§ 7.53 p.m.
§ Lord Hacking rose to ask Her Majesty's Government whether, in response to representations which have been made to them by members of the construction and building industries and others, they are prepared to introduce legislation concerning limitation of actions which, while falling outside the terms of reference and recommendations of the 24th Report of the Law Reform Committee, would produce greater certainty in the law.
§ The noble Lord said: My Lords, my Question concerns our law of limitations. Those laws have been on our statute book for many years and their purpose is to avoid stale trials—and to encourage early justice—and to protect defendants from civil actions relating to acts committed long ago. The periods of limitation vary according to the cause of the action from three years to six years and in some instances to 12 years.74
§ Our law of limitations has received considerable attention this century, particularly during the past 10 to 20 years. In 1936 the Law Reform Committee reported and that resulted in the Limitation Act 1939. Then there was the Limitation Act 1963 which followed the very tragic case which came before your Lordships' Judicial Committee—the case of Cartledge v. Jopling concerning pneumoconiosis and miners. In 1974 there was published the interim report of the Law Reform Committee concerning personal injuries, and in 1977 the final, and main, Law Reform Committee report was published. In 1980 there was the Limitation Amendment Act which was the product of the Law Reform Committee main report of 1977. The Limitation Amendment Act 1980 was then consolidated into another Limitation Act of 1980.
§ And now, most recently, the Law Reform Committee under the chairmanship of the noble and learned Lord, Lord Scarman, has produced the 24th report on latent damage. That report was presented in November, 1984. It has not been debated but it has been given early consideration by the Government. Indeed, the noble and learned Lord the Lord Chancellor has intimated the intention of shortly producing legislation seeking to implement its recommendations. I should at this stage like to put on record the personal helpfulness of the noble and learned Lord the Lord Chancellor and the officers of his department in holding extensive discussions concerning the recommendations of Lord Scarman's committee and for recently making available some draft clauses of the Bill.
§ Therefore, my Question is not directed to the recommendations of the Law Reform Committee or to the Government's proposed legislation. Those matters can be properly dealt with on Second Reading and there are matters which I intend to raise concerning those recommendations on Second Reading when the proposed Bill is taken through the House. My Question is directed to other reforms which could, in my submission, be added to the Government's legislative proposals.
§ I apologise for detaining the House and for detaining the noble and learned Lord the Lord Chancellor; but there are practical reasons for raising this matter by means of an Unstarred Question. First, amendments tabled in your Lordships' House which do not fall under the preamble of the Bill are not amendments which are readily received by the Government. I understand, however, that if in the House of Commons amendments are tabled which do not fall under the preamble of the Bill, they cannot be taken at all.
§ It may perhaps be helpful if we have a brief look at the present position of the law of limitations. I direct your attention in particular to the accrual point for those periods of limitation. The general rule is for contract, tort and breach of statutory duty to be based on a six-year period of limitation, although in the case of personal injuries the period of limitation is three years. However, the difficulty is that the accrual point for the period of limitation in contract, tort and breach of statutory duty, concerning the same set of facts, comes at different times. As regards contract, the accrual point of the limitation period is at the breach 75 of the contract. As regards tort, it has to be broken up into two parts. If it is a physical damage case, like damage to a building, the date of the accrual of the action is not when the wrongful act was perpetrated in the building of the building, but when "significant" physical damage took place. That has quite recently been established in the Judicial Committee of your Lordships' House in the case of Pirelli.
§ However, in the case of economic loss—and there is authority to support this—the accrual point is at the moment the act was taken following the wrongful or negligent advice, and not when the loss was sustained. The relevant case is a solicitor negligent case. As regards breach of statutory duty, the general rule is that it accrues at the date of the breach of the statutory duty. However, when one looks at certain Acts of Parliament—for example, the Defective Premises Act 1972—which concern statutory duties on the builders of dwellinghouses, one finds that in that Act the accrual point is the completion date of the dwellinghouse or of the particular activity under which the subsequent litigation comes.
§ Therefore, the present position is this. Out of the same set of facts there are three different accrual points for the period of limitation: under contract, under tort and under breach of statutory duty. Not surprisingly, the result of that is to cause uncertainty for both plaintiffs and defendants. There is uncertainty first of all over the accrual point (as I have described) and secondly over the test for physical damage. It has been my experience that the date for significant damage is a difficult one to establish, and requires experts on both sides to give evidence. It is generally a contentious point because usually the plaintiff has brought his action just inside or just outside the period of limitation, and therefore the matter is disputed. There is the calling in of expert evidence and there is the litigation, which, if there was greater certainty in the law, would not be taking place.
