Limitation in professional negligence cases has always been difficult, but especially so after the decision of the House of Lords in Law Society v Sephton. Some clarity has been offered by the recent Court of Appeal decision in Axa v Akther & Darby but are we really any closer to a clear and workable rule?
Limitation has always been a fruitful way of defending claims against professionals. The nature of professional life is that claims are often brought long after any alleged negligence, so witnesses or documents may be unavailable making a trial particularly unattractive. Limitation is a relatively easy way to avoid such a trial.
Ignoring the three year limitation period following date of knowledge, a claimant normally has six years within which to sue. But six years from when? In negligence claims it is six years from suffering loss. When is loss suffered? The answer is often easy. After a personal injury, it is the day of the incident.
For claims against a professional it is rarely so clear. Imagine if your solicitor fails to discharge a prior mortgage when you purchase your house, so you don't have a good title. You suffered a loss on completion since you paid for good title but don't have it.
What if the solicitor negligently exposes you to a liability which is contingent, so it might never come to pass? For instance, some home owners in rural locations have recently been faced with huge claims under ancient covenants to repair the local church. Unless the church actually claims under the covenant, the residents may not have suffered any loss. What if the claim is seven years after buying? Are they too late to sue?
Sephton and AXA
Sephton tried to clarify the law relating to limitation. However, whilst it confirmed that suffering a contingent liability is not damage for the purposes of limitation, the decision leaves application of the rules to any particular case quite difficult. It probably enhanced a claimant’s prospect of overcoming the limitation hurdle.
AXA now explains that a contingency will amount to damage if there is a measurable loss at the same time, such as reduction in the value of property. For instance, giving a guarantee secured over property. Alternatively there needs to be a failure to obtain benefits in a “bilateral transaction”. For instance, the failure of a solicitor to register the husband's interest in property arising from a separation agreement with his former wife. A pure contingency on its own does not start the limitation clock.
Whilst AXA makes application of the rules a little easier, and probably reinstates limitation as an effective tool for defendants, each case will be judged on its own facts. Realistically that has to be the position; it is almost impossible to make rules which cover every set of facts.
For that reason, limitation will always remain a fruitful ground for argument. For professionals however, the tide has turned again a little more in their direction. For the residents facing claims by their church, they probably need to rely on their date of knowledge!