HL Deb 17 March 1986 vol 472 cc797-816

3.8 p.m.

The Lord Chancellor

My Lords, I rise to move that this Bill be now read a second time.

The object of this Bill is to put into effect the recommendations of the 24th Report of the Law Reform Committee on a reference I made earlier in my present term of office on the subject of the limitation of actions for negligence in cases where the damage alleged to have been caused by negligence is not obvious and only appears long after the breach of duty has taken place. I made the reference in August 1980. The committee chaired by my noble and learned friend Lord Scarman reported in November 1984 and I have only now been able to obtain a slot for it in the Government's programme. The Bill is only five clauses and six pages long. It therefore ranks as a short Bill; but if, as I hope, it finds its way on to the statute book it will effect an important and valuable change in the limitation law as it affects the tort of negligence.

The necessity for the reference to the Law Reform Committee arose out of a series of court decisions which I need not enumerate seriatim. The tort of negligence arises when damage occurs as the result of a negligent act or omission in breach of an existing duty of care. A breach of duty by itself is not enough to give rise to the cause of action. The right of action arises only when the breach results in actual damage. The ordinary limitation period for actions for damages for negligence, apart from the numerous cases of personal injury (with which the Bill is not concerned) is the ordinary period of six years. In most cases this is perfectly adequate since in most cases the damage is obvious from the first. My Lords, if I run into your canoe in the Thames or negligently knock over a pile of plates in your restaurant or negligently set fire to your house, you have only yourself to blame if you let six years pass without issuing a writ. But sometimes damage occurs which is not easily or reasonably discoverable till after the six-year period has already passed. It may be that I am an architect or builder who has faultily designed or constructed the foundations of your house or a surveyor who failed to discover under the plaster. It may be that I am a solicitor or an under the plaster. It may be that I am a solicitor or an accountant who has advised incautiously or drawn a document in a way which for some time does not come to light. There is a whole range of cases and relationships to which such considerations may apply. What happens then, my Lords? The case to which I have referred establish, first, that the cause of action does not arise and therefore the six-year period does not begin to run on the breach of duty before damage has actually occurred; secondly, that the time does begin to run when damage has occurred even though it is not reasonably discoverable; and, thirdly, the principle of discoverability does not therefore apply to the limitation period. The reference therefore to the committee covered a very limited field. It covered the accrual of the cause of action; it covered the desirable limitation of the cause of action; and though it excluded latent disease or personal injuries it included a wide range of occupational relationships: builders, architects, solicitors, accountants and many others. It also covered the case where the victim of the damage was a third party—for instance, the purchaser of the house, or, in the case of a will drawn by a solicitor during a prospective testator's lifetime, an intended beneficiary. These are all persons other than the person to whom the original duty of care was owed.

There are really two classes of person whose interests are affected in this area of the law, apart from the third parties; the potential plaintiff (or alleged victim of the negligence) and the potential defendant (or alleged tortfeasor). They are both equally important. But there is this difference between them. In the main the potential defendants are well represented by professional associations of one kind or another who are extremely articulate, extremely competent and very well advised. The potential plaintiffs, however, do not constitute an identifiable class, since at any given point of time, ex hypothesi, they are unknown and, since they cannot be identified, cannot be represented and have no articulate voice at all.

The committee found that the present law did an injustice to both classes: to the potential plaintiffs, because owing to the irrelevance of the principle of discoverability the limitation period might elapse before they could reasonably be aware that they, had a right of action; and to the potential defendants because the right of action might arise so long after the negligent act or omission that they are unable to assemble adequate evidence to contest a claim, and might find it impossible or at any rate difficult to insure against it. In addition, under the existing law third party victims, as when a house is sold to a third party after damage has occurred and the action has accrued, can remain uncompensated, and in any case where the limitation period is in question the courts themselves are required to perform in every case the time-consuming, expensive and sometimes impossible task of ascertaining exactly when damage began to occur. It was to remedy these defects in the law that the committee recommended changes and now this Bill embodies their recommendations.

Following the committee, the design of the Bill follows three principles. The first principle was that plaintiffs must have a fair and sufficient opportunity of pursuing their remedy. The second principle was that defendants are entitled to be protected against stale claims. The third principle was that uncertainty in the law is to be avoided wherever possible.

These principles resulted in two major recommendations: first, that the ordinary period of limitation of six years should be subject to an extension which would allow the plaintiff a further three years from the date on which he discovered, or could reasonably have discovered, that he had suffered significant damage; but, secondly, that there should be a long stop provision which should operate to bar all negligence claims, however well founded, involving latent defects or damage that are brought more than 15 years from the date of the defendant's breach of duty. These recommendations are embodied in the Bill.

I must say a word about the contents of the Bill and scope for discussion. In the first place, I must emphasise that the Bill, based on the Law Reform Committee recommendations, is a highly balanced document based on the widest consultation, with over 140 entities listed in the appendix to the report. It endeavours to do justice both to the inarticulate, unorganised and unidentified potential plaintiff and to the highly articulate, well organised and easily identifiable potential defendant. Both gain by the Bill, I believe. In the second place, although it does not deal with insurance (which is the subject of an entirely separate consultation document issued in 1985 by the National Economic Development Office), nor with insurability, the long stop provisions which are for the benefit of potential defendants should ease their insurance problems. In the third place, both the Bill and the report on which it is based contain certain further provisions, which I will now enumerate seriatim.

First, the Bill deliberately makes no change in the general rule of substantive law whereby a cause of action in negligence accrues at the date on which the resulting damage occurs. The report deals with that at length. Secondly, the Bill provides that a person under disability (for instance, minority or unsoundness of mind) at the date of discoverability is given an extension to cover the unexpired portion of his disability. Thirdly, the Bill ensures that fraud, deliberate concealment or mistake are not protected by the long stop. Fourthly, the Bill provides that unlike the date of the accrual of the cause of action, the long stop period runs from the date of the breach of duty and not from the occurrence of damage. That is of course beneficial to potential defendants.

