Samantha Holland
Partner
Commercial Litigation UK Team Leader and UK Head of Insurance/W&I
Article
12
While parties are encouraged to take pre-action steps to resolve their disputes without recourse to the courts (and many are able to), there may come a point in a dispute where no progress is being made and you need to consider commencing formal legal proceedings. But how do you go about this, and how long do you have to do it?
Here we look at the basics of limitation, and commencing proceedings.
Limitation is a potential defence to a legal claim, on the basis that the claim has not been brought in time. Legislation prescribes limitation periods within which a legal action must be brought. If a claimant does not bring an action within the relevant limitation period, they run the risk that a defendant will argue any claim is out of time (also referred to as "statute-barred" or "time-barred").
There are various limitation periods prescribed by legislation. These vary according to the type of legal action being brought. For instance, negligence, personal injury and defamation claims each have their own specific limitation periods. The table below shows the limitation period for some common causes of action in commercial claims.
Cause of action | Limitation Period | When does period start? (see explanation below) | Statutory provisions |
---|---|---|---|
Breach of contract (simple contract) | Six years | Date of breach | |
Breach of a contract (deeds) | 12 years | Date of breach | |
Tort (including negligence, but excluding personal injury / death) | Six years | When damage is suffered (with protections for latent damage and knowledge – see main text) | s.2 Limitation Act 1980 (and s.14A & B) |
Contribution claims (by a defendant against a third party who was also responsible) | Two years | Usually date of judgment or settlement | s.10 Limitation Act 1980 |
The limitation period starts to run when the cause of action 'accrues' to the claimant, i.e. when all of the legal elements are present to enable the claimant to make a claim. When a cause of action accrues will therefore depend on the nature of the claim being brought and the necessary legal elements of that claim. For example:
Therefore even where two types of action have the same limitation period, that period may start to run at a different time in each case. In some circumstances, that can mean that one type of action remains open to a claimant even when another is statute barred. It is common, for example, for a claimant to bring a claim against a professional for both breach of contract and negligence because, although both causes of action have a limitation period of six years, it is possible in some circumstances for a negligence claim to be brought later than one for breach of contract.
There are also some additional protections for claimants in some cases which may effectively extend the time to bring a claim:
Yes. Parties are free to agree a different limitation period than that prescribed by legislation. Most commonly, this will be to reduce the statutory limitation period and further restrict the time in which a claim must be brought (although such agreements may be subject to the reasonableness test under unfair terms legislation). So ensure you check any contract to see if it alters the time in which you can bring a claim. You should also check if the contract between the parties has any requirements as to giving notice of potential claims. These provisions are common for example in corporate sale documents, and failing to adhere to any requirements, as to the timing and form of notice, may act as an effective contractual bar to bringing a claim, even if the claim is within statutory limitation.
The claimant needs to have 'brought an action', i.e. commenced legal proceedings. In litigation, this means the court needs to have issued a claim form at the request of a claimant i.e.:
An action is generally deemed 'brought' on the issue date endorsed on the claim form by the court. However, if there is any delay between the court receiving the claim form from the claimant, and the court issuing that claim form then, for the purposes of limitation, proceedings are 'brought' when the claim form was received by the court office.
If the parties have agreed to submit their disputes to arbitration, then the claimant needs to have commenced arbitral proceedings by the limitation date. Arbitration is by its nature, a flexible consensual process, and so when arbitral proceedings are deemed to have commenced will depend on the rules of any arbitral institution the parties have chosen, or any other agreement the parties have reached. However, there is a default provision in s.14 of the Arbitration Act 1996 which provides that arbitral proceedings are commenced when a party serves notice requiring the appointment of an arbitrator.
Yes. While it will usually be the claimant who is concerned to bring a claim by the limitation date, bear in mind that counterclaims are a form of claim, and limitation applies equally to them. So a party who has a claim which it sits on and raises only as a counterclaim in response to a claim brought against it, may find that counterclaim is time-barred.
If you believe you have a cause of action, but time to issue a claim is running out, then you should seek legal advice as soon as possible so that your advisers can investigate your claim and advise on limitation. If time to bring the action is very tight, then there are two common steps you can take:
Bear in mind that:
While issuing a protective claim form may be necessary to preserve a cause of action, it is a step which has consequences and is not one which should be taken lightly.
For more information or guidance on making a claim, contact Samantha Holland or a member of our Dispute Resolution team.
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