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Midnight Deadline: Beware of the Limitation Period

Disputes / 12 October 2021

Limitation issues should be considered at the outset of any potential claim. A claim that falls outside the relevant limitation period will not be allowed to continue by the courts. A few reminders about limitation periods are listed below, along with details of the recent guidance provided by the Supreme Court on calculating the expiry of a limitation period.

What is a limitation period?

The purpose of a limitation period is to prevent legal claims from being brought too long after the cause of action accrued. The length of the limitation period will vary depending on the type of legal claim. For example:

— A claim for breach of a simple contract must be issued with the court within six years of the date on which the contract was breached; and

— a claim for negligence must be issued with the court within either six years of damage being suffered or three years from the date on which the claimant had the required knowledge to bring the claim and the right to bring the claim, whichever is later (subject to an overall limitation period of 15 years from the date of the negligence).

What happens after the limitation period has expired?

If the limitation period expires before you have issued a claim with the court or entered a standstill agreement, your claim will be time-barred. Beginning your claim after the limitation period has expired will mean that the defendant will be able to raise limitation as a complete defence to your claim irrespective of the underlying merits.

When does time start running?

This is the crucial question!

The Supreme Court gave guidance on this issue in Matthew and Others v Sedman and others  [2021] UKSC 19. In this case, the Supreme Court was required to determine the following question: if a cause of action accrues at midnight on a particular day, does the day that immediately follows count towards the limitation period or not? The facts of the case are as follows:

— The case involved the Evelyn Hammond Will Trust (the Trust). The Trust held shares in Cattles Plc, which had entered into a scheme of arrangement following the suspension of trading in its shares after the publication of misleading information in its annual report and prospectus;

–As a result of the misleading information, the Trust could have made a claim in the scheme of arrangement.

— The former trustees of the Trust did not make a claim in the scheme of arrangement within the required time period, being midnight on 2 June 2011;

— A claim was issued against the former trustees in June 2017 alleging that they had been negligent in failing to bring a claim in the scheme of arrangement within the required time period;

— It was common ground between the parties that the cause of action against the former trustees accrued a nanosecond after midnight on 3 June 2011.

The claimant argued that the limitation period should start to run from 4 June 2011 on the basis that the cause of action had accrued part way through 3 June 2011, and so 3 June could not be regarded as a complete day to calculate the limitation period. If the claimant’s argument were accepted, it would have meant that the claim against the former trustees had been issued in time.

However, the Supreme Court disagreed and held that time started to accrue from 3 June 2011, i.e. immediately after the expiry of the midnight deadline, on the basis that the limitation period had begun to run from the start of that day. The Supreme Court’s decision meant that the claim had been issued one day too late and was stuck out.

This is a helpful reminder of how important limitation periods are and the serious consequences of failing to issue a claim within the correct limitation period. If you have a claim approaching its limitation period, you should act now to ensure that the claim is not time-barred. If you are in doubt when a limitation period expires, contact our disputes team for advice.

 

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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email: mailinglists@greenwoodsgrm.co.uk

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