I should admit that as counsel for the solicitor's professional indemnity insurer I was responsible for the unattractive limitation argument in Hawkins v Clayton. it is spelled
out in more detail in the Court of Appeal judgment of Hawkins v Clayton. I am way from Sydney at the moment, so don't have he reference at my fingertips, but it is published in NSWLR.
Joe
From: Barbara McDonald
Sent: Wednesday, 9 March 2016 9:55 AM
To: Joe Campbell; Neil Foster; Gerard Sadlier; Jason Neyers
Cc: obligations@uwo.ca
Subject: RE: Limitation Period for Negligently Caused Financial Loss
Sent: Wednesday, 9 March 2016 9:55 AM
To: Joe Campbell; Neil Foster; Gerard Sadlier; Jason Neyers
Cc: obligations@uwo.ca
Subject: RE: Limitation Period for Negligently Caused Financial Loss
As well as comments on when the plaintiff's cause of action for pure economic loss arose in this case, there are also some interesting comments In
Hawkins v Clayton on the solicitors' attempt to use the Limitation Act as a defence- described by Brennan J as "not an attractive argument".
The solicitors had kept their client's will, after she had executed it, "for safe keeping" but only made perfunctory attempts to find the nominated executor when they were informed that the client had died. Proceedings were commenced more than 6 years after
her death, once the plaintiff executor was notified and discovered the loss the estate had suffered over the preceding 7 years. As it turned out, the majority held that the cause of action was only complete when the executor took office so they didn't have
to decide that the solicitors would be barred from using the defence because their continuing negligence prevented the plaintiff from learning of the potential claim for PEL, as in my view they should be.
Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 (8 April 1988)
Brennan J
22. ...In my opinion this Court should now find that there was a breach of duty and that it caused some loss. But that finding will prove a Pyrrhic victory for the plaintiff if the action is statute barred. That leads us to the final question.
23. The solicitors in their defence pleaded that the action was statute barred and in argument they rely on the Limitation
Act as an ultimate defence if it should be found that they were otherwise liable for breach of duty. The submission made on their behalf is that the damage caused by any breach of duty on their part began in 1975 or, in any event, not later than six years
before the action was commenced on 22 November 1982. By November 1976 at the latest, so the argument goes, the period of limitation had commenced to run so that the plaintiff's cause of action was extinguished by the time the solicitors told him of the will
or within a relatively short time afterwards. Of course, the injustices occasioned by statutes of limitation have been seen in many cases (see, for example, Cartledge v. E. Jopling & Sons Ltd. (1963)
AC 758 where time was held to run before the plaintiff discovered that he had contracted compensable pneumoconiosis) and have led to modification of the bar in personal injury cases: see Pt
III Div.3 of the Limitation
Act. Wilson J. in Kamloops v. Nielsen (1984)
2 SCR 2; (1984)
10 DLR (4th) 641 observed that "perhaps the most serious concern is the injustice of a law which statute-bars a claim before the plaintiff is even aware of its existence": p 40; p 685. It would not be surprising if the application of s.14(1)(b) of
the Limitation
Act to cases of economic loss sometimes worked an injustice. The Act may be pleaded by a defendant whether its operation will serve the ends of justice or not. This was not a case in which the plaintiff's claim depended on a contest between the contradictory
recollections of opposing witnesses whose memories were likely to be dimmed by the passage of time; nor was it a case where a disputed claim had been allowed to lie dormant while the limitation period ran. It was a case in which the whole of the material evidence
as to breach of duty came from the solicitors themselves and from their own documents. Yet, if the argument founded on the Limitation
Act is right, the solicitors' breach of duty, persisted in throughout all or most of the limitation period, has successfully produced an exemption from their liability to compensate an executor for loss which their breach of duty caused. It is not an attractive
argument. If the argument be right, there is an incentive for a solicitor whose breach of a duty imposed by law causes damage to an executor to conceal it from the executor until six years have passed, even though further damage may accrue from day to day
so long as the concealment continues. The argument does not sit easily with the public perception, sedulously cultivated by professional societies, that the professional standards of solicitors assure substantial protection in the administration of the estates
of deceased clients. The argument is no more attractive if it is advanced at the insistence of professional insurers. The terms of a policy which is apt to qualify the protection expected by the public are a matter of private contract or perhaps of negotiation
by professional societies.
