Limitation periods are extremely important for those involved in a claim relating to defective building works, whether that be someone who wants to bring a claim to recover loss or for those who find themselves in the position of having to defend such a claim.
Limitation periods are critical because they prompt plaintiffs to make claims for monetary relief (or other relief) without undue delay by providing defendants with clear defences to old claims. In other words, it prevents the “dagger over the head” scenario for defendants.
Previously, limitation periods were primarily dealt with by the Limitation Act 1950 (1950 Act). However, in an effort to update and clarify the law on limitation periods, Parliament introduced the Limitation Act 2010 (2010 Act) which came into force on January 1, 2011.
At the outset, it is important to note that the 1950 Act will continue to apply to claims that are based on an act or omission that occurred before January 1, 2011 unless the parties otherwise agree (section 59, 2010 Act).
Accordingly, the 2010 Act will only apply to claims based on an act or omission that occurred after December 31, 2010. Furthermore, the “long-stop” limitation period of 10 years set out in section 393(2) of the Building Act 2004 (and section 91(2) of the Building Act 1991) continues to apply.
Nonetheless, while the 2010 Act may not have an immediate impact for those currently involved in a defective building works claim, the 2010 Act will become particularly relevant to claims which rely on an act or omission that occurred after December 31, 2010.
Changes introduced by the 2010 Act include:
• Section 11(1) provides a defence to a “money claim” if the defendant can prove that the date on which the claim is filed is at least six years after the date of the act or omission on which the claim is based (now known as the claim’s “primary period”).
• “Money claim” is a new term introduced by the 2010 Act, and refers to claims for monetary relief at common law, in equity or under an enactment. Importantly, it does not include a claim for contribution from another tortfeasor (section 12(3)(c)).
Section 34 provides that a claim for contribution from another tortfeasor (section 17 of the Law Reform Act 1936) is barred if the date on which the claim is filed is at least two years after the date on which the liability of the person claiming contribution is quantified by agreement, award or judgment.
• A new concept of “late knowledge” has been introduced. Under the 2010 Act, a claimant can pursue a claim up to three years from the date when they gained (or ought to have reasonably gained) knowledge of the claim (section 14 setting out the criteria of facts that the claimant needs to satisfy).
This is aimed at addressing some of the harsh outcomes that occurred under the 1950 Act where once the six-year limitation period had expired, the claimant could be prevented from claiming, even if they did not know that they had a potential claim.
• Notwithstanding this “late knowledge” period, in an effort to bring some finality to when claims can be issued, there remains a “long stop” limitation defence to a monetary claim of 15 years — ie, it will be a defence to a money claim if the defendant can prove that the date on which the claim was filed is at least 15 years after the date of the act or omission on which the claim is based (even if the claimant does not know about the potential claim) (section 11(3)).
• Parties to a contract can “contract out” of the 2010 Act (section 41).
• While the 1950 Act continues to apply to claims based on an act or omission before January 1, 2011 (unless the parties otherwise agree), generally claims under the 1950 Act will be “phased out” over time. Claims under the 1950 Act will need to be issued within either 15 years from the date of the act or omission, or by December 31, 2015 (whichever is the latter).
As noted above, the 10-year “long stop” period under the Building Act 2004 (and 1991) remains unchanged by the 2010 Act. Accordingly, in order to bring a claim for defective building works, the claimant will need to do so within 10 years from the act or omission on which the claim is based.
The 2010 Act has attempted to bring about some clarity to limitation defences and, it is suggested, has partly achieved that result. In addition, the introduction of the “late knowledge” period has potentially addressed some of the more harsh outcomes that resulted under the 1950 Act.
Nonetheless, the 2010 Act still leaves open considerable scope for debate and argument about when a claim is “out of time”. Accordingly, we do not foresee a significant reduction in the number of arguments surrounding limitation periods.
It therefore goes without saying, when faced with a claim in relation to defective building works (or any claim for that matter), seek legal advice promptly.
Limitation defences can be a disappointing reality for those seeking to make a claim, but can be of significant assistance to those who find themselves having to defend a claim.
Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision to anyone who relies on the information contained in this article.