HL Deb 08 April 1986 vol 473 cc82-91

2.59 p.m.

The Lord Chancellor

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Lord Hacking moved Amendment No. 1:

Before Clause 1, insert the following new clause:

("Amendment of Limitation Act 1980, s.2.

.—(1) The Limitation Act 1980 shall be amended as follows.

(2) In section 2 before the words "An action founded" there shall be inserted the words— Save for an action for damages for negligence to which section 2A applies".

(3) After section 2 there shall be inserted— 2A. An action for damages for negligence shall not be brought after the expiration of 6 years from the date (or, if more than one, from the last of the dates) on which the breach of duty, either by act or omission, occurred and upon which such action (but for this section) would be founded".")

The noble Lord said: This amendment concerns the problem arising out of the accrual point for causes of action. Some Members of the Committee may remember that I asked an Unstarred Question that directed the attention of your Lordships' House to this problem on 10th February. However, for those noble Lords who did not attend that debate, it may be helpful if I say a few words about the problem. The Bill is concerned with limitation of actions and focuses particularly on the problem of latent damage. Limitation is under statute a procedure by which claims cannot be brought after certain specific periods of time. Concerning negligence and contract, with the exception of personal injuries, the period is six years from the point of the accrual of the action.

For many years, it was accepted that the accrual point in negligence and in contract and under statutory duty occurred roughly at the same time; namely, when the wrongful act was perpetrated. In more recent times, there has been a widening of time between the accrual point for causes of action in contract and the accrual point for causes of action in negligence. This happened because the courts, and particularly the Court of Appeal, led by my noble and learned friend Lord Denning, focused on the problem of latent damage in cases like Sparham-Souter, and in Anns v. London Borough of Merton. The Court of Appeal took the view that while actions in negligence started at the accrual point, that accrual point did not occur until damage had been sustained. It took this view for the logical reason that the plaintiff was not suing for anything until he was suing for damages. Until he had been damaged, he was not in a position to sue.

As a result, the accrual point for actions in negligence moved a long way on in time from the date when the original wrongful act was perpetrated. For example, in cases of latent damage to buildings, that event did not occur until significant cracks or other significant damage took place in the building. That will be a long time after the wrongful act was done—the wrongful act that would be the starting point for the accrual of action in contract. The result has been that actions are often found to be statute-barred in contract, starting from the date of the defect, but are still actions that can be brought in tort.

Under the preamble of the Bill, and under the ambit of the Law Reform Committee, this amendment seeks in effect to bring together the starting point for the period of limitations of actions for negligence to the same point in time as that of contract. The purpose is to bring the commencement date for the period of limitation for actions for damages into line with the commencement date for actions for breach of contract. It is on that basis that I ask the noble and learned Lord to consider the amendment.

Lord Denning

I hope that your Lordships will not accept the amendment. We have had these cases of builders putting up houses on a rubbish heap, not providing proper foundations and the like, and after many years a house begins to sink and to crack. When does the cause of action accrue? As I have understood the common law, in negligence there are three elements: the duty of care, the breach of it, and the ensuing damage. The damage is the gist of the action, and the common law has always said that the cause of action accrues when the damage occurs. That is fundamental. My noble friend's amendment would date it back to the original breach of duty. That cannot be right. The controversy that has arisen because of the Bill is that very often a man whose house has been built on rubbish or on insecure foundations does not know anything about it and cannot discover anything about it for years. The common law said that, in those circumstances, time does not run against him until he knows of it or he could, with reasonable diligence, discover it. That is the common law.

The trouble arose because, in the House of Lords, in the Pirelli case, it was put a little differently. This was the case of a great chimney which had been designed wrongly by the engineer. Unbeknown to anyone, cracks appeared at the top of the chimney. This occurred in the Pirelli works in Southampton. No one knew about it at all for years afterwards. The House of Lords, held that the time ran from the date when the cracks appeared at the top of the chimney even though no one knew anything about this or could have discovered it. It is to remedy that situation that the Law Reform Committee proposed an alteration to the law, bringing it back substantially to what appears in this Bill and providing that time does not run against a man until he knows of the damage, or with reasonable diligence could have discovered it. My noble friend's amendment would go back on that, saying that time runs against him from the date of the breach of duty even though no one knew anything about it. That would be a retrograde step, and I hope that the Committee will not accept the amendment.

