Limitation Periods - a trap for young players

Junior lawyers are frequently warned by their supervising solicitors to watch out for limitation periods. However, this warning is rarely accompanied by training on limitation periods or what to say to your client. In this article I explain where to go to find the relevant limitation period and suggest appropriate steps to advise your client and avoid professional negligence liability.

What is a limitation period?

A limitation period is a time frame within which a certain cause of action must be commenced in a court. After the expiration of the relevant time period, legal action cannot be brought.

Where can I find the relevant limitation period?

Limitation periods can be found in both statute and contract:

1.       Statute

In NSW the main statute of limitation is the Limitation Act 1969. Section 14 is the general limitation provision and provides that for causes of action founded in contract and causes of action founded in tort are “not maintainable if brought after the expiration of a limitation period of six years”.

It is very important to know the correct cause of action because apart from this general rule for contracts and torts there are exceptions and special rules for almost every cause of action. Some examples:

a.       Defamation – limitation period of 1 year running from the date of publication – section 14B Limitation Act 1969 (can be extended to 3 years by a court under section 56A).

b.      Action under a Deed – limitation period of 12 years running from the date on which the cause of action first accrues – section 16 Limitation Act 1969.

c.       Recovery of land – limitation period of 12 years running from the date on which the cause of action first accrues – section 27 Limitation Act 1969.

d.      Redemption of property in possession of a mortgagee – limitation period runs from the later of the date at which the mortgagee last goes into possession of the property or the date at which the mortgagee last received a mortgage payment – section 41 Limitation Act 1969.

e.      Personal injury action – a complicated regime where the limitation period runs from whichever of the two periods is first to expire:

a.       The “3 year post discoverability limitation period” running from when the cause of action is discoverable; and

b.      The “12 year long-stop limitation period” running from when the time of the act or omission that led to the injury/death (can be extended by the court).

Not all limitation periods are contained in the Limitation Act 1969. Limitation periods in specialist fields like insurance and employment law are found in the “mother Act” of that field such as the Fair Work Act 2007 (Cth) which specifies a 21 day limitation period for commencing unfair dismissal claims.

2.       Contract

Some limitation periods can be found in contract. Contractual limitation periods are common in the insurance and building sectors. The contract may specify that a claim needs to be made within a specific time period, ie that “any claim must be made within 30 days of the purchaser becoming aware of the claim”.

Law Cover has a very useful “Schedule of Limitation Periods” which shows where you should look to find the limitation period for your relevant cause of action (http://www.lawcover.com.au/schedule-of-limitation-periods/). While this guide is useful, it is not a substitute for you as a lawyer checking the primary source. Limitation periods in areas such as employment law change frequently. Do not get caught out. Check the primary source.

Finding the start date and end date of the limitation period: When does the cause of action accrue?

For general contract and torts claims under section 14 of the Limitation Act 1969, the cause of action runs “from the date on which the cause of action first accrues to the plaintiff”. Generally, the cause of action first accrues at the time the breach of contract occurs (Sheldon v McBreath (1993) Aus Torts Report 81-209). There are exceptions to this including money loans payable on demand.

Money loans payable on demand

A money loan payable on demand will exist where no time for repayment has been specified or the loan is stated to be payable “on demand”. This type of money loan is most common between friends and family members who have not sought prior legal advice, as usually there is some sort of arrangement about when the money is to be repaid. Loans payable on demand create an immediate debt. The lender’s cause of action begins when the loan is made. Money loans are subject to a 6 year limitation period from when the borrower receives the money. In practice, this means the borrower does not have to repay the loan once six years has passed.

How to appropriately advise your client

1.       Mention limitation periods straight away

A typical way lawyers are caught out is when a client wants to pursue a claim but pulls out after given an estimate of costs to pursue litigation. At this point lawyers may have often advised on the likelihood of success only. The same client could return in a few years time having decided to pursue their matter in court. You did not advise on the limitation period at first instance, which could lead to a professional negligence claim if the limitation period has expired.

How to avoid this? ALWAYS advise on limitation periods at first instance. Even if your client is talking to you on the phone and you are not yet sure what the cause of action is, let the client know that limitation periods do apply, and depending on the cause of action, your client could be in or out of time. Advise of the length of the limitation period and the effect – ie “once the period has expired you will be statute barred from pursuing your claim”.

2.       Make a file note of the conversation

ALWAYS make a file note when you advise a client on a limitation period over the phone or in person. You could even write a letter or email to your client referencing the conversation, the causes of action discussed and the relevant limitation period.

Help! The limitation period expires in three days. What should I do?

You can only apply for an extension of the limitation period in certain circumstances such as if the claim is a personal injury or defamation matter. Advise your client that an application for an extension of the limitation period may not be successful. The safest course of action at this point may be to commence proceedings.

Commencing action in the appropriate court will preserve your position and make sure your client gets in within the limitation period. To commence proceedings you will have to file a Statement of Claim in the appropriate court.