The Limitation Bill: Legislative Overhaul

Against the backdrop of three Law Commission reports - in 1988, 2000 and 2007 - recommending that the Limitation Act 1950 be updated, the Supreme Court observed in Trustees Executors Limited v Murray & Ors [2007] NZSC 27:

[76] What is required in New Zealand, and has been required for some considerable time, is a complete legislative overhaul of the Limitation Act… The surgery now required is beyond the proper province of the courts

That legislative overhaul is nearly complete.  As reported in our March Litigation Update, the Limitation Bill proposed fundamental changes to limitation periods.   The Justice and Electoral Committee has now recommended that the Limitation Bill be passed with certain amendments, although the commencement date has been postponed from 1 July 2010 to 1 January 2011.    

The purpose of the changes to the current limitation regime are to clarify the claims affected by limitation periods, clarify when those periods commence and when they may be extended and address what the Committee describes as "the current unfairness that under the current law a limitation period may end before a claimant knows something is wrong".  We summarise below the key amendments recommended by the Committee. 

• For most claims, the Bill retains the current primary limitation period of 6 years.  The fundamental changes originally proposed in the draft Bill remain largely unchanged:
• The start date of the limitation period for most claims will be the date of the act or omission on which the claim is based.   Under the current Act, time runs from the date on which the cause of action "accrues" i.e. when everything which would entitle the plaintiff to the judgment of the court on the relevant cause of action has happened. 
• The Bill introduces the new, unifying concept of a "money claim" i.e. a claim for monetary relief whether at common law, in equity, or under an enactment. 

Late knowledge

The Bill introduces a "late knowledge date" that applies when, during the primary limitation period, the claimant did not know the facts (set out in clause 13(1)) necessary to make the claim. This applies to all money claims. The "late knowledge date" is the date when the claimant gained, or ought reasonably to have gained, knowledge of those key facts.  In such cases, the limitation period is the earlier of three years after the late knowledge period or 15 years after the date of the act or omission on which the claim is based. The Committee considered, but ultimately rejected, submissions to synchronise the longstop period under the Bill with the ten year longstop period under the Building Act 2004. 

Limitation and equity

Another significant change in the Bill as introduced was to expressly bring equitable claims for monetary relief under the new limitation regime.  Presently, equitable causes of action are not subject to a limitation period except "by analogy" i.e.   if a claim is made in equity which is not the subject of a statutory time bar, but corresponds to a claim at common law which is subject to a statutory time bar, equity may, in the absence of fraud or other special circumstances, adopt the statutory time bar in respect of the corresponding claim.

The Committee heard submissions on why equitable claims should not be brought within the new regime but has not proposed any amendments to the definition.  If anything, the Select Committee has further extended the application of the new regime to equitable causes of action.  In addition to the express application to money claims in equity, a new clause 8A provides that the new Act may also be applied by analogy to equitable claims.

The original draft of the Bill stipulated a six year limitation period for claims for an account.  The Committee has recommended that this be amended to make it clear that it applies to claims for an account irrespective of the legal basis for the claim.  This appears to be intended to deal with the fact that claims for an account are often made in conjunction with other claims and should therefore be subject to the same limitation period.

Arbitration

The Committee has recommended a number of changes to the Bill to clarify its application to arbitral proceedings.  For example:

• Whereas the Bill originally provided that every defence prescribed by the Act applies only to a claim made in a civil proceeding in a specified court or tribunal, the Committee has recommended that this be amended to include "or in an arbitration".
• The fact that arbitral awards can be enforced by being entered as judgment has sometimes caused confusion as to when time starts to run.  The Bill now provides that a judgment that is an arbitral award entered as a judgment is treated as having become enforceable in the country in which it was obtained on the date on which the award became enforceable by action in New Zealand. 
• The limitation period for enforcing an arbitral award by action, or having it entered as a judgment, is six years after the date on which the award became enforceable by action in New Zealand.   

Application to acts or omissions before Act commences

The initial draft of the Bill provided that all actions accruing prior to the commencement of the new Act would be dealt with under the Limitation Act 1950.  

The Committee heard submissions that the Bill should apply to claims arising from acts or omissions which had already occurred.  The effect of such an amendment would have been to bring pre-existing claims under the new regime and, contrary to legislative convention, retrospectively affect the parties' rights.   

However, the doctrine of "reasonable discoverability" (which currently applies only to certain causes of action) means that the existing Act could continue to apply until well after the Bill had been enacted, causing uncertainty for defendants as to when their potential liability may end as there is no longstop period for most claims under the current regime. 

The Committee has therefore recommended amending the Act to provide that, for actions based on an act or omission prior to 1 January 2011, there will be a longstop limitation period of the later of:

• five years ending on the close of 30 June 2015; and
• 15 years after the date of the act or omission.    

Conclusion

The Committee has recommended that the Bill be enacted with the amendments summarised above, as well as the others in its report. 

At first blush, the Bill appears to succeed in its goals of enhancing clarity as to the applicable limitation period.  However, in relation to equitable claims, such clarity has arguably come at the expense of equity's historic freedom from limitation periods.  While the concept of the "late knowledge period" may prevent injustices to claimants, the Bill cannot of course prescribe a code for assessing whether, in a particular case, a plaintiff knew, or ought to have known, the necessary facts.  That will always be a task for the Courts, and one of increased significance under the new regime. 

The expected commencement date is 1 January 2011.   

© Russell McVeagh 2009. All rights reserved. www.russellmcveagh.com