§ These difficulties have been accentuated by the spread in the range of negligence cases. The inevitable result has been an increase in the number of litigations. It is difficult to get the exact figures. His Honour Judge John Newey, who is one of the Official Referees, in a paper read at the annual meeting of the Chartered Institute of Arbitrators in October last year calculated that there had been a 100 per cent. increase in cases taken by the Official Referee's court from the mid-1970s to the early 1980s, and that would be a 100 per cent. increase in the number of cases over a five- or six-year period between, let us say, 1976 and 1982.
§ More startling figures were produced by the Royal Institute of British Architects in their evidence for the report commissioned by the National Economic Development Office (NEDO). That report came out in September 1985 and has been labelled as the Atkins Report. The evidence submitted by the Royal Institute of British Architects was that notices of claims increased from 200 in 1978 to 500 in 1982. If my arithmetic is correct, that is an increase of some 250 per cent. in four years.
§ This has placed a considerable burden on the courts but also on the construction industry, its architects and 76 civil engineers. The increasing costs of insurance have also placed burdens on those in practice who have to pay increasingly large insurance premiums, and those who have retired who still carry the risk of actions against them although they have long retired before the action is mounted.
§ It was within this background that the Law Reform Committee recommended, among other things, two new tests. The first was the knowledge or discoverability test, and the second was the long-stop test. Concerning knowledge and discoverability, the purpose there was to enable plaintiffs who had no means of knowing that they had suffered damage arising out of latent defect to bring their actions within three years, whether they knew or ought to have known that the latent damage had been suffered by them.
§ Secondly, in the long-stop provision which is the counterbalance on the other side, it is proposed here that there should be a long-stop period of 15 years stemming from the date of the breach of duty.
§ The result is that, as proposed by Lord Scarman's committee, these tests are running on top of the existing tests that I have just described. Significantly—and this is the important point—in their report Lord Scarman and his colleagues had to concede that they were unable to deal with the problem of differing accrual dates because it was outside their terms of reference. One might have thought therefore that the earlier report of 1977—and it would have been within the terms of reference of that earlier report, which were much wider than the terms of reference for Lord Scarman's report—would have reached a view on this problem. I am afraid to report to your Lordships that the answer is, not so.
§ It is true that the members of that committee were concerned about the multiplicity of different periods of limitation, but this is a different point. This refers to the length of the period of limitation and not to the point that I am addressing to your Lordships; namely, differing accrual dates.
In that report they signified an awareness of this problem. I quote from paragraph 1.11, which says:
One relevant factor is that the same incident may give rise to a number of causes of action and it merely causes confusion if they are subject to different limitation periods".
However—and this is as recent as 1977—the Law Reform Committee was unsure of the extent of the problem, and spent some time expressing doubts over the decidendi of the two cases which has recently come before the courts concerning latent damage—and I refer to Anns' case and the case of Sparham-Souter and to paragraphs 2.12 to 2.20 of this report.
It fell to the Law Reform Committee of the noble and learned Lord, Lord Scarman, in November 1984, to highlight this problem. I read the relevant passage from that report, which is to be found in paragraph 4.4:
In cases involving negligence, a plaintiff's cause of action might accrue at different dates depending upon whether the negligence was in the performance of a contractual duty, or a statutory duty or a duty of care at common law and this can lead to complications. Indeed a single set of facts could in theory give rise to claims for breach of duty under all three heads, with three limitation periods.
This situation was criticised by a number of those who wrote to us. Our terms of reference on the other hand are limited to the relatively narrow band of "negligence cases involving latent defects" and we consider that it would be quite inappropriate for us to make general recommendations, applicable for instance in the contract field, in the context of the present review.
That is the stumbling block to which I have drawn your Lordships' attention.
§ Turning back to my Unstarred Question, I am fully aware of the criteria under which the noble and learned Lord the Lord Chancellor, as I understand it, approaches matters of law reform. Law reform should be true law reform and should be handled with care. There should be consensus. Indeed the noble and learned Lord in this House in the earlier debate said, "Law reform by consent, or not at all". I am aware that the noble and learned Lord believes that it is imperative that the amendments to this Bill should not imperil its passage through this Parliament. I believe, however, that these criteria can be met.
§ I have been in discussion with members of the construction industry, the Bar and Members of this House. Indeed two Members of this House who unfortunately were not able to stay for this debate, the noble Lords, Lord Mishcon and Lord Campbell of Alloway, have both indicated their agreement with the proposal that I am putting before the House. Therefore all these matters lead me to think that consensus can be reached, and that it would be considered sensible and non-controversial to have a common accrual point for actions in tort, contract and breach of statutory duty.
§ 8.7 p.m.
§ Lord Lloyd of Kilgerran
My Lords, may I thank the noble Lord, Lord Hacking, for raising these important matters so comprehensively. I can therefore briefly follow his presentation and support the request he is making to the Government to introduce such legislation as would produce greater certainty in the present law relating to limitation of actions, particularly in the areas to which I shall refer.
