Professionals have been saved from negligence claims over errors from the past by the House of Lords' decision on Cave. Christine Seib reports
Lawyers have hailed the House of Lords' unanimous decision on Cave v Robinson Jarvis & Rolf as a victory for insurers.
The decision will save professionals from negligence claims over errors from the distant past.
The Court of Appeal had originally decided the case on the basis of the precedent set in Brocklesby.
This said that erroneous advice is deliberately given, so there is no limit to when claims can be made.
But the five Law Lords who heard the case overturned that decision on the deliberate concealment exception to the time limits on professional negligence claims.
Beachcroft Wansbroughs partner Helen Staines, who took the case to the House of Lords, said the decision would be a relief to professionals and their insurers.
If Staines had failed to win, insurers could have faced an unquantifiable amount of long-tail claims.
Staines estimated hundreds of cases had been stayed in anticipation of the House of Lords'
"Insurers will now be able to review their reserves for damages and costs in those cases that are now likely to be dismissed because they're outside the limitation period," she said.
The Limitation Act 1980 states negligence claims must be brought within six years of any loss.
Claims can still be brought within three years of discovering the loss, if the claimant was unaware of the loss at the time it was caused.
No claim can be brought more than 15 years after the loss.
However, the Act also sets out that the start of limitation periods were postponed where "any fact relevant to the plaintiff's [claimant's] right of action has been deliberately concealed from him by the defendant".
Lawyers said the deliberate concealment exception had been widely seen as directed at defendants who deliberately concealed the truth.
However, in Brocklesby v Armitage & Guest in the Court of Appeal, Lord Justice Morritt controversially found that the actual commission of a negligent act was deliberate, setting a precedent that removed the time bar on professional negligence claims.
His judgment was seen as unfair to professionals.
"Professionals would have faced the threat of stale, old claims being dug up that would previously have been time barred after the six-year period," Staines said.
The new House of Lords' decision on Cave has overturned that precedent, confirming that only defendants who are aware of their deliberate mistakes will be punished for non-disclosure.
Two of the Law Lords hearing the case blasted Lord Justice Morritt's precedent-setting decision.
Lord Millett said the Brocklesby decision "subverted the whole purpose of the Limitation Act".
"The harshness of the rule is evident," he said.
In Lord Justice Morritt's defence, one lawyer said that his decision was made in one day with one other judge, whereas the five Law Lords had several months before making a judgment.
Views of the lawyers
`This decision restores certainty to the law. Professionals - including accountants, solicitors and surveyors - will no longer face claims that were, prior to the Court of Appeal's judgment, considered long dead.
`It means that, generally speaking, professionals and their insurers no longer need fear, and make provision for, claims being brought today for events that took place decades ago.'
Gary Meggitt ACII, solicitor, Fishburn Morgan Cole
`For professional firms, their insurers and their regulators, the House of Lords' ruling comes as an enormous relief.
`Cave v Robinson confronted them with the prospect of a host of legal claims rising from the dead.
`Before this decision, there was every expectation that large corporate users of professionals would go back to their files to re-open claims which, because of the law of limitation, had previously been considered buried.
`The courts had started to interpret the Limitation Act in a way that was never intended and that would have placed a crushing financial and administrative burden on professional services firms in the UK.'
Nick Bird, solicitor-advocate, Reynolds Porter Chamberlain
`The practical implication for professionals is that they will not now have to ensure they keep all their records and files indefinitely, in case they're sued for some long unappreciated mistake.
`This applies to almost anyone who has been involved in any professional work.'
Helen Staines, partner, Beachcroft Wansbroughs
`The Court of Appeal decision in Brocklesby opened up the alarming prospect of professional advisers being sued without limit in time, potentially exposing insurers to an unquantifiable and potentially very long tail of claim.
`The House of Lords accepted that setting such a low threshold effectively denied a professional any effective limitation defence. It said, if that interpretation was adopted, it would subvert the whole purpose of the limitation defence.'
Simon Chandler, senior lawyer, CMS Cameron McKenna