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“On the stroke of twelve, the spell will be broken, and everything will be as it was before”

We all know that you cannot sue on a contract or tort after the prescribed limitation period has expired. This is usually six years after the right to sue has accrued. Subject to important exceptions (for which see our recent blog available here), after six years, broadly, the right to pursue a claim is gone. The result is that in many cases the start and end of the limitation period is the be all and end all issue for success or failure in proceedings.

That was the case in the recent action of Matthew & Others v Sedman and Others [2021] UKSC 19 (the judgment of which is available here) in which the Supreme Court considered both the start and the end of the limitation period in the, not uncommon, situation when a claimant’s cause of action accrues precisely at midnight as the clock strikes twelve.

When assessing a limitation period, the default position as set out in established case law is that time starts to run on the day after the cause of action accrues. The day on which the cause of action accrues is therefore excluded from the computation of the six year period. For example, if a breach of contract occurred part-way through 11 July 2016, a claimant would have until 23:59pm on 11 July 2022 to issue a claim for breach of contract against a defendant. However, for so-called “midnight deadline” cases which often arise within the context of professional negligence claims, and where the cause of action accrues at the stroke of midnight, should that day count as part of the limitation period or not? The Supreme Court sought to answer that important question.

  1. Recap of limitation periods

Limitation periods should be correctly calculated immediately upon any claim being considered. Get it wrong and the claim faces being time barred, enabling the defence to win despite the underlying merits.

So, what is a limitation period? A limitation period is a fixed period of time during which formal civil proceedings must be started. The general position, with respect to actions founded on tort or contract, is that a claim cannot be brought after the expiration of six years from the date on which the cause of action accrued. There are of course exceptions and it is possible for any limitation period to be extended by way of a standstill agreement between the parties. The date of the cause of action will vary depending on the nature of the claim. By way of example:

  • In contractual claims, s.5 of the Limitation Act 1980 provides that: “An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued”. For instance, if a contract is infringed at 3pm on a Thursday, general legal principles dictate that the limitation clock starts running the day after, on the Friday.
  • In negligence (i.e. tortious) claims, s.2 of the Limitation Act 1980 states that: “An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued”.
  • Where a claim involves an element of fraud, deliberate concealment of facts or mistake, the cause of action is postponed until the date on which the person has (or could with reasonable diligence have) discovered the fraud, deliberate concealment of mistakes. For more information on the postponement of limitation periods in cases of fraud following the Court of Appeal’s decision in Canada Square Operations Limited (CSOL) v Potter [2021] EWCA Civ 339, please view our recent article available here.
  1. Facts of the case

The claimants were trustees and beneficiaries of a trust, the main assets of which were shares in a company called Cattles Plc. The defendants were accountants of the trust (and former trustees until they retired during 2014). In 2007 and 2008, Cattles plc published an annual report and a prospectus which contained misleading information. Following the then FSA’s (now FCA) finding that the information in Cattles plc’s annual report and rights issue prospectus was misleading, proceedings were thereafter commenced under a court-sanctioned scheme of arrangement (“the Scheme”) in relation to Cattles plc and its subsidiary, Welcome Finance Services Limited.

It was expressly provided under the Scheme that claims had to be submitted “on or prior to the Bar Date (i.e. 2 June 2011)”. In other words, a claim had to be issued by midnight on Thursday 2 June 2011 for it to be made in time.

Nevertheless, the defendants (as trustees) failed to submit claims under the Scheme before the Bar Date, which resulted in the claimants being excluded from the Scheme. As a result, on Monday 5 June 2017 the claimants issued proceedings against the defendants for negligence and breach of trust. The defendants applied for strike out or summary judgment on the basis that the claim was time barred. In particular, the defendants argued that pursuant to the statutory six year limitation period, the last day for bringing a claim fell on Friday 2 June 2017. As more than six years had passed by the time the claim was eventually brought on 5 June 2017, the claim was effectively time-barred.

  1. Decisions of the High Court and Court of Appeal

The claimants argued that Saturday 3 June 2017 was the last day when the claim could be issued, and on that basis, it could validly be issued on the next working day, which was Monday 5 June 2017. However, both the High Court and the Court of Appeal determined that the limitation period had expired on Friday 2 June 2017, concluding that the claim was therefore time-barred. The High Court held that the cause of action had accrued right at the beginning of 3 June 2011. This meant that the claimants could have issued the claim at any time on 3 June 2011 (being the day after the Bar Date), and that consequently, that day was to be included in calculating the six year limitation period. The Court of Appeal subsequently upheld the High Court’s decision.

  1. Decision of the Supreme Court

The Supreme Court agreed with the previous rulings of the lower courts. It confirmed that, in “midnight deadline” cases, the following day should be included in the calculation of limitation as it remained a completely undivided day. In other words, this meant in the Supreme Court’s view that 3 June 2011 had to be included in the limitation calculation. As such, the claimants had the entire day on 3 June 2011 to issue a claim. Consequently, the Supreme Court ruled that the claimants had issued their claim too late and the claim was therefore time-barred, because the period expired “at the end of” Friday 2 June 2017.

  1. Practical implications

Prospective claimants should take stock of the ramifications of the Supreme Court’s decision, and be aware that when they are involved in “midnight deadline” cases, the day that starts immediately after midnight counts towards the limitation period.

Caution should be exercised however, as there is a distinction between on the one hand, cases where the cause of action accrues at midnight, in which case the day beginning at 00:01 will be counted when calculating the limitation period and on the other hand, cases where the cause of action accrues during the course of a day (not at midnight) whereby the day on which the cause of action accrues will not be counted when calculating limitation.

By way of example of the former scenario, where a cause of action for breach of contract accrues at midnight at the end of 10 July 2016, the limitation clock would start running on 11 July 2016 and the last day on which the claimant could bring a breach of contract claim would be 10 July 2022. In terms of the latter scenario, if a breach of contract occurred part-way through 11 July 2016, the remainder of 11 July 2016 itself would be ignored when calculating the deadline for bringing a claim. The limitation clock would start running on 12 July 2016 and therefore, the last day on which the claimant could bring a breach of contract claim would be 11 July 2022.

This case serves as a useful reminder of the importance of accurately diarising limitation periods at the outset of any case and seeking legal advice when in doubt as to how to calculate a limitation period. As this case has shown, getting the calculation wrong can result in a claim being time-barred.

If you have any questions on limitation periods, please contact David Greene, Oliver Bartholomew or any member of the Commercial Litigation team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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