CHANF 98/0314/3
BAILII Citation Number: [1999] EWHC 841 (Ch)
IN THE SUPREME COURT OF JUDICATURE  
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Carnwath)
 
Royal Courts of Justice
Strand
London WC2

Date: Monday, 11th October 1999

B e f o r e :

LORD JUSTICE SWINTON THOMAS
LORD JUSTICE WALLER
MR. JUSTICE JONATHAN PARKER
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CAROLINE ROSE WEBSTER
Appellant

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COOPER & BURNETT
Respondent
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(Computer Aided Transcript of the Stenograph Notes of Smith Bernal Reporting Limited
180 Fleet Street, London EC4A 2HD
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Official Shorthand Writers to the Court)
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MR. K. FARROW (instructed by Messrs Meredith Smith & Pratt, Tonbridge) appeared on behalf of the Appellant/Claimant.

MR. A. SUTCLIFFE (instructed by Messrs Reynolds Porter Chamberlain, London, WC1) appeared on behalf of the Respondent/Defendant.
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J U D G M E N T
LORD JUSTICE SWINTON THOMAS: This is an appeal from a decision of Carnwath J of 10th February 1998, when he dismissed an action by the claimant, Caroline Rose Webster, against a firm of solicitors, Cooper & Burnett, for professional negligence.  Mr. Burnett is a solicitor and a partner in the defendant firm.  The dispute arose concerning advice given, or alternatively not given, by Mr. Burnett to Mrs Webster on 1st December 1983 in relation to a deed or mortgage which she executed on that day in favour of the National Westminster Bank.
 
In the 1980s Mr Webster, the claimant's husband, was a successful property developer.  In 1983 Mr. and Mrs Webster decided to buy a house near Marbella in Spain and wished to obtain a loan in the sum of £28,000 towards the purchase of the house.  They banked at the Tunbridge Wells branch of the National Westminster Bank who arranged the mortgage.  By a letter dated 29th November 1983, to which Mr. Farrow invited our attention, the bank manager, Mr. Warren, confirmed that he, on behalf of the bank, was willing to make the loan of £28,000 subject to a second charge on Farthings, East Sussex, which was the Websters' matrimonial home.
 
 In the later part of 1983 and prior to this transaction, Mr. Webster instructed Mr. Burnett to advise him in relation to some of his business transactions, and consequently Mr. and Mrs Webster instructed him to advise them in relation to the mortgage.  The meeting took place on 1st December 1983.  The mortgage deed prepared by the bank was an all moneys charge securing the joint and several indebtedness of Mr. and Mrs Webster.  The Websters needed to borrow the sum of £28,000, and there was ample equity in Farthings to secure that sum.  Mrs Webster's case was that she understood that the charge over Farthings secured the amount of the borrowing to purchase the Marbella house; that is, the £28,000 only.  It was, she says, never explained to her by Mr Burnett that it covered the whole of any indebtedness of her husband or herself to the bank and continued after the loan had been repaid, and she was not advised that she could arrange a much more limited mortgage which would be confined to the Marbella loan.
 
This case was heard by the judge in February 1998.  The judge found, hardly surprisingly in the circumstances, that the recollections of the witnesses as to what had been said and what took place on 1st December 1983 was  imperfect.  Although Mr. Burnett was unable to remember the specific details of the meeting, he had some recollection of it, and he was certain, he told the judge, that he would have explained to Mrs Webster, as was his normal practice, that the charge covered all moneys owed by both her and her husband to the bank, both present and future, because it was his invariable practice to do so.
 
In his judgment the judge considered with care the evidence that he had heard and the surrounding circumstances, and he set out his conclusions in relation to those matters.  Following on his summary of the evidence, he said:
"Thus, I am forced to conclude that, whatever Mr Burnett said at the meeting about the unlimited nature of the charge, the message did not get through. Having said that, I accept that it is likely that Mr Burnett did give some explanation.  As he says, by this time the profession was aware of the potential problems of open‑ended charges of this kind, and he himself had had previous experience of such problems in advising other clients.   The manuscript reference 'unlimited sum' in the copy of the charge, suggests that it was in his mind at the  time of the meeting.  However, as he says, Mrs Webster did not appear to be paying much attention to his explanations.  This is more understandable from her point of view, if she thought that the charge was simply related to the Marbella loan, which caused her no worry.   In that context, it was 'a fuss about nothing.'   What Mr Burnett did not do, was to draw attention to the fact that this form of charge was much wider than was necessary for their purpose.   He says that this was because he did not know the purpose, but I have rejected that part of his evidence.
 
