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Beware of Limitation Periods: Supreme Court clarifies time periods for litigation claims

In a midnight deadline case, there is a complete undivided day following the expiry of the deadline, which should be included when calculating the limitation period. It is, therefore, crucial that limitation issues are considered at the outset of any potential claims.

The Supreme Court has reconfirmed the importance of not leaving issuance of a claim to the last minute in the recent case of Matthew v Sedman [2021] UKSC 19 heard before The Supreme Court, it was ruled that where a cause of action accrues from the stroke of midnight, the following day directly is to be included in the calculation time of the limitation period. Practitioners should be aware that failure to do so gives rise to a claim in negligence or breach of contract.

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The Facts

The Supreme Court found in favour of the defendants who were accountants and former Trustees of the Evelyn Hammond Will Trust until their retirement in August 2014 against the claimants who are the current trustees.  The trust had a shareholding in Cattles Plc and managed to acquire the Welcome Finance Services Limited, also known as “Welcome” in 1994.

Cattles published an annual report in 2007 which had included a right issue prospectus which had released to potential investors in April 2008. The FSA subsequently held that the information contained in the both the 2007 annual report and 2008 prospectus contained misleading information. As a result, trading in Cattles plc’s shares was later suspended in April 2009 and in December 2010 both Cattles and “Welcome” commenced proceedings for court-sanctioned schemes of arrangement.

The court approved the Welcome Scheme in February 2011 which included the provision of claims to be made by shareholders. As such, the scheme of arrangement required any claims to be submitted on behalf of shareholders to the administrators accordingly in time by Thursday 2 June 2011 and before midnight. A claim was made too late by a shareholder on 3 June 2011 and since the claimants failed to submit claims before the Bar Date, thereby prevented them from claiming under the Welcome Scheme.

The Claim

For this matter concerning the claim in the Cattles Scheme, the claimants accordingly issued proceedings against the former trustees alleging both negligence and a breach of trust on Monday 5 June 2017.

Under the Limitation Act 1980, actions brought in contract, tort and breach of trust is time-barred after the expiration of six years from the date on which the cause of action accrued.

The Judgment

The Court ruled that it was common ground before the judge that the cause of action had in fact accrued during the day namely a nanosecond after the stroke of midnight on Saturday 3 June 2017, thus the claim ought to have been discounted for limitation purposes. Following the decision of Pritam Kaur v S Russell and Sons [1973] QB 336, it was established that where a cause of action accrues part way through a day, that day should be excluded when calculating the relevant time period for the purposes of limitation as the law simply does not recognise segments of individual days. Simply put, it is intended to prevent segments of the day to be counted as a whole day, where it could prejudice the claimant by interfering with the time periods stipulated in the Limitation Act 1980.

In reaching this conclusion, the judge upheld the decision by noting this as a straightforward matter of calculating six years from the date the cause of action arose. Given here in this case, the six year period ended on Friday 2 June 2017.

Since the cause of action arose on the stroke of midnight on 3 June 2011, it would be considered prejudicial to lengthen the statutory limitation period by a whole day. Therefore, the Welcome Claim was brought out of time.

Download the judgment

What is a limitation period?

The law sets out deadlines for bringing legal claims, which are referred to as limitation periods. The purpose of limitation periods is to prevent legal claims from being brought too long after the cause of action accrued. The length of the limitation period varies with different types of legal claim.

Why is limitation in litigation important?

Limitation is not something that should be ignored. Where a party has a strong case, but the limitation period has expired, the claim will be likely to fail. Even in unusual circumstances, where a party is prevented from issuing its claim in time for reasons beyond its control, the court has no discretion to extend the limitation period in this type of claim. It is, therefore, crucial that limitation issues are considered at the outset of any potential claims.

When does time start running on a claim?

Once the cause of action has accrued, the time for bringing a legal claim will start to run and the limitation period will begin. In order to stop time running before the expiration of the limitation period in relation to a particular cause of action, you would need to either issue a claim form at Court or enter into a standstill agreement with your opponent.

What happens after the limitation period expires in litigation?

If the limitation period expires before you have issued a claim form or entered into a standstill agreement, then your claim will be time-barred. This means that if you begin your legal claim after the limitation period has expired, the defendant will be able to raise limitation as a complete defence to your claim (regardless of how strong a claim it may otherwise be).

The implications of leaving service of a claim form until the last minute

Justice Nicklin reiterated that it is very “unwise” for any Claimant to adopt a non-engagement approach, which as in this case, can cause your claim to be dismissed. Justice Nicklin also noted that, as long as defendants do nothing to mislead or obstruct, they can hardly be criticised if they decided to follow Napoleon’s advice ‘not to interrupt an enemy when they were making a mistake’, thereby restating the argument from Woodward -v- Phoenix healthcare Distribution Ltd [2019] EWCA Civ 985[44-47] that there is no duty on a defendant to warn a claimant about failure to validly serve a Claim Form.

This judgment serves as a stark reminder, to both litigants in person and solicitors alike, that strict adherence to the CPR is vital and the consequences of failing to do so can be fatal to any litigation, which is why you should instruct specialist litigation solicitors. Had the Claimant done so in this matter and the solicitor then failed to serve the Claim Form, there would be strong grounds for a professional negligence case which would enable him to seek damages from them.

You can read the full judgment here.

My solicitor failed to advise me about time limits

It is crucial for practitioners to consider limitation issues as soon as instructed in order to prevent the possibility of a claim being time-barred.

If you have been inadequately or negligently advised by a solicitor, barrister or any other professional adviser in relation to a potential claim, then you may be able to recover any losses in a claim for professional negligence against the firm or individual providing the advice.

Our professional negligence team can assist by assessing your case and advising you on the next steps.

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LIMITATION ACT 1980 – WARNING

The Limitation Act 1980 sets out strict statutory deadlines within which you must bring litigation claims. Your legal rights will become irreversibly time-barred if you fail to take legal action (or defend a claim on time). Therefore, you should seek specific legal advice about your legal dispute at the very first opportunity so that you understand the time you have left. Failure to take advice or delay in taking action can be fatal to your prospects of success.