Key point

The High Court recently issued an important decision considering the distinction between damage and defect, when these become apparent and their effect on the Statute of Limitations.

The court rejected an application by a defendant seeking to have a claim statute barred, where more than six years had passed since a defective Certificate of Compliance was prepared by an engineer.

Facts

A Certificate of Compliance with Planning Permission and Building Regulations was issued on 23 March 2006 by the First Named Defendant in respect of a property in Leitrim. The Plaintiffs purchased the property on 12 July 2006, in reliance on the Certificate of Compliance. They subsequently entered into a contract to sell the property on 28 May 2008. The Plaintiff became aware that certain conditions of the planning permission had not been complied with on 10 June 2008. The proposed purchaser rescinded the contact as the Plaintiff could not complete the sale, due to the issues with non-compliance with planning permission conditions on 16 October 2008. Proceedings were issued seeking damages for negligence, breach of duty and breach of contract on 26 May 2014.

The proceedings were issued in excess of six years from the date on which the defective Certificate of Compliance was prepared by the first named defendant, but less than six years before the rescission of the contract for sale by the proposed purchasers.

Decision

The High Court took the view that while there was a defect in the Plaintiff’s title which occurred when the property was acquired in July 2006, no damage occurred until the Plaintiff tried to sell the property in 2008. It was held that the date of damage was the date on which the contract was rescinded, since “it would have been open to the purchaser to complete the sale for the agreed price notwithstanding the defect in the title and thus the plaintiff would have suffered no loss.” While the defect existed in July 2006, the damage was not suffered until October 2008, when the contract was rescinded. This was the point in time that the damage occurred.

Takeaway

The case has far reaching implications for solicitors and other professionals regarding potential professional negligence actions. Previously it was considered that the cause of action in such cases would accrue on the date the defective certificate was furnished, notwithstanding that the error might not in fact been discovered until many years later. This High Court decision holds that where a negligent act gives rise to a contingent risk of financial harm, it is only when the adverse contingency arises that actionable damage has been suffered. This decision potentially exposes professionals to liability for actions which have long since passed, and where the professional may not have retained any records due to the passage of time.

The case is under appeal and we will provide a further update as soon as there are any further developments.

Smith v Cunningham, Sorohan, Kelly practising under the style and title of Paul Kelly and Co Solicitors.