A3/2004/1529 
Neutral Citation Number: [2005] EWCA Civ 623
IN THE SUPREME COURT OF JUDICATURE 
IN THE COURT OF APPEAL (CIVIL DIVISION) 
ON APPEAL FROM THE HIGH COURT OF JUSTICE 
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
MERCANTILE LIST 
(HIS HONOUR JUDGE BEHRENS
(sitting as a deputy judge of the High Court))
Royal Courts of Justice 
Strand 
London, WC2 

Tuesday, 10th May 2005
 
B E F O R E:

LORD JUSTICE PILL 
LORD JUSTICE CHADWICK 
LORD JUSTICE MAY 
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AURANGZEB IQBAL
Claimant/Appellant
-v-
 
LEGAL SERVICES COMMISSION 
Defendant/Respondent 
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(Computer-Aided Transcript of the Palantype Notes of
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No:  020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
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MR DAVID BERKLEY QC (instructed by Messrs Benyon Nicholls, London WC2A 1NE) appeared on behalf of the Appellant
MISS MARIE DEMETRIOU (instructed by Legal Services Commission, Policy & Legal Department, 1st Floor, 85 Gray's Inn Road, London WC1X 8tX) appeared on behalf of the Respondent
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J U D G M E N T
1.	LORD JUSTICE PILL:  Lord Justice May will give the first judgment.
2.	LORD JUSTICE MAY:  This is an appeal by the claimant from a decision of His Honour Judge Behrens QC sitting in the Mercantile Court in Leeds on 5th July 2004.  The judge himself gave permission to appeal.  His decision was that two causes of action for which Mr Iqbal claims against the successor of the Legal Aid Board were statute-barred.  So he dismissed those claims.
3.	The claimant and a Mr Aurangzeb practised as solicitors in Bradford.  Much of their work was publicly funded by payments from the defendant's statutory predecessor, the Legal Aid Board.  In the spring of 1997 the Legal Aid Board got the idea that the claimant's firm were overcharging for legally-aided work.  Mr Bracewell, among others, carried out an investigation for the Legal Aid Board and concluded that the firm owed the Legal Aid Board a substantial sum.  So in May 1997 the Legal Aid Board stopped making further payments and began deducting 25% from bills assessed as due.
4.	Separately from this, the firm became under investigation by the Office for the Supervision of Solicitors.  This revealed a cash shortage in the firm's client account at the end of April 1997 in the order of £21,000.  Meanwhile, the Legal Aid Board assessed sums which might be due to them. 
5.	On 1st August 1997 the Legal Aid Board released £20,945.79 to the firm, but at that stage retained a further £17,618.52.  On 6th August 1997 the firm began judicial review proceedings against the Legal Aid Board, making in those proceedings essentially the same allegations as are made in the present much later proceedings, but in a public law context.  They claimed that the Legal Aid Board were in breach of section 6 of the Legal Aid Act 1988.  This obliged the Legal Aid Board to pay out of the legal aid funds: 
"such sums as are ... due from the Board in respect of remuneration and expenses properly incurred in connection with the provision, under this Act, of advice, assistance or representation."
6.	The claimant subsequently proposed to amend the judicial review proceedings to add allegations of misfeasance in public office, again essentially the same as similar allegations made in the present proceedings.
7.	The judicial review proceedings were compromised by a consent order dated 26th November 1997.  This compromise may or may not be a defence available to the defendants in the present proceedings, but that question does not arise on this appeal.  One term of the compromise was that the firm was to pay the Legal Aid Board some £15,000.  Meanwhile, on 8th August 1997 the Office for the Supervision of deferred the intervention for three months to allow the firm time to make good the shortfall in their client account.
8.	At the end of September 1997 the Legal Aid Board released a further £9,733.34.  This left a remaining amount withheld of £7,885.18.  Substantially less, be it noted, than the amount agreed to be repaid under the compromise of the judicial review proceedings.
