Timing is everything
With any professional negligence claim the first step is establishing that you have enough time left on the clock to bring the claim; you can have a strong claim, and tick every box for success, but irrespective of the legal merits, once your time has run out, that is that.
As with all claims for professional negligence, in a claim brought for loss suffered as a consequence of negligent financial advice there is a period of six years from the date of the “damage” suffered as a consequence of the advice to bring the claim.
In this context, damage is likely to be the date that the claimant entered into the unsuitable investment or transaction rather than the date that the investor actually suffered a financial loss.
Sometimes the 6 year time period can be extended where the negligence only becomes apparent at a later stage. In those cases the relevant limitation period is three years from the date of “knowledge” of the facts which might give rise to a claim.
There is a long stop date of 15 years within which all claims must be brought.
Determining when a claimant has acquired “knowledge” is not always an easy exercise, partly because the test has subjective elements and partly because the case law is not altogether clear.
In short, the basic principle as established in Haward v Fawcetts is that suspicion, particularly if it is vague and unsupported, will not be enough, but a reasonable belief will normally suffice; in other words, the claimant must know enough for it to be reasonable to begin to investigate further.
But when is it reasonable to begin to investigate further?
Since the finding in Haward v Fawcetts in 2006, The Supreme Court has not dealt again with this point, although The High Court and The Court of Appeal regularly wrangle on this point.
Indeed, The Court of Appeal recently considered the date of knowledge argument in the case of Su v Clarksons Platou Futures Ltd and another.
In this case, the Court confirmed the position that is not when the claimant first knew they might have a claim for damages against the defendant; rather, it is when they knew enough to make it reasonable to investigate further and, if necessary, obtain professional advice.
This essentially reaffirms the position in Haward v Fawcetts, but it does not bring any clarity to the position. For example, in a negligence claim against a roofer, you first know enough to investigate further when your roof starts to leak; you would naturally inform the roofer of the faulty work, and perhaps commission an expert to undertake a review of the work to establish liability.
What is the equivalent with an investment made following the receipt professional advice? When returns are less than expected? What if your adviser repeatedly reassures you that the loss is temporary and has been caused by unforeseen matters in the market?
Similarly, if a client had received advice to enter into a tax mitigation scheme, should a claimant be fixed with “knowledge” upon receipt of a notice from HMRC that they are investigating the scheme? What if the adviser maintains that HMRC’s potential challenge lacks validity and will fail? At this stage, the claimant does not even know whether there will be any loss.
There is no leaking roof to which you can point, and unless you were financially sophisticated and experienced, how would you know you had a potential claim? My experience is that most people generally trust their advisers and would rather give them the benefit of doubt rather than immediately seeking legal advice.
Haward v Fawcetts and Su v Clarksons Platou Futures Ltd illustrates the importance of keeping a careful eye on the limitation clock where you are seeking to rely on a date of knowledge argument; if you think you have received bad advice, it is better to act sooner, rather than later.