A professional negligence claim against solicitors was issued too late because the clock began ticking from when the mistake was initially made rather than when damage ensued, the Court of Appeal has ruled.

In Elliott v Hattens Solicitors, Lord Justice Newey concluded that the claim was statute-barred because it was issued more than six years after a flawed lease transaction between the Essex firm and its former client.

The judge said that damage was caused to the claimant as soon as the lease and underlease were entered into. ‘It seems to me that the cause of action accrues at the outset,’ Newey LJ said. ‘If negligence on the part of a solicitor served to reduce the market value of an asset, the claimant cannot, in my view, defer the expiry of the limitation period by pointing out that he was not intending to sell it.’

The court heard that the firm had been retained by the claimant, Kelly Elliott, to act on a transaction where her husband was to grant her a lease on a property in Essex and she would grant an underlease to a man called Jamie Malster. The intention was that Malster’s parents should guarantee his obligations under the underlease and documents were drawn up in 2012.

However Hattens failed to name Malster’s parents as parties to the underleases. The firm also did not advise the claimant to obtain insurance.

In 2012, a fire at the premises effectively destroyed the buildings: Malster vacated the property without undertaking repairs and Mrs Elliott lost rent. Proceedings were issued seeking damages for negligence in 2018 – more than six years after the lease and underlease were executed but less than six years after the fire.

Hattens, which accepted failure to exercise ‘reasonable skill and care’ in drafting the documents, pleaded that the claim was statute-barred, but the High Court found in favour of the claimant on this issue.

On appeal, the firm submitted that Elliott suffered damage as soon as the lease and underlease were executed, as she was immediately in a measurably less advantageous position than she should have been.

The claimant said that she did not suffer any actual loss or damages as a result of the absence of a guarantee until the aftermath of the fire.

Newey LJ said he was in ‘no doubt’ that Hattens’ failure to ensure that Malster’s parents were guarantors caused Elliott damage as soon as the lease and underlease were entered into and, hence, that her cause of action accrued at that point and was now statute-barred. The appeal was allowed.