Lessons on limitation – two recent decisions highlight traps for the unwary

Two recent decisions illustrate short but important points of practice in relation to limitation. In the first, the High Court found that the six year limitation period for contract claims potentially applies where a party seeks to enforce a settlement under a Tomlin order, even if the claimant does not need to commence a new claim or amend the existing one. In the second, the Court of Appeal confirmed that, where a cause of action accrues on the stroke of midnight, limitation starts to run the following day (not the day after that, as argued). Both cases act as a reminder of the dangers of waiting until an applicable (or potentially applicable) limitation period is close to expiry before issuing a claim.

Enforcing a Tomlin order

A Tomlin order is a consent order staying proceedings on agreed terms, except for the purpose of enforcing those terms. The agreed terms may be scheduled to the order or set out in a separate agreement referred to in the order.

In Bostani v Pieper [2019] EWHC 547 (Comm), the High Court (Jacobs J) considered whether the six year limitation period for actions founded on simple contract, in section 5 of the Limitation Act 1980, applies where a party seeks to enforce obligations contained in a settlement agreement scheduled to a Tomlin order. The judge commented that there is no decisive authority on this point, but Sir Andrew Morritt VC in The Bargain Pages Ltd v Midland Independent Newspapers Ltd [2003] EWHC 1887 clearly considered that the Limitation Act was potentially applicable.

In the present case, Jacobs J agreed with that view, finding that a settlement scheduled to a Tomlin order remains a simple contract for the purposes of limitation. The court's approach to the construction of that contract or the assessment of any damages claimed would, he said, be in accordance with usual contractual principles, and so he could see no reason why the Limitation Act should not also apply. As he put it, the substance of an application to enforce a Tomlin order was to enforce contractual rights, and "it would be surprising if the consequence of scheduling those rights to a Tomlin Order was to insulate a claim for breach of contract from the statute of limitation".

The judge reached that conclusion despite agreeing with the claimant that enforcement under a Tomlin order does not require either the commencement of fresh proceedings, or the amendment of existing pleadings.

On the facts, however, the claimant's application to enter judgment under the Tomlin order (as it was entitled to do under the terms of the settlement agreement if the defendant failed to pay any of a number of instalments) was not out of time. The application had been issued more than six years after the first failure to pay, but each subsequent failure gave rise to a new right to enter judgment. The last such failure was within six years of the issue of proceedings.

Midnight deadline cases

There is a long standing rule that, for the purposes of calculating limitation, the date on which the cause of action accrues is ignored. In Matthew v Sedman [2019] EWCA Civ 475, the Court of Appeal (Underhill and Irwin LJJ) considered how that rule applies where a cause of action accrues on the stroke of midnight, eg because the defendant's alleged breach consists of a failure to take some action that must be done by the end of a particular day.

The claimant argued that, in a "midnight deadline" case, the cause of action does not accrue until after midnight and thus (however shortly) into the day following midnight. Accordingly, it said, that day must be excluded for limited purposes.

The Court of Appeal rejected that argument, finding that where a cause of action accrues at midnight, the following day is counted for the purposes of calculating limitation. Therefore, in the present case where the defendant trustees' alleged breach was a failure to claim under a court-sanctioned scheme of arrangement by the deadline of 2 June 2011, the last day for issuing the claim form was Friday 2 June 2017. The claim form was in fact issued the following Monday and so was out of time.