24. Whether the raising of the Limitation
Act in a case like the present is regarded as appropriate or not, the issue raises questions which depend on the answer to a technical question: when does a cause of action in tort for breach of a duty to disclose first accrue? The majority of the Court
of Appeal held that such a cause of action first accrues when damage occurs irrespective of the claimant's knowledge (per Kirby P.) or as soon as the wrongful act has caused some damage beyond what can be regarded as negligible (per Glass J.A.). There is no
doubt that most causes of action for negligence first accrue when the plaintiff first suffers damage caused by the defendant's breach of duty. The ordinary rule is restated in Cartledge v. E. Jopling & Sons Ltd. in terms reproduced by Glass J.A. in the Court
of Appeal. Difficulties in applying the rule have been encountered in England in cases where damage has occurred on land or defects have occurred in the construction of buildings, but there is no reason to doubt the applicability of the orthodox view: see
the discussion in Sutherland Shire Council v. Heyman, at pp 489-494. There are some observations in State of South Australia v. Johnson (1982)
42 ALR 161 which suggest that time runs from discovery of damage rather than from the occurrence of damage, but those observations are to be accounted for by the conventional basis on which the parties chose to fight the case - a basis which precludes
the judgment in that case from being treated as a rejection of established legal principle. This case, however, is not an ordinary case in which a plaintiff seeks damages for negligence. For reasons earlier stated damage is not temporally the last element
of the cause of action to occur. Unlike the ordinary case, the last element to occur in a case of the present kind is the nominated executor's assumption of the office of executor. Until that occurs, the cause of action is not complete. For the purposes of s.14(1)(b) of
the Limitation
Act, "time runs from the accruer of the cause of action, but a cause of action does not accrue unless there be some one who can institute the action": Meyappa Chetty v. Supramanian Chetty, at p 610; and see Thomson v. Clanmorris (Lord) (1900)
1 Ch 718, at pp 728- 729. Until the nominated executor assumes the office of executor, the cause of action does not accrue and time does not begin to run. If a cause of action is itself an asset which devolves on the executor or arises from an infringement
of the proprietary or possessory rights of an executor in respect of the estate, the executor's ignorance of his title would not prevent the time from running: cf. Knox v. Gye (1872)
LR 5 HL 656. But where no action can be brought by the nominated executor until he assumes office, time runs only from that event. Time commenced to run in this case only from Mr Hawkins' assumption of the office in March 1981. The action was commenced
within six years thereafter. The defence based on the Limitation
Act fails.
Deane J
38. There remains for consideration the firm's defence based on s.14(1) of
the Limitation
Act. That section provides, for present purposes, that an action on a cause of action founded on contract or tort is "not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action
first accrues to the plaintiff or to a person through whom he claims".
39. A cause of action in negligence is complete when the damage caused by the breach of duty is sustained. It is at that time that, in the ordinary case, the cause of
action "first accrues" for the purposes of a provision such ass.14(1) of
the Limitation
Act. It was submitted, on behalf of the plaintiff, that this Court should qualify that settled position by a general proposition that, at least in the case of a claim in negligence for damages for economic loss, time does not commence to run for the purposes
of a provision such as s.14(1) until
the stage is reached when the plaintiff discovers, or could on reasonable inquiry have discovered, that the damage has been sustained. In support of that proposition, particular reliance was placed upon the decision of the Supreme Court of Canada in Kamloops
v. Nielson (1984)
10 DLR (4th) 641 (esp. at pp 681ff.); (1984)
2 SCR 2 (esp. at pp 35ff.) and a passage in the judgment of this Court in South Australia v. Johnson (1982)
42 ALR 161, at p 169. I do not think that those cases, upon proper analysis, support the broad proposition for which the plaintiff contends. Such support is, however, to be found in the judgment of the Supreme Court of Canada in Central Trust Co. v. Rafuse,
at pp 535-536.
…..
