Limitation periods set out time periods within which legal proceedings must be issued. Observing limitation periods is of utmost importance as if proceedings are not issued within an applicable limitation period the relevant claim will be 'statute barred' which will afford a defence to the claim and bar recovery.
Statute of Limitations
The main piece of legislation in Ireland governing limitation periods is the Statute of Limitations Act 1957. It sets out the limitation periods for various causes of action including:
- Six years for simple contract claims (such as a loan agreement that has not been executed as a deed); and
- 12 years for an action brought in respect of an instrument under seal (ie a Deed).
Limitation periods generally start to run on the date on which the cause of action accrued. Accrual means the date on which the cause of action is complete and it becomes possible to issue proceedings / sue so for example:
- In the case of a demand loan the cause of action would accrue when a demand is made;
- For other loan agreements – the issue of when the right to receive the money accrued must be determined based on the wording in the loan agreement (which can vary);
- Most guarantees provide that a Guarantor will pay the guaranteed sum 'on demand' so the cause of action would accrue when the demand is made.
Civil Liability Act
In the case of deceased persons, regard must be had to section 9(2) of the Civil Liability Act, 1961. Section 9(2) provides that no proceedings which have survived against the estate of a deceased person shall be maintainable unless proceedings were issued within the relevant period of limitation and were pending at the date of death or were commenced within the 'relevant period' [in this regard relevant period means the period of limitation prescribed by the Statute of Limitations or any other limitation enactment] or within the period of two years after the date of death, whichever period first expired.
The key issue to be determined is whether or not there was a cause of action surviving against the deceased at the date of death.
High Court cases
If a right of action against the deceased only accrued after the date of death the 'ordinary' limitation period (usually found in the Statute of Limitations Act, 1957) will apply to the claim. An example of this is the case of Bank of Ireland v O' Keefe  IR 47. It was held by the High Court that where a demand was made on a guarantee after the death of the deceased, the ordinary longer limitation period contained in the Statute of Limitations Act 1957 applied (rather than the 2 year limitation period referred to in s.9(2) of the Civil Liability Act).
A case which could be contrasted with Bank of Ireland v O Keefe is First Southern Bank Limited v Maher  2IR 477 where it was held that, where a contract provided that a default in making an agreed instalment payment triggered an obligation to repay the entire amount of a promissory note without the need for a further demand, the cause of action arose soon as default was made on the first instalment (30 June 1981). It was on that date (which was prior to the date of death on 21 July 1983) that the monies became due and owing and the limitation period began to run against the plaintiff. As proceedings had not been brought within two years of his death, in accordance with section 9(2), the claim was statute-barred.
It is also of note that section 9(2)(b) of the Civil Liability Act 1961 makes no reference to any possible extension to the two-year limitation period on grounds of acknowledgement, part payment, disability or concealment. In Bank of Ireland v O' Keefe the High Court stated that an acknowledgement could not give rise to an extension to the two year limitation period, however the law does not appear to be certain on this point at present.
Given the short limitation period set out in section 9(2) of the Civil Liability Act, 1961 lenders should always pay particular attention to limitation periods in the case of deceased borrowers.
For more information, please contact Pat Nyhan or your usual contact in Beauchamps.