Lord Hacking

I hesitate to interrupt, but that was not the purport of my amendment. I am not attempting to put back the clock. The matters that the noble and learned Lord, Lord Denning, has rightly called to the attention of the Committee are more than adequately dealt with in the Bill. I am not seeking to disturb those provisions. I am simply asking for a common starting point for all accruals of action so that the anomaly of contract and tort starting at wholly different times can be put right. I am attempting in no way to disturb the Bill. My recollection is that the noble and learned Lord, Lord Denning, gave me full support when I argued the point on 10th February. I should like to adopt his remarks made at that time in support of the argument that I was presenting to the House. It is an argument that I am now presenting in the same form albeit under an amendment in this Committee.

Lord Scarman

I should also like to oppose the amendment and I hope that the Committee will reject it. The trouble about the amendment is that it confuses the procedural law with the substantive law. The Law Reform Committee of which I had the honour to be a member considered this proposal and rejected it. The proposal was rejected not because it was outside the committee's terms of reference but because of the confusion. That confusion has practical results. For instance, if the amendment was introduced, it would be possible for the period of limitation to run out before the cause of action had accrued. Of course, one could achieve the object of the amendment—that the time should expire six years after the breach of duty—by changing the substantive law; that is to say, by saying that the accrual of the cause of action for negligence arises not when damage is suffered but when the breach of duty is committed. That would put the law of tort in the same position as the law of contract. But the amendment does not do that. It seeks that result while not changing the substantive law. It has always been a menace to our common law that procedure should take control over substance.

This amendment is an unfortunate and dangerous way, I suggest, of achieving a reform which may or may not be of value but which cannot be considered in a limitation Bill. We cannot in a law reform Bill limited to limitation go into the profound questions as to the rightness or otherwise of common law principles which have stood the test of centuries of time.

Lord Elwyn-Jones

I respectfully agree with what has been said with such authority by the noble and learned Lords who have spoken. What surprises me is that I do not think that the noble Lord, Lord Hacking, intended his amendment to have the deplorable consequences which would flow from it if it became part of our law.

The Lord Chancellor

I think that my task has been facilitated. The effect of the amendment would result in time running against the plaintiff before the cause of action accrued and for that reason it is unattractive to me, and I hope to the Committee.

What my noble and learned friend Lord Scarman said is also an objection. One cannot alter the substantive law in the course of what is a very limited procedural measure to deal with a specific form of grievance. There are difficulties in relation to the law of negligence which arise out of the fact that negligence can be a breach of contract as well as of tort. But this is limited to the tort position, and for the reasons given by two noble and learned Lords I would ask the noble Lord, Lord Hacking, not to pursue this matter unduly.

Lord Hacking

I would be a very bold noble Lord to press forward my amendment in the light of the comments that have been made from such powerful authority in your Lordships' Chamber. I am not sure that my amendment has been wholly understood. I have a slight feeling of hurt that it has been misunderstood from all quarters of the Committee. But I am content in the circumstances to withdraw it.

Amendment, by leave, withdrawn.

Clause 1 [Time limits for negligence actions in respect of latent damage not involving personal injuries]:

Lord Denning moved Amendment No. 2:

Page 1, line 18, at end insert— ("( ) In this section "damages" consists of or includes damages for physical damage to property or financial loss to the plaintiff or any other person: "negligence" means a breach of duty of care, (whether the duty arises by reason of common law or by virtue of a contract or of provision made by or under a statute or independently of it).").

The noble and learned Lord said: My amendment is seeking to clarify what I think would otherwise be uncertain and obscure in the Bill and might give rise to a lot of litigation.

The committee, under my noble and learned friend Lord Scarman, was to consider the question of latent defects. The Bill is headed the Latent Damage Bill. In other provisions it shows that what Parliament is considering is damage to property—latent damage to buildings such as houses which fall down, or the chimney which was designed improperly and the like. That is the whole burden of the Bill as I see it at the moment.

However, there is an important paragraph in the report of the committee which says that several people wanted to limit the Bill to those kinds of cases—to latent damage. That is what it really means: hidden damage to property which is not disclosed until afterwards.

In paragraph 4.22 the committee said: It is probably true to say that the majority of claims for latent damage arise out of building and construction work and consequently a solution limited to these areas of activity would resolve much of the present difficulty in the law and could be tailored precisely to meet the needs of that industry. It would also avoid imposing upon professional advisers outside the construction industry any more lengthy liability than they already bear". In a way, they have said that the main objectives of the Bill are dealing with the building and construction industry.

3.15 p.m.

