Professional Negligence Claims:    Proving a Loss and Limitation Periods

Robert Higgins  -  March 2003

The duties owed by lawyers to their clients are set out in Astley & Ors. -v- Austrust Limited 1999 ATR 81-501 and in Hawkins -v- Clayton 1988 ATR 80-163.  In Astley -v- Austrust  the High Court held that the duty of a solicitor to exercise reasonable care was founded both in contract and tort.

Proving a Loss

It is also clear that whether the client sues in contract or tort, he or she must establish first that they have suffered a loss and secondly that the solicitor's negligence caused that loss.  In Sykes -v- Midland Bank Executor & Trustee Co Limited 1971 1QB 113, the plaintiffs who were taking an underlease of premises, established that the defendants were negligent in not drawing their attention to the fact that head lessor could unreasonably refuse his consent to a change of user, but were awarded only nominal damages because the Court of Appeal held that they would have taken the underlease even if properly advised.  Where the plaintiff's loss results from some failure on his part to secure his own interests or from an intervening act of the third party he may recover nothing in respect of it.

However, whilst it is true that the client must prove that he suffered actual loss because of the solicitor's negligence, which in a personal injury matter would generally involve proving that he would have succeeded in that claim and that the claim would have been worth a certain amount, it is also true that in limited circumstances a client can obtain something for the lost opportunity of successfully bringing a claim.

Where a solicitor negligently causes a client to lose in litigation (for example, by failing to serve proceedings in time or allowing the matter to be struck out) they will be liable not only for the costs wasted, but also for the client's loss of the chance of winning.  Hence, if the client had only a 40% chance of recovering $10,000.00, the measure of loss will be $4,000.00.

In Lee -v- Moog 1989 ATR 80-267, the plaintiff retained the defendant solicitor to pursue a personal injury claim against an employer.  The partner left the firm and warned the remaining partner of the limitation period which duly expired.  In the Supreme Court of Queensland, Justice Lee found the remaining partner liable in negligence and assessed the plaintiff's chance of complete success in the personal injury action had it been litigated at 50% on the basis that liability probably would have been established on the part of the employer and the plaintiff would probably have been held to have been guilty of contributory negligence to a significant extent.

In Appo -v- Barker 1981 50 FLR 298, a jockey was injured in a race fall and sued his former solicitors alleging they had acted negligently in allowing the action to become statute barred.  The Supreme Court of Northern Territory found negligence against the solicitors in failing to issue the writ.  The Court held that as the jockey's chances of succeeding against the turf club had been small, he was not entitled to much more than nominal damages and was awarded $1,000.00 against the solicitors.

Limitation Periods

The limitation period for proceedings brought against solicitors in both tort and contract is six years pursuant to the Limitation Act 1969 NSW Section 14(1).  The six year   

period runs from the date on which the cause of action first accrues to the Plaintiff.  There is no mechanism available in the Limitation Act for an extension of time.

David Lloyd, in a recent article (Law Society Journal, December 2002) pp 78 - 80, has identified that traditionally  litigants have attempted to use two devices to "extend" the six year period. 

·         The first device was an argument as to when the cause of action first accrued, the argument being that in some cases it is a later date than when the Plaintiff first suffered loss.  For example, were a solicitor act for a Plaintiff in a damages claim and the claim gets out of time then that solicitor brings an application for an extension whilst continuing to act for the Plaintiff and that application is unsuccessful, the argument is that the action only accrues from the time that the application or extension is unsuccessful.  It would appear however that that argument is unsound and the authorities have made it quite clear that the fact an extension is made does not change or alter the date the cause of action first accrues being that the original time limit expiry.

·         The second device is the argument of a solicitor's continuing duty referred to by Dean J in Hawkins v Clayton 1987 164CLR.  The argument is that in certain matters where the solicitor continues to act the limitation period is suspended.  The High Court in Sampson v Ducker made it quite clear that such an exception would very rarely be the case and only where it can be shown that by continuing to act, the Claimant was effectively precluded from seeking independent legal advice.

Longer Limitation Periods in Certain Cases

In his article, David Lloyd argues that a decision of the NSW Court of Appeal in Walmsley v Cosentino 2001 NSW CA has provided a basis for an effectively longer limitation period in certain cases. 

In the matter of Cosentino the solicitor acted for a Plaintiff in a Personal Injury claim and did not commence proceedings within time.  The solicitor continued to act for the Plaintiff until shortly before the expiry of the six year period to commence proceedings against the solicitor and at that time advised the client that the client had a right to bring a professional negligence action but did not advise the client of the limitation period to do so and continued to act whereupon the client eventually was out of time again.

The Court of Appeal held that there was no relevant continuing duty, nor was there any evidence of fraud, however, they did find that there was an additional cause of action against the solicitor available to the Plaintiff based on the failure of the solicitor to advise the Plaintiff of the existence or cause of action against the solicitor and of the time within which to commence proceedings in relation to that additional cause of action.  The Court held that the solicitor owed a duty in tort to the Plaintiff to advise him that, if he were to commence proceedings against the solicitor, those proceedings would need to be commenced by mid August 1992 and that forthwith those proceedings would in their turn become time barred.  The solicitor had failed to fulfil this duty.  In this way the Court recognised that an additional cause of action accrued to the Plaintiff against the solicitor.  This is a quite different duty to a solicitor's "continuing duty."  This duty has a much broader application and the result is that the Plaintiff's proceedings had been commenced within time in respect of this additional duty which arose only shortly before the expiry of the limitation period for commencement of the original proceedings against the solicitor.  Thus another 6 year period from that later date was applicable. 

Conclusion

As David Lloyd argues, in situations where a solicitor perceives a breach of their duty to the client, the solicitor must give the client the strongest possible advice that the client should obtain independent legal advice and that they may be entitled to bring proceedings in respect of the breach.  The client should also be given details as to the limitation period within which those proceedings need to be commenced.

____________________________________________________

This news bulletin is published by Carroll & O'Dea for general information only and is not intended as legal advice.  Anyone wishing to receive advice on the matters referred to in this bulletin should approach their professional advisers.  All liabilities are expressly disclaimed for any loss or damage that may arise from any person acting on any statements or information contained in this bulletin.