Good news for lawyers as Court of Appeal rules on negligence limitation period

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Court of Appeal: another case doesn't follow Law Lords' ruling in Sephton

The Court of Appeal has once again declined to follow the landmark House of Lords ruling in Sephton when deciding when the limitation period starts running for the purposes of a professional negligence claim.

In a decision hailed as good news for lawyers, Lane v Cullens Solicitors and Others [2011] EWCA Civ 547 involved a claimant who was the administrator of his late sister’s estate. He erroneously made distributions of £20,000 that had to be repaid when it was established the estate was held on trust for the deceased’s niece.

The claimant sued the defendant solicitors, alleging he should have been warned not to make any distributions.

The proceedings were issued more than six years after the first payment was made. In Law Society v Sephton [2006] UKHL 22, the Law Lords ruled that the potential of a claim was a contingent liability which did not start the limitation clock ticking.

Here the claimant argued he had not altered his legal position by making the payments, which did not occur until the niece established her adverse rights.

The appeal court found that before the claimant made the payments he was exposed to a claim but had the funds to meet it, and after he did not, and so had altered his position significantly by making them. The limitation period for the negligence claim began as soon as the payments were made.

Richard Harrison, head of the lawyers’ liability group at City firm Barlow Lyde & Gilbert, said the ruling was “good news for professional advisers and their insurers”.

He said: “Although, no doubt, there may be a factual scenario in the future where the courts would be prepared to find a pure contingent loss and delay the limitation period for a professional negligence claim, it appears clear that such a scenario will be rare.”

Mr Harrison pointed to rulings such as Axa v Akther & Darby [2009] EWCA Civ 1166 and Pegasus v Ernst & Young [2010] EWCA Civ 181, as examples of other cases where the court declined to follow Sephton.