 This does not explain why Mr Webster, who would have been more likely than his wife to be alive to the real effect of the document, did not pick up the point. However, he was not required to sign it personally.  His attention was directed to the Deed of Postponement. The explanation may  be that, as Mr Burnett's letter to the bank says, the explanations were indeed given to them individually, although in the same room, and therefore Mr Webster was not attending in detail when his wife was receiving her explanation.
 
I conclude, with hesitation and on the balance of probabilities, that Mr Burnett was made aware of the limited purpose of the charge;  and that, although he gave some explanation to Mrs Webster of the nature of the charge she was being asked to sign, he did not do so in terms which sufficiently drew to her attention the discrepancy between the scope of that charge and what was necessary to achieve her purpose.  I think that she was entitled to be advised whether the document she was being asked to sign was suitable for her purpose, and that Mr Burnett was in breach of his duty to her in failing to give that advice.  If he had advised her on that point, then in my view she would not have signed the charge in that form.   The most likely result would have been that, following a further exchange with the bank, the charge would have been amended to include a limit to the amount of the loan required plus interest.   If that had happened, it would have caused no subsequent problem and would not have subjected her to the massive liabilities which her husband later incurred.  I conclude therefore that, subject to the limitation point, the case against the defendants is made out."
  
The judge accordingly made two findings on the negligence issue.  First, he found that, whatever Mr Burnett may have told Mrs Webster, he did not advise her about the unlimited nature of the charge with sufficient effect, as the judge put it, to get the message through.  Secondly, he found that Mrs Webster was entitled to be advised whether the document was suitable  for her purpose and she did not receive that advice.
 
In a respondent's notice the defendant challenged the finding of negligence but the respondent's notice to that effect has now been abandoned.  Accordingly, that leaves for consideration by this court the limitation issue.  In considering that issue, the judge said at the outset:
"I turn therefore to the limitation issue. As I have said, the answer to this turns on the application of the provisions of section 14A of the Limitation Act 1980, the general effect of which I have stated above.   In the present case this depends on the resolution of a narrow factual issue ‑ when did Mrs Webster have  'knowledge' that the charge was not confined to the Marbella loan, but extended to all present and future borrowings of herself and her husband."
  
Mr Farrow told us that it was agreed between himself and Mr. Sutcliffe for the respondent that the judge did there pose the correct question for him to decide.
 
As with many other property developers in the recession that took place in the late 1980s, Mr. Webster's property businesses suffered.  In 1992 he entered into a voluntary arrangement with his creditors.  The bank sought to enforce their charge against Mrs Webster and commenced proceedings.  She defended the proceedings but the action was compromised on the terms that Mrs Webster  should pay the bank £85,000.  It was in those circumstances that she sued the defendants for that sum.
 
Mr. Burnett's negligence, as found by the judge, occurred on 1st December 1983, and the writ was dated 2nd February 1995.  Accordingly, the action was statute barred by the primary provisions of the Limitation Act, which provides for a period of six years from the date when the cause of action in negligence accrued. However, by section 14A of the Act that time limit is extended where facts relevant to the cause of action were not known to the claimant as at the date when the cause of action accrued.  It was Mrs Webster's case that she only became aware of the true nature of the charge in February 1992 when the bank made its claim against her in respect of her husband's indebtedness.  Section 14A(1) reads:
"This section applies to any action for damages for negligence, other than one to which section 11 of this Act 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) below.
 
(4) That period is either ‑
 
(a) six years from the date on which the cause of action accrued;  or
 
(b) three years from the starting date as defined by  subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above.
 
(5) for the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first 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." 
Subsection (9):
"Knowledge that any acts or omissions did or did not, as a matter of law, involve negligence is irrelevant for the purposes of subsection (5)." 
And, vitally, subsection (10):
"For the purposes of this section a person's 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;
 
but a person shall not be taken by virtue of this subsection 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."
  
The defendant's case on the Limitation Act before the judge was that Mrs Webster obtained the relevant knowledge either at the meeting of 1st December 1983 or, alternatively, when she received and signed an acknowledgement on 14th December 1987.  On this appeal Mr. Sutcliffe does not rely on the December 1983  meeting, so the appeal turns solely on the acknowledgement form of 14th December 1987.  That document reads:
"To National Westminster Bank Plc, 81 High Street, Tunbridge Wells, Kent
 
I acknowledge the mortgage in your favour dated 1.12.83 over Farthings, Main Street, Northiam, which is vested in my name, is currently securing the undernoted facilities being afforded by the bank.
 
