Limitation: The Long and Short of It

The Law Commission recognised in their original Consultation Paper of January 1998 that the current law on limitation (which dictates the time in which a Claimant must commence his action) is, amongst other failings, unnecessarily complex and uncertain. This is readily shown by the myriad of different limitation periods that currently apply. In contract law there is a 6-year limitation period from the date of breach, unless the contract is by deed, in which case it is 12 years. In tort, the claim has to be commenced within 6 years from the date of damage, or 3 years in the case of personal injury. This is except where the claim is for latent damage, in which case the 3 years run from the date the damage was reasonably discoverable, subject to a 15 year long stop. Add in various exceptions for fraud, mistake, deliberate concealment and contribution claims, mix it with a wealth of case law, and needless to say, there is a pressing need for clarity. Significant costs and court time are already wasted in disputes over the applicability of the current provisions, particularly in the more complicated situations where a claim against a professional may be for both breach of contract and negligence.

The Law Commission’s proposals were aimed at providing certainty and, at the same time, a balance between the competing rights of a claimant to seek redress, against the injustice to potential defendants of having a claim hanging over them for a number of years (whilst, all the time, the evidence in relation to the dispute deteriorates).

The central features of the proposed new regime are that there should be a single "core" limitation period of 3 years starting from the date on which the Claimant knew, or ought reasonably to know:-

(a) the facts which gave rise to a claim;

(b) the identity of the defendant; and

(c) that he/she has suffered a significant loss.

Importantly, there would also be a "long stop" limitation period of 10 years from the date of the accrual of the claim or, for those claims in tort where loss is an essential element of the cause of action, from the date of the act or omission which gives rise to the cause of action.

The long stop will not apply to personal injury claims and (whilst the Law Commission were reluctant to concede this), it is nonetheless also proposed that the courts will retain the discretion to permit a personal injuries claim (or one under the Fatal Accidents Act) to be made out of time. Special provisions will also apply as regards claims made by children and adults under a disability.

Claims in contribution will be subject to the 3 year "core" regime, with the starting date being the date of judgment or, if the original claim is settled, the date on which the amount to be paid is agreed.

As may be expected, the "long stop" period will also not run where a defendant has concealed relevant facts. Similar to the recent and welcomed decision of the House of Lords in Cave v Robinson, the concealment of the error by the defendant must be intentional and dishonest before the extended limitation period applies.

Whilst the new proposals mean that the parties are no longer going to be fighting over which limitation provisions apply, it can readily be predicted, however, that the central area of dispute will instead be over when the Claimant had actual or constructive knowledge of his/her claim, thereby triggering the start of the 3-year limitation period. The Commission did not make any attempt to define "actual knowledge" in their draft Bill, considering that it should be treated as a straightforward issue of fact. Constructive knowledge will arise when the Claimant, in his or her circumstances, ought reasonably to have known of the relevant facts. It is therefore a combination of a subjective and objective test. If the Claimant could have acquired the relevant knowledge by seeking advice from an expert, he will only be deemed to have knowledge of such matters if he acted unreasonably in not seeking this advice.

It will be for the Claimant to prove when he first had knowledge of the claim although, realistically, it is going to be the Defendant who raises the question of the Claimant’s action being time barred.

Despite the potential arguments over "knowledge", both insurers and insureds will take comfort from the certainty of the 10-year longstop period. It will also be important for parties to bear in mind the possibility, under the proposed new legislation, of modifying or excluding any of its provisions (with certain exceptions) when drafting contracts for services, or otherwise.

In all, if and when the Law Commissions’ proposals become enacted, it will bring a welcome relief to a previously convoluted area of law. The proposals represent a sensible balance between ensuring that claims do not go "stale" whilst, at the same time, protecting the Claimant against becoming time-barred in relation to a claim that he never knew existed.

The only uncertainty now is as to when, despite the proposals’ recent endorsement by the Government, the draft Bill will finally become legislation.