They then go on to deal with what I may call financial loss. That is not the case of an engineer who designs a building improperly but that of a solicitor who is guilty of negligence, does not injure any property, but causes financial loss to his client. The committee went on to say: However we do not find these arguments convincing. Although the majority of claims for latent damage occur in relation to building and construction work there is no doubt that such damage can also occur in other fields, and we can see no reason in principle why a plaintiff who has, for instance, suffered damage as a result of a negligently drawn lease should be in any worse position than a plaintiff whose house has defective foundations".

That is why in the definition of damage I have sought in this amendment to say that it includes not only physical damage but also financial loss. In other words, this is covering the very case of the solicitor which I have mentioned, as well as the others.

The position is quite different in our courts on solicitors' liability. Sir David Cairns in a recent case of Forster v. Outred said: The considerations which apply to the case of economic loss are different from those which fall to be taken into account when the negligence relied on is negligence in regard to the building of a house and the damage which is suffered is damage arising because of defects in the house".

The first part of my amendment therefore is to say that damage not only extends to physical damage but also to financial loss because that covers the cases such as the solicitor and the like. The first part is with regard to that kind of damage; and the other part is again almost equally important. Negligence is not defined in this Bill at all. Negligence in law is very different from negligence in common speech. In common speech negligence means carelessness, inadvertence, matters of that kind. But in the law negligence requires first a duty to use reasonable care; secondly, a breach of that duty; thirdly, damage from it.

How can that duty of care arise? Let me take the ordinary case of a solicitor. Let me tell you that for almost one hundred years the courts said that that duty of care did not arise in tort; it arose in contract. There was a great case of Groom v. Crocket I remember in 1939 in which Lord Greene declared that it had been so accepted. The duty of care on the solicitor arose out of contract and not out of tort. In the lower courts we have been saying that it can also be put in tort. But the House of Lords' Committee have not decided that. There is a recent article in the 100 Law Quarterly Review which says, "let us wait and see what the House of Lords says". It is therefore important to get it clear that this duty of care exists whether it arises out of contract—that is the second part of my amendment—or out of the common law.

I have then added the reference to the breach of a statutory duty. Building regulations often say that there is to be six inches of concrete in the foundation. Supposing the builder, to save himself money or maybe inadvertently puts in only three inches. Is that a breach of a duty of care, or is it a breach of a statutory duty? If it is a breach of a statutory duty under the building regulations, does it come within this Bill?

I have dealt with the breach of contract. I have dealt with the common law. On this question of breach of statutory duty I think I ought to refer to some wise words said as long ago as 1940 by Lord Wright in a case called Caswell v. Powell Duffryn when he had to consider a breach of statutory duty. That was whether one kept machinery fenced or not under the Factories Act or the miners Act. He had to consider whether or not the breach of statutory duty qualified as negligence.

At page 177 of the law report he said: I do not think that an action for breach of a statutory duty such as that in question is completely or accurately described as an action in negligence. It is a common law action based on the purpose of the statute to protect the workman, and belongs to the category often described as that of cases of strict or absolute liability. At the same time it resembles action of negligence in that the claim is based on a breach of a duty to take care for the safety of the workman. The cause of action is sometimes described as statutory negligence and it is said that negligence is conclusively presumed. He is there speaking of a breach of statutory duty.

In this amendment I say that a breach of statutory duty—for instance, whether the concrete has to be six or three inches thick—also ranks as a breach of a duty to use care and therefore comes within the whole spirit of this Bill. We need to know what the position is, otherwise the courts will have to decide it hereafter. In my amendment I suggest that negligence means a breach of the duty of care, whether the duty arises by reason of common law or out of a contract or out of a breach of a statutory duty. My amendment is really a clarifying suggestion and would save the courts having to argue about it and people going before the courts discussing it. It is a clarifying amendment, and I hope that my noble and learned friend the Lord Chancellor will be able to accept it. I beg to move.

Lord Campbell of Alloway

With the greatest deference and respect, I beg leave to question whether this limited technical Bill is an appropriate vehicle for a clarifying amendment of this kind. The amendment seeks to include a definition section in two parts: one as to damages and the other as to the meaning of "negligence".

As to damages, surely an action for damages for negligence, at lines 14 and 15 on page 1 of the Bill, includes all the matters, such as financial loss to the plaintiff, referred to in the amendment. As to the definition of "negligence", the noble and learned Lord, Lord Wilberforce, said at Second Reading that this Bill was designed to right a definite wrong and to remove a definite difficulty. It was limited in this way. Surely it is not appropriate to include in a Bill which has such a narrow intendment a definition of negligence which is readily definable as a matter of jurisprudence in the courts.

