In the Know?
Nobu Su v (1) Clarksons Platou Futures Limited (2) Mr Vassillis Karakoulakis  is the latest Court of Appeal decision to consider the meaning of "knowledge" under s.14A of the Limitation Act. Emma Pearson-Winstone highlights the implications for professional indemnity insurers and their insureds.
The Claimant was a businessman who, prior to the 2008 financial crisis, owned a number of companies in the shipping industry. The first Defendant was a brokering firm and the second defendant an employee of the first Defendant. In July 2008 the Claimant and Defendant negotiated a forward freight agreement (FFA) with another company, Lakatamia Shipping Company Limited ("Lakatamia"), with the intention that the Claimant would buy it back one month later at a higher price. However, the Claimant failed to buy back the FFA and Lakatamia issued proceedings against the Claimant in 2011, alleging that he was personally liable for the losses it then suffered on re-sale. In August 2011 a freezing order was issued against the Claimant and his companies.
Permission to appeal the freezing order was granted and in July 2012 the Court of Appeal found there was good arguable cause which should be explored at trial. The trial in the main proceedings came before the Court in October 2014. Judgment was given holding the Claimant personally liable along with his companies for the breach of the FFA Contract. He was ordered to pay Lakatamia over $37.8 million.
In November 2015 the Claimant issued proceedings against the Defendants, alleging breach of warranty of authority and duty of care for failing to ensure that only his companies were parties to the FFA contract. The Defendants sought summary judgment on the basis that, under sections 2 and 5 of the Limitation Act 1980, the claim in both tort and contract was time barred at the latest on 8 July 2014 (being six years from the date the Claimant was personally bound to the FFA contract). To the extent the Claimant sought to rely on s14A of the 1980 Act, the Defendants submitted that he had the relevant knowledge as at July 2012 – when the Court of Appeal found there was good cause for the Claimant to be personally liable which was to be explored at trial. The Claimant argued that relevant knowledge for the purposes of the 1980 Act did not arise until 5 November 2014, the date of the judgment in the Lakatamia trial, and that it was not until this date that he could be said to have suffered damage.
The Commercial Court found in favour of the Defendants and refused the Claimant permission to appeal. The Court of Appeal granted the Claimant permission to appeal solely in relation to the date of knowledge point arising from s14A.
The Court of Appeal found in favour of the Defendants and dismissed the appeal. Lord Justice Kitchener considered the application of section 14A to the appeal as follows:
- Firstly, s.14A only applies to claims in negligence and as such provided the Claimant no assistance in relation to his claim for breach of contract.
- Secondly, s.14A permits a claim to be brought within 6 years from the accrual of the cause of action or, if later, three years from the earliest date on which the Claimant had both the knowledge required and a right to bring such an action.
- Thirdly, the knowledge required means knowledge of two matters, namely (a) facts that would lead a reasonable person who had suffered damage to consider it sufficiently serious to commence proceedings; and (b) knowledge that the damage was attributable to the act or omission which is alleged to constitute negligence and the identity of the Defendant.
- Fourthly, a person's knowledge includes knowledge which he might reasonably have been expected to acquire from facts observable by him or ascertainable by him, or facts ascertainable by him with the help of appropriate expert evidence (which it was reasonable for him to seek).
He then considered the guidance given in Haward v Fawcetts  UKHL 9 on the meaning of "knowledge" in section 14A,citing Lord Nicholls' observation that knowledge "does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ … the claimant must know enough for it to be reasonable to begin to investigate further."
In applying these principles the Court of Appeal found that by the end of July 2012 the Claimant plainly knew enough to start asking questions and investigating the possibility that he was personally liable and so had a claim against the Defendants. Not only was it asserted by Lakatamia in its particulars of claim that the Claimant personally was a party to the FFA contract, but the Claimant also knew that both the High Court and Court of Appeal considered Lakatamia had a good arguable case that he was personally liable.
This case highlights the benefit of scrutinising all possible available defences early on. The Defendants successfully defeated this claim on a summary judgment application (albeit appealed to the Court of Appeal), potentially avoiding at best considerable costs exposure and at worst a potential multi-million dollar judgment. However, the case also reaffirms that the question of when time begins to run for limitation purposes remains complex and highly fact-sensitive and will be evaluated on the specific facts of the case.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.