Australia: Round-Up - Recent Limitation Decisions

Last Updated: 12 May 2009
Article by James McIntyre and Paul Baxter

This article reviews some recent Australian limitation decisions which considered issues of prejudice to potential defendants, delay by claimants or their solicitors and admissions of liability by insurers.

Limitation periods are a key feature of litigation and risk management processes. Statutory time limits impose a time frame for claimants to initiate proceedings against all relevant parties for tortious conduct within a prescribed time frame (usually three years for personal injury claims). The prescribed limitation period is intended to provide defendants with some reassurance that they will not have an indefinite period of exposure to claims against them. However, the courts have adopted interpretations of limitation statutes which seem to be overly generous to claimants. Ultimately, the outcome of any limitation issue will depend on the specific limitation statute being considered by the court and the particular circumstances of the case.

Lack of insurance and prejudice

Windsurf Holdings Pty Ltd v Leonard [2009] NSWCA 6

One of the key issues considered by the New South Wales Court of Appeal was whether the fact that a potential defendant no longer had professional indemnity insurance gave rise to such significant prejudice that an application for an extension of the limitation period should be refused.

Justice Sackville noted that the provisions of the relevant limitation legislation create a discretion to order an extension of limitation period but do not create a presumptive right to an order extending the limitation period.

His Honour pointed out that once it was apparent that a proposed defendant would suffer significant prejudice due to the expiration of their professional indemnity insurance cover it was necessary to refuse the application to extend the limitation period for the purposes of an action against the proposed defendant. It was not open to regard the prejudice as simply one factor to be taken into account in assessing whether the proposed defendant could receive a fair trial.

Justice Sackville made the very relevant observation that 'for an individual to be forced to defend a major claim without the protection of insurance coverage that otherwise would have been available to that individual, had the claim been brought within the limitation period or shortly thereafter, is very obviously and, ordinarily, a very serious form of prejudice.'

This decision is heartening for defendants as the Court has not confined the concept of prejudice to the ability of a potential defendant to undertake relevant investigations but also the ability of the defendant to meet the significant costs associated with defending a negligence claim.

Further, the decision provides some reassurance to defendants that, while run-off insurance is prudent risk management, the absence of such cover will constitute significant prejudice when a court considers whether a limitation period should be extended against that defendant.

Solicitors' delay

Baker‑Morrison v New South Wales [2009] NSWCA 35

A claimant's guardian promptly instructed a solicitor after the claimant suffered personal injuries but the solicitor did not taken steps to commence proceedings before the expiry of the limitation period.

Section 50D of the Limitation Act 1969 (NSW) provided that a person ought to know of a fact at a particular time if the fact would have been ascertained by the person had they taken all reasonable steps before that time to ascertain the facts.

The New South Wales Court of Appeal noted that, in most circumstances, the step of instructing a solicitor will be sufficient for a prospective plaintiff to satisfy the element of taking 'all reasonable steps'.

The Court concluded that the expression 'ought to know' should be interpreted with reference only to what the plaintiff would have found out if they had taken all reasonable steps. The Court also noted that the use of the word 'would', as opposed to 'should' was inconsistent with any expectation that a plaintiff was required to take active steps to obtain these facts.

Given that there was no suggestion that the guardian should reasonably have taken any step which she did not take, the Court allowed an extension of the limitation period.

This decision indicates that, when interpreting legislation to consider the matters that a prospective plaintiff ought to have known at a particular point in time, in the absence of words imposing a positive obligation on plaintiffs to take steps to find out such information, the courts will adopt a generous interpretation of the legislation. Further, given the circumstances in which the appeal arose, the decision also illustrates the general reluctance of the courts to punish a plaintiff for delays attributable to their solicitors. However, while the courts seem prepared to adopt generous interpretations of such provisions, the provisions may not be interpreted to reward a prospective plaintiff's complete inertia.

Plaintiff's delay

Kaye v Hoffman [2009] TASSC 5

In this case, the Supreme Court of Tasmania considered whether the date of discoverability of a potential cause of action (for allegedly misdiagnosing the presence of a pituitary tumour) arose prior to November 1998 (when a different specialist advised her that she was not suffering from a pituitary tumour). The defendant had treated the plaintiff in 1994 and arranged various pathology tests and MRI scans.

The final MRI scan indicated there was no tumour. However, the plaintiff failed to comply with the defendant's request that she arrange a follow-up appointment with the defendant to discuss the results of the tests and scans. Section 38A of the Limitation Act 1974 (Tas) provides that a person who has a cause of action may apply to a judge for an extension of the period of limitation up to three years, commencing on the date of discoverability.

The plaintiff submitted that the 'date of discoverability' was 26 November 1998, when a different endocrinologist advised her that she had never suffered from a pituitary tumour.

The Court noted that the plaintiff bore the onus of proving that the date of discoverability was not earlier than three years before 23 November 2001, the date on which proceedings were commenced. The Court noted that two issues needed to be considered:

  • What enquiries or other steps ought to have been made or taken by the plaintiff?
  • If she had made those enquiries or taken those steps, would she have found out earlier than November 1998 that she had not suffered from a tumour?