The implications of the present law relating to limitation and the uncertainty which prevails seriously affect a wide range of operations concerning professional bodies and such members of professional bodies as civil engineers, consulting engineers, architects, designers, even inventors, and certainly constructors, sub-contractors and suppliers. The uncertainties of the law not only affect them in their activities in this country, but they have, and may have, serious repercussions in the highly competitive international field where, for example, United Kingdom consulting engineers have such a high reputation and where small margins make such a difference in obtaining large contracts.
As the noble Lord, Lord Hacking, indicated, this uncertainty of the law presents serious problems for the insurance world, and of course increases the cost of insurance to those uncertain of their future liabilities. As I had the privilege of informing your Lordships in relation to another Bill a few months ago involving the work of United Kingdom consulting engineers, it is worth bearing in mind that the contracts with which 78 consulting engineers, for example, may become involved, involve very large sums indeed, and sometimes of the order of millions of pounds. The competition for such contracts, of course, is great.
On that occasion a few months ago, the Government Minister in the other place was gracious enough, with the assistance of the noble Lord, Lord Skelmersdale, who was speaking on behalf of the Government in the debate in your Lordships' House, to grant an interview at that late stage in the Bill to representatives of the Association of Consulting Engineers and myself. Through him we were able to put points to the Government which produced modifications in the Government's view, in the national interest.
I should like to join the noble Lord, Lord Hacking, in any further discussions about this serious problem which he may have with Government officials or with Ministers arising outside the rather narrow terms of reference of the recommendations in the 24th Report of the Law Reform Committee.
At this late hour I do not propose to go into the details of the arguments which should be put forward about this matter. I therefore hope that the Government will be willing to have further discussions in the national interest to ameliorate the uncertainties in the law which are causing so much anxiety in the areas covered, for example, by members of the Association of Consulting Engineers and other professional bodies. In conclusion, I apologise to the House, and once again to the noble and learned Lord the Lord Chancellor, that, owing to a prior commitment, I may not be able to stay to the end of the debate.
§ 8.12 p.m.
§ Lord Denning
My Lords, I have been involved in a number of these cases. Quite recently, the law on negligence has been very much extended in relation to latent defects. They arose first before us in a case called Dutton v. Bognor Regis. A lady bought a house which had been recently built, but after some years it began to crack and to fall down. Then it was discovered that it had been built on rubbishy foundations. There was negligence both on the part of the builders and of the inspector of the local authority because he had negligently passed the bad foundations. The Court of Appeal held that not only the builder (I am afraid he might have been bankrupt by this time) but the local authority was responsible for the negligence of its inspector. That was the, first big case putting the liability on the builder and on the local authority. I am afraid that, to their cost, local authorities have been held liable a great deal for the negligence of their inspectors.
A few years later a point arose about how long can one wait until a defect is discovered. Some people said that the cause of action starts when the building is wrongly built and the time is six years from that. The Court of Appeal held that the six years ran not from the date when the negligent work was carried out, but from the date when the householder discovered it or, by reasonable diligence, could have discovered it. That is the Sparham-Souter case.
79 That held ground for a little while until a case called Pirelli carne to our Lordships' House in 1983, when it was decided that that was wrong. The period of limitations starts not from when the fault was discovered. This was the case of a tall chimney which had been built with the wrong material and it had cracked at the top. The person who had it built could not have discovered it as he did not go to the top of the chimney. Nevertheless the House of Lords held that the period of limitation ran from the date when the cracks appeared, not from the date when it was reasonably discovered. In the House Lord Scarman and others said that it was a matter for legislation to put right. That in a way is what is being recommended here.
I gather that the Government are prepared to legislate on the line of the 24th report that the cause of action runs for three years from the time when the damage is discovered or, with reasonable diligence, could have been discovered. That is the law in relation to latent defects against building contractors and local authorities as well.
The terms of reference show that the committee only had to deal with negligence. I go on to the next stage. Against people who were negligent, such as solicitors and architects, in the old days it was said that the action only lay in contract and the cause of action ran from the date of the breach of the contract. Now, after the case of Esso v. Marden, and also in another case of Mr. Justice Oliver, as he then was, it has been held that the injured person can sue either for breach of contract or for negligence. That raised a question: is not the time for breach of contract to be measured the same as if the action is in tort? In other words, I should like this to be permissible to be discovered whatever frame of the cause of action, whether it be in tort for negligence or in contract for breach of contract, or whether for breach of statutory duty when the facts are the same and the damage is the same. The only question is the date from which it should run. It should be the same whatever the form of action. That I gather is what my noble friend Lord Hacking wishes.
