March 24 2011

Limitation Act 2010

What effect will this new legislation have on business? Limitation laws prevent certain legal claims being brought against a person or company after a defined period of time. They provide a defence against old claims and give certainty in relation to legal liability for past events.

This has important ramifications for businesses, particularly in relation to how long records should be kept for past clients and customers.

On 1 January 2011, the Limitation Act 2010 came into force, repealing the Limitation Act 1950. Attorney-General Christopher Finlayson considers the 2010 Act to be “clearer and easier to apply” than the old statute.

The 2010 Act only applies to claims for acts or omissions after 31 December 2010. Despite being repealed, the 1950 legislation will continue to govern a claim before that date, provided the claim is brought against the relevant person or company by the later of either 15 years from the date of the act or omission, or five years after the new Act comes into force.

Major features of the new legislation are:

  • It provides for a limitation period of six years after the act or omission for most ‘money claims’, which is a claim for monetary relief.
  • The concept of ‘late knowledge’ is introduced. If you do not discover your claim before the end of the relevant limitation period, you have three years from when you discover the claim to issue proceedings. There is however, a 15 year absolute ‘longstop’ by which all claims must be brought whether or not the person knows they have a claim.
  • It permits parties to contract out of, or modify, the terms of the Act. This means that businesses and individuals should be cautious when negotiating and signing agreements as to how long a potential claim in relation to the contract could persist, and for how long they should retain records of the events.