‘Midnight deadline’ decision highlights need to file court claims in time

In a landmark case, the court found that a case against trustees who missed a deadline for making a claim under a scheme of arrangement had not been filed in time, because the six-year limitation period included the first full day after the midnight deadline they had missed.

The Supreme Court said the day on which a cause of action accrues should generally be excluded from the calculation of a limitation period. If the cause of action accrues part-way through a day, that day would be excluded for limitation purposes. However, if the cause of action accrues at midnight (i.e. at the moment a day commences), that day is a complete day and the justification for excluding a fraction of a day from the computation of the limitation period does not apply.

Dispute resolution expert Michael Fletcher of Pinsent Masons, the law firm behind Out-Law, said: “The decision is relevant to all ‘lost litigation’ professional negligence claims based on a failure, often by lawyers, to issue a claim form before the end of the relevant limitation period, because limitation periods generally have a ‘midnight deadline’ of the type to which this decision relates.”

“It may also be relevant to claims against lawyers arising out of a failure to take the necessary step to serve a claim form once issued, since this is also something which has to be done before a midnight deadline under the Civil Procedure Rules. In such cases, there is a complete day immediately following the missed deadline in which a claimant could start a claim, and therefore time starts running on that day for the purposes of limitation,” Fletcher said.

The case was brought by the current trustees of a trust with a shareholding in now-defunct finance firm Cattles, which had published an annual report and rights issue prospectus in 2008 containing misleading information. After trading in the company’s shares was suspended, a scheme of arrangement was approved in 2011 in respect of Cattles and its subsidiary Welcome Financial Services.

Under the terms of the scheme of arrangement, the trust had a valid payment claim against Cattles and Welcome, and the then-trustees could have brought a claim up until midnight on 2 June 2011. However, they did not.

On 5 June 2017 the current trustees issued proceedings for negligence and breach of trust against the former trustees. The former trustees said the claim was issued out of time.

Both the High Court and Court of Appeal dismissed the negligence claim, agreeing that it was time-barred and that 3 June 2011 should be included in the six-year statute of limitation period. The Supreme Court agreed, saying in midnight deadline cases the complete day following the expiry of the deadline should be included in the limitation period, rather than the day-count commencing on the day after that.

“This is a pragmatic and sensible decision,” Fletcher said. “Had the court decided otherwise, claimants in these circumstances would in practice have six years and one day in which to bring a claim, rather than the six years laid down in the Limitation Act. For defendants facing professional negligence claims, it is a reminder of the power of limitation arguments. For claimants looking to bring professional negligence claims, it highlights once again the importance of seeking early advice, including a careful early analysis of how long you have in which to bring the claim.”

“The risk management lessons for professionals themselves are similar: limitation dates need to be carefully calculated and diarised, and leaving issuing or serving a claim form to the last minute avoided wherever possible,” Fletcher said.

Dispute resolution expert Jim Cormack QC of Pinsent Masons said the decision brought English law in line with Scottish statute.

“The court’s decision provides clarity on a narrow but important point of English law. In Scotland and Northern Ireland different legislation applies, although in Scotland the position ultimately adopted by the court here is set out in a specific statutory provision, so that the position in England and Scotland is now consistent,” Cormack said.