We should not confine this legislation to actions of negligence but let it go on to actions for breach of contract or for breach of statutory duty when the underlying facts are the same; that the structure has been badly built or advice badly given. Let the cause of action be the same in every case, and also let us deal with the troublesome point which is being argued out by academic writers. When does the period of limitations run for economic loss? I suggest that it is desirable that the legislation covers the whole field and should not be restricted to negligence.
§ 8.17 p.m.
Viscount Colville of Culross
My Lords, I very much enter into the spirit of the Question asked by the noble Lord. Lord Hacking. I should have thought that s our Lordships would in due course welcome legislation to deal with the 24th report of the Law Reform Committee, if my noble and learned friend the Lord Chancellor brings it forward. I should therefore like to continue the discussion about whether that is adequate 80 to deal with all the problems that arise. I am not suggesting to my noble and learned friend necessarily that new clauses ought to be added to any legislation that he has in mind, because for various reasons that may be difficult. But the noble and learned Lord, Lord Denning, has just given some examples about how the law of limitation has been built up. He referred to case law and to the legislative corrections that were made.
The whole history of the development of limitation takes that form. It has always been narrowly confined legislation that has been introduced to deal with something that was thought not to be fair. Personal injuries were often involved, but on this occasion it is to do with the construction industry in the Pirelli case which evidently had to be put right. If one has a case to do with limitation of actions (it occurs to practitioners as well as those who sit in the Court of Appeal and other courts) it is difficult to explain to clients why it is all so difficult and why one particular cause of action, if one can explain what that is, produces a result in terms of the time within which one can sue which is quite different from another cause of action. I believe that the reason for this is because it has had such a haphazard history in terms of overall consideration. If the plea is either in the form of a consideration for forthcoming legislation or perhaps in wider terminology—and maybe the noble Lord, Lord Hacking, is looking a little further ahead—I should simply support what other speakers have said by one small example which came to me only the other day.
There is a form of building construction claim which arises out of mineral leases. In the old days, this used to arise out of a lease which was made under seal and is probably, or was probably (though not certainly because nobody knows exactly what is the scope of this) something called a specialty. If it was a specialty and it was not covered in any other part of the limitation legislation, the limitation period was 12 years. If it was converted into something else, the limitation period was probably six years.
In the case of these particular covenants to repair damage, it was converted by statute, for various extremely good reasons, into a remedy which is now recoverable as a result of various Acts of Parliament. It is therefore certainly no longer a specialty because it is dealt with in those terms because it is dealt with under other provisions in the Act. Thus, although the nature of the damage is identical and the kind of claim is identical—and I do not suppose that Parliament ever considered the matter for one single moment—merely by transferring it from a contractual agreement, with a document under seal, to a statutory provision, they halved the period of limitation.
It is only an example. I do not expect my noble and learned friend to deal with it at all this evening. However, it illustrates how these matters, not fully pursued by any of the enormously learned committees that have sat upon them, have grown up upon the statute book without a comprehensive look. It is within the terms of the construction industry, as it happens. I dare say there are many other examples outside that, where a number of different forms of action can arise, as has been said, from the same set of facts.
81 If my noble and learned friend the Lord Chancellor, in the course of his consideration of this very short question, can consider whether in due time—and perhaps soon—a rather more general consideration could be given to simplifying the law on the limitations of actions, I think he would make the public very much in his debt. He certainly would make it a good deal easier for lawyers to explain what it is that the law says and why it is sensible that it should say so.
§ 8.23 p.m.
§ Lord Howie of Troon
My Lords, I must apologise for adding my name to the list very late in the day. I have been in Scotland on urgent family business for the past 10 days and could not be sure that I should be here at all. I apologise to the House for that.
This is a highly legal matter. Much of the discussion which has taken place around this report and this evening has been legal and by lawyers. However, I should like to speak as a civil engineer and reflect for a moment very briefly on how the proposals of the committee impinge upon the construction industry. I want to speak on only one aspect of the report. That is the long stop proposed by the committee, which is said to be a somewhat novel matter in English law. I want to touch on only two points relating to the long stop. These are first certainty, and secondly length of time, which of course is related to certainty.
I am thinking here of certainty not only on the part of the aggrieved person who suffers some defect in a building or other construction, but I am thinking also of certainty on the part of the civil engineer, the architect, the contractor, or any other person involved in the construction industry, who might have been the unwitting cause of the damage. I think certainty in a matter of this kind is something that should be sought after and reached, if that is at all possible.
I am not quite sure, though, that the proposals of the committee are sufficiently certain to satisfy many people in the construction industry. I say it for this reason. The date from which the long stop is to apply, so far as I understand the recommendations of the Committee, is from the date of the breach of duty. I am not at all sure that that breach can be very readily determined in time. There might very well be a considerable argument about when the exact breach took place, whether the breach was a breach of design, for example, which would be early in the state of the building, or whether the breach was in the matter of construction, which would be somewhat later on. There is an immediate and quite obvious area of uncertainty.
