Limitation and the stroke of midnight: Matthew v Sedman [2019] EWCA Civ 475

Helen Evans |

Where limitation is concerned, minutes and hours can matter as much as days. This is what the Court of Appeal found in Matthew v Sedman [2019] EWCA Civ 475 upholding the judgment of HHJ Hodge QC on an issue which he had described as “short but interesting and not unimportant”. The Court of Appeal’s decision is a must-read for anyone dealing with litigation issued at or near the expiry of the limitation period.  

Matthew v Sedman concerned difficult questions about the date (or even time of day) at which causes of action accrue and the calculation of limitation periods in professional negligence claims. The trustees and beneficiaries of the Evelyn Hammond Will Trust (“the Claimants”) brought proceedings against the Trust’s former trustees (“the Defendants”) for a failure to submit claims under a court sanctioned scheme of arrangement. In November 2017 HHJ Hodge QC held that part of the Claimants’ claim was time barred and granted the Defendants summary judgment on this aspect of the case. Permission to appeal was granted and the Court of Appeal heard the Claimants’ appeal on 15 January 2019.

Clare Dixon and Nicholas Broomfield of 4 New Square (instructed by Mills & Reeve LLP) represented the Defendants. The decision of the Court of Appeal is considered by Helen Evans of 4 New Square.

The Facts

The Claimants were the current trustees and beneficiaries of the Trust. The Defendants were accountants and the former trustees of the Trust, having retired in August 2014. The principal asset of the Trust was shares in a company called Cattles plc (“Cattles”) which company then acquired Welcome Financial Services Limited (“Welcome”). By April 2008 the Trust held almost 162,000 shares in Cattles, valued at approximately £393,000. However, in April 2009 trading in Cattles’ shares was suspended and in December 2010 both Cattles and Welcome applied to enter into court sanctioned schemes of arrangement (“the Schemes”). The applications were granted by Newey J on 28 February 2011 and they were registered at Companies House on 2 March 2011.

The Schemes included provision for shareholders to make claims. In summary, the Schemes operated as follows:

  1. By clause 3.6, claims under the Schemes had to be submitted “on or prior to the Bar Date”.
  2. The Bar Date was defined as the first business day falling 3 months after the “Effective Date”, which was 2 March 2011.
  3. The Bar Date was therefore 2 June 2011. Therefore, to be made in time, a claim in the scheme had to be made by the end of 2 June 2011. A claim made on 3 June 2011 was too late.

The Defendants failed to submit a claim on the Claimants’ behalf before the end of the Bar Date, thereby preventing the Claimants from claiming under the Welcome Scheme. The Claimants accordingly sued the Defendants (for this and a related matter which was not the subject of the judgment) for negligence. Proceedings were issued on Monday 5 June 2017.

The Defendants applied for summary judgment and/or to strike out this aspect of the Claimants’ claim on the basis that it was statute barred, having been issued more than  6 years since the cause of action accrued in the professional negligence claim.

Judgment of HHJ Hodge QC [2017] EWHC 3527 (Ch)

Two points were common ground before the Judge:

  1. First, the relevance of the weekend falling on 3 and 4 June 2017 (immediately prior to the claim being issued). The parties agreed (following Pritam Kaur v S Russell & Sons Ltd [1973] QB 336) that if the last day for issuing proceedings was 3 June 2017 (a Saturday) then the claim was in time because it had been issued on the next working day, namely Monday 5 June 2017. However, if the last date for issuing proceedings was Friday 2 June 2017 (when the court office was open) then the Claim Form had been issued too late.
  2. Second, the parties agreed that if the Claimants’ cause of action had accrued part way through a day then that day should be excluded when computing time for the purposes of limitation.

Against that background, the Judge formulated the point at issue in the following terms:

“The question is this: when a cause of action is completely constituted at the very first moment of a particular day, does that day fall to be included when calculating the applicable six years’ limitation period or does it fall to be excluded? More pertinently for present purposes, if a cause of action accrued at the very first moment of Friday 3rd June 2011, is a claim issued after Friday 2nd June 2017 brought after the expiration of six years from the date on which the cause of action first accrued?”

HHJ Hodge QC found that 3 June 2011, being the date on which the cause of action had been completely constituted at the very first moment of the day, should be included in the court’s reckoning of time. In so finding he placed reliance upon the decision of Channell J in Gelmini v Moriggia [1913] 2 KB 549. Gelmini was concerned with the payment of a promissory note the time for which expired on 22 September 1906. Proceedings were issued on 23 September 1912 which the Judge found to be out of time because the cause of action was complete at the beginning of 23 September 1906 and so limitation expired six years later at the end of 22 September 1912.