On Joint Loan with T W Webster
 
In regard to the purchase of your Marbella house      £5,600
 
In the name of Terry W Webster
 
Overdraft facilities     £25,000
 
Loan in connection with the acquisition by Grand International Ltd of property in Florida £50,000
 
In addition I acknowledge the mortgage stands as collateral in respect of my husband's suretyship liability under his unlimited guarantee for Grand International Ltd and would also secure any shortfall in security lodged for a loan in his name of £140,000 against The Coach House, Massetts Road, Horley."
  
That document was signed by Mrs Webster and returned to the bank.  The judge found that Mrs Webster's evidence about the document was unclear, as he put it.  The general effect of the evidence given by Mr. and Mrs Webster was that she did not read business documents, did not read this particular document, and left all business matters to her husband.  In particular, she said that she did not read the acknowledgement of 14th  December 1987 before she signed it.  The judge found her evidence in relation to that matter surprising, but none the less he found that he accepted the generality of the evidence given both by her and by her husband. Accordingly, she did not have actual knowledge of the relevant facts.  The judge also found that it would be inconsistent with his findings in relation to negligence to find that she had actual or constructive knowledge in 1983.
 
The judge then turned to consider the question of constructive knowledge.  He said that in his view the defendant's case on the 1987 document was unanswerable. The judge said:
"I am however unable to accept that she did not have constructive knowledge within subsection (10).  Mr Farrow accepts that the relevant information was, in terms of that subsection, 'ascertainable by her'.   The question therefore is whether it was information which she 'might reasonably have been expected to acquire' from those facts.   The answer to that must be 'yes'. Someone who signs a document without reading it does not thereby avoid responsibility for it.  I am talking of normal circumstances where the person in question is of ordinary intelligence and has not been actively misled.    Mrs Webster is such a person, and there is no suggestion that the content of the letter was concealed from her in any way.   She may have chosen blindly to rely on her husband in relation to all business matters, but that does not make it reasonable for her to have done so, or provide a reason for diminishing her responsibility for the document as against third parties."
  
The judge then went on to consider the appropriate test that he should apply.  He then continued: 
"As I have said, it would be a novel thing to hold that a person of normal intelligence, faced with a straightforward document, is not reasonably expected to read it before he or she signs it and to take responsibility for it thereafter.   That being my conclusion, Mrs Webster's action is statute barred and must fail."
  
Mr Farrow on Mrs Webster's behalf has submitted that, once the judge made the findings that he did in relation to the December 1983 meeting, it was reasonable for Mrs Webster not to read the 1987 acknowledgement, and, consequently, he submits, the judge's finding in that regard was inconsistent with his earlier finding in relation to negligence.  It can perhaps be summarised in paragraph 3.5.5  of Mr. Farrow's skeleton argument, where he says this:
"It was reasonable for Mrs Webster not to read the acknowledgement before signing it because, on the assumption that her continuing belief, which was attributable to Mr Burnett's breach of duty, was correct, reading it would not have told her anything which she did not already know."
  
Accordingly, he says in paragraph 3.6  that she was still reasonably entitled, nothing of significance having occurred in the meantime, to rely on the advice that she was given in 1983, when the 1987 document arrived.
  
In my judgment, the judge's finding in relation to limitation is unassailable.  He came to his conclusion on the basis of the evidence that he had heard.  The question was whether Mrs Webster might reasonably be expected to have acquired the knowledge that the mortgage was an all moneys charge, or whether Mr. Burnett was negligent in failing to advise her from facts observable or ascertainable by her.  The document which I have read could not be plainer in its terms.  If a customer of a bank receives a document of that nature from the bank, it must be reasonable to expect that she should read it.  If Mrs Webster had done that, it would have been clear beyond peradventure to her that this was an all moneys charge, and she would have had the requisite knowledge.  She had not been misled by Mr Burnett at the meeting of 1st December 1983.  What he had done, according to the judge's finding, was to fail to draw her attention to the fact that this was an all moneys mortgage.  That cannot, in my judgment, result in a finding that she could not reasonably have been expected to read documents in relation to the charges that were subsequently sent to her.  In my judgment, the judge was not only entitled but was right to come to the conclusion that she could reasonably be expected to read  the document from the bank and to understand its contents.  Accordingly, and for those reasons, I would dismiss this appeal.
 
LORD JUSTICE WALLER: I agree.
 
MR. JUSTICE JONATHAN PARKER: I also agree.
  
Order:  Appeal dismissed;  section 18 order against legal aid fund with nil contribution.
(Order not part of the judgment of the court)