A suggestion was made to your Lordships in the course of a short debate a few weeks ago on the Unstarred Question by the noble Lord, Lord Hacking, that the long stop period should run from the date of completion. That suggestion was deliberately rejected by the committee, particularly on the grounds, first, that it is applicable only to a narrow segment of the potential litigants in the causes of action concerned—for example, the construction industry—and, secondly, on the ground of the difficulty, even in relation to the construction industry, of defining completion so as to avoid injustice especially to defendants responsible for very large projects. Completion is a contractual concept, essentially difficult to apply, and perhaps wholly inapplicable to the law of tort. Furthermore, on consultation the suggestion was firmly rejected by the official referees who are perhaps the specialists best qualified to referee this decision.

Clause 3 enables successors in title to the original victim to inherit the original cause of action. This continues to be effective only within the original limitation period, and subject to the long stop.

I ought to say a word about the drafting of the first two clauses which at first sight might seem a little clumsy. As the House will remember, we consolidated the Limitation Acts, which by that time were becoming a little complex, in 1980. We do not wish to lose the advantage of that consolidation in 1986. We have therefore drafted Clauses 1 and 2 of the Bill in such a form as to read as textual additions to the consolidation Act in the form of a new Section 14A (the discoverability addition) and 14B (the long stop addition). Clause 2 of the Bill, which is consequential on Clause 1, adds a new Section 28A to the consolidation Act. Subsection (1) of that new clause gives the additional protection to those who are under a disability at the time of discoverability. Subsection (2) removes the long stop protection from a defendant guilty of deliberate concealment. I have described the effects of these provisions earlier in my exposition of the policy.

I think that Clauses 4 and 5 speak for themselves, and I will therefore add nothing. My Lords, I beg to move.

Moved, That the Bill be now read a second time.—(The Lord Chancellor.)

3.23 p.m.

Lord Silkin of Dulwich

My Lords, may I begin by thanking the noble and learned Lord the Lord Chancellor for his clear exposition of a Bill on a highly complex subject? In doing so, perhaps I may also be permitted to express my thanks and, I am sure, those of the House for the clear and interesting report of the Law Reform Committee upon which the Bill is based.

There is little that I can usefully add to what the noble and learned Lord the Lord Chancellor said, more particularly perhaps because we had a short debate on the Unstarred Question asked by the noble Lord, Lord Hacking, a few weeks ago, to which the noble and learned Lord referred. The issues raised by the Bill were thoroughly canvassed then.

However, there is one matter which I raised on that occasion to which I should like to return and with which I do not think the noble and learned Lord dealt when he answered the point raised by the noble Lord, Lord Hacking, either then or on this occasion. As the noble and learned Lord said, the Law Reform Committee put forward three principles which it sought to reconcile. They are not principles with which I would wish to quarrel. The first is that the plaintiff must have a fair and sufficient opportunity to pursue his remedy. In that context, perhaps I may draw particular attention to what the noble and learned Lord said a moment ago when he repeated what he said on the earlier occasion; that plaintiffs in such an action, particularly those which relate to defects in buildings, are unlikely to be assisted by the organisation or even the articulateness which defendants probably enjoy, so that when one considers what is a fair and sufficient opportunity one must bear that point in mind. The second principle is that a defendant is entitled to be protected against stale claims. The third is to avoid uncertainty wherever possible.

Of course, the difficulty which the committee had to resolve was how to reconcile those three principles which, particularly in cases related to buildings, are not always easy to reconcile. It may well be that the defect which causes loss and damage to the plaintiff is one of which he did not become aware and, indeed, of which he could not have become aware until many years have elapsed. I speak with a certain amount of personal experience inasmuch as settlement occurred to the house that I occupy which was not noticeable until some 25 years or more after it had been built. It certainly could not have been known about before then.

The plaintiff or the house owner may be put in a very difficult position as a result of the existing law, and the report and the Bill go some way towards dealing with that. The ideal situation would be to remove altogether the possibility that a plaintiff is debarred from suing upon something about which he neither knew nor possibly could have known. To achieve that ideal is extremely difficult without extending the limitation period so long as to be totally unfair to the defendant. It is fair to say in that context that the builder or the architect, if he keeps proper records, would normally be in a very much better position to defend himself against an accusation of negligence than would the plaintiff who may not even have been the first purchaser of the house if the defect does not appear for a substantial period of time.

The plaintiff in such circumstances will probably have to rely upon the advice of an engineer or other expert at the time when eventually the defect appears. As I know from my experience, it was not until extensive and expensive excavations had taken place that it was possible for me to be advised as to whether the settlement was due to any fault on the part of the builder or not. That is a situation which is likely to be repeated. It is in that context that I raise the only point on this Bill and on the report which has worried me; and that is the period, which is not subject to any change in any circumstances, of 15 years as the long stop period. As I have mentioned, in my own case it was 25 years before the defect became apparent, and though, fortunately, I was able to put the cost upon an insurance company, that will not always be the case and the costs of putting right that kind of defect can be quite frightening.

The question which has worried me in reading the report of the Law Reform Committee is whether it would be desirable and possible to give to the court some elasticity in the application of the long stop period. This matter was raised before the committee, which somewhat summarily rejected it on the basis that a long stop ceases to be a long stop if there is any uncertainty at all about its length.

I wonder whether that was a sound reply and whether it would be practicable—I am not seeking at this stage to think in terms of drafting—to give to the court some power to vary, obviously within fairly close limits, the 15-year period in favour of the plaintiff where it appears to the court on the facts before it, first, that it would not involve unreasonable hardship on the defendant; and, secondly, that in the circumstances of the case it would cause hardship to the plaintiff, particularly when he neither knew nor could possibly have known of the defect and the damage, and where, as soon as he did know, he took immediate action to bring the matter before the court. The courts have powers in other fields to vary limitation periods and I should have hoped that it might be possible to devise a satisfactory way of doing that in the sort of case to which I have referred.

