As Time Goes By - Limitation Decision In Solicitors' Negligence Case

The Court of Appeal decision in Watkins v Jones Maidment Wilson was handed down on 4 March 2008. The House of Lords in Law Society v Sephton (2006) raised the prospect of claimants having wide scope to litigate stale claims, and Watkins enters the difficult territory of how those principles are to be applied in practice.

Section 2 of the Limitation Act 1980 provides that "an action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued". A claim in negligence only accrues when "actual damage" is suffered, but the question of what constitutes actual damage has proved problematic, particularly when loss is contingent on future events.

Nykredit

Nykredit, in 1997, approved the formulation in the 1982 case of Forster v Outred that actual damage was "any detriment, liability or loss capable of assessment in money terms and it includes liabilities which may arise on a contingency,particularly a contingency over which the plaintiff has no control". In Forster, the Court of Appeal had held that the plaintiff suffered "actual damage" at the moment when she charged her home as security for her son's business borrowings, and not later when her son's creditors called upon the security. That was so even though the creditors may never have called on their security if, for example, the son's business had proved successful.

Despite this approach, and despite reciting the desirability of the claim accruing at or soon after the negligent act, Nykredit left the door open for claimants to revive old claims in some circumstances. The claimants in Nykredit were lenders whose security was valued negligently, and who would not have lent but for the negligent survey. The court contemplated circumstances in which claimants in that position may not be financially worse off immediately on entering the transaction, but may become so later. The borrower may not default, and even if he does, the overvalued security may be sufficient. In such cases at the outset "financial loss is possible, but not certain. Indeed it may not even be likely". The date when any loss was first suffered would depend on the facts of each case and although it was said there could be "evidential and practical difficulties" in determining that date, those were "not difficulties in principle".

Sephton

Further encouragement to claimants seeking to challenge limitation defences came in Sephton. Accountancy firm Sephton prepared...