9.	On 17th October 1997 the firm reduced the client account shortfall to £6,948.45.  On 13th November 1997 the shortfall was cleared.  However that may be, on 19th November 1997 the Office for the Supervision of Solicitors resolved to intervene.  On 12th February 1998 an administration order was made in respect of the firm.  In September 1998 there was a Solicitors Disciplinary Tribunal hearing into the claimant and his partner in the firm.  The outcome was that they were suspended from practice for six months.
10.	On 21st March 2002 the firm was wound up by order of the court.  By an assignment in writing dated 20th October 2003 the liquidator assigned the firm's causes of action relevant to these proceedings to the claimant, and so it was that the claimant upon this assignment filed the claim form in these proceedings on 23rd October 2003.  He claimed breaches of statutory duty by the Legal Aid Board in failing to comply with section 6 of the 1988 Act.  He also claimed for misfeasance in public office.  That claim is shortly particularised in paragraphs 47 to 48 of the particulars of claim in these terms:
"47.  Further, the conduct of the Legal Aid Board as hereinbefore set out constituted the deliberate commission by the Legal Aid Board of unlawful acts in a manner foreseeably injurious to the Claimant.
48.  The matters particularised above, demonstrate both that:-
 (i) there was a deliberate intent on the part of the Legal Aid Board by its officers, in particular Mr Bracewell, to injure the Claimants; and
 (ii) the Legal Aid Board acted knowing that it was doing so unlawfully, or was being reckless as to the legality of its action."
11.	The judge in his judgment summarised the particular allegations in paragraphs 64 and 65 of his judgment.  It is sufficient for present purposes to say that all the matters alleged to have been done or not done by the Legal Aid Board occurred before 23rd October 1997, and as to things done or not done which might constitute breach of a duty those were before July 1997.
12.	The defendants say that the claims are all statute-barred, having accrued more than six years before the proceedings were issued.  This was the issue which Judge Behrens decided in favour of the defendant.  The claimant appeals.  The preliminary issue, of course, proceeded on the unsubstantiated assumption that the pleaded allegations were true.
13.	For many causes of action in tort, including breach of statutory duty (at least of the kind alleged here) and misfeasance in public office, since damage is an essential ingredient of the tort, the cause of action does not accrue until there is material damage.  The claimant alleges that the withholding of money which ought to have been paid caused the firm damage.  The damage was the closure of the firm.  This, he says, occurred after 23rd October 1997, not earlier than the Office for the Supervision of Solicitors intervened in November 1997.  But there was, as I think Mr Berkley QC for the claimant appellant accepts, plainly material damage earlier than that; as, for instance, when in May 1997, as is pleaded, 11 members of staff had to leave because the firm could not pay them.  Damage was in essence alleged in the judicial review proceedings begun in August 1997.
14.	The judge in his judgment referred at some length to the perceptive judgment of Lord Justice Chadwick in the case of Khan v Falvey [2002] EWCA Civ 400, and reported at [2002] Lloyd's Rep PN 369.  There are a number of helpful passages in the judgments in that decision.  The first to which I shall refer is from paragraph 23 in the judgment of Sir Murray Stuart-Smith.  Sir Murray Stuart-Smith referred to the judgment of Hobhouse LJ (as he was then) in Hopkins v Mackenzie and said of it:
"I share Hobhouse LJ's difficulties.  A claimant cannot defeat the statute of limitations by claiming only in respect of damage which occurs within the limitation period, if he has suffered actual damage from the same wrongful acts outside that period."
