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Defective building cases – know your limits!


Thursday, April 27, 2017

In this article, Kate Mitchell gives us an insight into some recent case law in the area of limitations.
The time limits within which you can bring a civil action in Ireland are set out in the Statute of Limitations, 1957(“the 1957 Act”), as amended. (1)

Generally, the limitation period for bringing a civil action is six years. (2)
Limitation periods serve a dual purpose, firstly to discourage plaintiffs from unduly delaying the institution of proceedings; and secondly to protect defendants from stale claims.

One key issue which arises is the issue of the determination, as to when the action accrues, in particular in a defective building case. A defect may occur during the initial foundation work of the building, but may not be discovered or take form as a visual defect in the property for a considerable number of years.

The dilemma which often arises in such cases is when the six year limitation period commences. It has to be determined whether it was the date upon which the work started, the date upon which the work was completed or the date upon which the defect starts causing loss or damage.

“Cause of action”

    A cause of action accrues at the earliest time at which an action can be brought.
    If an action is not commenced within the limitation period, it will become statute barred and the defendant will have a good defence to the claim.

    While the 1957 Act lays down some rules for the accrual of causes of actions to recover land, it leaves it to the common law so far as actions in tort are concerned to provide for the date of accrual.
    The cause of action generally (3) accrues when the wrongful act is committed. Thus, traditionally Irish law has rejected the concept that a cause of action does not accrue until the damage is discovered, or is at least discoverable, in tort and contract cases that do not involve personal injuries.

    “Discoverability test”

      In relation to the discoverability test and non- personal injury claims the Irish courts have held that the date at which the defect actually becomes known, is irrelevant for the purpose of determining when time begins to run. Time begins to run when the damage occurred, and not the time at which damage is actually discovered.
      This question was deliberated in recent cases.

      Patrick Gallagher v ACC Bank plc (4) (The “Gallagher case”)

        The Supreme Court’s ruling delivered by Fennelly, J. considered the rules governing the time within which claimants must institute negligence proceedings in respect of financial loss.

        The Supreme Court confirmed that generally a claim must be brought within 6 years of the date on which the alleged loss occurred. Time may not begin to run however where there is only a “mere possibility” of loss in a case until such time as that loss materialises. The Supreme Court held there was an “immediate loss” upon entering the particular investment which was alleged to be inappropriate from the outset and consequently time began to run from that point.

        The case examined Pirelli v Oscar Faber & Partners, (5) which considered the accrual of a cause of action when the claim was made against a firm of constructing engineers for negligence consisting in the use of an unsuitable material. In this case, work was completed in June 1969; not later than April 1970 cracks developed at the top of the Plaintiff’s chimney. It was found that the Plaintiffs could not, with reasonable diligence, have discovered the damage prior to October 1972. The Plaintiff’s did not issue proceedings until October 1978. The Court held that the date of accrual of a cause of action in tort for damage caused by negligent design or construction of a building was the date the damage came into existence and not the date the damage was discovered.

        Judgement of Justice O’Donnell

          In his judgement O’Donnell, J. considered that the focus should be on legislation in the shape of a revised statute of limitations, rather than on judicial decisions on the question of accrual of a cause of action. He argued that if there is a perceived inadequacy in the current rules, particularly those to be applied to a claims of defective professional advice giving rise to claims which may only become apparent sometime after the acts alleged to have cause the wrong then that is best. He also considered the Law Reform Commission Report on Limitation of Actions (LRC 104-2011), which suggested a shorter general limitation period, the possibility of extension on grounds of discoverability, and a long stop provision after which no action could be brought.

          He suggested that any change desirable is best debated at a public policy level. However, the case at hand was decided by reference of the facts and the plaintiff’s pleaded cause of action in tort accrued when the investment was made and accordingly was barred by the provisions of the Statute of Limitations

          Liam Brandley and W.J.B Developments v Hubert Dean and Lohan (6) (the “Brandley case”)

            The question as to whether the time limitation begins on the date upon which the work was started or the date upon which the work was completed was debated in this case. Each of the defendants in the case pleaded that statute of limitations. The plaintiff claimed that although the negligent installation of the foundations and the subsequent negligent certification given by the defendant who was the supervising consulting engineer, were outside the 6-year period, the damage had happened as a result came about within the period.

            The foundations had been completed in March 2004 and the plaintiff did not observe the cracks until December 2005 but did not issue his plenary summons until November 2010. In the High Court, the Plaintiff’s claim was dismissed, on the basis that it was statute barred.

            The Court of Appeal (the “COA”) reversed the High Court decision that the Plaintiff’s claim was not statute barred and held that negligence, by itself, without the accompaniment of damage or loss is not actionable, and that the plaintiff in this case, did not suffer damage, at the time when the defective foundations were installed.

            The COA referred to the case of Hegarty v Loughran (7) and the decision of Chief Justice Finlay which stated:
            “A Tort is not completed until such time as damage has been caused by a wrong, a wrong which does not cause damage not being actionable in the context with which we are dealing. It must necessarily follow that a cause of action in Tort has not accrued until at least such time as the two necessary component parts of the Tort have occurred, namely the wrong and the damage”.
            In other words, the cause of action does not accrue until some damage occurs.

            The Court of Appeal held that negligence, by itself, without the accompaniment of damage, or loss is not actionable, and that the Plaintiff’s in this case, did not suffer damage, at the time where the defective foundations were installed.

            Conclusion

              The Gallagher case and in particular the judgement O’Donnell J revisited the law in this area highlighting the desirability of legislative intervention.

              The Brandley case confirmed that a cause of action in damages, for a non-personal-injury claim, accrues only at the time that “damage” occurs and that in a construction context, there may be a distinction between defective work, such as the installation of defective foundations, and actual damage, which is when the defective foundations cause damage to the building.

              Both cases consider non-personal-injury claims for negligence against those involved in the construction industry and rule that in certain circumstances these be prosecuted more than six years after the defective work was carried out. This could have considerable consequences for the majority of professionals involved in the construction industry, particularly their professional indemnity insurers.

              1. Statute of Limitations (Amendment) Acts, 1991 and 2000.
              2. Other limitation periods are also set out in the Civil Liability Act, 1961, the Liability for Defective Products Act 1991 and the Civil Liability and Courts Act 2004.
              3. In the cases of tort actionable without proof of special damage
              4. [2012] IESC 35
              5. [1983] 2 A.C. 1
              6. (High Court 2010/10994P and Appeal 2015/245).

              For more information, please contact our construction team.



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