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Can the Limitation Act Really Be Suspended?

Standstill agreements have become quite common, perhaps as a result of the effectiveness of the pre action protocols. The version I have seen simply comprises an agreement that, time will be suspended. Others refer to a Time Stop agreement. I assume that it was intended that the defendant would not raise any limitation defence relying on time running during the period of the agreement. Surely this is a nonsense? No-one can prevent time passing.

by Tim Hirst

 

“Standstill agreements” have become quite common, perhaps as a result of the effectiveness of the pre-action protocols.  The version I have seen simply comprises an agreement that, “time will be suspended”.  Others refer to a “Time Stop” agreement.  I assume that it was intended that the defendant would not raise any limitation defence relying on time running during the period of the agreement.  Surely this is a nonsense?  No-one can prevent time passing.

 

Even more significantly, however, it is not open to parties to negate law laid down by statute without persuading parliament to do so.  It surely cannot be possible for parties to agree away statutory provisions which lay down simple and uncompromising rules such as that laid down by Section 2 Limitation Act 1980 which reads:-

 

“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”.

 

It would perhaps be different if limitation was merely a defence available to a defendant at its option but this is simply not the case. 

 

In Ketterman –v- Hansel Properties Limited [1985] 1AER 352, Lawton L. J. concluded that, in his view, the burden was on the claimant to prove that the claim was brought within time.  Arguably, therefore, in every case this is an essential hoop which the claimant has to jump through to succeed.

 

Nicholls LJ thought to the contrary in Barclays Bank Limited –v- Walters, The Times, 20th October 1988.

 

McGee in his monograph Limitation Periods, 6th edition, concludes that:-

 

“It must be correct to say that the burden is initially on the defendant to plead limitation but thereafter it is for the claimant to show when time began to run favourably to himself”.

 

 

McGee concludes, that where the expiry of time does not extinguish the claimant’s rights, it is not an essential element at the outset to show that the action is not time barred.  He concludes this will only become essential if the defendant chooses to plead the statute.

 

This clearly seems to be the view of HHJ Havelock-Allan Q.C. in Mac Hotels Limited –v- Rider Levett Bucknall UK Limited [2010] EWHC 767(TCC) where, at paragraph 42, he says:-

 

“ The burden of proof in limitation cases rests on the claimant against whom the defence of limitation is pleaded.  In my judgment, it is not for the claimant to establish that he has a claim which he can bring which is not statute barred…”.

 

It seems quite possible therefore that there is an initial duty on the defendant to plead the defence, in which case the claimant then has the onus of proving that his claim falls within the limitation period.  This represents one clear logical basis for there being an agreement; if it is clearly agreed that the defendant will not raise or plead the issue of limitation, then there is no corresponding or subsequent duty on the claimant to prove that the claim is not statute barred.

 

One matter to bear in mind is that the general approach of the Limitation Act is not to extinguish the cause of action but rather to operate as a procedural bar on the right to bring claims which are statute barred.  The cause of action remains unaffected, it is merely procedurally ineffective.  Reading through the Act only seems to produce Section 3 which specifically extinguishes title (in respect of actions for conversion).

 

If this is right, and McGee’s opinion is correct, it would mean that it is not essential in the vast majority of kinds of claims to plead limitation in the Particulars of Claim.  Actually, you may be impaling yourself on an application for summary judgment!

 

However, that said, it is clear that once the defendant does raise the issue of limitation in his pleading, the burden shifts to the claimant.

 

How then can a defendant agree to neutralise limitation? 

 

There are essentially three ways:-

 

(a)        By admitting liability subject to quantum.  This appears to be the decision in Wright –v- John Bagnall & Sons Limited [1900] 2 QB 240 supported by Rendall –v- Hill’s Dry Dock [1900] 2 QB 245, both of which establish that there can only be such an agreement where liability is admitted first.  It is important to bear in mind that the common form of admission, made in the writer’s experience where causation is still left in issue, would not be sufficient to fulfil this requirement;

 

            It has to be noted that this principle was doubted by Jonathan Parker J. in Cotterell –v- Leeds Day (unreported).

 

(b)        Contracting out.  In Liborsky –v- Snelling [1944] KB 44 it was held that the defendant had promised not to plead statute.  However, this was again a case in which there had been a clear admission of liability.  The Court will need clear evidence of agreement: see Clewley –v- Blake Lapthorne [2003] AER D 178.  

 

(c)        Estoppel: as Neuberger LJ set out in his dissenting judgment, it seems impossible for an estoppel to have the effect of reviving that which was already time barred.  This was a case where the defendant’s solicitors wrote to the claimant’s solicitors in turn rather vaguely indicating that they did not have in mind advancing a limitation defence: see Law Society –v- Sephton [2005] 3 WLR 212, 244.

 

The Courts have repeatedly said that this doctrine will only be allowed to operate in exceptional cases. This was very clearly pointed by Judge Coulson in Holding & Management (Solitaire) Limited –v- Ideal Homes North West Limited [2004] EWHC 2408 where, at paragraph 83, he adopts the words from McGee op. cit:-

 

“…establishing estoppel in relation to the Limitation Acts is likely to be a formidable task and one which can be accomplished only the most exceptional cases”.

 

 

It can thus be seen that there remain serious doubts as to the scope and effectiveness of agreements to waive or to suspend the running of time.  It seems clear that this will be effective only where there has been a clear admission of liability, albeit subject to quantification.  In addition, there may be a possibility of an agreement by the Defendant not  to plead limitation as long as some consideration or detriment is provided or suffered by the claimant.  I would suggest that it is important to ensure that these 2 aspects are clearly identified and agreed if you want there to be an effective “stopping of time”.

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