15.	Then at paragraph 37 in the judgment of Lord Justice Chadwick, we have this:
"It is trite law that, where a tort is actionable only on proof of damage, the cause of action is not complete and time does not begin to run for the purposes of statutory limitation until actual damage occurs.  What is meant by 'actual damage' in the context of a claim for purely financial (or economic) loss appears from a passage in the submissions of Mr Murray Stuart-Smith QC (as my Lord then was) to the Court of Appeal in Forster v Outred & Co [1982] 1 WLR 86.  The passage was adopted by that Court, at [1982] 1 WLR 86, 94, 98; and has recently been approved by the House of Lords in Nyecredit Plc v Edward Erdman Ltd (No 2) [1997] 1 WLR 1627, 1630D-F.  Actual damage means: 
'... any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency, particularly a contingency over which the plaintiff has no control; things like loss of earning capacity, loss of a chance or bargain, loss of profit, losses incurred from onerous provisions or covenants in leases.  They are all illustrations of a kind of loss which is meant by 'actual' damage.' 
Lord Nicholls of Birkenhead added the 'cautionary reminder', at [1997] 1 WLR 1627, 1630F, that the loss must be relevant loss – that is to say, it must be 'loss falling within the measure of damage applicable to the wrong in question'. 
16.	Then Lord Justice Chadwick quoted in paragraph 56 of his judgment from a passage in the judgment of Hobhouse LJ in Knapp v Ecclesiastical Insurance Group Plc [1998] PNLR 172, at page 178:
"It is immaterial that at some later time the damage suffered by the plaintiffs became more serious or was capable of more precise quantification.  Provided that some damage has been suffered by the plaintiffs as a result of the second defendant's negligence which was 'real damage' (as distinct from purely minimal damage) or damage 'beyond what can be regarded as negligible' that suffices for the accrual of the cause of action."
17.	In the present case Judge Behrens held (at paragraph 84 of his judgment) that he agreed with Miss Demetriou that all the alleged tortious acts took place well before October 1997.  He also agreed with her that significant damage must have occurred before October 1997, and in his view the cessation of the firm and the intervention of the Office for the Supervision of Solicitors were further damage arising from the same causes of action.  They were not fresh causes of action in themselves.
18.	The essential submission on this appeal, which Mr Berkley advances in respect of both the alleged causes of action, does not seek to say that material damage did not occur before 23rd October 1997.  Rather, the submission is and has to be that the torts were continuing, such that a cause of action arose at all stages when the Legal Aid Board failed to pay what it is alleged they ought to have paid.
19.	Some torts are continuing torts, depending on the facts.  A lot of claims in nuisance are clear examples of this, so long as the nuisance continued.  The original written skeleton argument for this appeal (not composed by Mr Berkley) says that the duty imposed by section 6(2)(a) of the 1988 Act was a continuing one.  Reference was made to the House of Lords' decision of Darley Main Colliery v Mitchell (1886) LR 11 App Cas 127.  This was, however, a coal mining subsidence case, where subsequent subsidence gave rise to a fresh cause of action.  That is plainly, in my judgment, not applicable in the present case.
20.	But it is said here that the Legal Aid Board were not responsible for an isolated breach of duty, but for one which continued.  The alternative way of putting essentially the same submission in the written skeleton argument was that the Legal Aid Board failed to discharge their statutory duty throughout the period and beyond 23rd October 1997.  As I say, it is essentially the same point.  It is similarly submitted that the claim for misfeasance in public office gives rise to a continuing tortious act.
21.	Mr Berkley, recently instructed, adopts the written skeleton argument and supplements it.  In his supplementary skeleton argument he refers to the decision of Sir Andrew Morritt V-C in Phonographic Performance Ltd v Department of Trade and Industry [2004] 1 WLR 2893, [2004] EWHC 1795 (Ch).  I shall refer to that decision in a moment.  But on the basis of it Mr Berkley submits that there is a fundamental difference between, firstly, an event which causes a chain of damage over a period which straddles the limitation cut-off date, inevitably statute-barred and, secondly, continuing or repeated breaches with continuing effects over a period which straddles the limitation date, such that it is statute-barred before the cut-off date but not statute-barred for damage occurring after the limitation date.  He submits that assuming for the purposes of the appeal that the breach of section 6 of the 1988 Act provides a cause of action, the questions when does the breach occur and whether or not this is a continuing breach are essentially matters of statutory interpretation.
