Professional negligence: On the stroke of midnight the limitation clock started ticking

That was the discrete issue before the Supreme Court in Matthew & Others v Sedman & others [2021] UKSC 18 in a case against former trustee accountants.

In a decision handed down this morning, the Supreme Court found in favour of the defendant accountants. The Court affirmed that in stroke of midnight cases, you do include the date the cause of action arises when counting the start of the limitation period. This is distinct from cases where the cause of action commences during part of the day - in those cases the limitation clock starts ticking the day after - the law does not recognise part of a day.

Professional indemnity specialists from the accountants team at Mills & Reeve acted for the successful defendants and their insurers together with Clare Dixon QC and Nicholas Broomfield of 4 New Square.

The Claim

The Defendants were former trustees of the Evelyn Hammond Will Trust. The Claimants are the existing trustees and beneficiaries of the Trust. The principal asset in the Trust were shares in Cattles Plc valued at almost £400,000. Cattles Plc also owned Welcome Financial Services Limited. After trading in Cattles’ shares was suspended, both companies entered into court sanctioned schemes of arrangements. The Welcome scheme required any claims to be submitted on behalf of shareholders to the administrators by 2 June 2011 and before midnight. This was known as the Bar Date. The Defendants failed to submit claims before the Bar Date preventing them from making a claim under the Welcome scheme.

The Claimants then issued proceedings against the former trustees on Monday 5 June 2017. The Defendants argued the claim was time-barred because the last day for issuing proceedings was Friday 2 June 2017 in accordance with the six year time-limit under the Limitation Act 1980.

In 2017, the Defendants successfully applied to strike out that part of the claim in relation to the Welcome scheme on grounds of limitation. The Claimants appealed the decision of HHJ Hodge QC. The Court of Appeal dismissed the appeal in 2019 upholding the first instant decision and making clear that in midnight cases, you do include the day in which the cause of action accrues. The Claimants appealed again to the Supreme Court.

Arguments

The parties’ respective positions (click image to view full size):

There is a long standing principle that where a cause of action accrues during a day – for example in the case of a road traffic accident at say 11am on 20 March, you ignore 20 March when calculating the limitation period as the court does not recognise part of a day. The Claimants contended the cause of action had in fact accrued during the day namely a nanosecond after the stroke of midnight on 3 June 2011. Therefore, 3 June 2011 ought to be discounted for limitation purposes. The claimants relied upon the Court of Appeal authority of Pritam Kaur v S Russell and Sons [1973] QB 336 and the first instance decision in Marren v Dawson Bentley & Co Ltd [1961] 2 QB135, which established that where a cause of action accrues part way through a day, that day should be excluded for limitation purposes. Both cases concerned personal injuries. On the Defendants’ case, it was a straightforward matter of calculating six years from the date the cause of action arose. Given, the cause of action arose on the stroke of midnight on 3 June 2011, there was no good reason why that day should be ignored when calculating the six year limitation period. If you did ignore it, the Claimant would wrongly be entitled to six years and one day to issue proceedings.

The Defendants relied on an early 20^th Century authority of Channell J in Gelmini v Moriggia [1913] 2 KB 549, where it was clearly stated that:

“…in all cases of contract the person who has to pay has the whole of the day upon which payment is due in which to pay; therefore until the expiration of that day an action cannot be brought because until then there is no complete cause of action. The result is that an action cannot be brought until the next day; but it can be brought on that day because the cause of action is complete at the commencement of that day.”

Decision

In Lord Stephens' leading judgment, the Supreme Court agreed with the Defendants’ position finding that “midnight deadlines” are distinguished from all other cases. Lord Stephens' approach was to recognise that in a midnight case, the cause of action arose at not after midnight but in any event there was for practical purposes a complete undivided day from midnight. There was therefore no good reason to discount that day when computing time for limitation purposes. If the day was discounted, the Claimants would have had six years and one day to issue proceedings. That would have unduly distorted the six year limitation period laid down by Parliament and would prejudice the defendant.  

The decision in our view reflects common sense, and the correct application of the Limitation Act 1980. Whilst not surprising, it helpfully, brings clarity and certainty for litigators, particularly those dealing with claims involving midnight deadlines.