It seems to me that that uncertainty could be resolved very readily by adopting the date of the completion of the building or construction as the date from which the long stop would apply. That seems to me to be the most sensible date and certainly the most sure one because the date of completion is a specific day which is specifically certified, and about which there can be no doubt at all. There is no need to have recourse to the courts, for example, to determine when it is. It is exact, it is precise, it is certain.
82 I think that the committee would have been wiser to have adopted the date of completion rather than the date of the breach of duty which it did. I know it considered all these dates and it come to its own conclusion; but I think it should think again, or at any rate the noble and learned Lord the Lord Chancellor should think again.
Going on from the certainty of the date of the long stop, it is worth considering the length of time. The committee has proposed a period of 15 years, which is a fairly lengthy time. It has argued that to take the date of completion, that would make the 15 years even longer if the breach of duty were early in a long construction period. That is so, and there might be a possibility of what the committee calls a very stale case of negligence, if I remember the words properly.
I think that can be overcome by reducing the length of the period from 15 years from the breach of duty, whenever that might occur, to 10 years from the date of completion of the contract, when the building or construction is handed over. I think that would be quite long enough. It would be certain. It would of course be in accord with Continental practice. I think that the committee itself makes that point.
That is all that I wanted to say on this matter at this stage. I hope that the noble and learned Lord the Lord Chancellor will take these comments into account. They come not from a lawyer but from someone versed in the construction industry.
§ 8.29 p.m.
§ Lord Silkin of Dulwich
My Lords, the House will be grateful to the noble Lord, Lord Hacking, for the useful contribution to discussions on the complex subject of limitation. The problem which he has highlighted is fundamental to the area of consideration of the Law Reform Committee. As I see it, that problem is to achieve a fair balance between the desirability of certainty in the law and the need to do justice to the person who is damaged by somebody else's default.
The committee recognises that if the law is too rigid in its search for certainty, a person who suffers loss through another's negligence may be left without any remedy at all, or with inadequate time to ascertain the facts and to bring proceedings. It was for this reason that the committee recommended that the injured party should be allowed a period of three years from his discovery of the latent defect or from its discoverability, even if the result is to create a degree of uncertainty by extending the period provided for by the present law. Notwithstanding the view just expressed by the noble Lord, Lord Howie, I agree with the committee in adopting that balance. In building cases in particular a local defect such as defective foundations may take many years to appear in the form of visible damage to the building. It will be wholly inequitable for time to run against the innocent owner or that, although he may perhaps be put to great expense, he is deprived of compensation before he knows, or even could know, of the existence of the defect.
83 The noble Lord, Lord Hacking, said in effect, accepting the degree of uncertainty which will necessarily arise from this additional period, let us at least have a certain principle of the point of commencment of the limitation period irrespective of whether the right is founded in contract or in breach of statutory duty. In my view there is very much force in the noble Lord's point.
It is true that, as the committee remarked in paragraph 2.9, no reform of the law can eliminate the factual uncertainties likely to arise in cases of latent damage; but that seems to me to reinforce rather than to weaken the case for seeking to ensure that uncertainties unnecessarily created by the law should be eliminated. Having gone that far in support of the noble Lord, however, I would invite the House to look again at the recommendations in the report on the basis that any change in the limitation structure may affect the general balance of equities.
The report seeks to soften the impact of the additional three-year period recommended by it by introducing a fixed long-stop period of 15 years from the date of the breach of duty. The effect of that would be that a remedy would be barred after 15 years even if the existence of the defect had not yet been discovered and was not yet discoverable. The committee conceded that a long stop of this kind is a relatively novel concept in English law. That is in paragraph 4.10. Indeed they rejected it in respect of personal injury claims. They justify it in this case on the basis that the claim might appear at a date so remote that the defendant would be quite unable to meet the claim either evidentially or financially.
But the unfortunate plaintiff, in consequence, might, through the default of the defendant, be put to very great expense which he the plaintiff, would be quite unable to meet himself. Moreover, the defendant might be in a much better position evidentially to defend himself than would be the plaintiff to prosecute his claim. In those circumstances, one might have expected that the committee would recommend that a degree of discretion be given to the court to decide whether the long-stop period should or should not be extended. If that discretion were given, the period would in any event terminate three years from the date of discovery or discoverability.
The discretion of the court could depend, on the one hand, on the extent to which the defendant would genuinely be disadvantaged by the additional period and, on the other hand, by the degree of hardship that the plaintiff would suffer if there were no extension. The committee, in paragraph 4.19, dismisses this idea quite summarily. They say that the value of a long stop would be lost if there were a discretion to postpone it. I confess that I do not follow that view, and the committee did not elaborate it.
