Court says s138D FSMA claims outside s14A Limitation Act

The High Court has held that a claim for breach of statutory duty under s138D FSMA does not fall within the provisions of s14A Limitation Act, which would allow the limitation period to be extended in certain circumstances.

The claimant alleged that EFG Private Bank Limited had acted in breach of its statutory duties under s138D FSMA by breaching MCOB requirements in connection with two mortgage offers it made to him in 2012 and 2015 and valuations it had carried out for it.

The Court held that 14A Limitation Act applies to actions for damages for negligence, and does not apply to breaches of statutory duty, so the claims were time barred.

The claimant also claimed that EFG owed him a common law duty of care in respect of the valuation, but the court found that where a lender merely providers a borrower with a valuation prepared for the lender for the lender’s purposes, the mere act of doing that will not give rise to a duty of care on the part of the lender. For completeness, the judge also confirmed that MCOB 5.5.6R and related guidance did not give rise to a common law duty of care either.

The action arose after the borrower, a high net worth individual, did not repay the loans which ultimately led to the lender presenting a bankruptcy petition. Since more than 6 years had passed since the time of what the judge concluded were actionable losses in respect of the transactions, the primary limitation periods under section 2 or 9 of the Limitation Act had expired. So the claimant needed to argue that s14A Limitation Act could apply to extend the period for common law negligence and breach of statutory duty. It was common ground that it would apply to the common law claim for negligence based on the alleged duty of care, but it was not clear whether it applied to claims for breach of statutory duty.

In his judgment, the judge cited authority that a claim for breach of statutory duty is a claim in tort under s2 Limitation Act, and not an action for damages for negligence under s14A. He also said a claim for breach of s138D FSMA does not require an allegation of negligence.

In this particular case, EFG had throughout explained to the claimant that it was not providing advice about the merits of the mortgages but was treating him as an execution only customer – and the claimant accepted this. The claimant also accepted that merely providing the claimant with the valuation the lender had commissioned did not give rise to a duty of care but argued that MCOB 5.6.6R required any estimated valuation to be a reasonable estimate based on all the facts available at the time. As a result, this did give rise to a common law duty of care to take reasonable care in the valuation.

So, in fact, the judge struck out and dismissed the underlying claims in any event.

Emma Radmore