Mark Smith v Mark Cunningham and Others

JurisdictionIreland
JudgeMr. Justice Brian Murray,Mr. Justice Gerard Hogan
Judgment Date25 May 2023
Neutral Citation[2023] IESC 13
CourtSupreme Court
Docket NumberS:AP:IE:2021:000148
Between/
Mark Smith
Plaintiff/Appellant
and
Mark Cunningham, Kevin Sorohan, Ann-Marie Sorohan and Paul Kelly Practicing Under the Style and Title of Paul Kelly & Company, Solicitors
Defendants/Respondents

[2023] IESC 13

O'Donnell CJ

O'Malley J.

Woulfe J.

Hogan J.

Murray J.

S:AP:IE:2021:000148

AN CHÚIRT UACHTARACH

THE SUPREME COURT

Negligence – Damages – Statute barred – Appellant seeking damages for negligence – Whether the appellant’s claim was statute barred

Facts: The plaintiff/appellant, Mr Smith, in proceedings instituted in 2014, claimed damages arising from his acquisition (in 2006) of a dwelling-house. The fourth defendant/respondent, Paul Kelly & Company, Solicitors (the solicitors), were retained by the plaintiff for the purposes of that transaction. The property as constructed did not comply with the planning permission granted by the relevant local authority and, the plaintiff contended, the solicitors should have conducted planning searches in advance of the purchase which, had they been carried out, would have revealed the true planning status of the property. The claim against those defendants was inter alia for alleged negligence in thus failing to ensure that the plaintiff received a good marketable title to the property. The question that arose from those facts was whether the ‘damage’ sustained by the plaintiff for the purposes of the applicable limitation period occurred when he acquired the property in July 2006 (in which case the action was statute barred) or whether it occurred when a subsequent contract entered into by the plaintiff to sell that property was rescinded in October 2008 because of the planning issues affecting the property (in which case the plaintiff’s action was commenced within time). Following the trial of a preliminary issue as to the application to that claim of the Statute of Limitations 1957, the High Court ([2018] IEHC 600) drew a distinction for the purposes of identifying the point at which a cause of action in negligence was complete between a ‘defect’ and ‘damage’. It derived that test from authorities dealing with the recovery of compensation for injury to property. Meenan J found that while the purchase of the property in July 2006 with a flawed title presented a ‘defect’, ‘damage’ did not occur until a subsequent contract for the sale of the property was rescinded in October 2008 because of this ‘defect’. Thus, he concluded that, on the facts, the plaintiff’s claim was not statute barred. The Court of Appeal ([2021] IECA 268) in a judgment delivered by Collins J, concluded that the defect in this case, where the property was not compliant with planning permission, was an ‘immediate and significant blot on title’ with concrete adverse implications for the plaintiff and his wife, that the cause of action therefore accrued when the plaintiff purchased the property and, thus on the facts of the case, that the plaintiff’s claim was statute barred. The Supreme Court, in granting leave to appeal against the decision of the Court of Appeal ([2022] IESCDET 86) determined that the point from which time runs in a claim in negligence against a solicitor in connection with a conveyancing transaction is of general public importance.

Held by Murray J that the plaintiff obtained in July 2006 an asset that was less valuable than that for which he had contracted, and while it may be that the reason for that diminution in value might have been reversed at comparatively little cost, or for that matter in certain events at no cost to him, this was dependent on the actions of a third party which could never have been compelled and which – had the original vendor not intervened – would have involved a measurable cost. Murray J held that the plaintiff had been damaged in his property as and from that point in time, and he learnt both of the fact, and the cause, of that damage within two years of incurring it. In those circumstances, Murray J held that the plaintiff’s claim against the fourth defendant in negligence was statute barred.

Murray J dismissed the appeal.

Appeal dismissed.

