When does time start? The High Court clarifies the operation of limitation periods to actions in negligence for economic loss

The High Court of Australia recently handed down the significant decision of R Lawyers v Mr Daily [2025] HCA 419. The Court has provided clarity on when a cause of action in negligence accrues for claims of pure economic loss. 

Background

The case concerned a binding financial agreement (BFA) entered into by a couple under section 90B of the Family Law Act 1975 (Cth.) (FL Act). Section 90B of the FL Act allows people contemplating entering into marriage to reach agreement as to how property and finances are to be dealt with in the event of separation. In 2005, Mr Daily engaged R Lawyers to advise him and prepare a BFA prior to his marriage to Ms Daily. In accordance with section 90B, the BFA made provision for how the property and finances of the couple were to be divided in the event that the couple split.

In 2018, Mr and Ms Daily’s marriage ended. Ms Daily sought to have the BFA set aside on the basis that it was void for uncertainty. Mr Daily joined R Lawyers to the proceeding, seeking damages for the negligent drafting of the BFA should it be set aside for uncertainty.

R Lawyers’ pleaded that Mr Daily’s claim against it was statute barred on the basis that his cause of action accrued at the time he married Ms Daily. Mr Daily contended that his cause of action against R Lawyers accrued on the date that the marriage ended.

The trial judge was satisfied that the BFA was void for uncertainty, and made an order setting it aside. The trial judge also held that R Lawyers had breached its duty to take reasonable care in advising Mr Daily and drafting the BFA, and agreed with Mr Daily that the cause of action accrued “at the earliest” when the marriage ended. On that basis, the cause of action was not statute barred. R Lawyers appealed against the trial judge’s finding on the limitation period. The Full Court of the Federal Circuit and Family Court of Australia dismissed its appeal and upheld the trial judge’s findings that the claim was brought within time.

Key issue

The key issue before the High Court on appeal was when Mr Daily’s claim in negligence against R Lawyers accrued. In order to determine when time started, the High Court had to determine when Mr Daily sustained loss and damage referrable to the breach. R Lawyers contended that Mr Daily’s loss occurred when he married Ms Daily. Mr Daily contended his loss occurred when he separated from Ms Daily. If R Lawyers contention was correct, the claim against it would be statute barred by reason of the six year limitation period for claims founded upon tort commenced in South Australia.

High Court’s findings

The High Court confirmed the lower courts decision that the cause of action in negligence against R Lawyers did not accrue until Mr and Ms Daily separated, at the earliest, and therefore held that the claim was not statute barred. In their joint judgement, Chief Justice Gageler and Justices Jagot and Beech-Jones applied the reasoning in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 (Wardley) and held:

1. Applying Wardley, in determining when a loss is first sustained, it is critical to identify the nature of the interest infringed upon.
2. A BFA defines rights and obligation enforceable upon separation. The rights and obligations do not have an effect on the parties at the time of marriage.
3. Mr Daily’s interest that was infringed upon as a result of R Lawyers’ negligence was his interest in securing a BFA not liable to be set aside.
4. It is impossible to determine whether a BFA is liable to be set aside until the marriage ends. As such, his loss did not occur until the marriage ended. 

Crucially, their Honours held that it could not be inferred that Mr Daily suffered immediate damage as a result of entering into the BFA. The High Court acknowledged that in many contexts it will be inferred that a party who retained a solicitor to draft and advise upon an agreement that was found to be void and ineffective suffered loss or damage when that agreement was purported to be executed. However, this finding is not inevitable and will depend on the factual and statutory context. 

Takeaways for insurers

This case provides useful guidance on the assessment of limitation periods in claims for economic loss in negligence. In particular, in confirming that the loss suffered by negligently drafted BFA’s does not occur until a marriage ends, the High Court has limited the ability of defendant legal practitioners to rely on limitation periods. The decision raises the possibility of further claims which previously may have been considered statute barred. For some lawyers drafting BFAs, a potentially important consideration is whether or not they have sufficient run-off cover.