22.	Mr Berkley refers to the terms of section 6 of the 1988 Act.  He submits that there is a continuing or repeated breach unless or until all sums due to the firm are paid by the Board.  That submission, he says, is consistent with the words of the statute "there shall be paid out of the fund such sums as are due from the Board in respect of remuneration and expenses properly incurred."  He says that the case cannot be put on the basis of the passing of a one-off isolated payment date or dates, or a situation akin to a debt claim.  Here he says the breach continues -- i.e. the unlawful state of affairs continues -- until all payments have been made, and he suggests that counterintuitively the fact that nothing was done after the cut-off date is not the weakness of the case, but rather the strength of the case of limitation.  Mr Berkley submits of the misfeasance claim that the continued failure to authorise payment of the sums right up to the intervention represented continuing malicious conduct by the public officer, in particular Mr Bracewell.
23.	The case of Phonographic Performance Ltd was one in which a licensing body for sound recording claimed that the Department of Trade and Industry were in breach of its European Community obligation in failing to implement a relevant Council Directive.  The contention was that sections of the Copyright, Designs and Patents Act 1988 were unlawful, because they permitted the playing of sound recordings in certain circumstances without payment.  The date by which the Directive was to be implemented was 1st July 1994.  The defendant said the cause of action arose then and was statute-barred.  The claimant said both that there was a continuing breach of duty and that performances which would have attracted payment after 1st July 1994 gave rise to fresh causes of action.
24.	The Vice-Chancellor held that since damage was an essential ingredient of the claim, it was not a claim which was actionable per se and that a cause of action accrued on 2nd July 1994, but there was a continuing breach of duty giving rise to a fresh cause of action each time the claimant suffered loss, and that accordingly the action was not statute-barred.
25.	We have been helpfully referred to an extended passage in the Vice-Chancellor's judgment between paragraphs 13 and 28.  I shall refer to parts of this.  There is in paragraph 14 a very helpful quotation from the judgment of Colman J in Arkin v Borchard Lines Ltd [2000] Eu LR 232.  The quotation from Colman J's judgment includes this:
"In this connection it is important to recognise that there are different ways in which such a breach may cause damage.  Thus, an isolated event amounting to such a breach may cause a chain of damage development commencing when the effects of the breach first affect the claimant, and those [effects] may continue for a long period of time.  If that period commences prior to the cut-off date for the purposes of a period of limitation, the claim will prima facie be time-barred notwithstanding that the effects of the breach may continue beyond that date.  The position is similar to a claim in tort for negligence.  By contrast, there may be a continuing or repeated breach of statutory duty, over an extended period, such as an unlawful emission of toxic fumes which continues to affect and injure those exposed to it over the whole period of that breach.  In such a case, if the limitation cut-off date occurs during the period, the claimant's cause of action for the damage suffered after the date in question will not be time-barred."
26.	The Vice-Chancellor went on to refer by contrast to the decision of Homburg Houtimport BV v Agrosin Private Ltd [2001] 1 Lloyd's Rep 437 in the judgment of Rix LJ, and then in the House of Lords [2004] 1 AC 715.  In that House of Lords' decision Lord Hoffmann concluded, upon the facts of that case:
"... there was a single cause of action which accrued to the persons who owned the cargo at the time when the negligent stowage caused it any significant damage.  That cause of action comprised all damage caused by the negligent stowage, even if some of that damage did not manifest itself until after they had parted with ownership."
