In its recent decision in Matthew & Others v Sedman & Others the Supreme Court found that where a cause of action accrued at midnight the following day should be included in the calculation of the six-year limitation period under the Limitation Act 1980.
Background
The appellants were the trustees of a will trust and had, in August 2014, replaced the respondents who were partners or employees of an accountancy firm. The trust held ordinary shares in Cattles plc (Cattles) which had acquired Welcome Financial Services Ltd (Welcome). Following a finding by the Financial Services Authority that information published in an annual report by Cattles had been misleading, both companies commenced proceedings for court-sanctioned schemes of arrangement. In February 2011, the court approved both schemes each of which included a provision for claims to be submitted by shareholders.
The trust had a claim in both schemes and the respondents subsequently made a claim in the Cattles Scheme. In relation to the Welcome Scheme, any claim had to be submitted on or before the "Bar Date" and it was common ground the Bar Date was Thursday 2 June 2011. Therefore any claim could be made up to midnight on Thursday 2 June 2011. However the respondents did not make a claim by this date and the appellants commenced proceedings by issuing a claim form on Monday 5 June 2017, alleging negligence, breach of trust and breach of contract.
Applying limitation periods
Under English law, limitation provides that claims cannot be brought after a certain period of time has elapsed. Claims that are brought after the expiry of the relevant limitation period are said to be “time barred”, a complete defence to the claim. In these proceedings, the limitation period for each cause of action is set out in the Limitation Act 1980 as follows:
- Sections 2 and 5 provide actions founded on a tort, such as negligence, and actions founded on contract should not be brought “after the expiration of six years from the date on which the cause of action accrued”.
- Section 21 provides for actions in respect of trust property. The relevant provision in subsection (3) stipulates that an action by a beneficiary in respect of any breach of trust should not be brought “after the expiration of six years from the date on which the right of action accrued".
High Court Judgment
The respondents applied to strike out the appellants’ claim in relation to the Welcome Scheme on the basis it was time-barred under the Limitation Act 1980. The appellants contested this, arguing that Friday 3 June 2011 should be excluded from the calculation of the six-year limitation period. If that day was excluded the limitation period for the appellants to bring the claim would expire at the end of Saturday 3 June 2017. As this is a weekend day when the court office is shut, the final day for issue would be Monday 5 June 2017 and the action would not be time-barred.
In the High Court, Judge Hodge QC granted the respondents’ application ruling that if a claim arose during the course of a day then that day is excluded for the purposes of assessing the limitation period. Otherwise “the claimant would not have a full six year period within which to bring his cause of action”. However the Judge distinguished the position where the cause of action arises at the very first moment of a day. Relying on the decision in Glemini v Moriggia, the court found a claimant could bring a claim at any point during that day and excluding it from the calculation of the limitation period would give the claimant an extra day beyond the statutory period.
The Judge concluded that the appellants’ cause of action had arisen at the first moment of Friday 3 June 2011 and that day should be included when calculating the limitation period. On this basis, the last day for issuing the claim was Friday 2 June 2017 and the claim form issued on Monday 5 June 2017 was time-barred. The Judge granted the respondents summary judgment on their Limitation Act defence but gave the appellants permission to appeal on the issue of whether 3 June 2011 should be included in the limitation period calculation.
Court of Appeal Judgment
The Court of Appeal dismissed the appellants’ appeal. It was accepted in cases where the cause of action accrued part-way through a day, that day is to be excluded for limitation purposes. However, in the leading judgment, Lord Justice Irwin did not agree the appellants’ cause of action had arisen at the first moment of Friday 3 June 2011. He concluded that the midnight deadline “provides a categorical indication that the action accrued by that point in time”, rather than accruing on the day following the deadline.
The Court of Appeal highlighted there is a discrete category of cases which could be termed “midnight deadline” cases. These are distinct from cases where a cause of action accrues part-way through a day. On this basis, the Court of Appeal concluded 3 June 2011, being the day after midnight, should be included in the calculation of the limitation period and dismissed the appeal.
Supreme Court Judgment
The appellants appealed again to the Supreme Court on the issue of whether Friday 3 June 2011 should be included in the calculation of the six-year limitation period.
The appeal was unanimously dismissed. In the judgment, Lord Stephens preferred the view that the cause of action accrued at midnight, and not after, but concluded that "whether the cause of action accrued at the expiry of 2 June 2011 or at the very start of 3 June 2011 there is no significant difference, in that 3 June 2011 was for practical purposes a complete undivided day".
The Supreme Court also recognised the general rule that the day of accrual of the cause of action should be excluded as “the law rejects a fraction of a day”. However this reasoning does not apply to a “midnight deadline” case and the Supreme Court found there is no authority to exclude a whole indivisible day. Excluding that day in these cases would make the limitation period six years and one complete day, distorting the statutory limitation period and prejudicing a defendant.
Conclusion
The Supreme Court decision has provided clarity on the calculation of limitation periods under the Limitation Act 1980 in “midnight deadline” cases. While the difference highlighted between this category of cases and the general rule to exclude the day on which a cause of action arises seems reasonable, the case highlights care must be taken to carefully check when limitation periods will be deemed to have started. Parties involved in disputes, and their lawyers, would be well-advised to exercise caution when calculating limitation and ensure court proceedings are prepared and issued in good time before the deadline.
Lorna Sleave
Edward Cummings