The Supreme Court judgment in the Brandley and WJB Developments Limited v Deane and Lohan case (the “Brandley case”) brought to an end a long running legal saga and provided invaluable clarification of the limitation periods that apply to a claim in tort for property damage.
The purpose of limitation periods is twofold: (i) to discourage plaintiffs from unduly delaying the institution of proceedings; and (ii) to protect defendants from stale claims. Generally the limitation period for an action in tort is 6 years from the date on which the cause of action accrued. However, different limitation period rules apply to some torts such as negligence, nuisance, breach of duty and personal injuries claims.
These proceedings concerned alleged negligence, breach of duty and breach of contract in the construction of two houses in County Galway. The first Defendant (Deane) was the project engineer who issued certificates of compliance, while the second Defendant (Lohan) was the grounds work contractor who laid the foundations of the houses. The Plaintiffs (Brandley – property developer and WJB Developments – Brandley’s property development company) commenced their proceedings by issuing a plenary summons on 30 November 2010 claiming damages for negligence and breach of contract. The proceedings were therefore commenced over 6 years after both the laying of foundations and the dates of the certificates of compliance. Accordingly each of the Defendants pleaded that the matter was statute-barred on the basis of the following:
(i) the foundations of the houses were completed by the second Defendant in March 2004;
(ii) the first Defendant issued his certificates of compliance with planning and building regulations in September 2004 and so if he had been negligent in his supervision and certification of the works, the breach of contract and tort of negligence occurred by 4 September 2004 at the latest;
The Plaintiffs however argued that they first observed cracks in the houses in December 2005 and it was at this point that the clock started running for the purposes of the Statute of Limitations.
- Foundations laid and completed – March 2004
- Certs of compliance issued – 4 September 2004
- Houses completed – January / February 2005
- Cracks observed in both houses – December 2005
- Proceedings commenced by plenary summons – 30 November 2010
The question to be answered was “when did the plaintiffs suffer damage by reason of the negligence of the defendants? When was the tort of negligence complete?” In determining this the Courts were essentially considering whether the time limitation period began running from the date upon which the work was completed or from the date upon which the damage became apparent to the Plaintiffs.
It was the Plaintiffs’ case that although the negligent installation of the foundations and the subsequent negligent certification given by the first Defendant, were outside the 6 years’ time limit period, the damage that happened as a result came about within the 6 years’ time period.
In the High Court, Kearns P. held that the Plaintiffs’ claim could not succeed and was statute barred. He cited in his judgment the views expressed by Ms Justice Dunne in the case of Murphy v McInerney Construction Limited which “firmly exclude a discoverability test as being the relevant starting date”.
Court of Appeal:
The Court of Appeal overturned the High Court’s decision and held that the Plaintiffs’ claim was not statute barred and further held that negligence, by itself, without the accompaniment of damage, or loss is not actionable, and that the Plaintiffs in this case, did not suffer damage at the time when the defective foundations were installed. The Plaintiffs successfully argued that the damage, which occurred as a result of the defective foundations, came about within the 6 years prior to the date of the institution of proceedings.
In coming to its decision the Court of Appeal referred to the case of Hegarty v O’Loughran and the UK case of Robinson v PE Jones (Contractors) Ltd which makes clear that financial loss in respect of specific defects does not give rise to a cause of action in negligence unless the defects result in damage to other property.
In essence, the Court of Appeal held that the Defendants “pitched the beginning of the period of limitation at too early a point” and that negligence, by itself, without the accompaniment of damage, or loss is not actionable, and that the Plaintiffs in this case, did not suffer damage, at the time when the defective foundations were installed.
The Defendants applied for leave from the Supreme Court to appeal the Court of Appeal’s decision stating that it had effectively changed the law in respect of actions for damages involving property damage claims, had introduced uncertainty into the law as its decision ran contrary to well established judicial authorities and therefore it was a matter of public importance that required the judgment of the Supreme Court.
Leave to appeal was granted on the basis of 3 key questions to be addressed by the Supreme Court in relation to the Statute of Limitations in property damage claims:
(i) Does time run from when the damage is manifest? [i.e. from date on which the damage was capable of being discovered and proved, even if there was no reasonable / realistic prospect of that being so];
(ii) Does time run from when the damage is discovered?; or
(iii) Does time run from when the damage occurs?
The Supreme Court also took the opportunity to consider 2 further possible starting points from which the limitation clock might run in these types of cases:
(iv) Does time run from when the damage could / ought reasonably to have been discovered; [i.e. the ‘date of discoverability’]; or
(v) Does time run from when the act / omission said to constitute negligence took place [i.e. the date of the wrongful act].
