Barrister mag issue 90

Page 10

Supreme Court clarifies calculation of limitation periods in midnight deadline cases By Raj Arumugam, Barrister, 5 Stone Buildings, Lincoln’s Inn The Supreme Court in Matthew v. Sedman [2021] 2 WLR 1232 has provided much needed clarification on the calculation of limitation periods in cases where the cause of action accrues at midnight. The decision provides a salutary warning to claimants on the importance of seeking legal advice and issuing proceedings well before a limitation period expires.

The Facts The Appellants were the trustees and beneficiaries of a trust established under the 1948 will of Mrs Evelyn Hammond, who died in 1952 (the “Trust”). The Appellants were appointed on 1 August 2014, replacing the Respondents who were the former trustees. The Trust held shares in Cattles plc (“Cattles”), a company listed on the London Stock Exchange. In 1994, Cattles acquired Welcome Financial Services Ltd (“Welcome”). In 2007, Cattles published an annual report, information from which was included in a rights issue prospectus released to potential investors in April 2008. The Financial Services Authority subsequently found that information in the annual report and the prospectus had been misleading. Trading in Cattle’s shares was suspended. In December 2010, Cattle and Welcome each issued proceedings for Court-sanctioned schemes of arrangement. Both schemes were approved by the Court on 28 February 2011. The terms of each scheme included provision for claims to be submitted by shareholders. The rules for the Welcome Scheme provided that:

“in order to be entitled to any Scheme Payment, Scheme Creditors must, on or prior to [Thursday 2 June 2021], submit a Claim Form.” Unfortunately, the Respondent former trustees failed to submit a claim for the Welcome Scheme in time. It seems that they made a late claim after 2 June 2011 which was refused by the scheme’s administrators. The Respondents then retired as trustees on 1 August 2014. On Monday 5 June 2017, the Claimants issued proceedings against the former

trustees for breach of trust and negligence for their failure to make a claim in time under the Welcome Scheme (the “Claim”). In response, the former trustees applied for summary judgment on the Claim on the basis that it had been issued out of time and was statute barred under the six-year time limit in sections 2, 5 and 21(3) of the Limitation Act 1980, which apply respectively to actions founded in tort, actions founded in contract, and actions by a beneficiary in respect of any breach of trust. The key wording in each of those sections is identical, namely:

“An action … shall not be brought after the expiration of six years from the date on which the right of action accrued.” The issue for the Supreme Court Lord Stephens, who gave the lead judgment of the Supreme Court, summarised the question which arose on the appeal as follows: does Friday 3 June 2011, the day which commences at or immediately after the midnight hour, count towards the calculation of the six-year limitation period? If Friday 3 June 2011 was included for the purposes of calculating limitation, then the limitation period expired 6 years later at the end of Friday 2 June 2017 – on that basis the Claim (issued on Monday 5 June 2017) would have been statute-barred. If, however, Friday 3 June 2011 was excluded from the calculation, then the limitation period expired at the end of Saturday 3 June 2017. Since the court office is closed over the weekend, then (applying the Court of Appeal’s decision in Pritam Kaur v. S. Russell & Sons Ltd [1973] QB 336) the time for issuing

10 the barrister Michaelmas Term 2021

proceedings is extended until the next day when the court office is open, namely Monday 5 June 2017, in which case the claim would not be statutebarred. A similar provision appears in a procedural context in CPR rule 2.8(5). Determination of this short but important point was confused by conflicting decisions at both High Court and Court of Appeal level stretching back to the 18th Century. Accordingly, the Supreme Court decided it was time to settle the matter. Judgments at first instance and in the Court of Appeal At first instance, Judge Hodge QC (sitting as a judge of the High Court) agreed with the former trustees and granted their application for summary judgment, holding that the Claim was time-barred. The Judge found that the Claimants’ cause of action arose at the first moment of Friday 3 June 2011, noting that “at any moment during that day the [appellants] can bring a claim” and therefore the Judge included this day for the purposes of calculating the limitation period. The Judge relied in particular on the decision of Channell J in Gelmini v. Moriggia [1913] 2 KB 549 (discussed below). However, recognising that there were conflicting authorities on the point, the Judge granted the Claimants permission to appeal on this issue. The Court of Appeal (Irwin and Underhill LJJ) (Matthew v. Sedman [2020] Ch 85) dismissed the Claimants’ appeal, however their Lordships’ reasons differed both as between each other and from the first instance Judge. Irwin LJ held that in a “midnight deadline” case such as this, the cause of action had accrued by midnight. Accordingly Irwin LJ did not consider the cause of action arose on 3 June 2011. Underhill LJ’s reasoning was


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