In this case, therefore, the Claimants could have issued a Claim Form against the Defendants at any time on 3 June 2011 and should therefore be taken as having 6 years from and including that day to do so. 6 years from and including 3 June 2011 was 2 June 2017 and to be in time the Claim Form had to be issued, at the latest, on that date.

In so finding, the Judge drew a distinction between cases (such as this) where the cause of action was complete at (or by) the beginning of a day, and cases where the cause of action accrued at some point during a day (e.g. cases like Pritam Kaur in which an accident occurred in the workplace). In the latter case, as was common ground, the day itself was excluded. However, in the former case:

“[Where] it is absolutely clear that the cause of action arises at the very beginning of a particular day, that day should not be excluded from the calculation for Limitation Act purposes. At any moment during that day the claimant can bring a claim; and to exclude that day from the calculation for Limitation Act purposes would have the effect of giving him an extra day over and above the statutory limitation period for bringing a claim. I therefore accept Miss Dixon’s argument that where the cause of action is complete at the very beginning of a particular day, you exclude that day for the purposes of calculating the limitation period. On that footing, the limitation period in the present case being on 3rd June 2011 and expired at the very end of 2nd June 2017. On that basis, the last day for issuing the claim form was Friday 2nd June 2017, and this claim is out of time.”

The Judge granted the Claimants permission to appeal to the Court of Appeal. (For ease of reference the parties will however continue to be referred to as the Claimants and Defendants).

 Judgment of the Court of Appeal [2019] EWCA Civ 475

Whilst agreeing in large part on the reasoning and outcome Lord Justice Irwin and Underhill gave separate judgments, with Irwin LJ stating that he had not found it an easy case to decide.

Their reasoning proceeded in two stages. First, identifying when the relevant cause of action arose. Second, having identified the relevant moment, determining whether the 3 June 2011 fell to be included within the computation of time or not.

 

When did the relevant cause of action accrue?

On appeal, the Claimants’ case was that their claim did not, and could not, accrue on the stroke of midnight but a ‘nanomoment’ thereafter, meaning that the Claimants did not have the whole of 3 June 2011 to bring their claim. The Defendants’ case was that the cause of action accrued at the stroke of midnight, there was therefore no ‘nanomoment’ to consider and, consequently, the Claimants did have the whole of 3 June 2011 to bring their claim.

Their Lordships found that in cases where there was a ‘midnight deadline’ it was wrong to attribute the accrual of the cause of action to the day after the expiry of the midnight deadline. Underhill LJ explained at [38] that in such cases “there is [not] even a ‘nanomoment’ after midnight when the cause of action is not in being”, echoing Irwin LJ’s conclusion at [32] that, “it appears to me that Miss Dixon is correct. 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.”

 In so finding, Irwin LJ derived assistance from a landlord and tenant case (Dodds v Walker [1981] 1 WLR 1024) in which Lord Diplock said “I do not personally derive assistance from pursuing metaphysical arguments about attributing to the one day or the other the punctum temporis between 24.00 hours on September 30 and 0.00 hours on October 1…”.

 

Computation of Time in “Stroke of Midnight” Cases

As it had been at first instance, it was common ground between the parties that the where a cause of action accrued part way through a day then that day should be excluded for the purposes of computing time for the purposes of limitation. However, the Claimants alleged that this principle applied to all cases, including “midnight deadline” cases. In support of this proposition, the Claimants claimed that Gelmini (upon which HHJ Hodge QC had placed reliance) was no longer good law as it had been departed from in Marren v Dawson Bentley, the reasoning in which had been approved by the Court of Appeal in Pritam Kaur.  As a result, their case was that 3 June 2011 should be excluded from the computation.

The Defendants sought to uphold the distinction between causes of action that accrue part way through a day and “midnight deadline”. As the Judge had found, and as Channell J had concluded in Gelmini, the cause of action had accrued at, or by, the beginning of the day following the “midnight deadline” and the Claimants had the whole of that day to bring their claim. The Claimants’ time for pursuing a claim against the Defendants had not been cut short by counting a “fragment” of a day as whole day, and there was therefore no justification for refusing to count 3 June 2011. Further, the distinction drawn by the Judge was well established in both law and principle. Not only did it follow Gelmini, but it was supported by the leading text books McGee on Limitation Periods (7th ed) and Chitty on Contracts (33rd ed) and avoided interfering with the wording of the Limitation Act 1980 by extending limitation beyond the 6 years prescribed by the draftsman. Finally, and contrary to the Claimants’ case, the Defendants argued Gelmini remained good law following Marren and Pritam Kaur, neither of which had concerned “midnight deadlines” and any comments made about Gelmini were obiter.