Apart from that one difficulty on which I have doubts, and which I recognise is a matter of the balance to which the noble and learned Lord the Lord Chancellor referred—and I fully understand that those who represent the builders, the architects and those concerned with the erection of a building may prefer the balance to be on one side, while the householder may prefer it to be on the other—it seems to me that this is an extremely valuable Bill and I commend it to the House.

3.34 p.m.

Lord Mais

My Lords, I feel hardly qualified to rise and speak on this occasion in company with such an abundance of legal talent, but I can assure your Lordships that I shall at least be brief. There are many points in this Bill which required attention, but the one which has bothered me most, and I think it has bothered most people connected with the construction industry, whether on the professional side or on the industrial side, is the period of 15 years.

It is only recently that the subject of latent damage has been dealt with and I think we are all very grateful to the noble and learned Lord, Lord Scarman, for his report, which certainly clarifies the position both from the professional point of view and from the point of view of those who go their way in industry. I have been in the construction industry for the best part of 50 years and the fear of latent damage arising has always been with both the professions and the contractors who carry out the work. For the professions it is a very serious matter indeed, because, unlike the contracting element, they are entirely dependent upon the amount of insurance that they carry and it is not always possible to cover for the amount of damages that might be levelled against them.

The question of latent damage claims is worse now and much more prevalent than it used to be when I first started in the industry. Then there was a certain amount of covering up and people said, "We mustn't bring a case like this, because it will cause unnecessary suffering." But now people think of looking for the possibility of making a claim before a job has even started! In fact, I have come across cases where contract documents are handed over to the legal side of a company to see whether there are any loopholes in those documents which will support a claim at a later date.

When one is thinking about the unfortunate person who is on the receiving end of late contracts, and contracts completed several years after they were told, one should also bear in mind the problems of architects, engineers and contractors. With labour conditions as they are, and with the unknown problems which one may face on any contract, particularly if it is a big one and it is abroad, people need to have some protection.

There is no particular point to which I object in the Bill. In fact, it is a good Bill so far as the industry is concerned. The only point that I wish to raise is the period of 15 years from the breach of duty. That problem could arise at a stage in the contract which meant, ultimately, that it would be not 15 years but 20 or even 23 years. It could mean severe financial disaster for some people. If it is possible at this late stage, I suggest that the Bill should be amended so that the period will be "the completion of the contract" plus 10 years. That would be much more reasonable and acceptable so far as the industry is concerned, and certainly so far as the professions are concerned. It would also have the advantage of being in accordance with the Continental procedure. I have no other point to raise. It is a Bill which is welcome, so far as the industry with which I have been connected is concerned. There is just the one point which worries us considerably, and I would only ask whether at this late stage it could be looked at again.

3.40 p.m.

Lord Hacking

My Lords, in rising to make his comments to your Lordships' House the noble Lord, Lord Mais, spoke of some diffidence at speaking among so many lawyers. I am one of those lawyers but I also speak with diffidence for I have nothing like the detailed knowledge and experience of the noble Lord, Lord Mais, and other noble Lords in the construction and other industries that are affected by the provisions set out in this proposed legislation. I hope that other non-lawyer Members of your Lordships' House, whether they are representing the articulate or inarticulate and whether they are concerned about the interests of plaintiffs or defendants, will participate in this debate.

In beginning my comments, I should like to express again thanks to the noble and learned Lord the Lord Chancellor for the enormous time and trouble that he and his officials have taken in the extensive consultations that have taken place prior to the Bill being put before your Lordships' House. I shall not name the officials of the noble and learned Lord but I am glad to see that they are in attendance in the House and I state again my personal indebtedness to the noble and learned Lord and to his officials for the time and trouble they took over these consultations.

I welcome this Bill for several reasons. First of all, I welcome it because it produces justice for plaintiffs, whether inarticulate or articulate. It is some time now since the law came to the rescue of the plaintiff with latent injury. That arose after the troubling case in 1963, if my memory is correct, of Cartledge v. Jopling. The plaintiffs were held in that action to be statute barred even though they did not know about their latent injuries which in that case was pneumoconiosis. The Houses of Parliament came quickly to their rescue in—again if my memory is correct—the Limitation Act 1963. It is therefore clearly right and appropriate that the law should come to the rescue of, and do fairness to, plaintiffs who have suffered from latent damage and who have been statute barred long before they knew of their damage.

I also welcome the Bill on behalf of defendants because it does fairness to them. They should not be exposed to stale actions when so much time has passed that they are put at a severe disadvantage in defending the plaintiff's claim against them. I also welcome the Bill because it goes some way, although I hope to persuade your Lordships that the Bill should go further on this route, to establish greater clarity and certainty in the law relating to limitations of actions and particularly relating to latent damage.

The present law has not been in a satisfactory state for some time. For that reason I much welcome these measures but I am sorry, though, that the Government have not yet been persuaded—in bringing these measures before your Lordships—to deal with the five different accrual points for the period of limitations upon which I addressed your Lordships in the Unstarred Question in February. I hope nonetheless that the noble and learned Lord will give further and fresh consideration to this problem to which I intend to return at the Committee stage. I presented the argument as best I could in the Unstarred Question and I shall at this stage leave that argument as it rested there.

The noble and learned Lord has referred—and I have repeated the words—to the "articulate" and the "inarticulate" in his concern that the inarticulate plaintiffs interest should be protected, and protected within the framework of this legislation. I think it would be right, although I in no way defer from this concern of the noble and learned Lord, to draw your Lordships' attention to other persons who are potential plaintiffs who are far from inarticulate. I refer to large property companies and to large local councils and I refer to the Consumers' Association, which sent to me (and I suspect to other noble Lords) a letter which was highly articulate and represented the concern of potential plaintiffs. In truth, defendants and plaintiffs each have their special problems and that is why I welcome the Bill.

