SMITH V CUNNINGHAM & ORS – SUPREME COURT UPHOLDS COURT OF APPEAL DECISION ON LIMITATION PERIODS

The Supreme Court has today (25 May 2023) upheld the decision of the Court of Appeal in one of the most far-reaching judgments for solicitors and professional indemnity insurers for many years on the subject of limitation periods.

The Supreme Court has confirmed that where a solicitor is retained for the purposes of obtaining for his/her client a good marketable title and fails to do so, the point at which the client has suffered actionable loss will generally be the point at which the property is conveyed to the client. This is a hugely positive decision for solicitors as well as the professional indemnity market.

Beale & Co LLP were delighted to represent the Solicitor Defendant in this matter and in clarifying an important area for the professional indemnity market

Background:

In summary the Plaintiff acquired a house in 2006 and retained the Fourth Named Defendant Solicitor for the purpose of the transaction. The property was not constructed in compliance with the planning permission granted. This non-compliance only became apparent in 2008 when the Plaintiff attempted to sell the property and the prospective buyers sought confirmation of the planning permission. Those buyers rescinded the contract for sale because of the planning issues.  The Plaintiff issued proceedings in negligence against the Fourth Named Defendant.  The High Court found that the defective planning permission at the time the Plaintiff purchased the property was merely a defect and that the damage to the Plaintiff did not manifest until he attempted to sell the property in October 2008, therefore the proceedings were not statute barred.  The Court of Appeal held that actual damage that was capable of discovery occurred to the Plaintiff when he purchased the property, in that he did not receive good marketable title and had, in effect, purchased an unauthorised development in 2006 and it was from then that the cause of action accrued, therefore the limitation period had expired when proceedings issued in 2014.  The Plaintiff sought leave to appeal the Court of Appeal’s decision to the Supreme Court. For a detailed background into the facts of the case and the decisions by the High Court and Court of Appeal, please see our previous article : https://beale-law.com/article/case-review-smith-v-cunningham-ors/

The Supreme Court decision:

In granting leave to appeal against the decision of the Court of Appeal, the Supreme Court determined that the point from which time runs in a claim in negligence in connection with a conveyancing transaction is of general public importance. The Supreme Court noted that the issue hinged on the proper construction of S. 11 (2)(a) of the Statute of Limitations 1957, as amended, provides:

“Subject to paragraph (c) of this subsection and to section 3 (1) of the Statute of Limitations (Amendment) Act, 1991, 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”

Noting the complexities in claims of this nature, Murray J observed that a plaintiff may find that the Statute of Limitations has expired before they realise they have been wronged and that claims for economic loss may be wholly or partially contingent, reversible, uncertain and/or the product of fluctuating valuations.

Murray J held that the issue cannot be whether time runs from the time at which the plaintiff might reasonably have known of his loss or cause of action, but instead at what point an injury was sustained by the Plaintiff.  This, the court held, fell to be assessed by reference to whether the state of affairs the moment the sale of the property closed amounted to no more than a “contingent loss” or a “risk” of whether the Plaintiff had sustained real actual damage for which a person would consider commencing proceedings, and whether his rights were less valuable by reason of exposure to any relevant risk. In this instance it was confirmed that this was not a contingent loss as had been argued by the Plaintiff but an immediate one.

In its decision, the Supreme Court held that where a solicitor is retained for the purposes of obtaining for his/her client a good marketable title and fails to do so, the point at which the client has suffered actionable loss will generally be the point at which the property is conveyed to him or her. Citing Collins J’s decision in the Court of Appeal, Murray J set out the rationale of why the Plaintiff had from the point of the conveyance suffered an actionable loss:

1. The Plaintiff’s mortgage proceeded on the basis that the Plaintiff would obtain good marketable title;
2. The Plaintiff and his then wife as owners and occupiers of the property became liable to enforcement action by the Planning Authority;
3. Any such action would entail significant consequences for the Plaintiff and his wife
4. Even in the absence of enforcement action, the marketability of the property was clearly adversely affected by the defect on title, and as a result they received something less valuable than what they paid for
5. While it was open to the Plaintiff to seek retention permission, this would entail expense, and the application might be refused which would mean further expenditure would be necessary to bring the property into compliance, if this was even possible.

On the basis of the evidence before the court, the difficulties with the planning permission were in no way de minimis as it was not inevitable that they could be rectified at the time.

Murray J noted that in claims for pure economic loss, the court must take a pragmatic case – by – case analysis, asking itself that when a real and meaningfully measurable loss was sustained, at what point the balance between the benefits and burdens of a transaction became adverse to the interests of the plaintiff, and when a lay person would understand actionable damage for which a person would commence proceedings to have occurred.    Murray J acknowledged that there may be cases where that pragmatic approach may be difficult, but this case was not such a case. In this instance the Plaintiff became aware of the damage within two years of acquiring the property.

Conclusion:

In dismissing the Plaintiff’s appeal and upholding the decision of the Court of Appeal, the Supreme Court has reinforced the correct construction of  S. 11 (2)(a) of the Statute of Limitations 1957, as amended, as it applies to solicitors and other professionals in claims for pure economic loss.  This consistency is welcome in the absence of legislative intervention in this jurisdiction.  It is expected that clarity in such a key aspect of tort law will lead to significant cost savings for professional indemnifiers going forward because the cause of action in claims against solicitors are confirmed to begin to accrue at the earliest possible date leading to less claims, and also because the scope for legal debate on the question of when the cause of action accrued has been considerably narrowed.