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When the clock strikes midnight: Supreme Court clarifies calculation of limitation period in trust litigation

On 21 May 2021, in Matthew and others (Appellants) v Sedman and others (Respondent) [2021] UKSC 19, the Supreme Court concluded that some of the trustees’ claims against the former trustees were out of time because the causes of action accrued at midnight and the “complete undivided day” that followed should be included in the limitation period[1]. This judgment provides helpful clarification as to the rules for calculating limitation periods and reinforces the importance of issuing claims in good time to avoid the risk of being statute-barred.

Background

This case involved a Trust established under a Will whose main asset was a shareholding in Cattles plc (“Cattles”).  The Trust was entitled to issue claims against Cattles and its subsidiary, Welcome Financial Services Limited (“Welcome”), under schemes of arrangement agreed with shareholders / creditors due to information found to be misleading in Cattles’ annual report and rights issue prospectus.  The Welcome scheme rules provided that creditors must issue a claim “on or prior to the Bar Date”, which was accepted to be Thursday 2 June 2011[2].  The respondents, the trustees of the Trust in 2011 (“the Former Trustees”), failed to issue a claim relating to the Welcome scheme of arrangement on or prior to 2 June 2011.

On Monday 5 June 2017, the appellants, being the current trustees of the Trust and the Trust beneficiaries, issued a claim against the Former Trustees for negligence and breach of trust seeking damages, equitable compensation and other relief (“the Claim”).  In response, the Former Trustees applied for the Claim to be struck out and / or for summary judgment on the basis that the Claim had been issued outside the 6-year limitation period provided in sections 2, 5 and 21(3) of the Limitation Act 1980 and was out of time.

The appellants argued that the causes of action against the Former Trustees accrued after midnight at the end of 2 June 2021 i.e. on 3 June 2011 and relied on the general rule that the day of accrual of the causes of action should be excluded from calculation of the six-year limitation period to conclude that the Claim was issued in time. This was on the basis that excluding the day of accrual caused the limitation period to expire at the end of Saturday 3 June 2017, when the court office was closed, which, according to a Court of Appeal authority[3], shifted the final date to issue the claim to the next date when the court office was open, being Monday 5 June 2017.

The Supreme Court’s Judgment

Rejecting the appeal, the Supreme Court clarified that the reason for the general rule that the day of accrual of the cause of action should be excluded from the reckoning of time is that “the law rejects a fraction of a day”. The Supreme Court explained that the general rule seeks to “prevent part of a day being counted as a whole day for the purposes of limitation, thereby prejudicing the claimant and interfering with the time periods stipulated in the Limitation Act 1980”.  The Supreme Court held that “the justification in relation to fractions of a day does not apply in a midnight deadline case” because “[i]f that day were excluded from the computation of time then the limitation period would be six years and one complete day[4].  Since the appellants’ causes of action against the Former Trustees under the Welcome scheme of arrangement accrued at midnight on 2 June 2011, 3 June 2011 was a whole day and should be included in the computation of the limitation period.  On that basis, the Claim was out of time.

For further information, please contact Cheryl Gayer.

[1] Para 46, [2021] UKSC 19

[2] Para 11, ibid

[3] Pritam Kaur v S Russell & Sons Ltd [1973] QB 336

[4] Paras 47 – 49, [2021] UKSC 19


Disclaimer

This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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