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Court of Appeal, Civil Division [1992] 2 All ER 82, [1992] 1 Lloyd's Rep 570 HEARING-DATES: 2, 3, 4, 5, 8, 9, 10, 11, 12, 16, 17, 18, 19, 22 July, 21 November 1991 21 November 1991 CATCHWORDS: Limitation of action — Latent damage — Three-year limitation period — Three-year limitation period for negligence actions where facts relevant to cause of action not known at date of accrual — Time limit applying to 'any action for damages for negligence' — Whether 'any action for damages for negligence' including action for damages for breach of contractual duty founded on allegation of negligent conduct — Limitation Act 1980, s 14A. HEADNOTE: On its true construction s 14 of the Limitation Act 1980, which provides for a special time limit for 'any action for damages for negligence' in respect of damage not involving personal injuries where facts relevant to the cause of action are not known at the date of accrual of the cause of action, is limited to actions for damages for negligence where the duty of care the breach of which constitutes the negligence relied on arises solely in tort and does not apply to claims framed in contract. Iron Trade Mutual Insurance Co Ltd v JK Buckenham Ltd [1990] 1 All ER 808 approved. NOTES: For the limitation period applicable in case of latent damage, see Supplement to 28 Halsbury's Laws (4th edn) para 623A. For the Limitation Act 1980, s 14A, see 24 Halsbury's Statutes (4th edn) (1989 reissue) 662. CASES-REF-TO: Iron Trade Mutual Insurance Co Ltd v JK Buckenham Ltd [1990] 1 All ER 808. Pirelli General Cable Works Ltd v Oscar Faber & Partners (a firm) [1983] 1 All ER 65, [1983] 2 AC 1, [1983] 2 WLR 6, HL. INTRODUCTION: This case is also available on Lexis in transcript form. Interlocutory appeals and cross-appeals. The London Agency Inc (TLA), a company incorporated under the laws of the State of Georgia, USA, and International Insurance Co Inc (IIC), a company incorporated under the laws of the State of Illinois, USA, as against whom as the twelfth and thirteenth defendants the plaintiffs, Societe Commerciale de Reassurance (SCOR), a company incorporated according to the laws of France, sought, inter alia, by a writ amended pursuant to the order of Hobhouse J dated 24 March 1990 damages for breach of contract and/or negligence and/or breach of duty between the years 1982 and 1988 arising out of written and/or oral contracts in respect of the supervision, operation and management including but not limited to the promotion, underwriting, claims handling and retrocession of an environmental impairment liability (EIL) risks programme and/or reinsurance pool of EIL risks, appealed from the judgment of Waller J on 28 January 1991 whereby the judge dismissed various summonses to set aside orders for service out of the jurisdiction and/or to stay the actions on the grounds of forum non conveniens. The first to eleventh defendants were a group of United Kingdom companies known as the Clarkson Group (Clarksons), which included ERAS (International) Ltd and H Clarkson (Overseas) Ltd, which promoted a scheme for EIL to cover under policies issued in the United States of America during the period 1974 to 1984 which were specifically designed to provide protection for industrial concerns in respect of pollution of almost any kind which might have arisen in the course of their activities and in particular to fill a gap left by comprehensive general liability policies in relation to pollution that was not sudden and accidental but gradual. The fourteenth to eighteenth defendants were five companies (Howdens), which included Alexander Howden America Inc, a company incorporated under the laws of the State of Georgia, USA, through which Clarksons had written the direct insurance and against whom Clarksons claimed contribution. By a respondent's notice dated 25 April 1991 SCOR sought orders affirming the judge's judgment. The appeal is reported solely on a point arising under s 14A of the Limitation Act 1980. COUNSEL: Edwin Glasgow QC, Mark Howard and Stuart Catchpole for TLA and IIC; Nicholas Chambers QC and Mark V Smith for Clarksons; SA Stamler QC and Gavin Kealey for Howdens; Nicholas Legh-Jones QC, Peter Gross and Clifford Gill for SCOR. JUDGMENT-READ: Cur adv vult 21 November 1991. The following judgment of the court was delivered. PANEL: Sir Donald Nicholls V-C, Mustill and Nourse LJJ JUDGMENTBY-1: MUSTILL LJ. JUDGMENT-1: MUSTILL LJ. After outlining the facts of the case and the course of the proceedings, and having dealt with matters not relevant to this report, considered Clarksons' claim against Howdens for contribution and held that the limitation period for the contribution claim had not started to run. His Lordship then considered whether s 14A of the Limitation Act 1980 applied to claims in contract as well as to claims in tort: The prime issue here is whether the case falls within s 14A of the Limitation Act 1980, which reads as follows: '(1) This section applies to any section for damages for negligence, other than one to which section 11 of this Act applies, where the starting date for reckoning the period of limitation under subsection (4)(b) below falls after the date on which the cause of action accrued. (2) Section 2 of this Act shall not apply to an action to which this section applies. (3) An action to which this section applies shall not be brought after the expiration of the period applicable in accordance with subsection (4) below. (4) That period is either -- (a) six years from the date on which the cause of action accrued; or (b) three years from the starting date as defined by subsection (5) below, if that period expires later than the period mentioned in paragraph (a) above. (5) For the purposes of this action, the starting date for reckoning the period of limitation under subsection (4)(b) above is the earliest date on which the plaintiff or any person in whom the cause of action was vested before him first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action. (6) In subsection (5) above "the knowledge required for bringing an action for damages in respect of the relevant damage" means knowledge both -- (a) of the material facts about the damage in respect of which damages are claimed . . .' This section was inserted by s 1 of the Latent Damage Act 1986 into the 1980 Act, itself a consolidating statute. In the latter Act, ss 2 and 5 reaffirm the long-established limitation period of six years for actions in contract and tort. Section 11 establsihes the special provisions which start time running in personal injury cases when the person injured acquires the relevant knowledge. This section is expressed to cover -- '(1) . . . any action for damages for neligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision) where