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Limitation periods: what they are, why they matter and how to avoid their unpleasant consequences
Limitation periods arise out of a group of statutory rules (the Limitation Act 1980) which create deadlines for various types of claim to be brought at Court. The applicable time limits vary as between different types of claim, but the purpose behind the rules always remains the same: limitation periods exist to bring certainty and finality in litigation and to avoid parties arguing over historic events where there could not be a fair trial.
The rules operate in such a way that if a claim is issued after the relevant limitation period has expired, the Defendant will have a “limitation defence” which, if made out, will deny the Claimant the relief it seeks, even if in all other respects it has a very strong claim to bring and the Defendant would be found liable. This is the unpleasant consequence of limitation periods: strong, viable claims can be thrown out of Court simply because the Claimant did not issue its claim at Court in time. As a result the rules on limitation matter as it is important for any party with a claim which they have been mulling over to consider the applicable limitation period and get on with the claim before it will be too late to bring it.
Although the rules are complex and detailed, the basic limitation periods are as follows:
- A claim for breach of contract must be brought within 6 years of the occurrence of the breach (this is regardless of whether any damage occurs at the time and even regardless of whether the Claimant even knows there has been a breach at all);
- A claim in tort (which is a civil wrong) must also be brought within 6 years, but this time the 6 year period runs from the date upon which the damage occurs, regardless of whether the Claimant even knows that it has suffered damage;
- Personal injury claims must be issued within 3 years of the damage occurring or the date that the Claimant became aware of the facts which give rise to their claim; and
- Claims in defamation must be brought within 1 year of the publication of the offending words.
While the first three types of claim listed above account for the overwhelming majority of issued Court claims, there are other types of claim which are not subject to a limitation period at all. For example, a claim in fraud against the trustee of a trust is not subject to any limitation period, although even in these sorts of cases if a Claimant has deliberately sat on their claim then a different set of rules might apply which could act in a similar way to the limitation rules to deny the claim being successful (these other rules are outside the scope of this article).
It is recognised that rigid operation of limitation periods can produce harsh and unjust results and so it is possible for the time limits to be varied in certain instances. In the recent decision of Boyo v Lloyds Bank Plc the High Court had to grapple with whether the defamation limitation period (of 1 year) should be extended in the case of a Claimant who issued her claim 3.5 years after the limitation period had expired. The Claimant ran two arguments:
- Under section 32 of the Limitation Act, any limitation period can be postponed where there has been “fraud, concealment or mistake”. The Claimant alleged that the Defendant had acted in a way which concealed facts which would have revealed the alleged defamation to her sooner, as she argued that the bank had failed to send a warning notice to her which she thought it was obliged to send. The Court found that in fact the bank had no obligation to send a warning notice and so there were no grounds under section 32 to extend the limitation period.
- Under section 32A of the Limitation Act, the 1 year defamation limitation period can be extended if the Court, having regard to all the circumstances, considers that it is appropriate to do so. This section gave the Court a wide discretion and the Judge was persuaded that it was appropriate to extend the limitation period (and thereby deny the bank its limitation defence) as the Claimant has been ill, was without legal advice and had been genuinely unaware of the alleged defamation against her for a long time.
While some flexibility in the rules is sensible to remove injustice, it does mean that the goal of certainty is eroded, as it is not always clear when a limitation period might be extended, as well as making the rules themselves more complex to apply to any given case. What remains fundamental though is that parties who have claims which might yet be issued seek legal advice on the applicable limitation period and do not fall foul of the rules and lose the ability to make the claim at all simply through the passage of time.
At Goodman Derrick our dispute resolution lawyers have built up extensive experience in helping businesses at every stage of their lives protect themselves against potential disputes. If you would like to discuss how your business could take full advantage of that experience, please email Nigel Adams at firstname.lastname@example.org or call Nigel on 0207 7404 0606.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.