Assessing when a limitation period applies to a claim and substantiating loss: Lessons from R Lawyers v Mr Daily
The task of assessing whether a claim may have expired due to the application of a statutory limitation period and how to substantiate a loss claimed if there is a viable claim is not always straightforward.
In the decision of R Lawyers v Mr Daily [2025] HCA 41, the High Court of Australia clarified when a limitation period will start running for professional negligence and the evidence needed to substantiate a claim for loss where negligence has been established in a case involving a binding financial agreement.
Background
Mr Daily and Ms Daily (pseudonyms) met in 1996. Between 2002 and 2005, Mr Daily engaged R Lawyers to provide advice and to prepare a binding financial agreement (Agreement).
In 2005, Mr and Ms Daily signed the Agreement, stipulating their intent to “contract out” of Part VIII of the Family Law Act 1975 (Cth) (FLA) and to enter into a “binding financial agreement under s 90B” within Part VIIIA of the FLA. The intention was for the Agreement to regulate how property would be divided if Mr Daily and Ms Daily separated.
In September 2018, Mr Daily and Ms Daily separated.
In December 2019, Ms Daily sought to set aside the Agreement and sought an order under s 79 of the FLA for the alteration and settlement of property.
In 2023, the Federal Circuit and Family Court of Australia set aside the Agreement on two grounds.
First, the Agreement was void for uncertainty.
Secondly, since the time the Agreement was made, there were material changes to the caretaking of Mr and Ms Daily’s children, which would amount to hardship under s 90K of the FLA if the Agreement was not set aside.
The Court however upheld part of a claim brought by Mr Daily in negligence against R Lawyers for the advice it gave about the drafting of the Agreement, awarding $38,000 in damages.
Mr Daily appealed, seeking the balance of his claim against R Lawyers in negligence regarding the Agreement’s drafting.
The Federal Circuit and Family Court of Australia Appellate Jurisdiction allowed the appeal (remitting the balance for a further hearing at first instance), and rejected R Lawyer’s contention that Mr Daily’s claim for negligence was statute barred under the Limitation of Actions Act 1936 (SA) (Limitation of Actions Act).
R Lawyers appealed this decision to the High Court of Australia.
Issues for determination
Was Mr Daily’s claim barred due to the limitation period for bringing it having expired?
Had Mr Daily established compensable loss for his negligence claim beyond what had been ordered by the lower courts?
Court Findings
Mr Daily sued R Lawyers in contract and tort.
Under section 35 of the Limitation of Actions Act, Mr Daily had six years from the time each of the causes of action accrued to bring a claim against R Lawyers.
The High Court found that Mr Daily’s action in contract accrued upon breach of the standard imposed upon R Lawyers under Mr Daily’s contract of retainer and therefore became statute barred in 2011.
However, the High Court determined that time did not start to run for Mr Daily’s claim in tort until the point when damage was sustained, that is, it started running in 2018, when Mr Daily and Ms Daily separated and the Agreement failed to provide the protection it was intended to deliver.
The High Court said that a binding financial agreement does not alter property rights during a relationship. Rather, the terms of a binding financial agreement only become enforceable after separation, and through an order under section 90K of the FLA.
Accordingly, Mr Daily had not exceeded the statute of limitations in making his negligence claim, and R Lawyers’ appeal on this issue was rejected.
In doing so, it rejected R Lawyers’ argument that Mr Daily sustained loss and damage upon his entry into the Agreement.
The High Court also affirmed the findings of the primary judge that subject to the award of damages of $38,000 for Mr Daily’s legal fees, he did not suffer compensable loss because of R Lawyers’ negligence.
In reaching this conclusion, the High Court considered two questions.
First, what was Mr Daily’s claimed loss?
Secondly, did Mr Daily prove that he suffered loss?
What was Mr Daily’s claimed loss?
The High Court noted that Mr Daily’s claimed loss lacked clarity, and changed at different points throughout the proceeding’s history. Sometimes, the loss was framed as the loss of a particular outcome, while at other times, the loss was framed as loss of chance.
While this confusion was partly attributed to a misunderstanding of the Federal Circuit Court Appeal Division, the High Court ascribed this misunderstanding to Mr Daily’s case shifting to one of loss of opportunity.
The High Court found that My Daily’s claim would fail on either grounds, as Mr Daily could not prove this loss.
Did Mr Daily prove that he suffered loss?
Mr Daily argued that his loss could be calculated as the difference between the Court’s division of property and what he would have been required to pay upon separation pursuant to an enforceable financial agreement. He asserted damages could be assessed as at the date of Mr and Ms Daily’s separation, by undertaking a comparison of the position Mr Daily would have enjoyed but for the negligence of R Lawyers.
To prove his negligence claim, Mr Daily needed to prove that R Lawyers’ negligence caused his loss of a more favourable outcome. The High Court clarified that while this standard of proof is not one of certainty or precision, the onus is discharged by proving a substantial prospect of a beneficial outcome.
Mr Daily presented two counterfactual arguments.
First, that had R Lawyers advised him that the Agreement would not be enforceable if he and Ms Daily had children, he would not have proceeded with entering the Agreement.
Secondly, and in the alternative, had R Lawyers advised Mr Daily that the Agreement may be set aside due to changes in marital circumstances, he and Ms Daily would have agreed for the Agreement to be amended to survive a challenge under the FLA.
R Lawyers however provided evidence to the contrary. At the time of the Agreement’s drafting, R Lawyers told Mr Daily that he could not have a “bullet proof” agreement, and that there were five bases on which the Agreement could be set aside, including under section 90K of the FLA.
Mr Daily did not provide any evidence of what a non-voided binding financial agreement would have been. He failed to prove the substance of the terms of that agreement, how or why that agreement would not be set aside, and how it would have secured a better outcome than the position he found himself in after the Agreement was voided.
As a result the Court found Mr Daily was not entitled to damages beyond the $38,000 originally awarded as he failed to prove that he and Ms Daily would have entered into an alternative binding financial agreement that may not have been set aside under the FLA.
The High Court upheld R Lawyers’ appeal on this issue and determined that no more than $38,000 in damages was payable to Mr Daily.
Key Takeaways
This case shows that it can take consideration of the facts to determine how the law applies, particularly when assessing if limitations periods have expired and also what loss or damage may have been sustained, which may not always be straightforward.
In this case:
The statute of limitations for torts claims does not commence until damage is sustained as opposed to execution of an agreement
To establish loss in negligence plaintiffs must provide a court with evidence to support how a different situation would have occurred and the value of that situation (or loss) to them
Professionals defending a negligence claim need to ensure that they can produce contemporaneous evidence which supports the performance of their duties to an appropriate standard of care in order to avoid negligence findings against them.
Should you have any questions in relation to establishing if a claim is within our outside a limitation period or what loss or damage may have been sustained please contact:
Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au
Ben Wyatt
Principal Lawyer
T: +61 3 9611 0115 | M: +61 409 173 928
E: bwyatt@sladen.com.au
Jake Cole
Senior Associate
T: +61 3 9611 0112 | M: + 61 413 557 157
E: jcole@sladen.com.au
Chris Downes
Law Clerk
E: cdownes@sladen.com.au
