Commercial Negligence – When Does The Clock Start Running?

The risk of injustice increases with the passing of time. To protect against this, a limitation period is a length of time set by statute, within which a legal action must be brought or a right enforced. In Ireland, limitation periods are governed by the Statute of Limitation, 1957.

The purpose of limitation periods is twofold:

  • to discourage plaintiffs from unduly delaying the institution of proceedings; and
  • to protect defendants from stale claims.

Though limitation periods are often thought of in relation to cases involving physical injury, they are also an important factor within commercial relationships as they determine the length of potential liability between parties.

This has become a particularly interesting point of discussion regarding property damage claims in recent years.

In Brandley v Deane [2017], the Supreme Court confirmed that time starts to run against a potential plaintiff in property damage claims based on negligence from the date when the damage is manifest. In this case, a property developer brought proceedings in negligence against a consulting engineer and a building contractor when cracks appeared in a number of properties. The engineer and contractor admitted negligence but pleaded that the claim was statute barred. The Statute of Limitations provides:

“[A]n action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.”

Their argument was that time began to run when the defective foundations were laid. The Supreme Court took guidance from the personal injuries case Hegarty v O’Loughran [1990] in which the Supreme Court decided that the relevant start date was the date on which the personal injury was manifest. When applying this to the Brandley case, it was found that there was a distinction between a “defect” and the subsequent damage which it caused. It was determined that the clock started from the time that the damage became discoverable, rather than the date on which the cause of the defect occurred.

These principles were applied in the more recent High Court case of Smith v Cunningham & ors p/a Paul Kelly and Company Solicitors [2018]. Here, no damage occurred until the plaintiffs came to sell the property in 2008. At this time, it emerged that a defect had occurred in their title when they acquired the property in 2006. It was found that the precise date that the plaintiff’s cause of action accrued was the date that the contract for sale was rescinded, causing the plaintiffs to suffer a loss. This interpretation saved the plaintiff’s claim for negligence and breach of duty from becoming statute barred by virtue of the provisions of the Act of 1957.

The High Court’s confirmation regarding the distinction between damage and defect has far-reaching implications for solicitors with regard to professional negligence actions as it could possibly expose professionals to liability for actions from a number of years in the past.

It is expected that this development will be welcomed by home and business-owners alike, however professionals will be required to show more prudence in their work as they are exposed to higher risk.