The Court found that the breakdown in communications between the plaintiff and the defendant resulted from the plaintiff's failure to return to see the defendant in accordance with the advice given.

Consequently, the Court concluded that if the plaintiff had continued to consult the defendant, she may have learned much earlier than 1998 that she was not suffering from a pituitary tumour. Further, the Court rejected the plaintiff's submission that even if she had continued to consult the defendant, the defendant would have persisted with the misdiagnosis.

The facts in this case differ from those considered by the New South Wales Court of Appeal in Baker-Morrison as the delay in the commencement of proceedings related to the conduct of the plaintiff rather than her solicitors. However, the decision should provide some reassurance to professionals (particularly medical professionals) and their insurers that the courts may be reluctant to allow a plaintiff to take advantage of their own inactivity to secure an extension of a limitation period.

Potential impact of statutory pre-litigation procedures

Casey v Alcock [2009] ACTCA 1

A number of Australian jurisdictions have statutory frameworks setting out pre-litigation procedures for personal injury claims. This decision illustrates the impact that compliance with these pre-litigation procedures may have on limitation issues.

In this case, the ACT Court of Appeal considered whether a letter from the defendant's insurer to the plaintiff's solicitors admitting liability created a new starting point for the calculation of the limitation period. The letter was written to satisfy the requirements of section 61(1)(b) of the Civil Law (Wrongs) Act 2002 (ACT) which requires a respondent to a personal injuries claim to provide a claimant with written notice stating whether liability is admitted or denied, and the extent of any contributory negligence claimed by the respondent.

Section 32 of the Limitation Act 1985 (ACT) provides that if, during the limitation period, a person against whom the cause of action lies confirms the cause of action, the time running before the date of the confirmation does not count in the calculation of the limitation period for an action.

The plaintiff had been injured in a motor vehicle accident on 20 December 2003 and lodged a personal injury claim form with the defendant's insurer on or about 30 January 2004. The insurer wrote to the plaintiff's solicitors (in compliance with section 61 of the Civil Law (Wrongs) Act) and admitted liability for the accident. The plaintiff commenced proceedings on 1 May 2007, three and a half years after the accident and the defendant raised a limitation point in its defence.

The defendant submitted that if an admission made to comply with an obligation under section 61 of the Civil Law (Wrongs) Act could constitute an acknowledgment under section 32 of the Limitation Act, it would be a result that was unintended by the legislature and would be contrary to the legislature's intention in enacting amendments to create a strict three year time limit for the commencement of personal injuries actions.

The Court of Appeal rejected this argument and noted the following matters:

  • Section 32 was not, in form, an extension of time provision.
  • The acknowledgement for the purposes of section 61 did not come about because of a decision of a court or by reason of a claimant's conduct but from an informed decision made by a respondent to a claim.
  • Although one of the reasons for a strict three year time limit is to facilitate the litigation of liability issues, in the present case, this issue did not arise as liability had been admitted.

This decision again illustrates that courts will be reluctant to interpret limitation legislation in a manner that is adverse to a plaintiff's interests unless there is clear legislative intent on the face of the legislation. Further, this decision shows that steps taken by a defendant to comply with their statutory pre-litigation obligations may benefit a claimant by providing them with an extension of the limitation period. However, such outcomes will depend on the wording of relevant personal injuries legislation and limitation legislation in each jurisdiction.

Implications

The outcome of a limitation issue will always depend on the individual circumstances of a claim and the wording of relevant limitation legislation. However, these cases demonstrate that while courts will be reluctant to adopt an interpretation of limitations legislation that disadvantages plaintiffs (particularly where the delay is not the fault of the plaintiff) where a plaintiff has failed to act diligently, the courts may be reluctant to grant an extension of the limitation period.

Importantly, the decision in Windsurf Holdings demonstrates that, in considering the concept of prejudice to a defendant, the court will not confine its consideration to abstract concepts of potential evidentiary disadvantages but more practical issues such as a potential defendant's access to insurance coverage to allow them to defend a proposed claim and be indemnified for the loss.

When confronted with potential limitation issues, parties need to give careful consideration to a variety of issues. The list set out below is not intended to be exhaustive but provides a framework for assessing whether limitation claims should be raised in the course of litigation.

Legislation

  • What is the wording of the limitation legislation?
  • How have the courts interpreted these provisions or similarly worded provisions from other jurisdictions?
  • Do the relevant provisions impose a positive obligation on a plaintiff to obtain relevant information? (Baker- Morrison)
  • Are there statutory pre-litigation procedures that may have given rise to an extension of the limitation period? (Casey v Alcock)

Circumstances

  • What were the relevant events leading up to the proposed claim?
  • Was the delay due to the conduct of the plaintiff or their solicitors?
  • Where a party seeks to add a defendant, at what point in the existing litigation did they become aware of the proposed defendant's potential involvement and what steps were taken to commence proceedings against the proposed defendant?
  • Does the proposed defendant have insurance cover that will allow them to defend the proceedings or satisfy any judgment? (Windsurf Holdings)

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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