June 2011
Autumn 2011 will mark the third anniversary of the depth of the world financial crisis, which gave rise to many potential claims and revealed others. For claimants who have not yet pursued such claims, time is running out. The government’s proposals to abolish the recoverability of success fees and some litigation related insurance premiums adds further urgency.
Limitation periods
I recently read a list of the five most common nightmares. I have never had the second most common one, said to be that all one’s teeth have fallen out (though my dentist would say that it is one I should have, given my recurrent failure to act on his reminder notices). However, I have sometimes had one that was not on the list – the litigator’s nightmare of missing a deadline. Whilst some missed deadlines can be extended, a missed limitation period usually cannot be and therefore deserves the description “nightmare”.
A limitation period is a statutory limit on the time a claimant has in which to issue court proceedings (or, if applicable, an arbitration). In England and Wales, the most common limitation period is 6 years from the date the right to bring a claim arose, but some claims are subject to shorter periods (for example, one year for libel claims and less than one year for some other claims). Claims for particular types of remedies can be barred if there is undue delay, without any particular period being specified. Prescription periods have similar effect.
The lowest point of the financial crisis which engulfed the world in 2008 is commonly regarded as the demise of Lehman Brothers in the Autumn of that year. That crisis gave rise to numerous claims and revealed many others. As it was graphically put, “when the tide goes out, you see who has been swimming naked”, the prime example of which was the Madoff “Ponzi” fraud.
Although, at the time, many losses were suffered, claimants were often reluctant to spend time and money pursuing defendants who might not be around long enough to pay any judgment obtained: when the world’s biggest insurer, AIG, was bust, there was no longer any such thing as a reliable “deep pocket”. However, as stabilisation and confidence returned, some claimants began to bring claims. Others, however, have not and the time they have in which to do so is running out.
In cases in which the 6 year limitation period applies, claims that arose in the depths of the crisis are about half way through the time limit. But no claimant can safely assume that there is a further 3 years left in which to bring a claim: even an ordinary contract claim might be subject to a shorter limitation period if subject to a foreign governing law clause or if the contract specified a shorter limitation period. In the case of claims that arose before the financial crisis, but were not revealed until the waters went down, the limitation period might have begun to run some time prior to 2008.
What this means is that any person or business who or which may be sitting on a potential claim needs urgently to seek legal advice as to the time limit for bringing the claim. As litigators and dispute resolvers, it is second nature to us to check this whenever we are asked to advise on a claim. If the expiry of a limitation period is getting close, we will advise as to what steps need to be taken to preserve a claim. This will not necessarily involve issuing court proceedings, as it is possible to agree with an opponent to put a standstill on the limitation period, though that needs to be handled in a careful and expert manner.
The usual reasons for agreeing a limitation period standstill are to allow time for claims and defences to be set out in pre-action correspondence and/or to enable settlement negotiations or mediation to take place. Statistically, most claims are settled before they reach court and many can be resolved without even the issue of proceedings. That is clearly desirable, as it removes the costs and uncertainty of litigation. However, it is vital that the right to bring a claim before a court is preserved, as without that there will be no reason for a defendant to negotiate.
Other reasons not to delay
Even if a claim is comfortably within the limitation period, there may be steps that should be taken if it is to have a reasonable chance of success. For instance, documents (including electronic documents) should be preserved and evidence should be obtained from witnesses, whose memories may fade with time.
Delaying the commencement of claims until almost the end of a limitation period is not to be recommended. The claim may have to be prepared in a rush and you may lose the ability to amend it later on. Furthermore, the defendant may have survived the financial crisis, but could succumb to insolvency later on.
Where you are relying on a defendant having insurance against claims, it is better to notify a claim sooner rather than later, so that the defendant has the opportunity to notify the insurer and trigger cover, though that does not necessarily require that court proceedings be issued at once.
Our Litigation Triage service
In the wake of the “credit crunch” and ensuing recession, I developed a service called “Litigation Triage”. In short, this is a screening service for claims, which sorts the urgent from the non-urgent, as well as providing initial advice as to the merits of a claim and what steps should be taken to preserve it and to maximise its chances of success. A similar service is available for defendants who are faced with a claim or are concerned that they might be.
Potential claimants or defendants who wish to consider having claims “triaged” can find more details of the service on our website www.gdlaw.co.uk/news-and-articles/Articles/litigation-news/litigation-triage-early-assessment-of-civil-and-commercial-claims-and-disputes.
Alternatively, I and my colleagues will be happy to have an initial informal chat with you to establish the best way of assessing and pursuing or dealing with a claim, with particular regard to limitation time limits.
Abolition of the recoverability of success fees and ATE insurance premiums: another reason to hurry
Currently:
Under draft legislation presented to Parliament in June 2011 to implement the Jackson Litigation Costs Reforms (considered in Craig Walker’s May 2011 article www.gdlaw.co.uk/news-and-articles/Articles/litigation-news/the-jackson-litigation-cost-reforms-the-winners-and-the-losers), the Justice Secretary has proposed the abolition of the recoverability, by the winner from the losing party, of CFA success fees and ATE premiums. It seems that these changes are not intended to come into effect until the Autumn of next year, 2012, but at the time of writing it has not been possible to confirm this. The draft legislation provides that the changes will not apply to any CFA or ATE insurance policy entered into before the legislation comes into force.
Successful parties will still be entitled to recover their solicitor’s usual (“base”) costs from the losing opponent. Solicitors will still be able to enter into a CFA with a client, but any success fee will be payable by the client, subject to a cap of 25% of the amount of damages awarded.
These changes will be to the detriment of claimants, who will have to fund both success fees and ATE premiums from the compensation they receive. On the other hand, that will be welcomed by defendants.
This is a further reason for claimants who consider that they may have claims that arose in, or were revealed by, the “credit crunch” or subsequent recession to seek early legal advice as to the pursuit of such claims. Subject to any changes to the draft legislation, if claimants enter into a CFA and/or ATE insurance policy prior to the legislation coming into force, and they win the claim, they are likely to be entitled to recover both success fees and ATE premiums from defendants. Once the legislation comes into force, they will lose that right.
Jonathan Haydn Williams
Consultant
If you would like to any further information about the issues raised in this article please contact Jonathan Haydn-Williams (jhw@gdlaw.co.uk), or any other member of Goodman Derrick LLP's dispute resolution team on 020 7421 7936.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice.
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