Time limits for bringing claims at Court are strict. The rules seem superficially clear, but they continue to confuse claimants with the result that potentially valuable claims are lost. The latest case to demonstrate the risk is Howard and Pate v Bank of Scotland/Halifax.
The claimants sought damages from their mortgage lender because the loan was allegedly based on misrepresentations made by the lender’s employee. When the house was repossessed and the borrowers were left with a debt of £120,000 they claimed against the lender for that alleged misrepresentation. The lender said they were out of time.
In 2007 the claimants wanted to buy a farmhouse that needed renovation, to be their home. The sales particulars described it as "A brick and tile former farm house in need of renovation and improvement with a range of buildings and land extending to 1.07 acres or thereabouts". It was offered for sale at £310,000. They applied to the defendant for a mortgage loan of £248,999.
The lender’s valuer produced a valuation report for the property that indicated that the property was unfit for habitation and the valuer could not provide a valuation until he knew about the repairs and improvements the claimants intended to carry out. This seems to have stopped the mortgage application and that resulted in a complaint by the borrowers about the time and money they had wasted.
However a few days later the defendant appeared to change its mind and made an offer for a normal repayment mortgage. The claimants alleged that this change in attitude was brought about by an email from the mortgage manager who handled the complaint. It contained a number of statements about the claimants’ situation and referred to Mr Howard as a "qualified structural engineer specialising in electrics". But this was untrue and it was an email that, at the time, the claimants knew nothing about.
Unaware of the reasons for the change in the lender’s attitude, they accepted the mortgage offer and the house purchase went ahead. Repayments were made as expected but when the fixed term came to an end in 2012 the claimants discussed an extension with the lender. At that time Mr Howard was asked to confirm that he was a structural engineer, which of course he was not. A valuation at this date was £250,000 and because the claimants thought this left them in negative equity they stopped the mortgage repayments.
The loan fell into arrears and in 2013 the lender started repossession proceedings. In April 2013 the borrowers set out a defence to the repossession relying on the statements made by the mortgage manager. They argued that there had been negligent misrepresentation and negligent property valuation, which caused them to take on a loan that otherwise they would not have accepted.
The repossession went ahead but after sale of the property for £150,000 in April 2014 a debt remained due to the lender of £120,000. After referrals to the Financial Ombudsman and the police, on 9 June 2019 the claimants issued a Court claim for misrepresentation.
The lender said that was too late. They applied to stop the legal claim at its very earliest stage based on a time bar defence.
The law on limitation
You have six years from a breach of contract to issue a claim at Court.
You have six years from a breach of statutory duty (which in this case would be breaches of the FCA’s Mortgage Conduct of Business Sourcebook).
In negligence you have six years from when a negligent act causes damage.
If you do not know that a negligent act has caused loss you might have three years from when you first knew about the claim to bring an action.
These limits can be complicated to apply though, particularly for negligence claims. The time when actual loss is suffered can be particularly troublesome. The claimants in this case thought that loss had only been caused when the sale of the house crystallised a £120,000 loan shortfall in 2014. However, the claimants had purchased the house in 2007. At that point they paid more for the house than it was worth and suffered a loss there and then (even though they did not realise it). Their six year period started to run in 2007 and the claim in negligence became time barred in 2013.
They may have been able to rely on the three year extension. However they had set out in great detail the alleged misrepresentations in their repossession defence in April 2013. The Court considered that they knew enough, at that point, about the claim they could make against the lender. The three year extension started to run then and the claims became time barred at the latest in April 2016. Even if the claimants relied on the knowledge that they had suffered a loss of £120,000 that was known by them in April 2014, still well over three years before they issued legal proceedings.
The claim was therefore time barred and failed. The defendant was given summary judgment in its favour in October 2019.
Court time limits often seem unfair if a legal claim is lost before a claimant realises they have one. This is a particular problem with negligence claims. The time limits are there to ensure cases are brought to court without unreasonable delay and before vital evidence is lost (whether documents or people’s recollections which inevitably fade). If you think you might have a claim it is important to take legal advice without delay to ensure limitation is considered before it is too late.