When limitation periods for loss claims start

When limitation periods for loss claims start

When does a limitation begin to run?  The commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in commercial loss claims and contract terms and we will advise you strategically on your case

Out of time

Limitation periods (also known as ‘prescriptive’ periods) are an important element in litigation.  A claim will be out of time if it is not made within the limitation period and the claimant will not be able to take legal action (subject to strict exceptions).

In a UK ruling, the Supreme Court 1 has recently considered the issue of when the prescriptive period began to run where there was loss as a result of damage to a building. It decided that the cause of the loss, injury or damage is not required before the prescriptive period commences - only awareness of the occurrence of loss. 

Whilst the ruling currently affects only Scottish law, the interpretation and underlying principles are important for commercial organisations and their lawyers.  The case came to the Supreme Court from Scotland, in circumstances where an explosion caused damage to a neighbouring property but the owners had difficulties in investigating what actually caused the explosion.

It was unclear whether the explosion was caused by negligence, and the circumstances led to the question of whether the explosion created a right to raise an action immediately, or only once investigations had been undertaken into the cause of the loss.   

At issue was, does the prescriptive period runs from the loss itself, or from when the claimant knows that the loss has been caused by a breach of duty owed to him or her?  The Supreme Court held that on a natural reading of the relevant Scottish law (s11(3) of the Prescription and Limitation (Scotland) Act 1973) it only required awareness of the occurrence of loss before the prescriptive period commences.  It has been accepted for some time that the actual wording as drafted is not clear, but the Supreme Court ruling has turned on its head 40 years of accepted interpretation (ie  that the claimant must have actual or constructive knowledge that it has suffered more than a minimal loss, and of the acts or omissions which caused that loss).

Helpfully, the court (who said the law does need reform) recited the words of the reputable Lord Neuberger who made clear that “the legislature could perfectly reasonably have assumed that in almost every case, five years from the date of discovery of loss, injury or damage would represent plenty of time for the injured party to discover all he needs to know to bring proceedings”.

What does this mean for businesses?

Where commercial organisations are facing potential claims arising out of property damage,
the limitation (or prescriptive) period may now commence when awareness of the loss has occurred.  This is the case whether or not the loss can be said with certainty to have been caused by an ‘act, neglect or default’ on the part of someone else.

Where incidents occur, it is important that these are investigated much more quickly in light of this important ruling to ensure any potential claims are made within time.   We expect more cases to come before the courts, for instance, in relation to latent damage and whether any loss at all has been suffered.   Prudent investigations are therefore vital.

The ruling marks a distinct departure from the law of England and Wales where the periods of limitation or prescription start from the date of knowledge of the cause of the loss - and not merely the date of loss under s14A of the Limitation Act 1980.

How can we help?

The commercial litigation lawyers at ParrisWhittaker have years of experience advising commercial organisations on their liabilities to third parties.  If you are concerned about potential claims against you, we advise you to contact us straightaway for urgent advice – particularly if the limitation period is drawing near.

Contact us now

1 David T Morrison & Co Ltd (trading as Gael Home Interiors) v ICL Plastics Ltd and others [2014] UKSC 48[2014]