41. It can be assumed for the purposes of the present case that economic loss caused by the negligent failure to inform Mr. Hawkins of the existence and contents of the testatrix's will was first sustained, in the sense that rent was not
earned, within twelve months of her death. In the light of the subsequent grant of probate which retrospectively vested all of the testatrix's real and personal estate in Mr. Hawkins as from her death, the damage which was then sustained by the estate can
now be seen to have been sustained by Mr. Hawkins as the testatrix's executor. The question for the purposes of s.14(1) of
the Limitation
Act is not, however, when damage was sustained. The relevant question is when the cause of action first accrued "to the plaintiff or to a person through whom he claims". In the circumstances of the present case, that question gives rise to a miscellany
of problems to which reference was made in argument or in judgments in the courts below. The cause of action obviously did not accrue to the testatrix for she was dead when the damage was sustained. It may be arguable that, viewed contemporaneously, the cause
of action accrued to the Public Trustee at the time when damage was first sustained. The limited interest of the Public Trustee under s.61 of the Wills, Probate
and Administration Act assumed an ephemeral quality, however, after the grant of probate to Mr. Hawkins and it is difficult to see how it could realistically be said that the Public Trustee was, for the purposes of s.14(1) of
the Limitation
Act, the person to whom the right of action had originally accrued (cf. the reference to the first of a class of owners in Pirelli, at p 18) or a "person through whom" the plaintiff in the present case claims. Nor is it easy to see how, in the context
of s.61and
viewed objectively, it can realistically be said that the cause of action accrued to Mr. Hawkins as executor some six years before he decided to apply for, let alone obtained, a grant of probate of the testatrix's will. Finally, it is arguable that, in the
circumstances of the present case, the duty of care owed by the firm was a continuing one, that the breach of that duty continued up until the firm finally took some positive step to locate Mr. Hawkins and inform him of the existence and contents of the will
and that damages (which would include the loss of a right of action by the operation of the Limitation
Act) continued to accrue in varying forms right up until the time when the Stamp Duties Office imposed a fine for late lodgment of the death duty return and when Mr. Hawkins incurred any additional legal costs involved in seeking probate of a copy will
as distinct from the original document. In these circumstances, there is something to be said for the view that a distinct cause of action accrued each time new damage was incurred by reason of the continuing breach of duty. It is, however, unnecessary to
pursue these problems involved in the firm's defence based on the Limitation
Act. There is a more general answer to that defence. Its basis is to be found in the circumstance that, in the present case, the negligent failure of the firm to inform Mr. Hawkins of the existence and contents of the testatrix's last will not only caused
the damage which was sustained by him in the capacity of executor of the testatrix's estate but also effectively concealed from him, for so long as he remained unaware of the contents of the will, the existence of the cause of action in negligence against
the firm.
42. It is inevitable that a Statute of Limitations will, on occasion, lead to injustice in the special circumstances of particular cases. Such injustice, when it occurs, is an unavoidable cost of the benefits involved in ensuring that plaintiffs
act promptly and that defendants are not subjected to the litigation of stale claims. The present case falls, however, in an anomalous category where the applicability of a limitation provision such as s.14(1) would
invariably involve prima facie hardship and injustice and where any compensating public benefit, apart from protecting the courts from being required to determine issues of distant fact, is absent. If a wrongful action or breach of duty by one person not only
causes unlawful injury to another but, while its effect remains, effectively precludes that other from bringing proceedings to recover the damage to which he is entitled, that other person is doubly injured. There can be no acceptable or even sensible justification
of a law which provides that to sustain the second injury will preclude recovery of damages for the first. It would, for example, be a travesty of justice and common sense if the law provided that a cause of action lay for damages for false imprisonment but
then went on to provide that that cause of action would be lost if the false imprisonment continued for six years after the cause of action first accrued. Likewise, it would be a travesty of justice and common sense if the law imposed a duty upon a solicitor
to take positive steps to inform a third person of the contents of a document of which the solicitor was alone aware and then provided that any cause of action against the solicitor for damage caused by a negligent failure to perform that duty would be lost
if the negligence continued for six years. It is arguable that the notion of unconscionable reliance upon the provisions of a Statute of Limitations which provides the foundation of the long-established equitable jurisdiction to grant relief in a case of concealment
of a cause of action until after the limitation period has expired (cf. s.55(1) of
the Limitation
Act) should, by analogy, be extended to cover cases such as these where the wrongful act at the one time inflicts the injury and, while its effect remains, precludes the bringing of an action for damages. It seems to me, however, that the preferable approach
is to recognize that it could not have been the legislative intent that the effect of provisions such as s.14(1) of
the Limitation
Act should be that a cause of action for a wrongful act should be barred by lapse of time during a period in which the wrongful act itself effectively precluded the bringing of proceedings. On that approach, the reference in s.14(1) of the Act to the cause
of action first accruing should be construed as excluding any period during which the wrongful act itself effectively precluded the institution of proceedings.
43. In the present case, the negligent failure of the firm to notify Mr. Hawkins of the existence or contents of the testatrix's will effectively precluded the institution of the present proceedings against the firm until he was finally informed
of his appointment as executor. The present proceedings were instituted within six years of that time. That being so the firm's defence based upon the Limitation
Act fails.
Gaudron J
25. Until the assets came under the actual control of Mr Hawkins they had sustained damage by deterioration and had been subject to waste, including that the real estate had not been put to income-producing use. But that was not the loss
sustained by Mr Hawkins. The property was not then vested in him, notwithstanding that by s.44 of the Wills, Probate
and Administration Act the grant of probate effected a vesting with retrospective effect. Nor had he suffered a loss of income. Indeed it may have been that had the real estate been under his control it would have been used for his personal occupation
rather than for the production of income. What he suffered was a loss in the value of the assets referable to their not having been properly managed in the period prior to coming under his control. That loss was suffered by the executor only when the assets
came under his actual control. At the earliest, that occurred when he was informed of the existence of the will in March 1981. Action was commenced within six years of that date.
