Other Areas of Law
Contingencies, possibilities, probabilities and limitation.
The question of when a cause of action arises can be difficult where the Claimant has entered into a transaction which gives rise to a contingency of a loss; is it when the transaction was entered or when the contingency arose? In claims for negligence the cause of action only arises when there is an actual loss. In Venulum Property Investments Limited v Space Architects and others  EWHC 3948 (TCC) Edwards-Stuart J. suggested a “simplistic approach” for resolving the difficult question of when such a loss occurs.
Venulum entered into a conditional contract to buy development land on 7 September 2006. The contract became unconditional if planning permission was obtained before 31 December 2006. Planning permission was granted on 1 November 2006. It later transpired that the plans used to obtain planning permission were defective. Proceedings were not issued until 31 October 2012, by which time the vendor had ceased to exist. The claims against the other parties to the development would be out of time if the causes of action against them arose when the contract was made but would be in time if the causes of action accrued when the contract became unconditional.
The Defendants applied for summary judgment and, having reviewed the authorities, the judge said that:
“A simplistic approach to the problem…might be to ask whether at the time of entering into the relevant transaction the occurrence of the contingent liability was a probability or only a possibility”
The judge suggested that where the arising of the contingency is probable the loss and the cause of action arise when the transaction is entered into (e.g. as in Sephton and Axa). Where the contingency is merely possible the loss only arises when the contingency does (e.g. as in Sephton).
The judge considered that as at 7 September 2006 it was probable that the planning permission condition would be satisfied. Against his instincts, however, the judge did not give summary judgment. There was no evidence that the defective plans had diminished the value of the Claimant’s rights and the judge did not accept the Defendants’ submission that it was self-evident that there was a loss.
The Defendants’ disappointment may have been eased by the condition on which the Claimant was allowed to continue its claim: it must pay an amount sufficient to cover the Defendant’s pre-trial costs of £450,000 into court.
Whether or not the judge’s “simplistic approach” finds favour in later cases remains to be seen, especially where a possibile contingency approaches a probability.
LATEST ARTICLES[View All News]