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PROFESSIONAL NEGLIGENCE CLAIMS – WITHOUT LIMITATION?

Subject to certain exceptions the general rule is that claims in contract and tort cannot be brought more than six years after the claimant’s cause of action arose.

This provided a balance between the interests of claimants and defendants and some degree of certainty for professionals who, thanks largely to professional indemnity cover, are often in the firing line.

A series of recent Court decisions in the context of professional negligence has rendered the six year rule inoperative in many cases and has tipped the balance significantly in favour of claimants.

One of the exceptions to this rule is contained in section 32(1)(b) of the Limitation Act 1980 which provides that, where any fact relevant to a claimant’s cause of action has been deliberately concealed from him by the defendant, the limitation period will not begin to run until the claimant has (or could have) discovered the concealment.

Section 32(2) provides that a deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

Section 32 replaced section 26 of the Limitation Act 1939 and, although the wording of the two sections is different, it was until recently assumed that the general sense of the old section had been preserved in the new.

Authorities on Section 26 of the 1939 Act clearly held that a degree of wrongdoing beyond mere negligence was required to trigger the operation of the section. This view was dramatically altered by the Court of Appeal’s decision in Brocklesby -v- Armitage & Guest ([2001] 1 ALL ER 172).

In this case the defendant solicitors had been instructed to effect the transfer of a mortgaged property from the claimant to a company but no steps were taken to secure the release of the claimant’s obligations to the mortgage.

The company subsequently went into liquidation and ceased paying the mortgage instalments. It was only at this point that the claimant realised that his obligations had not been released.

The defendants argued that the claim was time barred as the writ had been issued more than six years after the date the cause of action accrued. In response the Claimant relied on section 32 and, in particular on the deeming provision of section 32(2). The Court of Appeal held that concealment of a fact was deliberate if it arose from an intentional act whether or not the defendant appreciated the legal consequences.

Using this interpretation Section 32 will apply in many professional negligence cases since professionals generally act intentionally and clients are unlikely to discover the relevant facts for some time.

The Court of Appeal’s decision has been criticised by commentators but has nevertheless been followed. Mr Justice Laddie applied the decision in Liverpool Roman Catholic Archdiocese Trustees Incorporated -v- Goldberg, ([2001] ALL ER 182).

More recently Mr Justice Neuberger relied on it in Gold -v- Mincoff Science & Gold ([2000] ALL ER (D) 2412). In so doing he appeared to express misgivings about the current state of affairs but took some comfort from the fact that the Court of Appeal would shortly be looking again at the issue.

The Court of Appeal has now done just that in a case called Cave -v- Robinson Jarvis & Rolf ([2001] ALL ER (D) 232 (Feb)). However, there is little in its judgment which will give professionals, or their insurers, any comfort.

In this case the defendant solicitors had advised in connection with the sale of a piece of land in 1989. As part of the deal the claimant wanted to acquire enforceable mooring rights over the land.

The land was sold to a company which later went into receivership. The receiver denied the existence of the mooring rights on the basis that the claimant could only establish a personal right against the company.

The claimant commenced proceedings alleging breach of contract and negligence. Limitation arose as a preliminary issue. It was common ground that, unless the claimant could bring himself within the provisions of section 32 his claims would be time barred.

At first instance the issue was resolved in favour of the claimant, the Judge holding that he was bound by the decision and reasoning in Brocklesby.

The defendants appealed and invited the Court of Appeal to hold that Brocklesby had been wrongly decided and that it should not be followed or applied. The Court declined the invitation holding instead that Brocklesby was binding and had to be applied with the effect that the claim was not time barred.

An application for permission to appeal to the House of Lords was refused. It remains to be seen whether the Lords will themselves give permission for an appeal.

This leaves professionals which something of a dilemma.

The general feeling of certainty engendered by the six year limitation rule has completely evaporated. In many cases the six year rule will simply not apply.

The difficulties inherent in defending old claims, for example witness availability and recollection will become more acute. Practical considerations such as how long to keep documents and how to purchase insurance to protect retiring partners will also cause difficulties until such time as the Lords or the Law Commission look again at (and do something about) this issue.

Paul Goodman, Solicitors Insurance Practice Group, Simmons & Simmons