Law Society v Sephton & Co

In Law Society v Sephton & Co, the House of Lords considered the issue of when a cause of action accrues for the purposes of the Limitation Act 1980. The Law Society sought to recover damages from the accounting firm Sephton & Co for negligently signing reports that failed to disclose the misappropriation of client funds by a solicitor, Andrew Payne. The Law Society argued that its cause of action accrued when it first suffered damage, which it contended occurred when it began making payments from its Compensation Fund to Payne's former clients. Sephton & Co argued that the Law Society's cause of action accrued when Payne first misappropriated client funds after relying on the negligent reports. The House of Lords held that a cause of action accrues when the claimant suffers "actual" and "relevant and measurable" damage. Mere exposure to a risk of future damage was not sufficient. The contingent liability incurred by the Compensation Fund did not amount to damage until a claim was actually made by a former client of Payne. The appeal was therefore dismissed and the cause of action was held to have accrued when the first claim was made in July 1996, outside the limitation period.

The key issue was determining when the Law Society's cause of action accrued for the purposes of the Limitation Act 1980. The House of Lords held that a cause of action accrues when the claimant suffers "actual" and "relevant and measurable" damage. Mere exposure to a risk of future damage was not sufficient. The contingent liability incurred by the Compensation Fund did not amount to damage until a claim was actually made by a former client of Payne. The appeal was therefore dismissed and the cause of action was held to have accrued when the first claim was made in July 1996, outside the limitation period.