I should like now to turn to some special points concerning this proposed legislation and to address a few comments upon them. I turn first of all to the activating event for the long stop period. In new Section 14B of the 1980 Act it is proposed that that activating date should be, in effect, the date of breach of duty. The difficulty is that it covers so many wide, diverse activities. It covers the building of buildings to the making of products and indeed, as the noble and learned Lord mentioned, solicitor negligence. Therefore this test of breach of duty, while it covers all those differing activities, still presents some difficulty in ascertaining the accrual point. I do not think it was me in the debate that I introduced in February who argued that we should settle on "completion date". This is a matter which has been extensively discussed among those in the construction industry—among those members who are truly concerned for clarity of the law and not to get an advantage for their own interests.

It has been suggested—and I hope to deal with this in Committee—that some compromise may be reached about the accrual date for the long stop period in terms which would fairly bring the completion date as one of the starting points for the accrual point of the long stop period. I merely put before your Lordships what I believe to be the difficulty, which is to find a phrase which covers such wide and diverse activities from the building of buildings to the making of products or to the provision of services.

I turn next to the period of the long stop. In fixing this period it is clear that different persons have different interests. It spans (does it not?) a 10-year period to a 12-year period, to a 15-year period to a 20-year period. At this stage I shall not advocate before your Lordships any particular period. I just reflect that the time that has been chosen in the Bill is clearly a middle period. It is also the period that the noble and learned Lord, Lord Scarman, and the fellow members of his committee recommended in their report. It has a sense of fairness in the sense of being middle ground.

All I make is the general observation that the plaintiff is not being served by too long a long stop period. He is not being served because it is the plaintiff who is also put to disadvantage by stale litigation. He is not being served because too long a period means that he may no longer be able to find his defendant or, more seriously, no longer able to find his defendant with means to pay damages because, for example, that defendant is no longer covered by insurance. Thus it is not in the interests of the plaintiff to go for too long a period. Indeed, it is in the interest of both the plaintiff and the defendant that there should be an alertness to the need to get on with the action and—more than that—an alertness about the need to be sure that the products you are receiving into your possession—whether it be a house or another product—are carefully examined so that you are not caught by latent damage and, worse still, caught by the 15-year period.

I turn now to another point in the Bill. It is set out in the proposed Section 14A and subsections (5), (6), (7) and (9). The noble and learned Lord explained how those subsections came to be drafted into the Bill. He referred to them in his most helpful speech to your Lordships in explaining the Bill as "textual additions" to the Consolidated Limitation Act 1980. In my humble submission that is precisely the difficulty about those provisions. They are indeed largely, although not exclusively, taken from Section 14 of the 1980 Act, as the test of knowledge for plaintiffs who have suffered personal injuries.

I should like to refer to this matter in a little more detail because it is my submission that those tests are not appropriate for latent damage cases. It is my submission also that, to coin a phrase used by the noble and learned Lord, these provisions are "too cumbersome".

The new section involves a series of tests, and I shall read from the text of subsection (5): For the purposes of this section, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which any potential plaintiff first had knowledge both—

  1. (a) of the material facts about the damage in respect of which damages are claimed; and
  2. (b) of the other facts relevant to the current action mentioned in subsection (7) below".
Leading from those two initial tests, we go on to the actual tests for putting into effect subsection (5)(a). I refer to subsection (6), where we find these words: For the purposes of subsection (5)(a) above, the material facts about the damage are such facts about the damage as would lead a reasonable person who had 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. That is not the end of the matter because the clause goes on to elaborate upon the test in subsection (5)(b). Subsection (7) states: The other facts referred to in subsection (5)(b) above are—
  1. (a) that the damage was attributable in whole or in part to the act or omission which is alleged to constitute negligence; and
  2. (b) the identity of the defendant; and
  3. (c) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant".
Your Lordships might think that that is a big enough mouthful, but the clause goes further because it is again picking up "textually" Section 14 of the 1980 Act. Thus it is proposed that the "knowledge" test is now applied.

Subsection (9) states: For the purposes of this section a person's knowledge includes knowledge which he might reasonably have been expected to acquire—

  1. (a) from facts observable or ascertainable by him; or
  2. (b) from facts ascertainable by him with the help of appropriate expert advice which it is reasonable for him to seek":
and that subsection goes on to describe yet another caveat with which I need not trouble your Lordships.

The sum total of all of this is, with great respect to the noble and learned Lord, that—to adopt again his own phrase—the clause is extremely "cumbersome". Indeed, if one refers to the very adequate Explanatory Memorandum on the face of the Bill, one finds it is all contained within half a sentence and within lines that number no more than two. In describing Section 14A, the Explanatory Memorandum states: It prevents bringing such actions after 6 years from the date on which the cause of action accrued and these are the critical words— or 3 years from the date on which the plaintiff knew or ought to have known facts about the damage, whichever is the later". That puts the proposition with at least greater clarity—if not with sufficient precision for the text of the Bill—without the cumbersome use of all these tests, which I have put before your Lordships.

Another point of worry that I should like to draw to your Lordships' attention concerns the general extension of Section 32 of the 1980 Act as it is intended to refer to the proposed revisions. The general proposition in Section 32 is that the period of limitation shall not run when there has been fraud, concealment or mistake. In those circumstances, the plaintiff—within certain procedures that I shall not detail to your Lordships—is still entitled to bring his action, albeit that he is out of the six-year time frame. The inclusion of the word "mistake", which is a technical term well known to lawyers, produces some degree of uncertainty, and that is another matter that causes me concern.

I have one other small observation to make before returning to my general welcome for this Bill. The Explanatory Memorandum includes a note that states: There are no EC implications". Unless I have misunderstood it, I take it that that means there are no EEC implications. I am a little concerned about this proposition because there is a Council Directive of 25th July 1985 that I know is well known to the noble and learned Lord the Lord Chancellor and to his officials. With respect, I believe that that Directive has a direct bearing on the provisions in the Bill. I shall not go into detail but I will return to that point, and the importance of it when considering the long stop period, when we reach the Committee stage.