The Lord Chancellor

Naturally enough, in the short time that I have had since these amendments were tabled I have taken very great care to consult those who are more expert in draftsmanship than I am as to the value of each one of them. Of course this was especially the case when I saw this amendment and other amendments in the name of my noble and learned friend Lord Denning.

This amendment is in two parts, containing two proposed definitions. One refers to the arguments in relation to damages and the other refers to arguments in relation to negligence. The arguments are not identical in each case, but they are rather similar in parts of each case. The Bill as drafted, apart from damages for personal injuries and death resulting from negligence, which are excluded for reasons which were fully gone into in previous debates, deals with all damages for negligence and it thus applies to claims for damages in respect of damages caused, for instance, by cracked foundations in the building industry, to which my noble and learned friend referred; but it also applies to damages for negligence resulting in financial loss.

There is the case of Ross V. Caunters, where a beneficiary lost her legacy as a result of a negligently-drawn will. I am advised that the Bill covers that. I am bound to say that I find it difficult to see any form of damages for negligence, other than those expressly included, which are not included in the Bill as drafted. For instance, I think that this would equally apply to a case like Dutton v. Bognor Regis Urban District Council, which my noble and learned friend will remember very well because he presided in it, and the case of Anns v. Merton London Borough Council, where the decision was followed by your Lordships' House. It is quite clear that the negligent breach by local authorities in the performance of their duties under the building regulations is not excluded by the Bill as drafted. Therefore, I would respectfully suggest that the first limb of the proposed definition clause is superfluous, rather as was suggested by my noble friend Lord Campbell of Alloway.

As regards the proposed definition in relation to negligence, I think that there is a more substantial objection to the proposed change. This Bill is limited to actions for tort for negligence and, so far as tort is concerned, it is of course true, as we discussed on the last amendment, that a duty of care can arise under two heads: it can arise under contract and it can arise under tort. However, this Bill is not designed to alter the law of contract and does not in fact do so. The cause of action in contract, if the action is brought in contract, arises out of the agreement between the parties. Whether, and to what extent, there may be liability for breach of it primarily depends on the terms of the agreement, expressed or implied, between the parties, subject of course to the unfair contracts Bill which passed under the aegis of the noble and learned Lord, Lord Elwyn-Jones, during the last Labour Government. Therefore, it is rather inappropriate to this Bill to include it in that form.

However, where the duty of care arises under a contract, the action may be brought in tort, and where the damage is latent, the Law Reform Committee's recommendations already apply. With respect, the same is also true in relation to statutory duty. There are all sorts of actions for breach of statutory duty where the statute lays down the extent to which liability can arise. It may be absolute; it may exclude certain types of negligence, and so on. On the other hand, where the action is brought in tort for the negligent performance of a statutory duty, as in the local authority cases to which I have referred, as I am at present advised, the cause of action is covered by the Bill.

I am very grateful to my noble and learned friend for bringing my attention to the point. If my noble and learned friend withdraws the amendment, as I shall suggest he does, I will take further advice as to whether what I have said is correct or incorrect. At the moment, I am acting on the advice I have received and upon the opinion I have formed myself. My feeling is that the first part of the proposed definition is unnecessary, and the second is open to potential objection as well as being in large part unnecessary. I would therefore suggest that my noble and learned friend does not press this amendment.

3.30 p.m.

Lord Denning

My noble and learned friend has said that he will think about it again, and I hope he will. He said, for instance, that my bit about financial loss is surplusage. It is much better to have in a little surplusage and get it clear than to have arguments afterwards in the courts as to whether it includes it or not.

The other point, whether it is tort or not, I made clear: it is for a breach of a duty of care. The rest of it is only what it arises under. So again it is tort. I have only put them in for the sake of clarity. If it remains as obscure as it is in the Bill, the lawyers will have a field day of it. I would much rather have my little amendments in. However, in view of what my noble and learned friend has said, I shall not press the amendment.

Amendment, by leave, withdrawn.

Lord Hacking moved Amendment No. 3: Page 2, line 14, leave out ("any potential") and insert ("the").

