Professionals, continuing duty and limitation

The general rule is that there is no continuing contractual duty on professionals to review their work unless the client chooses to request and pay for that service. To take the example of a solicitor working on standard forms of contract for a client, the constant reviewing of earlier advice for an indefinite period could place an intolerable burden on them/their firm and the costs of doing so might be extensive.

There are some exceptions to this rule and claimants may try to rely on one where their claim against a professional would otherwise be time-barred. Statutory limitation periods exist to protect professionals and others from being vexed by stale claims and to ensure that claims come before the court when the relevant evidence is still available.

In this article, we explore the circumstances in which a continuing duty may exist and review some recent limitation decisions.

Limitation periods in claims against professionals

Someone claiming against a professional will be able to bring a claim in both tort and contract. The limitation period under the Limitation Act 1980 for both will be six years, but the starting point for that period works differently for each type of claim. This makes little difference in practice, as can be seen below, because public policy not only encourages prompt claims but it also requires the courts to reduce disparity between the parallel causes of action in tort and contract (Maharaj v Johnson).

Claims in tort

The six year period for a claim in negligence (tort) begins to run from the date the claimant suffers damage. This will generally be when the negligent act or omission occurs, for example, executing a defective document or failing to put a guarantee in place. Depending on the facts giving rise to the claim, this may be described as the “flawed transaction”, “package of rights” or “damaged asset” rule. It is irrelevant that, at the date of the transaction, the extent of the claimant’s financial loss is unknown or may in fact never occur.

The flawed transaction rule was recently upheld by the Court of Appeal in Elliott v Hattens.  The court rejected (as it has done repeatedly) the claimant’s attempt to rely on the unusual case of Law Society v Sephton to argue that her loss was contingent and that she had suffered damage at a later date.

The flawed transaction rule is clearly demonstrated by the facts of Knapp v Ecclesiastical Insurance Group. The claimant’s insurance broker failed to disclose material facts to the insurer when they organised the renewal of insurance for the claimant’s outbuildings. There was a fire causing damage six months later and after a further six months the insurers voided the insurance because of the broker’s non-disclosure. The six month limitation period in tort was held to run from the date of the renewal because at that date the claimant had failed to obtain a binding contract of insurance.  

Latent damage

This apparently harsh approach to the date the claimant suffers damage is tempered by the latent damage rule. Where the client was unaware of the negligence within the six year period, they may be able to rely on section 14A of the Limitation Act. This allows them to bring a claim in negligence within three years of their date of knowledge of the facts giving rise to the cause of action, subject to a longstop of fifteen years.  In practice it can prove difficult for claimants to rely successfully on section 14A – see the recent example in Richardson v Hills Contractors and Construction Ltd concerning the design and construction of a swimming pool and gym complex.

Claims in contract

The six year period for a claim in contract begins to run from the date of the professional’s error/breach of contract. Claimants are often unable to bring a claim in contract because the six years has expired before they discover the professional’s negligence or they simply fail to issue a claim in time. Where this is the case and their claim in tort is also time-barred, they may rely on a continuing duty argument to postpone the moment at which the six year period began to run. It will be an uphill struggle in most cases: the courts have described the continuing duty argument as “a transparent mechanism for delaying artificially the commencement of some period of limitation” (Tesco v Costain Construction, referred to recently in Sciortino v Beaumont).

When might a professional have a continuing duty?

Claimants used to rely on the decision in Midland Bank v Hett Stubbs & Kemp to support a continuing duty argument. This has become more difficult since the Court of Appeal in Capita (Banstead 2011) Ltd v RFIB Group Ltd held that Midland Bank was inconsistent with the decision in Bell v Peter Browne and should no longer be followed.

Despite the decision in Capita, there are still circumstances in which a professional will be subject to a continuing contractual duty. These include:

• Where the professional has expressly agreed in their contract of retainer to exercise continuing vigilance to discover any mistakes they may have made and then to put them right
• Where the relationship between the professional and client is a general retainer under which the professional is required from time to time to give advice for reward. For example, a family solicitor drafts a will for a long-standing client and later handles his divorce.  If the solicitor knows that an impending re-marriage would invalidate the will, they may/would be under a duty to advise the client about this consequence (example given in Shepherd v Pinsent Mason)
• Where the professional has continued to have dealings with the client after their initial negligent act or omission and has accepted that they have a continuing duty to fulfill their contractual obligation (Midland Bank, subject to comments in Capita)
• Where the nature of the professional’s role requires them to maintain a state of affairs, for example under a repairing clause in a tenancy agreement – here there will be fresh breach on each successive day
• Where the professional becomes aware of a problem concerning their work that requires them to review it before the contract has been discharged – for example, where an architect negligently designs foundations and before completion reads an article showing that the materials they have specified are not fit for purpose (New Islington and Hackney Housing Association Ltd v Pollard Thomas & Edwards)

What happens when two errors are made, one outside and one within the limitation period?

This issue arose recently in Sciortino v Beaumont. A barrister had advised twice in relation to a claim, once in April/May and subsequently in October the same year. The first alleged negligent advice was outside the limitation period and the second was within it. The Court of Appeal reversed the decision below and held, on the particular facts of the case, that the claim in respect of the October advice was not statute-barred. The barrister was being asked to give different and more comprehensive advice in very different circumstances from those in April, and the October breach gave rise to a separate smaller claim for a distinct head of loss. The court drew a distinction between a case like Sciortino where there are two separate breaches of duty and one where a single breach causes damage outside and then later inside the limitation period.

Two final points to note

It is important to remember that where the professional becomes aware of their negligence after the contract has been discharged, although they won’t be under a contractual duty to advise the client about their breach of contract, they may have a duty of care in tort to do so (New Islington). 

And although it is generally unfair to expose a professional to a negligence claim long after the events in question, when they may have retired and no longer have professional indemnity insurance, this will be allowed where the professional has deliberately concealed their breach of duty – see section 32 of the Limitation Act 1980 and Cave v Robinson Jarvis & Rolf  (considered recently by the Court of Appeal in Canada Square Operations Ltd v Potter).