Will COVID-19 affect the time limit to issue a legal claim?

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Despite scaled-back court services, the statutory limitation periods for legal claims remain unchanged 

The COVID-19 crisis has prompted the Australian Government to introduce unprecedented measures to protect the economy, while it focuses on saving lives. Significant spending. Scaled-back court services which have disrupted trials and hearing schedules. An increase in statutory demand thresholds and the accompanying response time. Personal liability laws for insolvent trading have also eased.

But even with various sectors going into hibernation, not all legal processes have been relaxed. For example, despite reduced court services, you can still file a legal claim. The clock continues to tick on limitation periods for legal claims, just as it always has.

What are the restrictions on court services due to COVID-19?

In mid-March 2020, the NSW Government announced restrictions for State-based courts and tribunals. In addition to the standard limits around international travel and flu-like symptoms, the following restrictions now apply:

  • Court attendances are limited, and video conferencing is used wherever possible
  • Suspension of jury trials. Only trials in which the jurors already have been selected and empanelled will continue

The Federal Court of Australia implemented similar restrictions, employing video link technology and telephone conferencing as widely as possible. It has also adjourned some matters to try to manage the workload.

The Federal Court issued a Special Measures Information Note on 31 March 2020 which provided for:

  • Remote registry services
  • Electronic filing of documents
  • Remote hearings, other than in truly exceptional circumstances

All court systems remain focused on ensuring hearings are fair, and cases proceed as efficiently as possible.

What’s important to understand is that for both NSW and Commonwealth courts, registries remain open. They will continue to accept documents for filing, including new legal claims.

But why does this matter? We’ll explain.

What you need to know about limitation periods

Many legal claims have limitation periods.

At its most basic, a limitation period is a time limit in which you can start legal action. Once that time limit has expired, you might be permanently barred from pursuing your claim, even if it has excellent merit.

Different types of claims have different limitation periods.

Under NSW’s Limitation Act, (also known as a statute of limitations), some legal actions are limited to six years. That means you have six years to file a claim in a court. The time starts from the date on which the possible legal action (the cause of action) first arose. Actually determining that date can be tricky, and legal advice should be taken to understand when the cause of action first arose.

In a commercial and business setting, six-year limits apply to the most common causes of actions including:

  • Breaches of contract, for example under an indemnity clause, breach of warranty claim under a share sale agreement, or breach of a supply agreement
  • Breach of promises made to a court
  • Actions to recover money under legislation
  • Civil actions for negligence or some other loss in which damages can be claimed (torts), including breach of statutory duties such as breach of director duties

Limitation periods for deeds are different. Deeds can include:

  • Escrow deeds
  • Termination deeds
  • Settlement deeds
  • Other legal agreements which are labelled as, and meet the criteria for being, a deed. Not all agreements labelled a deed would meet the legal test for being a deed

For causes of action involving deeds, the limitation period in NSW is 12 years. In Victoria, the limitation period is 15 years.

Under the Commonwealth Corporations Act, there is a six-year limitation period for legal claims arising from a breach of director duties.

As we’ve previously explored, businesses may rely on frustration of contract due to the impact of COVID-19 to terminate a contract. You have six years from the date of the frustrating event to make a claim.

Time limits also apply for claims in other legal areas, which may be different to those stated above. As ever, determining the correct time limit will be a matter of looking closely at the facts of each individual case.

How the new arrangements may affect your legal claim

The upshot is this.

Because of COVID-19, your business may have taken a hit. Seeing a lawyer is perhaps your lowest priority while you furiously tread water, trying to stay afloat. All the while, your potential legal claim simmers away in the background.

Despite these difficulties and distractions, limitation periods remain the same. If you’ve had a potential claim that’s now a few years old, be careful, because neither the NSW nor Commonwealth Governments appear likely to tinker with the deadlines. 

It’s a fundamental lesson: don’t take your eye off the ball.

Can a court extend the time to claim if the limitation period has expired?

If a limitation period has expired, there are some circumstances in which a court may grant an extension of time.

Under the NSW Limitation Act, those circumstances include:

  • The person with the cause of action is under a legal disability; for example, they lack the mental capacity to bring a claim
  • The cause of action is confirmed by the person against whom the action exists  
  • Where there has been fraud and deceit
  • Where there has been a significant mistake

The NSW Limitation Act also imposes a 30-year limit on any actions in which extensions of time have been granted. But some claims have no time limits; for example, historical child sexual abuse claims.

Case law has set out other general questions for courts to ask when deciding whether to grant extensions of time. These include, but are not limited to:

  • Has the applicant done enough to convince the court to grant the extension?
  • Will justice be served if the extension is granted?
  • Is it possible to have a fair trial after so much time has passed?
  • What is the explanation for the delay? Is it satisfactory?
  • Will the respondent be prejudiced by the extension being granted?
  • Is there evidence of the prejudice the respondent may suffer?

Extensions of time are rare. If you’re nearing the end of your limitation period, it would be unwise to depend on an extension of time being granted. This is because if a court decides not to allow your application, it could be a costly gamble.

Respondents can defend themselves against legal claims by arguing that the limitation period has expired. If you’re responding to a claim, you’ll need to be aware of important dates so you (through your lawyer) can work out when the limitation period expires. Arguments of this type should also be included in your defence document (which is filed in the court).

What this means for you

If you have grounds for a legal claim, or even if you’re wondering whether you have grounds, you need to understand how the limitation period operates during the COVID-19 crisis.

It’s tempting to think that because our court system is restricted, the ticking clock is suspended for the duration of the crisis. But this isn’t so.

The courts are still functioning, and there has been no government intervention in regard to limitation periods under any legislation.

Limitation periods last for years, so maybe it’s not a big deal to you now. But if you’re approaching the end of the time limit and you haven’t commenced your claim, you’re at risk of missing out.

Now is the time to contact us for advice. Not every cause of action is straightforward. If there’s no specific event, but rather a collection of events, you’ll need legal advice to work out how much time you have.

Contact us to find out how we can help you preserve your right to claim.

Further information

For more information about how COVID-19 is impacting potential legal claims and their limitation periods, please contact:
Trevor Withane: trevor.withane@blackwattlelegal.com.au, tel +61 (0)418 717 001

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