Cain v Francis; McKay and Hamlani v Direct Line Insurance PLC 2008
- Reported: [2008] EWCA Civ 1451
- Year: 2008
- Court: Court of Appeal
- Read full case: Here
FACTS:-
This judgment involved two appeals. Both arose from road traffic accidents. In McKay, the Defendant had stolen the car and it was uninsured. In each case, the Claimant communicated the fact of the claim to the Defendants’ insurers and liability was accepted. In Cain, the Claimant’s solicitors had invited the Defendant’s insurers to a limitation moratorium, as limitation was approaching but missed the time limit for issue by one day.
However proceedings later became time barred by operation of section 11 of the Limitation Act 1980 and the Claimant tried to persuade the court to exercise its discretion under section 33 of the 1980 Act. In the case of McKay, where the delay was just under one year, discretion was exercised in favour of the Claimant. In the case of Cain, where the delay was one day, the judge refused to extend the time.
HELD:-
Lady Justice Smith considered sections 11 and 33 of the 1980 Act and then the facts of each case.
In Thompson v Brown [1981] 1 WLR 744 Lord Diplock said that the effect of a direction under section 33 (then section 2D of the Limitation Act 1938) was to deprive the Defendant of what would otherwise be a complete defence to the action. However if the time elapsed after the expiration of the primary limitation was very short, what the Defendant would lose might be regarded as being in the nature of a windfall.
Smith LJ said that there was a fortuitous bonus for any Defendant who, having conceded liability, suddenly found himself with a good defence. She would describe that as a windfall even if the delay was longer than it was in Thompson (about a month) provided that the delay had not caused the Defendant any evidential or other forensic prejudice on the outstanding issues of quantum.
In Thompson the trial judge eventually exercised his discretion in favour of the Claimant. In Hartley v Birmingham City Council [1992] 1 WLR 968 the delay had been one day. The court had exercised discretion in the Claimant’s favour where liability had been admitted.
Smith LJ said that in the two cases now before the Court of Appeal, there were two trial judges who had taken diametrically opposed positions, and that could not be right.
She considered the case of Firman v Ellis [1978] QB 886 where the Court of Appeal said that they would extend the period of limitation, where the delay was slight. When dealing with the issue of prejudice, the Court of Appeal also said that it was prejudicial to the Claimant to have to start a new set of proceedings against her solicitors, whereas the prejudice to the Defendants by reason of a small delay in missing limitation was slight.
In Hartley v Birmingham City Council the facts were similar to the present cases. The Claimant had intimated a claim very promptly and the Defendant had admitted liability. Proceedings were issued one day late in error. The Court of Appeal exercised section 33 in the Claimant’s favour, stating that if such discretion could not be exercised in this case, it was difficult to see how it could be exercised in any case.
Parker LJ giving judgment in Hartley referred to another case, Donovan v Gwentoys [1990] 1 WLR 744. In this case the Claimant was a minor and issued proceedings five and a half months after expiration of limitation, and five years after the accident. The House of Lords said that the primary purpose of the limitation period was to protect a Defendant from the injustice of having to face a stale claim. In this case the claim was stale because it was made five years after the event. The Lords also said that it would always be relevant to consider when the Defendant first had notification of the claim, and thus the opportunity to meet the claim at trial.
Parker LJ in Hartley said that the task of the judge was not simply to balance the prejudice to the parties. It was to reach a conclusion that was “fair and just”. He said that the prejudice to the Claimant by reason of limitation set against the prejudice to the Defendant if limitation were disapplied, would be equal and opposite. The prejudice referred to in section 33(1)(b) was prejudice to the merits caused by the delay, not the prejudice caused by deprivation of a fortuitous or “windfall” defence.
In the more recent case of Horton v Sadler [2007] 1 AC 307 Lord Bingham in the House of Lords had said that even if the Claimant had a cast iron claim against her solicitors, the limitation defence could fairly be regarded as a windfall or gratuitous bonus.
Smith LJ said that there was now a long line of authority to support the proposition that, in a case where the Defendant had had early notice of the claim, the accrual of a limitation defence should be regarded as a windfall, and the prospect of its loss should be regarded as no prejudice at all. The real issue was whether the Defendant had suffered any evidential or other forensic prejudice.
However the authorities had arrived at the same result by different reasoning, and there was still the question of the Claimant’s claim against his own solicitor, which was one of the circumstances in the case of Hartley. Smith LJ said that the phrase “it would be equitable to allow the action to proceed” lay at the heart of section 33(3) of the 1980 Act. The imposition of a three year time limit under the Limitation Act 1954 was arbitrary and could only ever hope to do rough justice. Hence the need for some flexibility.
Parliament could not have intended that financial prejudice, i.e. the loss of a complete defence to the Defendant, should be taken into account. A Claimant’s position was different. He had a substantive right, but he could not proceed because of the operation of the 1980 Act. He had therefore been prejudiced to that extent, but his prejudice might be reduced if he had a good claim against his solicitor. However the fact that the Claimant had a claim against his own solicitor would not necessarily mean that limitation should not be disapplied.
The real question was whether it was fair and just in all the circumstances to expect the Defendant to meet this claim. It would always be relevant to consider when the Defendant knew that a claim was to be made against him, and the opportunities that he had to investigate and collect evidence.
In the case of Cain v Francis the trial judge had fallen into error by considering that the loss of the limitation defence would amount to real prejudice to the Defendant. There was no argument by the Defendant that any other prejudice had been suffered. In relation to the Claimant, he had been prejudiced because he would now have to sue his solicitor if section 33 were not exercised in his favour and repay his interim payments. The Defendant’s counsel had answered the point about the interim payments by saying that the Claimant would not be expected to pay this money back, until his solicitors’ insurer had put him in funds. However it would be fair and just to disapply limitation and the appeal would be allowed.
In relation to McKay v Hamlani, the trial judge had applied section 33 of the 1980 Act in the Claimant’s favour. He had disregarded the “loss of a windfall defence” argument and held that the delay of one year had not significantly prejudiced the Defendant. Smith LJ said that the trial judge was entitled to draw those conclusions, and also to conclude that if he refused to make any direction, the Claimant might suffer some prejudice. Smith LJ therefore agreed with the trial judge’s conclusions and this appeal would be dismissed.
Lord Justice Maurice Kay and the Chancellor of the High Court agreed.
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