FORSTER V OUTRED & CO (A FIRM) [1982] 2 ALL ER 753 The plaintiff who was involved in this case is MRS.

FORSTER, a mortgagor; meanwhile the defendant is OUTREAD & CO, a solicitor firm. The issues raised are whether the damage occurred since she signed the mortgage deed or after creditor sought to enforce the security? When is the accrual of the cause of action? And whether the cause of action against solicitor completes when client acts on solicitor's negligent advice or when loss or damage occurs. In this case, the claim was made against solicitors who had advised Mrs Forster in connection with a mortgage on her farm to secure her son's borrowing. The case started on 8 February 1973, when plaintiff executed a mortgage deed which charged her property by way of legal mortgage as a primary security for the son's liabilities after taken legal advice of a solicitor. On 23 April 1974, the company threatened to foreclose on the plaintiff's property unless she paid the amount of the son's liabilities. Next, on 21 January 1975, the company made a formal demand to the plaintiff under the terms of the mortgage for payment of the son's liabilities. 29 August 1975; plaintiff paid almost 70,000 to the company. However, on 7 January 1977, plaintiff issued a first writ claiming damages for negligence against the defendants alleging that the defendants were in breach of their duty to explain the contents of the mortgage to the plaintiff before she signed it. The plaintiff claimed that in particular the defendants should have explained that the mortgage was security for all the son's present and future liabilities to the company and not merely, as the plaintiff believed temporary security for a bridging loan from the company to her son. As a reply, defendants served a defence on 9 March 1977 (8 February 1979 limitation period of 6 years starting on 8 February 1973 already expired & plaintiff did not take any further action during this period) Then only on 14 December 1979, plaintiff gave their notice of intention to proceed. However, on 27 February 1980, defendants already applied to strike out the action for want of prosecution because plaintiff already exceeds the limitation period. On 27 March 1980, the plaintiff issued a second writ against the defendants claiming damages for negligent advice in regard to the mortgage. The master refused to strike out the first action. The second action was

issued more than 6 years after the impugned transaction, but within 6 years of Mrs Forster paying her sons debts to clear the charge on her property. Lastly, on 30 July 1980, courts allowed the appeal by defendants and struck out the first action for want of prosecution because he found that there had been inordinate and inexcusable delay by the plaintiff to the defendants' prejudice in prosecuting the first action and he thought it was only arguable, and not clear, that the second writ had been issued within the limitation period. The judge decided that, since the defendants would not be able to raise the limitation defence if the plaintiff was allowed to proceed with the first action, justice required him to strike out the first action and let the plaintiff proceed with the second action when the defendants could raise the limitation defence. Later, the plaintiff appeals to COA on the grounds that the judge ought not to have struck out the first action, since the second action had been commenced within the six years' limitation period applicable to the plaintiff's cause of action for negligence because the cause of action was not complete until she had suffered actual damage in consequence of the defendants' alleged negligence, and that had occurred at the earliest on 23 April 1975 when the company threatened foreclosure, or possibly on 21 January 1975 when the company made its demand or on 29 August 1975 when she made the payment to the company under the mortgage. They contended on certain grounds; that the judge misdirected himself in refusing to determine the issue whether or not the limitation period in relation to the plaintiff's cause of action in negligence had expired by the date of the defendants summons (27 February 1980) to dismiss the action for want of prosecution and/or by the date of a second writ for the same cause of action issued by the plaintiff against the defendants on 25 March 1980, and ought to have determined that issue and to have held that the plaintiff's cause of action did not accrue before 29 August 1975 or, at the earliest, on 23 April 1974; the judge ought to have found that the limitation period in respect of the plaintiff's cause of action had not expired by the date of the defendants' summons to strike out the first action or by the date of issue of the second writ and should accordingly have allowed the action to proceed; the judge ought not to have found that the plaintiff's delay was inexcusable; and the judge ought not to have found that the defendants had established that they would be prejudiced as a result of the plaintiff's delay.

However, the Court of Appeal upheld the judge's before decision that there had been inordinate and inexcusable delay, causing prejudice to the defendants, in prosecuting the first action. The court stated that when plaintiff suffered economic loss in consequence of a solicitor's negligent advice, actual damage occurred and the plaintiff's cause of action was complete when in reliance on the solicitor's negligent advice the plaintiff acted to his detriment by incurring a contingent liability which was capable of monetary assessment. Thus, her cause of action was therefore complete, when she entered into the mortgage on 8 February 1973, because the effect of her entering into the mortgage was to encumber her freehold property with a legal charge and to subject her to a contingent liability to discharge her son's liabilities to the company, which might (as it in fact did) mature into financial loss and in consequence diminish her equity of redemption. ISSUE: ACTUAL DAMAGE?? Stephenson LJ recorded the submission of counsel at p 93E: 2 Mr Stuart-Smith contends, on behalf of the defendants, that when (the plaintiff) signed the mortgage deed she suffered actual damage. By entering into a burdensome bond or contract or mortgage she sustained immediate economic loss;. Later, on the issue of actual damage, What is meant by actual damage? Mr Stuart-Smith says that it is 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 he had no control;.... ISSUE: WHEN DID THE PLAINTIFF SUFFER DAMAGE & WHEN DID THE CAUSE OF ACTION ACCRUED? BY DUNN LJ The express terms of the mortgage stated that the plaintiff was under no liability to the mortgagees for repayment of her son's overdraft and the mortgagees could not exercise their power of sale of the mortgaged property until demand had been made under the mortgage. But does that mean that no damage was suffered by the plaintiff until there had been a demand (as was submitted by counsel for the plaintiff)? It is sufficient that it is financial loss that should be foreseen, and I would hold that in cases of financial or economic loss the damage crystallizes and the cause of action is complete at the date when the plaintiff, in reliance in negligent advice, acts

to his detriment. Before she executed the mortgage deed she owned the property free from encumbrance; thereafter she became the owner of property subject to a mortgage. That, in my view, was a quantifiable loss and as from that date her cause of action against her solicitor was complete, because at that date she had suffered damage. I would therefore hold that the cause of action accrued on 8 February 1973 and the time had expired by the date of the issue of the second writ. In conclusion, the decision by Stephenson LJ, Dunn LJ and Sir David Cairns held that the CoA found that Mrs Forster had suffered actual damage when, having received advice from her solicitors, she executed a mortgage charging her freehold property to security for a loan to her improvident son. Her cause of action against the solicitors in negligence accrued then, when she encumbered her property, and not subsequently when on demand she repaid her sons loan. Thus, damage was suffered as soon as the claimant signed a mortgage deed, not when the creditor sought to enforce the security. Cause of action against the defendants was complete on 8 February 1973 and therefore the second writ had been issued outside the six years' limitation period. The issue of the second writ was not a reason for refusing to dismiss the first action, which had therefore rightly been dismissed for want of prosecution.