Bermuda: Heads Up, LADS!

Last Updated: 1 March 2017
Article by Andrew A. Martin

In a recent Supreme Court decision the Chief Justice has made an important ruling with potentially wide implications. The case concerns the time limit for bringing a claim in negligence against a party with whom the claimant is also in a contractual relationship. The decision is of particular interest to Lawyers, Accountants, Architects, Doctors, and Surveyors (the "LADS") but also anyone else who makes their living by providing professional advice to clients.

The effect of the decision is that a claim can be brought against one of the LADS (or other professional) in negligence independently from any claim for (negligent) breach of contract. The time limit for bringing a claim in contract and negligence is six years, but the date on which the time starts running for each type of claim may differ significantly.

The Limitation Act 1984 provides a time bar defence against stale claims. The time limit for bringing a claim in contract and tort is six years from the date that the relevant cause of action arose. The time limit can be extended in special circumstances, none of which arise for discussion here.

Accrual of a cause of action

A cause of action "accrues" when all the necessary elements of the claim have occurred. For a breach of contract, this is normally the date on which the contract is breached. For negligence, this is when both a breach of duty of care has occurred, and a measurable and foreseeable loss has been sustained as a result of that breach. (It is relevant to note that this does not apply to claims in torts where no proof of loss is required, like defamation, trespass and nuisance.)

In English law it was generally held that when a client relies on a lawyer's faulty advice, the loss occurs at the date of the reliance on the advice. Bermuda law has to date followed that line of thinking.

However, in recent years, the English position on the date for the accrual of a cause of action in negligence has evolved. There have been a number of cases in the last 20 years in which the English court has held that where the negligence gives rise to a contingent loss (ie where the consequence may not necessarily give rise to a financial loss) the limitation period does not start to run until the actual financial consequences are sustained. This may be many more than 6 years after the actual reliance on the bad advice. For example, in a case where the security for a loan has been negligently drawn, and the security is ineffective, the court has been prepared to accept that the loss does not occur until reliance is placed on the enforcement of the security, and the creditor client (eg a bank) recovers less than he (or it) would have received had the security been valid.

This means that even though there would be no claim for a breach of contract after 6 years from the date that the client relied on the faulty advice, there may still be an independent claim in negligence long after the six years has elapsed when the claimant actually suffers foreseeable financial loss as a result of the negligence. This could be when the security turns out to be defective and unenforceable, and instead of exclusively recovering the value attributable to an asset which was subject to the faulty security instrument, the secured creditor has to share that value pro rata with all the other unsecured creditors. The time limit for bringing the action would be 6 years from the date of the recovery, not 6 years from the date of the reliance on the negligent advice.

The contract "rule"

In the 1980's, in a case arising from Hong Kong, the Privy Council expressed the opinion that where parties have entered into a contract the parties' mutual obligations in tort cannot be any greater than those to be found expressly or by necessary implication in their contract, including any limitations of action. This statement was not strictly part of the decision, and so is an obiter dictum, and not binding on other courts.

However, the Bermuda Court of Appeal in White v Conyers Dill & Pearman [1994] LR Bda 9 applied the dictum of the Privy Council as an integral part of its own decision in a subsequent case in which a former client asserted a claim for both breach of contract and negligence against his lawyers. The Court of Appeal upheld the first instance judge's decision and struck out the claim on the basis that a) more than 6 years had elapsed from the date the (allegedly) faulty security document in that case had been drawn up b) the fact that there was a contract meant that there could be no independent claim in tort and c) that even if there was an independent claim, the relevant date was the date of reliance on the advice and the execution of the faulty document, and so the six years had run from that date.

This became the conventional view, and has been applied several times in cases over the years since it was decided in 1994. This analysis has featured in countless opinions on Bermuda law since then which have been provided by eminent Bermuda lawyers to foreign courts. The general approach has been that where there has been negligent advice under a professional services contract (usually against one of the LADS), the time for bringing the claim is 6 years from the date on which the advice is given, or the document reflecting the advice is executed, or the negligent omission occurs.

It is also relevant to note that Bermuda has yet to pass a legislative amendment to extend the limitation period where "latent" damage was in fact sustained as a result of a negligent act or omission, but could not have been discovered until after the limitation period has run (eg in a defective building design).

A new way?

Recently, in Medeiros v Island Construction Ltd and Others [2016] SC Bda 103 Civil the Chief Justice has held that the "rule" in the Court of Appeal's decision has been misunderstood and misapplied. He held that a claimant has the ability to choose whether to sue for breach of contract or negligence and that he may use the type of claim which is most advantageous to him, especially if it preserves a claim in tort would otherwise be barred. He applied an English decision from the House of Lords (now Supreme Court) decided both after the Privy Council decision and a year or so the Bermuda Court of Appeal's decision. That case decided that a claimant may make a claim in contract or in tort, whichever one is the more advantageous, and may take the benefit of any difference in the extension of the time limit for bringing the claim. The Chief Justice agreed, and said that he was not bound by any "rule", and that the Bermuda Court of Appeal's decision was in any event not binding on him.