In my view there is a strong case for looking at the possibility of giving the court the limited discretion which I have suggested so as to enable it the more carefully and justly to balance the equities in the particular case. I do not believe that the additional minor uncertainty would create greater unfairness 84 than would be created by a long-stop period which was fixed by law and unchangeable, irrespective of the realities of the factual situation.
It might be said that this point could very well be made irrespective of a point raised by the noble Lord, Lord Hacking. I have to accept that; but if his case is accepted so that there is a fixed starting point irrespective of the nature of the claim then, in my view, the case for allowing a limited discretion at the other end is certainly strengthened. There should, at any rate, not be rigidity at both ends. However, the point that I have made stands on its own. I have conceded that it is not dependent on the noble Lord's contention, and I hope that those considering changes in the law will give it full weight.
§ 8.36 p.m.
§ The Lord Chancellor
My Lords, I am grateful to the noble Lord, Lord Hacking, for the graceful compliment to myself that he paid at the beginning of his remarks and to all noble Lords who have played some part in this short debate on the Unstarred Question. I confess that during the course of the afternoon, which began for me strictly when the Bishop read the Prayers, it occurred to me to wonder whether I was getting fair and reasonable remuneration for work actually done. But having said that, I will do my best to deal with some of the points raised, although I am afraid not all, because I think they rather indicate the truth of what I was saying in the other debate; namely, the wisdom of the late Lord Campbell that law reform is either by consent or not at all. And there has not been a very great degree of unanimity among noble Lords who have participated.
What I can say—and, of course, I had no notice apart from the terms of the Question as to what I should be asked—is that the only new factor that I can really introduce by way of information to the House (and this is in response to something in the Question as well as in response to what the noble Lord, Lord Hacking, said) is that the Association of Consulting Engineers with a number of other, I am told, learned and professional bodies have already put their points; that they are to meet officials of the Lord Chancellor's department and those of the Environment department with other representatives of the construction industry very shortly, next Wednesday, in fact. The second piece of information I can give is that the Minister for Housing and Construction is having regular separate discussions in addition.
The Bill to which reference has been made is not yet ready. It is likely to be printed during March, which is not very far away, and has not yet been approved in its final form. I do not therefore feel able to unveil the statue while the sculptor is still at work with his hammer and chisel. The problem, as many of your Lordships will realise, to which the Question relates became obvious to me fairly soon after my assumption of office as the result partly of the series of cases referred to by my noble and learned friend Lord Denning and, in particular, the so-called Pirelli case.
After a certain amount of discussion I decided to hand it over to the distinguished Law Reform 85 Committee chaired by my noble and learned friend Lord Scarman and composed of a number of distinguished lawyers, academic, practising and judicial. They reported to me in November 1984 and they reached the conclusion that the present law is just neither to potential plaintiffs nor to potential defendants, and that reform is therefore not only necessary but bound to be in effect a compromise between conflicting interests. They said that in their view the law required reform which will take care of the interests of both plaintiffs and defendants.
My noble friend Lord Hacking asks the question whether I am prepared to introduce legislation outside the terms of reference of the committee. Quite obviously, I am not bound by the actual terms, as the committee was. But equally obviously, any attempt at law reform which has not been previously researched and made the subject of proper discussions and consultation between the interests involved must inevitably result in a botched job, has a poor chance of getting through Parliament and is likely to lead to bad legislation if it does. I must therefore say to the noble Lord that the Bill which I intend if possible to introduce this Session, if not sticking absolutely to the terms of reference, will in fact be founded on the report.
My noble friend's Question relates to representations made to me by members of the building and construction industries, and so did the speech of the noble Lord, Lord Howie of Troon. The answer, strictly, is yes. Of course I listen to everything that is said to me and endeavour to arrive at a just solution; but I do rather wonder why my noble friend Lord Hacking has necessarily singled these out in particular, as if I was not likely to be even-handed in my consideration of the subject—because I must now refer him back to what the Law Reform Committee said. It said that the law was unjust to both plaintiffs and defendants. So, as I shall explain, it is; but there is this difference between potential plaintiffs and defendants.
The members of the construction and building industries, who are singled out in the Question, are, for reasons which I shall explain, mainly potential defendants and therefore on one side of the dispute and, as I shall indicate, only part of one side. They are also extremely well organised and very articulate. The potential plaintiffs on the other hand—that is, the consumers of the services in question—are not organised and not in the least articulate because many of them may not even know that they are potential plaintiffs.They are the potential victims of dry rot in their houses, or of unstable foundations, to use the example given by my noble and learned friend Lord Denning.