From: Joe Campbell [j.campbell@sydney.edu.au]
Sent: Tuesday, March 08, 2016 10:32 AM
To: Neil Foster; Gerard Sadlier; Jason Neyers
Cc: obligations@uwo.ca
Subject: RE: Limitation Period for Negligently Caused Financial Loss
Sent: Tuesday, March 08, 2016 10:32 AM
To: Neil Foster; Gerard Sadlier; Jason Neyers
Cc: obligations@uwo.ca
Subject: RE: Limitation Period for Negligently Caused Financial Loss
Other authority is in Leda Pty Ltd v Weerden [2007] NSWCA 174 at [70]-[71], which reiterates Segal v Fleming [2002] NSWCA 262 at [20]-[27], and expressed the view that the analysis is consistent with the judgment of the majority of the High Court in the then-recent decision in Commonwealth v. Cornwell.
Negligently caused financial loss is an area where there is possible scope for an extension of the limitation period by virtue of fraudulent concealment, especially when fraudulent concealment can arise from the way in which the tort was committed: Bulli Coal Mining Co v Osborne [1899] AEC 351; Beaman v ARTS Ltd [1949] 1 KB 550; Levy v Watt [2014] VSCA 60.
Kind regards,
Joe Campbell
From: Neil Foster [mailto:neil.foster@newcastle.edu.au]
Sent: Tuesday, 8 March 2016 9:05 AM
To: Gerard Sadlier; Jason Neyers
Cc: obligations@uwo.ca
Subject: Re: Limitation Period for Negligently Caused Financial Loss
Dear Ger;
There is a brief summary of some of the authorities in the 7th edition of Luntz & Hambly et al Torts Cases and Commentary (LN Butterworths, 2013) paras 5.2.8-5.29. Herewith:
5.2.8 Th ere are many cases of apparent property damage that are better analysed as cases of pure
economic loss. Time would then start to run from the suff ering of the economic loss, which would
usually be on discovery of the defect: see the analysis of the Australian cases in Cyril Smith & Associates
Pty Ltd v Owners-Strata Plan No 64970 [2011] NSWCA 181; BC201104963 at [8]–[24]. But, as the
decision in this case shows, even when the defect is known and time has started to run, the plaintiff
may be unaware of who is responsible for the defect. In general, even in economic loss cases, the High
Court has ‘rejected the proposition that … time does not run until the plaintiff discovers, or could
on reasonable inquiry have discovered, that damage has been sustained’: Commonwealth v Cornwell,
see 5.2.9, at [6], citing Hawkins v Clayton, see 16.2.19.
5.2.9 In Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514, Mason CJ, Dawson,
Gaudron and McHugh JJ said:
Economic loss may take a variety of forms and, as Gaudron J noted in Hawkins v Clayton (1988)
164 CLR 539 at 600–1, the answer to the question when a cause of action for negligence causing
economic loss accrues may require consideration of the precise interest infringed by the negligent
act or omission. Th e kind of economic loss which is sustained and the time when it is fi rst sustained
depend upon the nature of the interest infringed and, perhaps, the nature of the interference to
which it is subjected: see Cane, Tort Law and Economic Interests, 1991, pp 16–17. With economic
loss, as with other forms of damage, there has to be some actual damage. … Prospective loss is not
enough (at 527).
See also Commonwealth v Cornwell (2007) 229 CLR 519 (employer gave plaintiff negligent advice
concerning his eligibility to join superannuation fund; majority held loss crystallised only on his
retirement; decision criticised by C W Pincus QC, (2007) 81 ALJ 735 at 738); Law Society v Sephton
& Co (a fi rm) [2006] 2 AC 543 (HL) (no damage from negligent certifi cation of solicitor’s accounts
by auditor until claim made on Law Society).
Regards
Neil
Associate Professor Neil Foster
Newcastle Law School
Acting Assistant Dean, Teaching and Learning
Faculty of Business and Law
O: MC177, McMullin Building
T: +61 2 4921 7430
E: neil.foster@newcastle.edu.au
W: http://www.newcastle.edu.au/profile/neil-foster
The University of Newcastle (UON)
University Drive
Callaghan NSW 2308
Australia
CRICOS Provider 00109J
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From:
Gerard Sadlier <gerard.sadlier@gmail.com>
Date: Tuesday, 8 March 2016 at 3:35 AM
To: "jneyers@uwo.ca" <jneyers@uwo.ca>
Cc: "obligations@uwo.ca" <obligations@uwo.ca>
Subject: Limitation Period for Negligently Caused Financial Loss
Dear all,
I'd be really grateful for any references to the leading works
regarding the Australian and/or Canadian law on this issue, especially if they
happened to be available online?
Many thanks
Ger