Those are the observations that I have for your Lordships' House on the proposed measures in the Bill. I end as I began, by giving the Bill's provisions a general welcome; but I also end by urging that your Lordships should, when in Committee, show a flexibility that I hope will be shared by the noble and learned Lord so that we may make a reasonable Bill a much better Bill.

3.56 p.m.

Lord Kimball

My Lords, it is with some trepidation, as one who is not versed in the law, that I dare to enter into this debate. My only reason for so doing is that for the past two and half years I have been joint chairman of Lloyd's of London's law reform committee. We have been negotiating with the department on this particular Bill and on the long stop provisions especially. In any negotiations with a government department, the more that one has to negotiate, more often than not one gets let down by it. It is fair to say that my understanding of the position of the negotiations as we finished them was exactly that as summarised by the noble Lord, Lord Hacking, who has just spoken; namely, that the long stop provision would run for 10 years from the date of completion of a building. That is a very acceptable arrangement and one equally proposed by the noble Lord, Lord Mais.

The 10-year long stop provision would be in line with the EC directive under Article 11 on product liability, which states that product liability must run for a 10-year period. The 10-year long stop provision would also have the merit of avoiding the criticism that was in the 24th report of the Law Reform Committee, when it criticised the Scottish 20-year period of extended liability. It criticised that provision on the ground that it led to, stale claims and defendants risking litigation over an unreasonable length of time". I submit to your Lordships that the 10-year long stop period would meet that particular objection.

After all, the longer one waits over a claim, the more difficult it is to prove the fact. Surely the consumers are best served by ensuring that architects, quantity surveyors and civil engineers are all covered by soundly-based policies against claims for latent damage. The position in the market is that those very quantity surveyors, architects and civil engineers are now finding it an extremely difficult market in which to obtain proper insurance provision. Premiums are galloping away at the moment. The Institute of Civil Engineers is currently finding it impossible to obtain building inspectors, who are not prepared to take the jobs simply because they cannot afford to take out the necessary insurance to cover themselves. I hope that when we reach the Committee stage of this Bill we will look very carefully at the whole question of the long stop provision for latent damage.

Your Lordships will be aware that there are many small states in America where distinguished doctors, surgeons and other professional people simply cannot practise today because they are unable to obtain the necessary insurance cover. It always frightens me when the courts and the law see an insurance company and a claim. It is rather like a pack of hounds when they see their fox. The lawyers' tongues hang out and their wigs flow behind them as they brandish their sticks and pursue the wretched insurance company and the wretched underwriter to a point where they can no longer carry on in business. I am quite certain that that is a situation we wish to avoid. I hope that eventually, during the course of the Committee stage, we shall agree to limit the latent damage provision to a 10-year period.

4 p.m.

Lord Denning

My Lords, I too welcome this Bill and also thank the noble and learned Lord, Lord Scarman, and his committee for a well-reasoned and convincing report. As I have been concerned in many of the law cases that were under consideration, perhaps I may be permitted to explain to your Lordships that the primary object of this Bill, as I understand it, is to deal with latent defects in buildings.

We had two or three cases, the leading one of which was Sparham-Souter in 1976. A house had been built on rubbishy foundations. A little damage was noticed from time to time, but it was over six years before the cracks became very bad in the house, and so the householder looked to see who he could sue because it was discovered that the foundations had been laid on a rubbishy base. The builder had gone into liquidation, so the householder sued, if you please, the inspector of the local authority for having passed the foundations when he ought not to have done. It was seven years or more since the house had been built. It looked as though his claim would be defeated by the six-year limitation. However, in the Court of Appeal, after much consideration, we held that the time did not run against him until he knew of the defects or, with reasonable care, ought to have known. Therefore, he won his case.

The next case in the House of Lords was similar, that of Anns v. Merton. There was even a third case which, I stress, again concerned foundations. The owner of the house noticed a few cracks after 10 years. He had them patched up by a jobbing builder, but after another 10 years—that is, 20 years altogether—the house was falling down. Excavations were carried out and it was found that the concrete flooring was only three inches where it ought to have been 10 inches, or whatever it should be. There had been a breach of the building regulations. The local inspector had passed it. The Court of Appeal held that the householder could not reasonably have known of the bad foundation work for 20 years and that his action was good.

Then there came the great case in the House of Lords of Pirelli. This did not concern foundations but dealt with a 160-foot high chimney at Pirelli's works at Southampton. The chimney looked satisfactory when it was built and for a little time. But after, I believe, six years the owners had occasion to send up a steeplejack who found that the wrong material had been used in cladding the chimney at the top. Because of that the chimney had cracked and it was only then discovered. I am afraid that the House of Lords said those earlier cases of ours were wrong; that the time of limitation arose from when the cracks first appeared six years before, although no one had seen them, no one had been up the chimney, and no one knew that they were there. But the time ran from the time of the damage.

In that case the House of Lords said that it was time this matter was looked into. The noble and learned Lord the Lord Chancellor appointed this committee as a result of that case. I am glad to see that the fundamental recommendation of the committee is that in cases of latent defect the time should not run against the plaintiff until he knows of the defect or with reasonable diligence could have discovered it. That is a welcome principle which I gladly accept. It protects the individual who has been unorganised, as my noble and learned friend said, whose house falls down after years and he finds that there is a latent defect. Therefore, so far I welcome the Bill.

Another question arises which is almost more important. It could be said to be hardly within the scope of the committee's report. It does not deal with latent defects in building but with negligent advice from an architect or a solicitor which causes no physical damage but only financial loss. One of the most interesting cases recently is where a man made a will to leave something to his sister-in-law, a Mrs. Ross. The solicitor sent the will to the testator to sign and told him to get it witnessed, but to get it witnessed by someone independent. Therefore, the testator had the will witnessed not by Mrs. Ross but by her husband, Mr. Ross. That made the gift fatal and flawed because the Wills Act says that wills must not be witnessed by either a beneficiary or by the spouse of a beneficiary. The solicitor had not told the testator of that. After he died, the poor sister-in-law was done out of her legacy because the solicitor had given the wrong advice about the witnessing of the will.

