Court: time and day can impact limitation period

Out-Law News | 26 Mar 2019 | 2:08 pm | 2 min. read

The time of day that a cause of action accrues can alter the date on which the limitation period for raising a claim against that action expires, the Court of Appeal has suggested.

In cases where a cause of action is constituted precisely at midnight at the start of a day, the court said that day should count towards the calculation of the limitation period. However, it left open the question of how the limitation period is affected when the cause of action occurs at another time of day.

The case before the Court of Appeal concerned a dispute between the current and former trustees of a trust provided for in a will formed in 1948.

The trust owned shares in a company and a subsidiary it acquired. However, in 2011 those businesses obtained a court order enabling them to complete a corporate restructuring. The court order provided existing shareholders, including the trust, with a right to obtain payment from the scheme, but a deadline was placed on raising such a claim.

Shareholders had until midnight on the first business day following the expiry of three months from the date on which the scheme became effective to raise their claim.

The scheme became effective on 2 March 2011, and three months after that date was 2 June 2011.

On Monday 5 June 2017 the current trustees and will beneficiaries issued court proceedings against the former trustees of the trust for not raising a claim for payment under the scheme. They argued that their case against the former trustees was brought within the six year limitation period that applied to the cause of action relevant to their case. This was disputed by the former trustees who argued that the case brought against them was out of time. The High Court previously sided with the former trustees' position.

Because there was a midnight deadline at the very beginning of 3 June 2011 for raising a claim for payment, the current trustees and will beneficiaries argued that 3 June 2011 did not constitute a full day and should therefore not trigger the start of the limitation period.

On this basis they claimed that the limitation period ended not on Friday 2 June 2017 but on Saturday 3 June 2017, and that they were entitled to file their case against the former trustees on Monday 5 June 2017 since the courts were not open on the Saturday.

After consulting case law, however, the Court of Appeal rejected this argument.

"A 'midnight deadline' case is different from others in the sense that the deadline provides a categorical indication that the action accrued by that point in time, rather than accruing on the day following midnight," Lord Justice Irwin said. "For that reason, no fractions of a day arise."

"Different considerations might arise, in my view, if the scheme of arrangement had stipulated a claim by 9am on the relevant day, leaving the whole of the working day later than the moment the action accrued. That would be equally certain as to timing and would provide equal opportunity for initiating legal steps. Then what if noon were stipulated, or 3pm? What then of fractions of a day? … In the end, this question does not arise here," the judge said.

Those views were supported by the other sitting judge in the case, Lord Justice Underhill.

He said: "My strong provisional view is that even in a case where the cause of action arises very early in the relevant day that day falls to be excluded, because I cannot see a rational basis on which to distinguish between fractions of a day that are or are not sufficiently big to count. But … the question does not arise in this case, because the essential point is that there was no part of the day during which [the current trustees and will beneficiaries] did not enjoy their cause of action."