Judgment of Mr. Justice Brian Murray delivered on the 25 th day of May 2023

Background
1

. The tort of negligence is complete only when a party has suffered actual damage as a result of another's breach of duty. It is at or after that point that that party can institute proceedings to recover damages for negligence, and it is only then that the cause of action accrues for the purposes of the Statute of Limitations. This court has decided that in negligence claims involving damage to person or physical property, ‘actual damage’ occurs, and the cause of action thus accrues, at the point at which the injury or damage to property is ‘manifest’. This has been held to mean the time that the damage was capable of being discovered and capable of being proved by the plaintiff. While that formula may present difficulties of application in a small minority of such cases (in particular where the wrongful act and damage do not coincide) there is what has been described as ‘a working definition’ and it is applied to cases involving both of these forms of loss. The enquiry is objective and does not depend on whether the plaintiff actually knows that they have suffered an injury: it is directed only to whether provable damage exists, not to whether in a particular case there was in fact a reasonable or realistic prospect of its being discovered.

2

. In the negligence action giving rise to this appeal, the plaintiff seeks to recover financial loss that is independent of damage to person or property. Such claims for (as it is often described) ‘pure’ economic loss are more complex than property or personal injury claims and the formulation of a workable and generally applicable test to determine the point in time at which the plaintiff has suffered ‘damage’ has proven elusive. Obviously, economic loss is intangible. It can assume many diverse forms – the diminution in the value of an asset, the acquisition or sale of property on terms less advantageous than they should have been, or the wrongful exposure to a liability to pay monies (or the payment of such monies) being the most common. Sometimes these losses will be contingent on other events that may or may not occur, on occasion they are the product of uncertain and/or fluctuating valuations in volatile markets, and in the case of certain kinds of transaction they may be reversible at no or very little cost. It is to be expected that the reduction to a single coherent and generally applicable test of when ‘damage’ in these various situations is ‘manifest’ is (as some of the cases have described it) ‘troublesome’, and less than surprising that preference has been expressed for ‘pragmatism’ over logic, and for leaving each case to be decided ‘on its own facts’.

3

. In these proceedings (instituted in 2014) the plaintiff claims damages arising from his acquisition (in 2006) of a dwelling-house. The fourth named defendant ( ‘the solicitors’) were retained by the plaintiff for the purposes of that transaction. The property as constructed did not comply with the planning permission granted by the relevant local authority and, the plaintiff contends, the solicitors should have conducted planning searches in advance of the purchase which, had they been carried out, would have revealed the true planning status of the property. The claim against those defendants is inter alia for alleged negligence in thus failing to ensure that the plaintiff received a good marketable title to the property.

4

. The question that arises from these facts is whether the ‘damage’ sustained by the plaintiff for the purposes of the applicable limitation period occurred when he acquired the property in July 2006 (in which case the action is statute barred) or whether it occurred when a subsequent contract entered into by the plaintiff to sell that property was rescinded in October 2008 because of the planning issues affecting the property (in which case the plaintiff's action was commenced within time).

5

. Following the trial of a preliminary issue as to the application to that claim of the Statute of Limitations 1957, the High Court ( [2018] IEHC 600) drew a distinction for the purposes of identifying the point at which a cause of action in negligence was complete between a ‘defect’ and ‘damage’. It derived this test from authorities dealing with the recovery of compensation for injury to property. Meenan J. found that while the purchase of the property in July 2006 with a flawed title presented a ‘defect’, ‘damage’ did not occur until a subsequent contract for the sale of the property was rescinded in October 2008 because of this ‘defect’. Thus, he concluded that, on the facts, the plaintiff's claim was not statute barred.

6

. The Court of Appeal ( [2021] IECA 268) in a judgment delivered by Collins J. (with whom Whelan and Ní Raifeartaigh JJ. agreed) concluded that the defect in this case, where the property was not compliant with planning permission, was an ‘immediate and significant blot on title’ with concrete adverse implications for the plaintiff and his wife, that the cause of action therefore accrued when the plaintiff purchased the property and, thus on the facts of this case, that the plaintiff's claim was statute barred.

7

. This Court, in granting leave to appeal against the decision of the Court of Appeal ( [2022] IESCDET 86) determined that the point from which time runs in a claim in negligence against a solicitor in connection with a conveyancing transaction is of general public importance. That issue depends on the proper construction of s. 11(2)(a) of the Statute of Limitations Act 1957, as amended, as it is applied to claims in negligence for the recovery of ‘pure’ economic loss.

Facts
8

. In April 2006 the plaintiff and his wife entered into negotiations with the second and third...

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