Negligence: liability timescale
Claims on your time
18 December 2019
Surveyors remain liable in contract and tort for a number of years after any alleged negligence. This, the first of 2 articles on the topic, covers situations giving rise to liability and when claims might be brought.
The law of limitation strikes a balance between the competing interests of 2 parties: the right of those who have suffered loss as a result of a wrongful act by another to obtain compensation for that loss; and the right of those who are alleged to have committed the wrongful act not to have a claim hanging over their heads indefinitely.
The law reconciles these interests by specifying the time within which a claimant must commence proceedings. If proceedings begin after the prescribed time limit, they may be dismissed on the basis that the entitlement to claim compensation is barred by statute. These time limits for commencing proceedings are set out in the Limitation Act 1980, and numerous cases illustrate how they apply in practice.
Most claims that surveyors, valuers and other building professionals face will be for breach of contract or negligence. This article will therefore focus on what the law says as to the time limit for bringing these claims.
Claims against surveyors tend to be brought by their own clients. The relationship between the surveyor and the client, and the former’s duties to the latter, will almost always be governed by the terms of a contract into which they have entered. The surveyor will also normally owe the client a tortious duty to take reasonable care when providing services. The extent of this duty will usually be the same as the duty the surveyor owes under the contract; that is, the 2 duties are co-extensive.
The 1980 Act states that, where the contract has not been entered into as a deed, a claim for breach of contract must be brought within 6 years of the date when the cause of action accrues; in other words, the date on which the claimant’s right to sue first comes into existence. Where the contract has been entered into as a deed, this period is extended to 12 years.
Most claims that surveyors, valuers and other building professionals face will be for breach of contract or negligence
The cause of action for a claim for breach of contract accrues on the date on which the breach actually occurs. By way of example, a surveyor agrees to provide a client with a building survey for a property that they are considering buying. The property suffers from significant subsidence, but the surveyor, in breach of contract, fails to mention this in their report.
The breach of contract occurs when the surveyor delivers the report to the client, and the client’s cause of action for damage by that breach accrues on that date, so they must commence any proceedings for breach of contract within 6 years. If they do so after that time, the surveyor will be able to have proceedings struck out as being statute-barred.
Generally, the limitation period for breach of contract cannot be extended, irrespective of whether the claimant knew that the surveyor had breached the contract. In most cases, therefore, once 6 years have passed since the breach of contract, or 12 in the case of a deed, the client will be unable to pursue a claim for breach of contract against the surveyor.
This may not be the end of matters, however. As noted above, a surveyor will usually owe duties to their client in both contract and tort, and may also owe tortious duties to other people as well, such as any party who comes to see and rely on the survey or valuation. The limitation period for claims in tort is more complex, but a client will often still be able to bring such a claim, even if their contractual claim is statute-barred.
Under the 1980 Act, the primary period for bringing a claim in tort that does not concern personal injury is also 6 years from the date on which the cause of action accrued. However, the cause of action in tort does not accrue until the claimant has suffered damage – which may be a long time after the surveyor’s negligent act.
In our earlier example, the client’s cause of action for negligence in tort will accrue not when they receive the report but when they suffer damage by acting in reliance on the surveyor’s advice. Most probably this will be when they legally commit to buying the defective property, which may be some months after they received the report.
A more extreme example is that of a surveyor who values a property that a borrower is considering buying. The surveyor is retained by the lender, but their valuation will often be provided to the borrower as well. The surveyor values the property at £500,000, but because of problems with subsidence that were missed yet subsequently come to light, it is only worth £400,000. In the meantime, relying on the valuation, the borrower has agreed to buy the property for £500,000, with a loan from the lender of £350,000.
The surveyor will owe a duty to the lender in contract, and is likely to owe duties to both the lender and the borrower in tort, if the borrower is buying a modest residential property. If they do, the borrower will have a claim against the surveyor for negligently overvaluing the property.
The borrower will suffer loss as soon as they are legally committed to paying £500,000 for a property that is only worth £400,000, and their claim in tort will accrue at this stage – that is, shortly after the surveyor has provided their valuation.
The lender will also have a claim in tort against the surveyor for negligent overvaluation, but will not suffer loss immediately on making the loan unless the amount it lends is greater than the value of the property against which the loan is secured. In fact, the lender may never suffer loss as a result of the surveyor’s negligence: if the borrower continues to repay the mortgage and eventually does so in full, the lender will never suffer a loss, and so its claim in tort will never accrue. Its cause of action in tort will only accrue when the value of its security falls below the level of debt owed by the borrower. In our example, the loss only accrues if the borrower defaults on the mortgage and the value of the property drops below £350,000.
While the primary limitation period for claims in tort is 6 years, this can be extended where a claimant was unaware of their right to bring a claim at the time the cause of action accrued. For example, a lender may have no idea that the surveyor overvalued the subject property and that it has suffered a loss as a result of acting on this information.
Although its cause of action accrued at the date of the loan, if it does not become aware of the overvaluation in the subsequent 6 years then the time for bringing its claim may be extended. In those particular circumstances, the 1980 Act allows a claimant to commence proceedings within 3 years of acquiring the requisite knowledge. There is extensive case law on what constitutes requisite knowledge for these purposes, and when it has been acquired, and each case will turn on its specific facts.
This extended limitation period for claims in tort is subject to an absolute time limit of 15 years. This period runs from the date of the allegedly negligent act, which means that a claim in tort could be statute-barred before the loss has even occurred or a claimant knows that they have the right to bring a claim; for example, where a loan is for a period exceeding 15 years and only after this time does the borrower default and the loss occur.
In the next article, we will look at some ways surveyors can limit their liability to clients and third parties.
Alexandra Anderson is a partner and Jonathan Angell is a consultant at Reynolds Porter Chamberlain.
This feature is taken from the RICS Built Environment Journal (November/December 2019)