In its unanimous decision given by Mr Justice McKechnie the Supreme Court upheld the Court of Appeal’s decision that the Plaintiffs’ claim was not statute barred.
The Defendants had submitted that the Court of Appeal had “misapplied the established test for determining the date on which a cause of damage founded on property damage accrues in law” and “in substance applied the test of discoverability, despite unequivocally stating earlier in its judgment that that was not the test to be applied in property damage claims in negligence”. The Defendants maintained that the ‘damage’ had occurred in March 2004 or September 2004 (in the case of the negligent certification) and submitted that there was uncontested evidence that the foundations were defective from the outset. They cited a number of authorities to support their argument that the Plaintiffs cause of action was statute barred.
Possible limitation period commencement dates considered by Supreme Court:
Mr Justice McKechnie initially considered and dismissed the following 3 potential commencement dates:
- Date of the wrongful act – the Court noted that in negligence cases some actual damage must occur and so without it the tort is not complete.16 Therefore a wrongful act in of itself does not give rise to a cause of action and so cannot be regarded as the appropriate start date for the limitation period.
- Date of discoverability – Having referred to other case law, the Court found that the ‘discoverability test’ was not the test to be applied in property damage claims.
- Date when damage is actually discovered – The Court held that this is not the correct starting point and quoted approvingly from the judgment of Birmingham J in Hegarty v D&S Flanagan Bros where he stated that:
“[t]he time-limit on negligence actions begins to accrue on the date on which damage manifests itself, and not from the date on which the damage is discovered.”
The Supreme Court stated that to find the date when damage is actually discovered as the appropriate commencement point for the limitation period would be a “radical departure from existing case law”
The Court then turned to consider the remaining 2 possible limitation period commencement dates (when damage occurred or when damage was manifest). In noting the distinction between the two, the Court referred to the decision in Hegarty v O’Loughran and found that in order for damage to be ‘manifest’ it must be capable of being discovered by a plaintiff. Mr Justice McKechnie did however note that “such must of course be considered in the context of the distinction between latent defects and subsequent damage” and that “it is not the latent defect which needs to be capable of discovery: it is the subsequent physical damage caused by that latent defect”.
The Court helpfully went on to point out the distinction between the ‘discoverability test’ and the ‘manifest test’ noting that the former imports an element of reasonableness to the plaintiff’s ability to discover the injury which is absent from the latter test. Therefore with the ‘manifest test’, the damage need only be capable of being discovered by a plaintiff.
McKecknie J noted that the majority of the Supreme Court in Hegarty v O’Loughran viewed the date of the manifestation of personal injury as being the correct point for the commencement of the limitation period. The Court then proceeded to consider this judgment in the context of property damage claims and examined whether any subsequent case law required it not to apply this same interpretation.
He concluded that since it had been decided that the date of manifestation was the appropriate start date in respect of personal injuries cases then there did not appear to be any reason why the date of the manifestation of damage should not also be the proper starting point in property damage claims, particularly where the potential for injustice to a plaintiff is just as relevant in property damage claims as it is in personal injuries cases.
The Supreme Court judgment also examined what ‘manifestation of damage’ or ‘manifest’ means. The Court noted that in a number of UK cases (such as Pirelli General Cable Works Ltd v Oscar Faber & Partners) it was accepted that a cause of action in negligence will not arise until physical damage has been caused to a building, with the existence of an underlying latent defect not being enough. The Supreme Court viewed this as the correct application of the law and while McKechnie J accepted that there had been much academic and judicial criticism of the Pirelli decision due to the harsh result it produced, he remained of the view that the “decision remains sound as far as the important distinction between latent defect and subsequent physical damage is concerned”.
In concluding the Supreme Court judgment, McKechnie J found that without damage or loss arising out of a defect no cause of action exists. However in this case it was clear that the damage, arising from the defective foundations in the form of cracks, to the two houses manifested itself in December 2005 and so the limitation period ran from that date.
- Supreme Court judgment makes clear that while the date on which the Statute of Limitations begins to run in property damages cases remains the date upon which a cause of action arises, key to establishing this date is determining the date of manifestation of the damage.
- The Court re-emphasised the principle that a cause of action in non-personal injury claims only accrues once all elements of the tort are complete culminating with the manifestation of actionable damage.
- Damage is “manifest” when it is capable of being discovered, regardless of whether it has or has not been discovered or ought to have been discovered. The Court was keen to point out that this should not be taken as an endorsement of the ‘discoverability test’ which it maintained does not apply to property damage claims.
- While the decision is a welcome clarification of the Statute of Limitations as it applies to property damage claims it does however mean that those within the construction industry (and their insurers) must remain alert to the fact that the manifestation of damage requirement may extend their liability period well beyond 6 years post completion of a project.