The Law Commission’s report on limitation1 has recommended a major clarification and simplification of the limitation periods applying to all types of litigation. These proposals, if enacted, would have the effect of shortening the limitation periods for many professional indemnity actions. This will enable professionals to know for how long they need to maintain run-off insurance cover and to preserve their files. The Law Commission also recommend that the Brocklesby2 decision should be overturned.
It remains to be seen whether the Law Commission’s proposals will be enacted. In the meantime, the House of Lords has the opportunity to reverse Brocklesby in the appeal in Cave v Robinson, Jarvis & Rolfe3 for which provisional leave for appeal has been granted.
The law today
The basic limitation period is six years from the date of the alleged breach of contract or, in tort cases, from the date when the claimant first suffers a loss. In professional negligence actions, there are concurrent rights of action in tort as well as contract, allowing claimants to take advantage of the longer limitation period allowed in tort4 . Whilst in many cases it has been held that loss is suffered at the date of the transaction giving rise to the problems5, the date of loss may be considerably later6.
There are many circumstances when the limitation period may be longer. In all negligence actions, Section 14A of the Limitation Act (introduced by the Latent Damage Act 1986) allows an additional period of three years from the date when the claimant first has knowledge of the loss giving rise to the claim, subject to a long stop period of 15 years from the date of the relevant events. The Brocklesby decision made claims possible for up to six years after the claimant could first reasonably discover the breach of duty with no overriding maximum.
The Law Commission’s proposals
The Law Commission propose a standard core limitation regime. This will allow claimants three years from the date the claimant first knows, or ought reasonably to know:
(a) the facts which give rise to the action;
(b) the identity of the defendant; and
(c) that any injury, loss or damage was significant.
This will mean that limitation periods will generally begin to run at the same time as they now do under the Latent Damage Act. As at present under Section 14A, the claimant then has three years to bring the claim. This will never be longer than the present limitation period but may often be shorter.
In many cases, problems come to light very soon after the relevant advice or transaction. In these cases, the basic limitation period will fall from six years to three years. Moreover, the long stop limitation period is reduced from 15 years to 10 years.
Personal injury actions will be the one exception to the 10 year long stop. The court will also have discretion to extend the basic three year limitation period in actions for personal injuries, taking into account the balance of hardship between the claimant and the defendant. This is similar to the present discretionary exclusion of time limits for actions in respect of personal injuries or death7.
The proposed new limitation regime will apply to all actions for tort, breach of contract, breach of trust and restitution.
Deliberate concealment
In Brocklesby v Armitage & Guest the Court of Appeal held that whenever there was a breach of duty where the circumstances were unlikely to be discovered for some time, this was deemed by Section 32(2) of the Limitation Act to be a deliberate breach of duty, with the result that the limitation period ran for six years from when the claimant could, with reasonable diligence, first have discovered the breach of duty. There is then no maximum limitation period.
This decision gave rise to the fear that claims could be brought decades after the relevant transaction: for example, in the case of a 25 year endowment mortgage the claimant might first be able to discover there was a problem at maturity, and then bring a claim for up to six years thereafter, ie 31 years after the relevant advice.
Nonetheless, in Cave v Robinson, Jarvis & Rolfe the Court of Appeal held that it was bound to follow Brocklesby. Many commentators (including this firm) regarded Brocklesby as an incorrect decision. The Law Commission has now joined those holding that view. The Commission says that Brocklesby "gives the claimant far more protection than was ever intended by the concept of "deliberate concealment"", and penalises the defendant even though he cannot be said to be in any way culpable for the "concealment"..... It has been suggested that the courts have been guilty of "a travesty of statutory interpretation"8.
The Law Commission recommend that Brocklesby be overturned by legislation. Deliberate concealment would still extend the overriding long stop period, but only if the concealment was dishonest. Unusually, the Law Commission recommend that this change in the law should effectively be retrospective, applying to all cases where proceedings have not been commenced at the date when the Law Commission’s proposals are enacted.
What happens next?
The Law Commission has been working on the Limitation Acts for many years. Their consultation paper "Making the law on civil limitation periods simpler and fairer"9 was published in January 1998. In their final report, the Law Commission have had to strike a careful balance between the interests of claimants wishing to have as long as possible to bring claims and the interests of defendants who must be protected from stale claims.10 The Law Commission’s final report on limitation of actions is accompanied by a 41 clause draft bill.
It is now for the Government to decide whether or not to accept the Law Commission’s recommendations. It will then be necessary for them to be enacted by Parliament, either as a Government or a private member’s bill. Regrettably, the Government’s record in enacting Law Commission proposals, even when the proposals are universally supported and non-controversial, is not a good one. The Law Commission’s 2000 Annual Report lists 21 previous Law Commission Reports dating back to 1991, but still awaiting implementation.
In the meantime, the Cave case on deliberate concealment awaits the decision of the House of Lords: it is to be hoped, given the possibility that the Law Commission Report may not be implemented for many years, that the House of Lords will hear the Cave case notwithstanding that legislative reform may, in due course, be introduced. Indeed, the Law Commission’s strong comments on Brocklesby should be an encouragement to the House of Lords to restore the law as it was understood before Brocklesby.
If the Law Commission’s draft proposals are enacted, they will not come into force immediately. There will be a long transitional period in which claimants have either the limitation period granted by the new law, or the limitation period granted under the previous Limitation Act, whichever is longer. The one exception to this rule is that the reversal of Brocklesby is proposed to be with immediate effect, except where proceedings have actually been commenced before the new law is enacted.
Footnotes
1) Limitation of Actions, Law Commission Report No.270, 9th July 2001, www.lawcom.gov.uk/ library/lib-com.htm#liblc270
2) [2001] 1 All ER 172
3) Unreported, Court of Appeal 20th February 2001, www.courtservice.gov.uk/judgments
4) Henderson v Merrett Syndicates Limited [1994] 2 AC 145
5) Forster v Outred [1982] 1 WLR 86
6) Nykredit Mortgage Bank Plc v Edward Erdman Group Limited [1997] 1 WLR 1627
7) Section 33, Limitation Act 1980
8) Law Commission Report, Paragraphs 3.135 and 3.136
9) Law Commission Consultation Paper 151
10) Law Commission Report Paragraph 1.6
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