I am glad to say that in an important judgment the Vice-Chancellor, Sir Robert Megarry, held that the solicitor was liable for that negligence. That was an almost epoch-making decision. But what if that happens 10, 15 or 18 years afterwards; is there to be no remedy?

The committee wondered whether it ought to go into such a matter as the liability of a solicitor giving negligent advice. The committee said: we can see no reason in principle why a plaintiff who has, for instance, suffered damages as a result of a negligently drawn lease should be in any worse a position than a plaintiff whose house has defective foundations". I agree. The committee did not mention it, but it means overruling cases which have stood for over 100 years. For over 100 or 160 years the law said that a solicitor was liable for breach of contract, for his carelessness or for not taking due care, but was not liable in an action for negligence for tort.

That lasted until about 20 years ago. I am afraid we got round that a bit and we held that a solicitor was not liable for breach of contract only but also in tort for negligence. But it is an open question. There was an important long article in volume 100 of the Law Quarterly Review a short time ago which said that the House of Lords has not ruled upon that. Is not the solicitor liable only in contract and not in tort? It is therefore an open question. However, the important point I would raise is this. There are two cases, one called Howell v. Young in 1826 and the other called Forster v. Outred in 1985 or 1986, when it was said that so far as a solicitor's negligence is concerned the time runs from when the person acts upon it.

The cases are these. A man goes to a solicitor and says "I want to lend £1,000 on this property. Advise me, is it good security or not?". The solicitor says "yes". After seven, eight, 10 or 15 years, when it comes to realising the security, it turns out that it was bad and the solicitor's advice was bad. The courts have held that in such a case the time runs from the solicitor's initial act. Those cases must, and I hope will, be overruled by this Bill. Regarding solicitors and all those people, the principle should apply not only in regard to latent defects in the making of buildings but also to bad advice by professional men. It is the very important principle of our law that time should run against the man only from when he knows of the defect or damage or ought reasonably to have known of it. That is the general principle.

Perhaps I may say one word about the long stop. I have given some illustrations. Fifteen years would have knocked out the case about which I have already told your Lordships, Dennis v. Charnwood, where the damage was not discovered, or could not be, for 20 years. It would knock out the will case when the solicitor's negligence was not discovered or did not appear for 20 years. Is it to be looked at again? Is there not ground, as my noble and learned friend Lord Silkin said, not for making this long stop absolute but for giving a discretion to the judge in a proper case to extend it, as has been done in the personal injury cases?

With regard to the date of completion so urgently recommended by my noble friends Lord Mais and Lord Kimball, there is a good deal to be said for this. In the Defective Premises Act 1972—that is on contract, not negligence—Parliament has made the time run (I think it is 12 years) from the date of completion, so that it is already on the statute book in regard to defective or bad work from the date of completion. I can well see how the industry—the engineers—would like to see it from the date of completion. I shall say nothing in favour of it, because I should prefer the principles as enunciated and set down in this report.

I raise those small points, but I should like to say this. We ought to make it clear that the negligence we are concerned with here is not only neglect of a common law duty of care but also negligence in breach of a contract to use due care and negligence in breach of building regulations and the like which have to be observed. At the moment the Bill does not deal with those. My noble friend Lord Hacking suggested in the Unstarred Question that we should deal with them. I should have thought that it was a very good idea to make that clear.

Subject to those observations, many of which no doubt would have to be discussed in Committee, I welcome this Bill.

4.15 p.m.

Lord Wilberforce

My Lords, I ask your Lordships' indulgence in order to add one or two words, prompted by the interesting and valuable observations made by noble and "un-learned" Lords who have spoken in this debate. I am referring, if they will allow me the designation, to the noble Lords, Lord Mais and Lord Kimball. I agree that this is a useful Bill and that the report on which it is based is a very valuable report. But I should like to make the point, which I think is inherent in the observations of some of your Lordships too, that the report is based on very narrow and limited terms of reference.

The committee was to consider the accrual of the cause of action and limitation in negligence cases involving latent defects. I treat that, as I think is the reality, as basically referring to building and engineering cases. That is an enormously important area. When we heard the case of Anns in this House some years ago we were told that there were 200 cases of a similar character awaiting that decision. The law reports are full of cases in which it has been discussed, followed, and so on, and not only here. There is a volume of jurisprudence in Canada, the United States, Australia and New Zealand on this very difficult question of latent damage in building cases.

That is the major problem which was being faced by this report and with which this Bill deals. Picturesque cases about the negligent making of wills, and so on, are very interesting, but that is not the main subject with which we are dealing. I think it is a pity that the terms of reference were so narrowly drawn. They prevented the committee, and it says so in its report quite fairly, from considering broader questions of breach of contract, breach of statutory duty and other cases of liability which may arise in this country. But, more important than that—and this is the point to which the noble Lord, Lord Mais, drew attention—they prevented the committee from considering whether there should not be imposed strict liability in these cases, coupled with a short period of limitation. That is what all the Continental laws, to my knowledge, provide for: strict liability with 10-year limitation. It is not only the Continent of Europe; this has gone into Egyptian law, and has been followed therefore in all the Arab states, because it gives a convenient and, on the whole, just way of dealing with these cases. One does not have to prove negligence; one has strict liability.

I therefore agree entirely with what the noble Lord, Lord Mais, said, subject to this. If one is going to cut down the period to 10 years—and there is a lot to be said for that—one must accompany that with the other limb in the case; namely, strict liability and not negligence. This is the trend in the EC. That is what is being recommended in the case of product liability and in relation to this area. We should be going along entirely with the modern trend if we were to do that instead of sticking to our old common law negligence.