Both Irwin LJ and Underhill LJ held that Gelmini remained good law following Marren and Pritam Kaur and upheld the distinction drawn by both Channell J in Gelmini and the Judge at first instance. At [32], Irwin LJ explained that no “fractions of a day” arise in “midnight deadline” cases because the cause of action has already accrued “by” the first moment in the day after midnight, “rather than accruing on the day following midnight”. Underhill LJ agreed at [38] in the following terms:

In my view there is, as propounded at the end of the passage from McGee on Limitation Periods set out at paragraph 30 of Irwin LJ’s judgment, a clear distinction between the case where a cause of action accrues “at the stroke of midnight”, because it is based on a failure to do something by the end of a specified day, and the case where the cause of action accrues part way through a day.  In the latter case it is indeed well-established that for limitation purposes you ignore the date on which the cause of action accrues: the authorities go back to the early nineteenth century and were not originally concerned with the Limitation Acts, but they culminate in Pritam Kaur, which is binding authority on their application in the context of what is now the Limitation Act 1980.  But in the former type of case the cause of action arises, as Channell J put it in Gelmini, “at the commencement of [the] day”.  Even without the benefit of Dodds v Walker I would not have accepted that in such a case there is even a “nano-moment” after midnight when the cause of action is not in being, but Lord Diplock’s observations quoted at paragraph 15 above confirm my view: the cause of action arises at, not after, midnight.  I regard Gelmini as being, on this point, rightly decided.  Havers J took a different view in Marren, as Irwin LJ shows, but his decision is not binding on us, and I agree with Irwin LJ that the general approval of Marren in Pritam Kaur is not authoritative as regards this issue. 

The Court of Appeal accordingly upheld the Judge’s decision that the Claimants’ cause of action had accrued by 3 June 2011 and limitation had therefore expired 6 years later on Friday 2 June 2017. The Claimants’ claim, issued on 5 June 2017, was therefore out of time and the appeal was dismissed.

Commentary

Matthew v Sedman is a case of real and significant importance for litigation lawyers faced with cases based on “midnight deadlines”. The Court of Appeal’s judgment gives clear answers to two difficult questions, namely (a) if a “midnight deadline” is missed, when does the cause of action accrue and (b) in those circumstances, how is the limitation period computed? Contrary to the Claimants’ concerns Matthew does not impact on the well settled law applicable to anything other than “midnight deadline” cases and both Irwin LJ and Underhill LJ were careful not to trespass beyond the scope of the appeal.

The Court of Appeal, following Gelmini, concluded that in “midnight deadline” cases the cause of action accrues by the first moment of the day after midnight, and not in that first moment. It therefore follows that there is no time on the day after midnight in which a claim cannot be pursued and there is no reason not to count it for the purposes of calculating limitation.

 


 

Helen Evans (2001 call)

Helen is listed in the Directories for professional liability, professional discipline and insurance. Recent comments include “Helen Evans stands out as one of the most highly regarded barristers in the field. Peers regard her as “thorough and meticulous”, and say she “can unpick the most complicated of cases”. Helen is also a co-editor of the chapters on Solicitors and Barristers’ negligence in Jackson & Powell on Professional Liability.  

 

Clare Dixon (2002 call)

Clare is rated in the Directories for professional liability and insurance and in 2018 was nominated for the Chambers & Partners Professional Negligence Junior of the Year. Recent comments in the directories include “She has good judgment and is technically excellent”, “She is very down-to-earth, a great communicator, and inspires confidence in the client”, “She mixes great commercial acumen with an excellent grasp of black letter law” and is “a brilliant advocate”.

  

Nicholas Broomfield (2010 call)

Nick is a busy commercial chancery practitioner specialising in commercial, banking and mortgage related disputes, insurance litigation, claims involving issues of real property and land law, professional negligence claims and the law of trusts and restitution. He is described by the directories as “exceptionally bright, tactically astute, very easy to work with and great with clients”, “fiercely bright as well as very hard working” with an “ability to get to the heart of the matter very quickly”.

 

Disclaimer: this article is not to be relied upon as legal advice. The circumstances of each case differ and legal advice specific to the individual case should always be sought.

© Helen Evans of 4 New Square, March 2019.