27 November 2000
When Parliament enacted the Latent Damage Act (Section 14A Limitation Act 1980) it struck a fine balance between the unfairness of depriving claimants of their right of action before they know they have a claim, and the unfairness of making defendants face stale claims after documents have been destroyed and witnesses' memories have faded. No action for negligence can be brought more than 15 years after the relevant acts or omissions, even if the cause of action has not yet accrued. The recent cases of Brocklesby v Armitage & Guest and Liverpool Roman Catholic Archdiocese Trustees v Goldberg may have undermined that balance, allowing claims without any effective time limit if the claimant could not discover the circumstances for "some time".
The Limitation Act allows a claim for up to six years after the claimant discovers the concealment. In Brocklesby the Court of Appeal held that this also applies when the defendant has deliberately done an act which amounts to a breach of duty, whether or not they intended to. Judge Laddie followed this approach in Liverpool Roman Catholic Archdiocese.
The courts held that Section 32(2) deemed there to have been concealment where there was the intentional commission of a breach of duty in circumstances where the breach was unlikely to be discovered for some time. Any intentional act which amounts to a breach of duty was treated as deliberate concealment. This is exactly the scenario covered by the Latent Damage Act. But unlike latent damage, deliberate concealment applies not only to negligence but to any cause of action. It allows a claim six years, rather than three, after the claimant could (with reasonable diligence) have discovered the breach. Most significantly, the 15-year stop does not apply.
Brocklesby was a solicitor's negligence action. The claimants had sold property in consideration for a release from their obligations under the mortgage. The defendant's solicitors had failed to obtain that release. The problem was unlikely to be discovered for some time. If this is treated as deliberate concealment the limitation period is extended dramatically. So it is no longer a safe assumption that files can be destroyed after six years.
What are the other implications? Retiring partners will need to maintain run-off cover indefinitely to cover the possible unending liabilities. In its recent reforms of solicitors' professional indemnity insurance, the Law Society required policies to provide six year's run-off cover, no doubt on the assumption there would be few if any cases thereafter. The Law Society says that claims which arise more than six years after a firm has closed would be met by the profession collectively. This may be more expensive than anyone had envisaged.
The Court of Appeal is bound by its previous decisions. An application for leave to appeal in Brocklesby was refused both by the Court of Appeal and by the House of Lords itself. In January 1998 the Law Commission published a consultation paper on limitation. It recommended that the basic limitation period should be three years from the date that the claimant discovers, or ought reasonably to discover, that they have a legal claim against the defendant, subject to a long stop of 10 years (or 30 years for personal injury claims). However, deliberate concealment would extend the long stop.
The Law Commission anticipates publishing its final report by the end of 2000. Let us hope that the final report will consider the difficult issue of public policy raised by the Brocklesby and Liverpool Roman Catholic Archdiocese Trustees cases.
Jonathan Davies is a partner at Reynolds Porter Chamberlain.