Also, I must add in answer to my noble friend Lord Colville of Culross that they can also be persons suffering from medical negligence or from an incompetent document drawn by a poor lawyer which has not yet shown its weakness. They may even be victims of a mistake by the Lands Registry, for which I am responsible, although happily the Lands Registry does have to indemnify people against a defect in title. So if my noble friend asks me the question, "Shall I pay attention to representations by members of the 86 two industries?" the answer is yes. But in singling them out he has in fact singled out for special attention a single group, potential defendants, who are well organised and articulate. That will inevitably place them in conflict with another group, potential plaintiffs, the consumers, who are neither articulate nor organised at all. That would be neither good justice nor good politics.
May I now take the opportunity to elaborate on what I wanted to say? We shall, of course, have plenty of opportunity for discussing this matter when the Bill comes forward, but I think the House is entitled to a short description from me of what the problem is and what the Law Reform Committee propose. The difficulty arises principally from the action in tort for negligence and not from actions for breach of contract or actions for breach of statutory duty; nor, although I have taken on board what my noble friend said, actions on a specialty.
It arises from the fact that the cause of action in negligence arises when the damage is actually done, even though the breach of duty may have been years before, and not when the breach of duty takes place, and even though the damage, when it begins to happen, is not really discoverable at all. In the nature of things, a potential plaintiff cannot tell, until his house begins to tilt, that the foundations are faulty although there may have been some damage done before that, or if he finds an inconvenient right of way that his title is defective; or until a cancerous growth has become patently obvious, that there has been negligent medical diagnosis or treatment.
On the other hand, the architect, the builder, the solicitor or the doctor may be permanently at risk for a breach of duty which he may never have committed—he may be completely innocent—but which, if it has taken place at all, took place so long ago that the evidence available to defeat the claim may have altogether disappeared. The committee say:In the Consultative Document our sub-committee suggested that there were two main criticisms of the law as it then appeared. First, it seemed to place an unduly heavy burden on professional advisers who in theory might be open to claims for negligence for an indefinite period of time. In such circumstances the cost of obtaining insurance could be formidable"—that was the point made by the noble Lord, Lord Lloyd of Kilgerran—and there could also be difficulties in obtaining sufficiently comprehensive insurance. Secondly, the sub-committee criticised the law on the ground of uncertainty, in particular the uncertainty as to whether the effect of the Sparham-Souter"—that is the case referred to by my noble and learned friend Lord Denning—and Anns cases was to make the accrual of the plaintiff's cause of action dependent upon the discoverability of the damage".He may not be able to resist and, if he has insured, because of the uncertainty he may have been compelled to pay a heavy premium. I must add that the uncertainty is increased to some extent by the difference in periods to which reference has already been made, as to differences in the commencement date according as to whether the action is in contract, tort or statutory duty; but I do not think I need elaborate that further.
87 The potential plaintiff is equally in an uncomfortable position because—and I now return to the report:The substance of the law is more certain following the Pirelli decision. Unless a building is so defective as to be 'doomed from the start' a plaintiff's cause of action will accrue at the moment that physical damage occurs to it. The element of discoverability has been ruled out as irrelevant in determining when the cause of action accrues. Hence, as soon as damage as a matter of fact occurs, time will start to run in favour of the defendant and six years later the plaintiff's action will be statute-barred. The law has been clarified: but the difficulties of establishing the date of the occurrence of the latent damage—which are difficulties arising out of the facts in each and every case—remain as severe as ever they were. Where there is a disagreement neither a plaintiff nor a defendant can be certain as to this date until a court has ruled on it. The sad truth is that no reform of the law can eliminate the factual uncertainties which are likely to arise in cases of latent damage".Then they go on to point out that it is unfortunately the case thatThe facts in Pirelli concerned latent defects in a building, but the decision in relation to the law of limitation of actions may extend still further. A significant feature of the modern law has been the extension of the tort of negligence to cover cases other than those of personal injury and physical damage. This extension presents problems in the law relating to limitation. If a solicitor gives his client bad advice and the client acts on it but in the result does not suffer financial loss until very much later, does the cause of action accrue and the period of limitation run from the time when the client acts on the advice or from the time when he first suffers financial loss? It is not much help to the client to be told that the limitation period runs from the date of damage unless it is possible to identify damage and its date. Despite its general application, therefore, Pirelli offers no guidance in solving such problems and uncertainties in the limitation law".The fact must be faced that any limitation law, in any form it takes, is bound to be arbitrary in its effects, whether it is certain or uncertain and whether there is a period of discretion, such as the noble Lord, Lord Howie of Troon, suggested, or whether there is not. On the expiry of the period of limitation, a potential plaintiff is barred from rights which he could have exercised five minutes before the expiry. On the expiry of the same period a potential defendant is freed from an obligation to which he would have been liable five minutes before. But all systems of civilised law have had, and have, limitation periods of some kind, and most systems of law have different systems, differing according to the type of right or the type of context in which it is exercised. Some give rights to property. Some bar the cause of action. Not a few are the subject of international convention—a point which I shall attack a little later. Some are extensible. Others are absolute.