The noble Lord said: Amendment No. 3 is linked with Amendment No. 5. With the leave of the Committee, I intend to address the Committee on both Amendments 3 and 5. This is the simplest amendment that I have tabled for this Committee. It seeks to change the words in subsection (5) from "any potential plaintiff" to "the plaintiff". Then it seeks to remove the following paragraph in that subsection which only arises because of this description of "any potential plaintiff", which I am seeking to have removed.

This problem is one of identification of the person whose knowledge is relevant for the purpose of the starting date of the extended period of limitation under subsection (4)(b) of the new Section 14A. One would expect that the only person whose knowledge is relevant for this purpose will be the plaintiff in the action. This seems to be the principle applied under the comparable provisions in the Limitation Act 1980 in respect of personal injury actions (I refer to Section 11(4)(b) of that Act) with extensions only to deal with cases where the injury has resulted in death.

However, subsection (5) of the new Section 14A, to be inserted by Clause 1 of this Bill, makes the extended period run from the earliest date on which "any potential plaintiff" first had the relevant knowledge. "Any potential plaintiff" means not only the actual plaintiff in the current action but anyone in whom a cause of action is for the time being vested in respect of the negligence alleged in the current action. At first sight, it might seem that this wider definition is meant to deal with the successive causes of action created by Clause 3 of the Bill when the property contained in the latent damage is transferred. However, it is difficult to understand how this can be so since a new cause of action is only created by Clause 3(1) where the predecessor in title had not discovered a defect.

Furthermore, the "potential plaintiff" under subsection (5) of the new Section 14A would include not only those with successive causes of action but also those with separate, concurrent causes of action in respect of the same act of negligence. Thus, for example, in the Ross v. Caunters case, which is a solicitor negligence case and which concerned the preparation of a will, the testator himself and a number of different potential beneficiaries would have had separate, concurrent causes of action.

Therefore, the argument is: why should the state of knowledge of one of these potential plaintiffs cause the extended limitation period to run against others who do not have the same relevant knowledge? Hence, my amendment would have the effect of making the starting date for the extended period of limitation depend solely on the state of knowledge of the actual plaintiff in the action concerned. With respect to this Committee, that seems to me, even though this is an argument that I myself am moving, to be a logical argument, and that is why I move this amendment.

The Lord Chancellor

In replying to the noble Lord on the Cross-Benches, perhaps I should say, totally irrelevantly but for the convenience of the Committee, that I understand the Statement has been cleared. Therefore, when this amendment is disposed of I shall move that the House be resumed for the purpose of hearing the Statement.

I think I detected behind the reasoning of the noble Lord a doubt which had arisen in the minds of the Law Society. Behind the hand of Jacob I thought I detected the voice of Esau. I must modestly confess that I had a word with Esau through my officials, and I think I have persuaded him that, although he was a hairy man, his amendment had been made upon a false assumption that the effect of the reference in the new Section 14A(5) to "any potential plaintiff" is to cause the starting date to run at large against all potential plaintiffs as soon as any potential plaintiff has actual knowlege that he has suffered damage. This is not so.

The provision turns on a plaintiff being aware of the damage he has suffered in respect of which he claims damages. It is not left to the actual, subjective knowledge of the individual concerned. The test, as laid down in subsection (6) of the proposed new clause, is whether the damage is such as would lead a reasonable person who has suffered such damage to consider it sufficiently serious to justify his instituting proceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment. So we follow the hallowed steps of the reasonable man in our text.

Such a plaintiff would allege in his statement of claim, for instance in the will case, that the will was negligently drawn, and that that negligence robbed him of his inheritance and that he only discovered the damage within the limitation period. The defendant would challenge the circumstances of discovery on the ground in subsection (6) that a reasonable plaintiff would have commenced these very proceedings earlier in respect of the damage and that time has run out. He may even show, as a matter of evidence, that earlier, albeit separate, proceedings had actually been commenced as he alleged.

The point is that each potential plaintiff is to be judged on his or her merits, on the Bill as it is drafted. I am therefore at the moment of the opinion that the proposed amendment is based on a false premise. If those who initiated this are still worried about it, they can have further discussions, but for the moment I am not persuaded that the amendment is an improvement on the Bill. I would suggest that it should not be pressed at this stage at any rate.

Lord Hacking

It is not my intention to press this amendment at this stage, but Jacob will certainly consult Esau and ascertain whether Easu has been satisfied. I may, therefore, come back again at Report stage, either as Jacob or as Esau. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Lord Chancellor

I beg to move that the House do now resume.

Moved, accordingly, and, on Question, Motion agreed to.

House resumed.