Fawlty law

Patrick Holmes and I have both recently flagged the muddle that exists in relation to construction professionals’ liability in tort (see 21 January, page 60, and 4 February, page 49). As Patrick said then: “I fear that whatever the courts say now, they may well say something different in 2007 and something new again in 2008.”

Just how right Patrick was is shown by the Court of Appeal’s decision in Abbot & Anor vs Will Gannon & Smith Limited, which related to an engineer’s liability. The judge said: “So what is the present state of the law of England? With three House of Lords’ cases to guide us it ought to be possible to give a clear answer to this question, but I regret that I feel unable to do so with any confidence.”

This time the confusion relates to the limitation period for claims against consultants where there is a “special relationship” and a duty not to cause financial loss. Interestingly, in this case, the existence of the special relationship between client and engineer was simply accepted. In the Mirant case, which Patrick and I looked at it before, this was disputed.

The facts in this case were that the owners of a hotel in Torquay retained an engineer in May 1995 to design remedial work for a large bay window. Remedial work duly completed by a local builder in March 1997 and in late 1999 the owners noticed that the lintel over the window had moved and cracked the surrounding structure. Further remedial works, costing approximately £20,000, had to be carried out. But the claim against the engineers was not issued until 15 September 2003.

By that stage the contractual claim was barred: the design was done sometime around 1995 and the contract was oral, so the limitation period ran out in 2001. But when did the limitation period in tort commence? Since the Limitation Act 1980 there are two relevant periods:

• Six years from when the cause of action accrues (section 2),
• Or a further three years from the claimant’s date of knowledge (section 14A).

Usually, the second limb helps a claimant but here the date of knowledge was late 1999, when cracking was spotted, and the owners should have brought proceedings by late 2002, which it failed to do. Accordingly, the Court of Appeal had to look at all of the conflicting House of Lords’ decisions as to when the cause of action accrues in tort where there is special relationship. Was the relevant date:

• When the owners relied on the negligent advice? n When the remedial work was completed?
• When cracks first occurred?

The Court of Appeal concluded that some authorities (notably Pirelli) decided that the cause of action accrues “only when physical damage occurs to the building”, even though the owner could not have discovered the damage (in Pirelli, the cracks appeared at the top of a chimney). But others suggested that the loss occurred when the work had been completed, leaving the owner with a defective building requiring remedial work (as in Murphy).

Once again, English law has not delivered the certainty that commercial people are entitled to expect

In the event, the Court of Appeal decided that it was bound by Pirelli and the cause of action accrued when the damage occurred – late 1999.

The court then went on to say that, even if it was wrong and the cause of action accrued when the financial loss was suffered, this too occurred in late 1999. So on either basis the claim was not time barred.

But the court also went on to say that it still did not really know what happens where there were different causes of action.

The very obvious point arising is to make any claims as soon as you can and not hang around while you try to sort things out. The wider issue is that yet again in a fundamental area, English law has not delivered the certainty that commercial people are entitled to expect – without having to take their disputes to the House of Lords. Surely it must be time for the Law Commission to look into all of this and for statutory intervention?

Ann Minogue is a partner in Linklaters