27.	The Vice-Chancellor then referred to three textbooks on the subject of the law of tort, and he summarised what they had to say in his paragraph 20 as follows:
"20.  All three textbooks refer to Darley Main Colliery Co v Mitchell (1886) 11 App Cas 127.  As Lord Hoffmann pointed out in Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 that case was unusual because the cause of the damage, digging coal underground, was not itself a wrongful act but gave rise to a cause of action only in so far as it let down some part of the surface.  He added, at para 91:
'So there was no unifying element in the cause of action such as, in this case, is provided by the negligent stowage.  Each letting down of the surface was a separate cause of action.  In the present case, all damage caused by the negligent stowage is a single cause of action which is complete once any significant damage has occurred.'" 
28.	The Vice-Chancellor rejected the defendant's submissions under a number of heads.  These included the following, at paragraphs 24 and 25:
"24.  Second, it was common ground that the obligation of the UK imposed by article 8(2) of the Rental Directive did not cease on 2 July 1994 when the date by which the obligation was to be performed had passed.  No doubt it is true that had the duty been performed on or before 1 July 1994 then there would not have been any breach of duty on or after 2 July 1994.  But the converse is not true, the obligation continued but was not performed.  In these circumstances the crystallisation of the breach of duty on 2 July 1994 cannot be such a unifying element as Lord Hoffmann referred to in respect of the Darley Main case and the fact that nothing further occurred after that date is the complaint not an answer to it.
25.  Third, I do not agree that all subsequent damage can be attributed to the initial breach.  Playing a sound recording as part of the activities of a charitable organisation in, say, 2000 was not an infringement because the Crown had not done by that time what article 8(2) required; that is to say the relevant breach is that which occurred in 2000 not that which had occurred previously in 1994.  PPL was not deprived of a chance in 1994.  It was deprived of a right on each subsequent occasion when a sound recording was played in circumstances which, because of the Crown's failure to do what article 8(2) required, did not constitute an infringement."
29.	It is, I think, immediately obvious that the facts of the present case do not measure up, at least to the second of those two matters which influenced the Vice-Chancellor in the Phonographic case.  There were not subsequent occasions (i.e. subsequent to 23rd October 1997) when events occurred giving rise to separate and additional damage.  It is in my judgment significant that there is no factual allegation of any kind made against the Legal Aid Board in the present proceedings after September 1997, when they made a payment which reduced the amount allegedly wrongfully withheld to £7,885.18.  Indeed, there are no specific allegations of breach of duty or misfeasance after July 1997.
30.	Paragraphs 10 to 34 of the particulars of claim plead facts between 8th April 1997 and 28th July 1997.  The facts relied on to constitute malice for the purpose of the misfeasance claim are those relating to Mr Bracewell, against whom allegations are confined to April 1997.  Paragraph 29 of the particulars says that he had not produced an audit report.  The only documentation he produced was a draft and incomplete document entitled "Investigative Audit - April 1997".
31.	Paragraph 35 of the particulars specifically relies on "the premises", being allegations no later than 28th July 1997 as constituting harassment, intimidation and abuse of power in intentionally withholding legal aid money which ought to have been paid.
32.	In these circumstances, a cause of action for breach of statutory duty in failing to comply with section 6(2) of the Legal Aid Act 1988 (if there is one) plainly accrued before 23rd October 1997.  There was material damage before that date, as Mr Berkley accepts.  The only question here is whether the breach of statutory duty was a continuing one, giving rise daily to a fresh cause of action.  In my judgment, it plainly was not such a continuing breach.
33.	Granted that there could be cases in which additional obligations to pay out of the legal aid fund might arise as time goes by, this is not such a case.  This case falls within Colman J's first category.  That claim is, in my judgment, statute-barred.
34.	As to the misfeasance claim, Mr Berkley helpfully reminds us by reference to Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1, that the elements of the claim for misfeasance in public office are that a public officer has exercised or failed to exercise a power as a public officer maliciously, causing damage to the claimant of a type which was foreseen by the defendant.  Mr Berkley's forensic attempt to show us from the documents the germ of a case of malice was not, so far as I was concerned, successful.  However that may be, a case of malice is pleaded.  The difficulty here is that paragraph 47 of the particulars of claim explicitly relies on the conduct of the Legal Aid Board "as hereinbefore set out".  That conduct does not, as I have said, go beyond July 1997 and the malice of Mr Bracewell does not go beyond April 1997.
