What is the period over which leaseholders may issue a claim against freeholders or developers?
Image by Alexas_Fotos
Image by Alexas_Fotos
Almost two years since the Grenfell tragedy, the latest UK government data confirms that 226 private sector residential buildings still have ACM cladding that is unlikely to meet building regulations; and there is no data on the other fire-safety issues that are emerging. This blogpost builds on an earlier one that outlined the remedies in contract, tort (negligence), and the Defective Premises Act 1972 (DPA) which leaseholders have against freeholders and developers in English law, in respect of defective cladding and insulation (and associated costs, such as distress and the ‘waking watch’). Here, we look in more detail at the time within which claims have to be issued – ‘limitation periods’. In later posts, we will look in more detail at the substantive ‘causes of action’ (the claims that can be brought).
What is a limitation period?
A claimant does not have an indefinite period within which to bring a claim against a defendant but has to do so within a particular timeframe. The reasons for there being limitation periods are policy-based, as a defendant should not have the threat of being sued hanging over them forever, and claimants should have an incentive to bring claims as soon as possible, particularly as evidence will often become less reliable and more difficult to secure as time passes. If that period has expired, the claimant will be prevented, ‘time barred’, from bringing the claim regardless of the substantive merits of the claim. It is for the defendant to raise the limitation defence. Once the defendant has raised the limitation defence, it is for the claimant to demonstrate that the limitation period has not expired.
When does the clock start?
The date on which the cause of action accrues depends on the circumstances and claim being brought. Generally:
- For contractual claims, the cause of action starts on the date of breach of contract;
- For negligence-based tortious claims, the cause of action starts on the date on which the damage is suffered, that is, the date on which a quantifiable or ascertainable loss is suffered. In practice, with defective construction, this will be date that the defective work is completed. Applied to the cladding context, the harm caused by the responsible act (building with unsafe materials) became apparent to potential claimants only post-Grenfell in June 2017, yet the limitation clock starts ticking earlier.
When does the clock stop?
Image by Nathan Bunney
When calculating the date on which the limitation period expires, in most cases, the day on which the cause of action starts is ignored, which means a claimant will normally have six years and one day to commence the claim.
Special limitation under the Defective Premises Act 1972 (DPA)?
Claimants are likely to seek redress under the DPA for defective cladding and insulation. The limitation period under the DPA runs for six years from completion of the dwelling. What ‘completion’ means for these purposes is not defined. Practice under building contracts may provide an answer. ‘Practical completion’ could be the guide, which occurs when, according to Lord Diplock in Kaye v Hosier & Dickinson (1972), there is ‘absence of any patent defects in materials or workmanship’. Or maybe it is the end of the snagging period allowed for correcting defects that become apparent before the final contract payment becomes due. An alternative position, less intuitive since building work will often remain to be completed, is to assume that completion means the date on which the building control certificate of completion is issued. This will be before the date on which the leaseholder legally completes, or the date on which any insurance policies (such as NHBC policies) take effect. With flats, individual units may be completed before the block as a whole, complicating the analysis.
Where work is undertaken to remedy an earlier defect, under the DPA the cause of action accrues (and the six-year time limitation commences) at the time of completion of the remedial work.
How to protect a claim?
To bring a claim within the limitation period, a claimant will need to ensure that the court receives the claim within the limitation period (not the date on which the claim form is issued – although in most cases they will be the same day). This prevents the defendant from arguing that the claim is ‘time barred’. Of course, that does not mean that the claim will ultimately be successful, but, importantly, the claimant would have successfully protected his/her legal rights.
Once issued, the claim will need to be served on the defendant within four months from issue (unless a ‘stay’ is ordered – see below – or the parties (or court) agree to extend the time). If the claim is not so served the claimant would need to re-commence the process and issue a new claim within the relevant limitation period.
What about Pre-Action Protocols?
In order to make litigation cheaper and quicker, Pre-Action Protocols set out steps for parties to follow to narrow down issues before issuing proceedings, and potentially resolve the dispute without having to litigate. As a number of steps are involved (a letter of claim, a response from the defendant, and a pre-action meeting) there will not always be enough time to comply with the relevant protocol(s) before the limitation period expires. In those circumstances, claimants should still issue the claim but should then, as specifically contemplated in the Pre-Action Protocol for Construction and Engineering Disputes, apply to the court for a stay (postponement) to complete the pre-action steps. A stay ‘halts’ the proceedings; and as Coulson LJ remarks in Grant v Dawn Meats (2018), once it is lifted the ‘parties (and the court) pick up where they left off’ when the stay was imposed.
Alternatives to issuing a claim
An alternative to issuing a claim is for the claimant and defendant to enter a standstill agreement. This ‘stops the clock’ for limitation purposes, with the result that the claimant will not need to incur the costs and expenses of issuing a claim to protect their legal rights and avoid any claim being ‘time barred’. Of course, both claimant and defendant would need to agree a standstill – and a defendant may not agree. In those circumstances, the claimant would have no other option other than to issue proceedings against the defendant to avoid a claim becoming ‘time barred’.
Although superficially attractive to refuse to enter into a standstill agreement, defendants should think very carefully before refusing to do so. Agreeing to enter a standstill agreement is not an admission of liability and no adverse inference is drawn; it is a simple procedural step to address limitation period issues and the substantive merits of the case will be determined later by the court. However, a refusal to enter into a standstill agreement which forces claimants to issue proceedings, incur costs and potentially wastes valuable court time will likely be taken into account by a court in respect of cost awards.
Next steps for leaseholders
The need for procedural rules preventing stale claims, the erosion of evidence, and promoting the goals of legal certainty and finality is recognised by the Court of Justice of the European Union. It also notes, however, that limitation periods must not ‘restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired’ (Stubbings v UK, 1996, para 48). Although there are policy reasons supporting limitation rules generally, applied to this context they are instead liable to erode both ‘the court’s ability to remedy wrongs or to protect legitimate interests’ (Zuckerman) and, as required by the overriding objective, to ‘deal with cases justly’.
Leaseholders considering legal action need to be aware of the relevant limitation periods. Agreeing to enter into a standstill agreement with the freeholder and developer is the most pragmatic and cost-effective way of protecting their legal rights. If freeholders and developers refuse to do so, then leaseholders will need to commence proceedings to protect their legal rights and avoid them being ‘time barred’.
How to cite this blog post (Harvard style)
Bright, S. and Bull, C. (2019). Limitation Periods: How much time is there to bring a claim?. Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2019/05/limitation-periods (Accessed [date]).