The report of the Law Reform Committee is based on three intelligible principles which they describe as of critical importance in this branch of the law. The first is that the plaintiff must have a fair and sufficent opportunity of pursuing his remedy. The second is that a defendant is entitled to be protected against stale claims. The third is that uncertainty in the law is to be avoided wherever possible. They go on in a rather melancholy tone of voice to say:We would not find any proposal for reform of the law acceptable which failed in any significant respect to satisfy these criteria.I must say that I agree with that passage.
They then come to the two positive conclusions in relation to latent damage: 88In our view, the problem of limitation in 'negligence cases involving latent defects' can be solved by amendment of the existing limitation statute; i.e. the Limitation Act 1980—which is of course a consolidation Act—We recommend in such cases (i) that the ordinary period of limitation should be subject to an extension which would allow the plaintiff three years from the date on which he discovered or could reasonably have discovered that he had suffered significant damage; (ii) that there should be a long stop which, we suggest, should operate to bar all negligence claims involving latent defects or damage that are brought more than fifteen yearsand here I confirm what the noble Lord, Lord Howie of Troon, said—from the date of the defendant's breach of duty.I admit, of course, that both the three-year period of discoverability in the first and the 15-year period of long stop in the second are open to criticism as being arbitrary. They are arbitrary. All powers of limitation are arbitrary. Those who view the thing from potential plaintiffs' spectacles think that 15 years' long stop is too short and that it should be, say, 20 like many other prescriptive periods in the world. Those who view the thing through the spectacles of potential defendants are equally sure that it is too long for their clients to be at risk and think that the period ought to be 10 years from some commencement date and not 15.
There are two factors which must be borne in mind. The first is the long list of those who gave evidence to the committee contained in the appendix. I counted—I am probably wrong—141 individuals or bodies. Am I to know better than the committee with that body of research behind it, or does the House think it wise to improve on that? In some respects, no doubt, the answer might be yes. In others a more cautious note might seem more prudent, and probably there is a happy mean to be drawn between the extreme on the one side and the extreme on the other.
The second factor, to which I have already adverted, must be borne in mind, and that is the comparative lack of organisation and inarticulateness on the part of potential plaintiffs and the extremely well organised and articulate lobby of potential defendants. How am I to hold the scales equally between these?
The Question also refers to the limitations placed on the committee by the terms of reference. On this the committee had this to say—and I think it needs to be repeated—In particular it [the sub-committee] noted that the Committee is not empowered to examine the question of who should be liable in respect of a particular type of loss. In the event a number of those who submitted comments to us did seek to open up this area. Another proposal made by a number of commentators was that there should be a system of compulsory insurance against latent damage during the period of a contractor's liability and that this should be taken into account in the price paid by the purchaser. These ideas, particularly the insurance suggestion, are interesting, and we think it desirable that they should be considered by an appropriately qualified body at some future date.I am bound to say that, although this is vague, I have to endorse that. Then:However, they have very wide implications and we would be travelling far outside our terms of reference if we were to attempt in the present study to explore the field of business and law opened up by such proposals. They are therefore not covered in the recommendations which we make for the reform of the law. We have also refrained from making recommendations for a more general overhaul of the law in respect of accrual of causes of action"—89 this deals with the point of the noble Lord, Lord Hacking—but for a different reason. We are satisfied that the proposals which we put forward for reform by amendment to the Limitation Act 1980 should achieve a substantial improvement in the law and can be enacted without a major overhaul of the law of tort. If a more general survey of the substantive law relating to the cause of action in negligence cases is believed to be necessary, it should be undertaken upon terms of reference not limited to cases involving latent damage.So I am bound to tell the noble Lord that the prospect of getting a wide-ranging Bill on this range of subjects, or even of limitation, without a further Law Commission or Law Reform Committee report, either this Session or immediately in the future, is fanciful and as a matter of practical politics should not be pursued too far. Apart from anything else, some of our limitations, as I said before, are prescribed by international convention and these, at least, could not be changed unilaterally. Those who wish for a change in the law will I think, in practice, this Session have to be content with the law as it is—I think my noble friend Lord Colville recognised this in part of his speech—or a change in the direction (of course subject to the views of Parliament) on the same broad lines as the committee report referred to in this Question. Therefore, the answer to the noble Lord's Question is: Yes, I will listen to any representations made to me, either from those he names or from others. But, no, I am afraid that I must limit the prospect of legislation this Session more or less to the lines reported on by the committee; otherwise I believe we shall get into one of those treacle seas where law reforms of various attractive appearances are proposed and we get no legislation at all.
§ House adjourned at nine o'clock.