35.	Further, paragraph 50 of the particulars pleads that the loss constituted by the closure of the firm was said to be the direct consequence of the Legal Aid Board's actions, these actions being those previously identified in the pleading.  There is no misfeasance alleged within the limitation period.  Mr Berkley does not suggest that there was.  His forensic lifeline is to submit that the alleged misfeasance maliciously intended to close the firm down and the firm's closure was within the limitation period.  However, the tort (if tort it was) was committed exclusively outside the limitation period and material damage was caused by it outside the limitation period.  The manifestation of the misfeasance was the same withholding of money as on the breach of statutory duty claim.  It caused the same damage.
36.	I grant again that on different facts misfeasance might be a continuing wrong, but it was not so here.  Nor is it alleged to have been.  So here again the assumed cause of action accrued outside the limitation period.
37.	The judge, in my view, reached the correct conclusion.  For these reasons, I would dismiss the appeal.
38.	I would only add that it does not appear that limitation may have been the claimant's only problem with this claim.  Other problems included the possibility, perhaps probability, that the compromise of the judicial review proceedings embraced the present claims, the problem of establishing malice, to which I have referred, and the fact that the firm's collapse was the result of the intervention of the Office for the Supervision of Solicitors, which was itself because there was a deficiency in the firm's client account.  That could not have been caused or excused by the non-payment of legal aid money.  The most that might be said was that the delay in legal aid payments hampered the firm from rectifying their breach of the Solicitors' Accounts Rules.
39.	LORD JUSTICE CHADWICK:  I agree. 
40.	LORD JUSTICE PILL:  I also agree.
41.	The claim is based on causes of action in tort and the judge held them to be statute-barred.  Reliance is placed by Mr Berkley, for the appellant, on the decision of Sir Andrew Morritt V-C in Phonographic Performance Ltd v Department of Trade and Industry and another [2004] 1 WLR 2893, where breach of statutory duty was alleged and the action was held not to be statute-barred.  I have had more difficulty than my Lord, Lord Justice May, in deciding whether the breach of statutory duty is outside the second proposition stated by the Vice-Chancellor at paragraph 24 of Phonographic, that is a case where "the obligation continued but was not performed". 
42.	I do not dissent on present facts, but there is force in the submission that the breaches were repeated by non-payment after 23rd October 1997.  In other circumstances, the Vice-Chancellor's proposition would apply.  An absence of action may constitute a breach of statutory duty.
43.	Where both claims also fail, in my view, is upon the Vice-Chancellor's third proposition at paragraph 25 in Phonographic.  The Vice-Chancellor stated that he did not agree in that case that all subsequent damage could be attributed to the initial breach.  He was thereby holding that damages could arguably be attributed to the later breach.
44.	The Vice-Chancellor's conclusion involved some factual inquiry into the events leading to the damages alleged.  In this case, as in that, some damage occurred outside the limitation period.  In the present case as pleaded, it is, in my judgment, impossible to attribute the catastrophic consequences alleged to result from the events as a whole to the only alleged breach of statutory duty after 23rd October 1997.  That is the withholding by the respondents of a sum of just under £8,000.  The pleaded case does not begin to establish a sufficient connection.
45.	As to the misfeasance claim, I agree with Lord Justice May that the damage claimed cannot be linked with the pleaded allegations, which are remote from it in time and substance.  Nor is this merely a question of failure of pleading.  In substance, the events described do not support the propositions which the appellant would need to establish to succeed in this appeal.
46.	Accordingly, the appeal is dismissed.
ORDER:  Appeal dismissed with costs in the agreed sum of £4,000. 
(Order not part of approved judgment)