Therefore when a former client sues one of the LADS for negligent advice, the present position seems to be that the claim will not be excluded by the contractual six year "rule", but the former client may wait until actual loss is suffered before the cause of action accrues, and may measure the time limitation period for bringing a claim as six years from the date the loss is suffered, not just the date of the contractual breach, or the reliance on the advice.

What does it mean?

This has some significant potential implications. For example, where a lawyer has drawn a defective deed of conveyance or mortgage, the client who discovers that the deed was negligently drawn may wait until he or she has suffered loss flowing as a result of the negligence. This may only arise when the client attempts to sell the property and suffers loss because the deed has been improperly drawn and the conveyance cannot be completed or there are consequential losses which flow as a result; or, in the case of a lender, the mortgagee may wait until such time as there is a default on the payment of the mortgage, enforcement proceedings are taken to obtain possession and sell the property and when the defect in the deed becomes apparent, then the mortgagee suffers actual loss. In the case of property transactions, this could take many years to emerge.

Other examples might be when an architect has designed a building negligently, and the financial consequences of remediation work are not felt until years later, after the 6 year period for breach of contract has run; or, perhaps when reliance on an audit report trigger financial consequences which are not incurred until after the 6 year period has run for breach of contract; or, perhaps negligence in the performance of surgery, or medical treatment, the effects of which do not give rise to loss until much, much later, or faulty survey resulting in a defect in title, which only emerges when the owner tries to sell the property.

Is the Chief Justice right?

Well, Yes and No. (It is a legal question, after all.)

The "Noes" might say that he has misapplied the doctrine of precedent and has ignored the Court of Appeal's decision, which is binding on him, even if it was based on an obiter dictum of the Privy Council. He has also declined to follow several decisions of co-ordinate jurisdiction at the first instance level, which he is supposed to do, unless there was a distinguishing feature of the case, which there does not appear to be, and he did not suggest that there was. But these are lawyers' points.

The "Ayes" would say that the decision is correct in law because it brings Bermuda law into line with the prevailing English law precedent, and removes an anomalous distinction between English law and Bermuda law, the gist of which appeared only to favour the LADS, not the people whose interests they were supposed to serve. Right or wrong on the doctrine of precedent, it would seem likely that the Privy Council would (on any appeal from this decision) apply the modern English rule anyway.

Does it matter?

Yes, not just to the LADS, but their respective professional indemnity insurers. It is important to be able to draw a line under potential claims after a measurable period, especially when witnesses' memories and physical evidence may deteriorate over time, and the ability to produce a witness may be difficult or impossible, if they have (for example) left Bermuda.

The policy reason for having a time limitation rule to bar claims being brought after a certain period is to achieve certainty and finality. The English case law, which will be applied in Bermuda, has now developed in such a way that it is not always easy (or sometimes even possible) to say when a loss has occurred, and therefore whether the time period has begun to run. This is unsatisfactory for both potential claimants and potential defendants.

As things stand, at one end of the spectrum, the court might hold that cause of action accrued when some notional, theoretical but unquantifiable damage has occurred on the execution of a defective mortgage, as in the early English cases; this means that time starts to run from that date. Or, at the other end of the spectrum, applying more recent English case law, the loss might be held to have occurred only when enforcement of the same mortgage reveals a defect, perhaps after many years of satisfactory payments, when a real financial loss has been sustained. In that case, the time period for bringing the same negligence action would not start to run until then.

This will likely lead to arbitrary results, based on the court's assessment of the fact pattern of a particular case, and this will undermine confidence in the fairness and consistency of application of the legal principle. Until there is a decisive case which settles the approach, or until statute intervenes, there is likely to be considerable uncertainty, and legal advice on the point will have to be qualified.

What to do?

Where there is a contractual relationship, it is possible to modify the extent of liability under it, and to provide for specific limits to apply as to quantum of liability or the time within which a claim may be brought for breach of duty, in contract or in tort or both. Most professional services contracts are in writing or evidenced by terms in writing.

Therefore, it would be sensible in many cases to make a simple addition to the contract for provision of professional services by one of the LADS, (or others in a similar relationship) to state that any claim for breach of contract or loss arising from any negligence must be brought within 6 years of the date on which the relevant advice is given or breach of duty occurred. This will be adequate to bring clarity and certainty to the date when time starts to run, irrespective of when the loss is sustained.

Such a term would not be unreasonable, in light of the nature of the relationship, the fees charged for the services, and the risks borne by the professionals, who are generally required to be insured. It may be a negotiation point for some clients, but really (I would suggest) most reasonable people do not expect to be able to sue their former adviser more than 6 years after the advice is given, or the professional services are rendered. In most cases, the reliance on professional advice, or services, is immediate, so the 6 year limit will normally apply; it is only in circumstances of a contingent or potential financial loss that an express contractual limitation will make a difference.

The Supply of Services (Implied Terms) Act 2003 is not engaged because it does not reduce the scope of the duty, just the time period within which the negligence claim can be brought.

Clarity in the contract would avoid conflict, uncertainty and expense because such a term would be clear, reasonable and in almost all cases appropriate. The interests of both clients and professional advisers would be served.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions