It can be easy for parties in dispute to overlook limitation periods while settlement discussions are happening. This article covers some simple risk management measures parties can take to prevent their claim from being time barred and the practitioner also being faced with a professional negligence claim.
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The early resolution of legal disputes has many benefits for clients including avoiding the considerable costs, time, diverted focus and stress associated with litigation. In some jurisdictions, such as the Federal Court and Federal Circuit and Family Court, pre-litigation procedures mandate certain parties to make reasonable and genuine attempts to resolve disputes before commencing legal proceedings.
While a focus on early dispute resolution procedures is generally to be encouraged, LPLC sees claims where parties become engrossed in protracted settlement negotiations, are optimistic about a successful resolution, and don’t turn their mind to an approaching limitation period. In these instances, settlement discussions fall through, and the client instructs the practitioner to commence legal proceedings. The proceedings are filed and served but the practitioner then discovers that it’s too late as the time limit to bring the client’s claim has expired, handing the defendant a complete defence to the claim.
Missed limitation periods are a persistent source of claims, but they can potentially be avoided with some simple risk management actions.
Know your limits
When first receiving instructions from a client, always identify the relevant causes of action and check the legislation to confirm the limitation periods which apply. Limitation periods should then be diarised, with multiple automated electronic reminders sent in advance of the deadline so the date is continually on your radar.
Have a plan B
If a limitation period is approaching, clients have some options to protect their position while they continue with settlement discussions.
One is to file (but not serve) a protective writ within the time limit. The writ can then be served at a later point in time if settlement discussions or other alternative dispute resolution processes fall through. If this option is pursued, practitioners must also remember to check and diarise the time limit for serving the writ and if necessary, agree in advance with the other party an extension of time for service of the writ.
Another option might be for the parties to the dispute to enter into a standstill agreement where it’s agreed that limitation periods are suspended or stood still pending the parties’ attempts to resolve the dispute. This means that if a claimant were to issue proceedings, the prospective defendant would agree not to rely on the passage of time occurring during the standstill period as providing a limitation defence to the proceeding. In Price v Spoor [2021] HCA 20 the High Court of Australia affirmed that parties can contract away the right to plead a statutory limitations defence if it is not contrary to the applicable statute to do so.
Typically, standstill periods have an agreed duration or end date, or may end if the agreement is terminated by either party providing notice in writing. Once the agreement has expired or is terminated, time will start to run again from the point in time the limitation period was suspended. A word of caution here: a standstill agreement should be entered into before the limitation period expires and will not usually save a claim which is already out of time.
Some clients may be reluctant to incur the legal costs associated with the preparation of a protective writ or standstill agreement when there is still a prospect of resolving the dispute by negotiation. However, in most cases this investment is likely to be worthwhile in comparison with the financial consequences of missing a limitation period and having a claim time barred.
Key risk management takeaways
- Provide clear written advice to the client about the grave consequences of a missed limitation period, and steps they can take to protect their position while settlement discussions continue. Their options may include filing a protective writ and/or entering into a standstill agreement to pause limitation periods.
- Time limits should always be front of mind from the outset of a matter. Don’t assume a matter will resolve. Advise your clients of the need to plan for contingencies, particularly where a limitation period is imminent.
- Diarise and set up multiple automated electronic reminders well in advance of approaching limitation periods. At least two sets of eyes in your firm should always be tracking and reviewing time limits.
- If you are not a disputes lawyer, don’t dabble in this area and refer your client for specialist advice.