I know that there is an inherent, in-built resistance to dispensing with our precious common law of negligence. We love it. Let the juries, if there are still juries, or the judge find it. Prove negligence; there is nothing so fruitful in costs in litigation as having to prove negligence in relation to an act which may have taken place five, 10 or 20 years ago, involving the calling of experts, architect against architect, surveyor against surveyor, and so on. Can we not face up to the fact that the beautiful common law of negligence is not a panacea for all evils and come into line with some of these other countries? It is a great pity that the Bill has been drawn on a report which itself was prepared on so narrow a base. However, perhaps it is now too late to do anything about that here.

Coming to the Bill itself, I have one or two observations to make. It does a faithful and good job in carrying out the recommendations of the report. But I should like to draw attention to three points. First, in spite of the terms of the remit, which is to consider the law relating to the accrual of the cause of action, the Bill does not do anything about it at all. The committee's report says that it does not recommend any change in the law by which a cause of action accrues when damage occurs. But Clause 1 of the Bill simply refers to accrual of the cause of action without telling us when the cause of action is to be deemed to accrue. That is followed up in the new Section 14A(1) in Clause 1, which says: "the date on which the cause of action accrued". In subsection (4)(a) it says: "six years from the date on which the cause of action accrued". Then one goes on and adds the additional periods based on the discoverability test.

The noble Lords who have spoken from building experience know perfectly well that it is extremely difficult to find out when the cause of action accrues. Foundations are laid. The right depth is not gone to, according to the regulations. It is on a rubbish dump. The wrong sort of rubble is put there. Perhaps after a couple of years there is a little subsidence and one of the plates holding up the building slips a bit. Does the cause of action accrue then? A few years later perhaps some weeds come up—this is an actual case—through a crack in the cement. Does the cause of action accrue then? A few years later there are some cracks in the wall. Does the cause of action accrue then? The man probably feels, "Well, this is very annoying, but I am not going to do anything about it." A few years later still the building falls down. There is no doubt that there is a cause of action then.

All these cases—and I repeat that there are many of them not only in our courts but in other courts all over the world—focus on this point and find difficulty in the point: when does the cause of action arise? Does it arise on the first and imperceptible damage or does it only arise when the damage occurs which means something in money on which the man is to sue?

I repeat again for clarification that this has nothing to do with the discoverability problem which is separately solved by this Bill by the additional three years. You have to start with the accrual of the cause of action and the Bill does not help us at all on that point. I know that the noble Lord, Lord Hacking, has much to say on this point which is much more valuable than what I have just said. It is a very real point and I am sorry that the Bill does not clarify it.

The second point is that I believe—I may not have understood the Bill fully—that the provisions about concealments is likely to give rise to some difficulty. Your Lordships will find that on page 4, Clause 2(2). It is a convoluted clause; one cannot follow it in the ordinary way. Fortunately, if one goes to the report, it will tell you what it is trying to do. What it is trying to do in paragraph (f) on page 28 is to say that the long stop should not apply in cases of latent damage involving fraud, deliberate concealment or mistake. That is surely very right, but does that not open the door to the whole difficulty with which the report has been dealing—deliberate concealment? Many of these cases are ones of deliberate concealment: the builder covers it up; the inspector says, "All right, let it go, it won't be noticed for some time." Do not worry about fraud, but deliberate concealment is a very great reality. It seems that cases of deliberate concealment are taken out of the long stop provision. We shall therefore be faced with a lot of litigation as to whether particular cases are cases of deliberate concealment or not.

The third point is rather a lawyer's point but I cannot refrain from making it. I am very sorry to see that this Bill follows the bad old English habit of making limitation cases a question of procedure. This is an old English absurdity which has been followed for many years. This country is quite unique in it, and we have our affection for these old things. We keep it as a matter of procedure instead of substance. Every European law does the opposite. I thought that we were going to bring our law into line with European law in order to enable us to ratify their Judgments Convention. Here we find this old thing: limitation is a matter of procedure which related to an old doctrine in Dicey and Morris on Conflict of Laws because we wanted to apply our procedure limits to cases arising abroad. We should forget about it; we do not need it here.

I know that the report has something about contribution, which it says may be helped by this particular provision. I was not impressed in the least by that. I think it is just a case of our old conservatism preserving this rule which is out of date, out of line with everybody else, out of line with our own intending obligation to come into line with Europe. I am sorry to see it here again. It is a technical Bill. I am sorry it is so narrowly based. It has one or two things wrong with it, but it represents a laudable attempt within its limits and within its lights to right a definite wrong and remove a definite difficulty.

I apologise for having kept your Lordships.

Lord Simon of Glaisdale

My Lords, may I slip into the gap behind my noble and learned friend Lord Wilberforce just to make one very short technical point. My noble and learned friend the Lord Chancellor explained why the method of drafting by textual amendment of a principal Act—in this case the 1980 Limitation Act—was adopted. No doubt over and above that my noble and learned friend will take note of the criticisms that were made by my noble friend Lord Hacking and my noble and learned friend Lord Wilberforce. My point is a different one. If this sort of method is adopted I had hoped that immediate steps, before the matter ever came before Parliament, would be taken to ensure that the Statutes in Force were so reprinted that the principal Act—the 1980 Limitation Act in this case—was reprinted with the amendment proposed to be made.

I hope that my noble and learned friend the Lord Chancellor will be able to assure your Lordships that that has been done, and that if it has not been done, immediate steps will be taken to implement that procedure. I know that he is interested in it and has personally pursued the matter. I hope it will be applied in this case.

The Lord Chancellor

My Lords, this has been a lively and variegated discussion. I would like to thank all those noble and learned Lords who have played their valuable parts in it. I will take note of the last point made by my noble and learned friend Lord Simon of Glaisdale about the Statutes in Force, but he knows that I take an interest in the point and will see that it is looked into. One does not, of course, want to anticipate the decision of Parliament at too early a stage.

