Crawford Legal Services shares advice on limitation and how attention needs to be focused on three particular areas when the limitation period starts to run in various causes of action:
- When is the accrual of the cause of action?
- How does this apply to claims in:
- contract
- tort
- restitution
- When does:
- time start to run, for limitation purposes
- how does the starting date get postponed/delayed?
Accrual of the cause of action
Time, for limitation purposes, runs from the accrual of the cause of action. This phrase is used in many sections of the Limitation Act 1980 (the Act). What does it mean?
It is:
- The establishment of every fact that the claimant must prove to get judgment; or
- A factual situation that entitles one person to obtain a remedy against another
- It is essential to remember that one has to ascertain when the elements of a pleadable (as distinct from a winnable) claim have come into existence!
Claims in contract
An action in simple contract must be brought within six years of the accrual of the cause of action (s5 of the Act). In other types of contract, e.g. a deed, different time limits apply (see s6 and s8 of the Act).
The accrual of the cause of action will normally be referred to as being when the breach of contract takes place i.e. when there is a failure to deliver goods. However there may be cases such as contracts for services or work where the position is slightly different.
In the case of a contract for work then the right to payment (and therefore the cause of action) arises when the work is completed and is not dependent on a demand for payment or from when the other party refuses to pay.
It is always open to the parties to make specific contractual arrangements which differ from this but any such arrangement should be absolutely clear.
Most of the contractual breaches we see are breaches of contract that are caused by a failure to perform a contract with the appropriate care needed and are, therefore, linked to a claim in negligence (see below). There is always a difference in the way that such causes of action accrue, for instance in negligence the cause of action is dependent on damage being caused whereas in contract all that is needed is a breach – it is not required that damage has been causally linked to that breach.
Time limits in claims under an insurance policy
This is often difficult but only because the way the law works is dependent on the principles on which an insurance contract works and not on our everyday perception of how we think it works.
Does the cause of action accrue when the event giving rise to the claim occurs (such as a theft/loss) or at the later date of a claim being made by the Insured, or perhaps when (if) the Insurer refuses to pay? It is tempting in insurance disputes between Insurer and Insured to conclude that the cause of action should accrue when the insurer refuses to pay. This is of course when battle lines are drawn.
It is important to remember the nature of the agreement between the parties. The Insurer agrees to pay if certain things happen and when they do happen that is when a cause of action arises even if the claimant has not made a claim! Again this can be subject to agreement between the parties.
Again any such agreement would have to be clear.
There is still some legal debate on this approach but for safety’s sake the date that we should work on is the date of the underlying event.
Claims in tort (negligence)
In general, an action in tort must be brought within six years of the accrual of the cause of action (s2 of the Act). There are certain types of negligence claims, e.g. personal injury, where different time limits apply (see s11 of the Act) – in that case three years from the accrual of the cause of action.
The cause of action in negligence is said to accrue when there is a breach of duty of care and when damage is suffered. In a personal injury claim that will be when the injury is suffered, e.g. when a leg is broken (always remember, however, the possible effect of s33 of the Act – discretionary exclusion of the time limit for personal injury claims).
There are some other time limits such as the 2 year limit in the Carriage by Air Act relating to personal injury.
The position in professional negligence is often difficult as it is important to ascertain when damage actually occurs. In a negligent conveyance action for instance, the damage is caused when contracts are exchanged and not at the date of completion. If an asset becomes burdened in some way due to a negligent act, say an onerous mortgage, the damage occurs when the mortgage is entered into, not when there is a default on payment or on repossession.
Sometimes assets become subject to contingent liabilities i.e. something will happen dependent on another action taking place and in those cases damage is caused only when the contingency comes to pass.
It is also always important to bear in mind the effects of s14A of the Act (see below).
Claims for restitution (unjust enrichment)
This area of the law is growing in importance. Such claims are governed by s5 of the Act. The cause of action would run from the date when the claimant obtains a real benefit that they should not have done. Proving the facts of that may be hard but the principle seems clear. Six years is the relevant period.
On what day does time start to run?
If the relevant event occurs during a particular day then that day is excluded for the purposes of calculating time which runs from the next day. However if the action can be brought at the very start of the day (often referred to as a midnight deadline case) then time runs from the beginning of that day.
Claimants should, for safety’s sake, work on the basis that they use the date of the incident before they issue. Conversely, defendants should raise limitation arguments on the basis of the next day so as to have a better chance of a successful outcome.
How can time be postponed or delayed?
Date of knowledge
S14A of the Act provides that in negligence actions time can run from the date of knowledge of the cause of action and provides that the claim can be brought within three years of that date of knowledge. This provision was brought about to assist claimants where the problem arising may not be obvious, sometimes referred to as latent damage.
There is some technical case law as to what is sufficient to constitute knowledge and, also, when the date of knowledge occurs.
Concealment
Any concealment must be by the defendant and be deliberate. For the purposes of the Act, the concealment cannot be negligent. A pertinent fact may have been concealed but the concealment must be with the intent of concealing the facts etc. in question.
Disability
S28 of the Act deals with the situation if the claimant is under a disability at the date of accrual of the course of action. This applies e.g. where the claimant does not have the requisite mental capacity.
In such circumstances, the limitation period only starts to run when the party taking the action ceases to be under the disability or dies.
In a personal injury action involving a minor time will not run until they reach the age of 18. Being under 18 equates to a disability for these purposes.
Claims for contribution or indemnity
It is often the case that there is a need for a defendant to take an action against another party who has caused or contributed to the losses claimed against them. The Civil Liability (Contribution) Act 1978 provides that there is a period of two years within which to start such a claim. The two year period runs from the date of judgment against the defendant.
The position is more complex if there has been a settlement as opposed to a judgment. There is case law on this point but the general rule is that the two-year period starts from the earliest date that the defendant entered into a binding agreement to make payment of compensation.
If you would like to discuss this further, please contact Gordon Walker (07919 024346) and Richard FitzGerald (07471 997966) or visit https://www.crawco.co.uk/services/legal-services.
