintiff may, however, be held to have imputed knowledge of the liability where, for instance, she simply omitted to read a letter from the bank listing the debts secured: Webster v Cooper Burnett [2000] PNLR 240.

[53]        [1999] Lloyd’s Rep PN 489.

[54]        See Lord Walker’s analysis at [2006] 1 WLR 682 at 699-700, §§60-61.

[55]        Haward v Fawcetts [2006] 1 WLR 682 at 686, §11.

[56]        Ibid at 709, §§87-88 (my italics).

[57]        [1994] 4 All ER 439 at 448.

[58]        Haward v Fawcetts [2006] 1 WLR 682 at 696,§49.  Lord Walker at 708, §79; Lord Brown at 710, §90; and Lord Mance at 722, §120, are of the same view.

[59]        Ibid at 685, §10.

[60]        [1994] 4 All ER 439 at 449.

[61]        Broadley v Guy Clapham & Co [1994] 4 All ER 439 at 448 per Hoffmann LJ.

[62]        Haward v Fawcetts [2006] 1 WLR 682 at 719, §113.

[63]        [2001] Lloyd’s Rep PN178 at 181.

[64]        Ibid.

[65]        [2006] 1 WLR 682 at 686-687, §14 per Lord Nicholls; at 695, §45 per Lord Scott; at 700-701 §62 and at 702, §66 per Lord Walker; at 720, §116 per Lord Mance.

[66]        [1994] 1 WLR 1234.

[67]        Ibid at 1238.

[68]        Ibid at 1243.  Beldam LJ agreed at 1245, as did Steyn LJ.

[69]        [2001] Lloyd’s Rep PN178 at 181.

[70]        [2008] 2 WLR 311.

[71]        Ibid,see 326, §§44- 45 per Lord Hoffmann; 333, §70 per Lord Carswell; 335-336, §§84 and 86 per Lord Brown.

[72]        Appellant’s Case §57.

[73]        Affirmation of Yeung Han Yi Yvonne, 27 July 2005, §5(d).

[74]        Section D.6b above.

[75]        Sections D.6b and D6.c above.

[76]        Section C.1.