Going backwards along the list of speakers. I was very interested in what my noble and learned friend Lord Wilberforce had to say about strict liability and the nature of the law of limitation. I am afraid I have to tell him that, although like everything else he says there was immense penetration and perceptiveness in his argument, basically speaking the choice before Parliament at the moment is not about altering the whole nature of the English law of limitation but about the way in which it applies to a fairly narrow range of cases. I would agree with him that if we were dealing with product liability, as we may be—although the matter is not within my departmental functions as Lord Chancellor—in applying the European rule, it is quite possible that we shall be adopting the principle of strict liability over a range of cases probably wider than, or at any rate different from, the range of cases to which this Bill applies.

The Law Reform Committee quite deliberately, and for reasons which it explains in its report, said that it did not want to introduce into our law of limitation in this particular exercise a principle which operated to destroy the plaintiffs right rather than the principle which is already there and inherent in English law: that it limits the circumstances or time at which he can bring his cause of action. It gave reasons for this. I believe them to be sound. I do not, however, feel any sense of guilt about limiting its terms of reference. I was, like my noble and learned friend Lord Denning, concerned in 1980 with a whole range of cases that dealt with latent damage and not with the whole law of limitation that had been the subject of successive amendments and, finally, of consolidation only a year before under the Labour Government.

I was concerned with the sequence of cases—some have been cited by noble and learned Lords—with which the noble and learned Lord, Lord Scarman, and his committee were concerned. The real point that I am trying to make is that if one considers the time that it took the committee to look at the narrow range of issues with which it was asked to deal between August 1980 and November 1984 and the time thereafter that it took me to find a slot in the programme even for that, your Lordships will, I think, probably agree that although what my noble and learned friend Lord Wilberforce says makes, as it always does, a great deal of sense, I was right, faced with the actual practicalities of the situation, to choose the course of action that I did and to which at any rate by now I am committed.

Assuming that we are not concerned with strict liability, I must now address myself to the other points raised in the debate. The grand debate lay, of course, between the criticism of the noble and learned Lord, Lord Silkin, from the Opposition Front Bench, who thought it arguable that the long stop provision was too short and rightly pointed out that his own house had subsided after 25 years when the long stop provision is limited to 15 years from the breach of duty, and those noble Lords of whom the noble Lord, Lord Mais, was one and my noble friend Lord Kimball was, I think, another, and there were others, who thought that the long stop period should be shortened still further, some with and some without a change in the definition of the point at which the time should run.

I have to return to something that I said at the beginning. I asked the committee to undertake a limited task. It consulted 140 different entities and came up with the 15-year period running from the breach of duty and not from the occurrence of the damage, which is too short to help the noble and learned Lord, Lord Silkin, and too long to please the noble Lord, Lord Mais, and my noble friend Lord Kimball. Someone asked me to make a compromise. But the 15 years is, in fact, a compromise. Any other period that you choose will be a compromise if you are going to have either a limitation period or a long stop period at all. Five minutes before the period runs out a plaintiff, even though slightly unmeritorious, will be able to exercise his full rights. Ten minutes later, when five minutes have passed since the long stop period came down like a guillotine, he will not be able to exercise any rights at all. It is bound to be a compromise and is bound to have an element of arbitrariness against it. This is what limitation laws are about, whatever form they take.

The noble Lord, Lord Hacking, thought that I was overstating the case when I said at the beginning that my experience had been that potential defendants were articulate, well organised and extremely lucid whereas potential plaintiffs were inarticulate, unidentifiable and not represented. It was only through the matter of chance that the noble and learned Lord, Lord Silkin, came to their assistance in this debate. And that was because it had happened to him. He does not happen to be inarticulate, and the last thing that I would suggest is that he is not well organised. It is, however, a pure matter of chance that from the body of the kirk the potential plaintiff was represented at all. I am not at all convinced that the person in the position of the noble and learned Lord, Lord Silkin, would be in the least mollified by what the noble Lord, Lord Hacking, says when he points to large property companies and the Consumers Association. I do not think that they do represent him. It is my duty to put his point of view. The committee took exactly the same view.

I do not wish to dismiss summarily what my noble friend Lord Kimball said. I would, however, ask him to banish from his mind the bogey of American-type litigation in this country and his picture of lawyers with their wigs trailing and their sticks waving, chasing whatever form of spiritual ambulance it may be to get cases started. This does not happen here. I must point out that the two major factors in what has led to this evil, for I believe it to be an evil, although I am not so familiar with American law as I am with our own system is, first, the contingent fee which a potential plaintiff's advisers are entitled to charge; and, secondly, the fact that the civil jury continues to exist in my mother's country—that great mausoleum, or museum, of archaic and obsolete English practices—and that civil jurors in America are quite wise to the contingent fee and aim off in their assessment of damages to make allowance for it. Neither of those features, if I have anything to do with it, will occur here. So whatever else may be true about the periods and the particular criticisms made, that one, I do not think, need be taken seriously as yet.

The only other matter that I should like to mention on Second Reading is that those arguing for a shorter long stop were arguing for the following proposition. Damage occurs on either view. The question, as so often in civil law, is on whose shoulders the loss is going to fall. Their proposition, if I may put it bluntly, plainly and, I hope, not unpleasantly, is that it should fall on the victim and not on the tortfeasor. This is a proposition where the burden of proof lies on those who wish to place it there.

What I have done, and what the committee has done, for the potential defendant is to give him a long stop with certainty and provide that the long stop should not run from the occurrence or discoverability of the damage, as the limitation period does, but from the actual breach of duty. That may mean a great deal less than the 15 years which would have run had it been made to run from the date of damage or any other period. We shall have to return to these matters in Committee. I should like now to conclude my remarks, looking forward to any further debates that we may have later.

On Question, Bill read a second time, and committed to a Committee of the Whole House.