the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries to the plaintiff or any other person . . .' The question is whether s 14A extends to actions in contract, or whether it is limited to cases where the duty of care, the breach of which constitutes the negligence relied upon, arises solely in tort. If the latter, all Clarksons' claims in contract are time-barred which arose more than six years before they issued their third party notice, ie all pre-30 August 1983 causes of action are barred. If s 14A does apply, then it potentially postpones the starting date of the limitation period in relation to some of their causes of action until Clarksons acquired the relevant knowledge for the purposes of sub-s (5). I say 'some of their causes of action', because s 4 of the 1986 Act prescribes that actions already time-barred before it came into force (on 18 September 1986) would not be revived. Thus, even if s 14A is capable of applying to claims in contract, and even if the requisite lack of knowledge is shown to have existed, the section will not save claims in respect of which the cause of action came into existence more than six years before 18 September 1986, ie causes of action antedating 1980. This question whether s 14A applies to contractual claims is by no means straightforward. The different treatment for limitation purposes of claims in contract and in tort is already unsatisfactory because: (1) whatever the legal logic, the fact that claims in contract and in tort between the same parties arising out of the same facts become time-barred on dates which may well be years apart offends common sense; (2) the existence of different rules for what may really be the same claims forces the law into unnatural complications. Whatever the historical justification for holding that there are concurrent rights of action in contract and tort, nobody we believe would trouble nowadays to insist on the difference, but for the fact that one form of claim (usually the one in tort) offers procedural advantages. This is not a sound basis for the development of a practical and self-consistent law of negligence; (3) so far as limitation is concerned, the rules regarding the accrual of the cause of action tend to push the evolution of substantive law in the wrong direction. In most if not all cases a plaintiff will be better off by framing his action in tort, whereas, in our judgment, if a contract is in existence this is the natural vehicle for recourse. Whilst these features are firmly embedded in the law, at least so far as this court is concerned, we have no enthusiasm for attributing to s 14A a meaning which, if the respondents are right, will enhance the practical attraction of a claim in tort. Nevertheless, we find it impossible to resist the conclusion, in company with the learned judge and also with Mr Kenneth Rokison QC, sitting as a deputy judge of the High Court in Iron Trade Mutual Insurance Co Ltd v JK Buckenham Ltd [1990] 1 All ER 808, that as a matter of language s 14A cannot be applied to actions in contract. Even when the section is read in isolation, the words 'any action for damages in negligence' denote to our minds an action asserting that the defendant has committed the tort of negligence, and are not wide enough to comprise what is often (albeit inaccurately) called 'contractual negligence'. This reading is reinforced by the express overriding of the ordinary provision for tort claims in s 2, coupled with the absence of any overriding of the provision for the contractual claims in s 5. The position becomes even clearer when reference is made to s 11 of the 1980 Act. The special regime thereby created for personal injury claims is expressed to apply -- '(1) . . . to any action for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision) . . .' We find it impossible to accept that, when the draftsman of the 1986 Act came to prepare the new s 14A for insertion in the 1980 Act, he ignored the precedent supplied by s 11, and assumed that the naked word 'negligence' would suffice to denote a breach of contractual duty, of a kind which in s 11 had been thought worthy of special mention. The contrast in language must, as it seems to us, reflect a distinction in the kinds of claim to which the different methods of enlarging time are to apply. This conclusion was resisted by Clarksons principally on the ground that it is based too narrowly on the words of the statute, and pays insufficient regard to the mischief which s 14A was designed to correct, namely the barring of claims before the injured party knows that he has a claim to assert. We cannot agree, for Clarksons' proposition states the mischief in terms which are too wide. The insertion of s 14A stemmed from the Law Reform Committee's 24th Report (Latent Damage) (Cmnd 9390), which took up again the question of latent damage which had been left unresolved in the committee's 21st Report of 1977 (Final Report on Limitation of Actions) (Cmnd 6923). Whilst this work was in progress there were a number of important decisions in this field, notably Pirelli General Cable Works Ltd v Oscar Faber & Partners (a firm) [1983] 1 All ER 65, [1983] 2 AC 1, and this led to the canvassing of various possible solutions. It is quite plain, on reading the report as a whole (and in particular para 4.4) that with the exception of one solution considered and rejected at para 3.17(b) the committee was occupied solely with claims arising in tort. We do not find this surprising. In latent damage claims, the claim in tort will either be equal or superior to that in contract from a limitation point of view. If faced with a time bar, the plaintiff will concentrate on his cause of action in tort, and will have nothing to gain by deploying a claim in contract as well (if indeed he has a contract with the defendant, which he often will not); so that it would be natural for the committee to focus its attention accordingly. Thus, if the words of the section had been sufficiently ambiguous to require recourse to its origins, we should have held that such recourse did not assist the appellants. In the event however we are content to rest on the words themselves, which are quite clear. His Lordship then went on to deal with other matters in the appeals and cross-appeals. DISPOSITION: Appeals and cross-appeals dismissed, save in so far as necessary to give effect the court's decision with respect to service out of the jurisdiction of a claim based on a cause of action other than the one for which leave to serve out of the jurisdiction had been given. 19 December. After hearing further submissions the court dismissed the appeals and cross-appeals and refused leave to appeal to the House of Lords. SOLICITORS: Baker & McKenzie; Simmons & Simmons; Freshfields; Lovell White Durrant. |