Supreme Court confirms that, where cause of action accrues at midnight, the following day is included for limitation purposes

The Supreme Court has unanimously held that where a cause of action accrues at midnight (a "midnight deadline case") the following day will count towards the calculation of the limitation period for commencing proceedings: Matthew v Sedman [2021] UKSC 19.

The judgment provides an important clarification for parties calculating limitation periods in cases where accrual falls at the stroke of midnight, as opposed to where it falls part way through a day. While the court noted the general rule that the day on which a cause of action accrues is excluded for limitation purposes, as the law rejects fractions of a day, it held that midnight deadline cases form an exception to that rule. In a midnight deadline case, the day following the midnight deadline is a complete, undivided day on which the claimant may start proceedings. This undivided day must be included for limitation purposes to avoid interfering with the time periods stipulated in the Limitation Act 1980, and prejudicing the defendant by providing the claimant with an additional day in which to issue its claim.

As a practical matter, the decision illustrates the dangers of waiting until a limitation period is near expiry before issuing proceedings, given the highly technical nature of the law relating to limitation and the very real prospect of things going wrong.

Background

The claimants were trustees and beneficiaries of the Evelyn Hammond Will Trust, the main assets of which were shares in the company Cattles plc. The claimants issued proceedings against the former trustees for negligence and breach of trust on Monday 5 June 2017.

The cause of action arose following an FSA finding that information published in Cattles plc's 2007 annual report and 2008 prospectus was misleading. This resulted in court-sanctioned schemes of arrangement for both Cattles and its subsidiary Welcome Finance Services Limited (the "Welcome scheme"). Although the schemes provided for shareholder claims, the defendants failed to bring a claim in the Welcome scheme prior to the scheme imposed deadline at midnight (at the end of the day) on Thursday 2 June 2011.

The defendants applied for strike out or summary judgment on the basis that the claim was statute barred pursuant to s.2 and/or s.5 and/or s.21(3) of the Limitation Act 1980 for actions in tort, contract and trust property respectively. The claimants argued that Saturday 3 June 2017 was the last day when the claim could be issued, and it could therefore be validly issued on the next working day, Monday 5 June 2017 (following Pritam Kaur v S Russell & Sons Ltd [1973] QB 336).

Both the High Court (HHJ Hodge QC sitting as a High Court judge) and  the Court of Appeal (Irwin and Underhill LJJ) found that the limitation period expired on Friday 2 June 2017 and that the claim was therefore out of time.

Decision

The Supreme Court upheld the decisions of the lower courts (Lord Stephens giving the lead judgment, with which Lord Hodge, Lady Arden, Lord Sales and Lord Burrows agreed). It confirmed that, in midnight deadline cases, the subsequent day should be included in the calculation for the limitation period as it counts as a complete indivisible day in which a claimant could issue proceedings. If instead the subsequent day were to be excluded from the computation of time, this would unfairly lengthen the statutory limitation period by a complete day.

Lord Stephens noted the general rule that the day of accrual of the cause of action should be excluded from the reckoning of time, as the law rejects a fraction of a day. The justification for the rule is straightforward; it prevents part of a day being counted as a whole day for the purposes of limitation, which would cause prejudice to claimants and interference with the time periods stipulated in the Limitation Act 1980.

However, he agreed with the defendants' submission that, in a midnight deadline case, even if the cause of action accrued at the very start of the day following midnight, that day was a complete undivided day. The justification for the rule relating to fractions of a day did not apply.

The claimants had advanced a number of arguments in relation to the wording of the Limitation Act, including the interpretation of "from" in "after the expiration of six years from the date on which the cause of action accrued". Lord Stephens rejected this approach, considering that it would be inappropriate to decide the case purely on a textual analysis. Further, in relation to the arguments advanced relating to the peculiarity of midnight dividing one day from the next, Lord Stephens considered that it would "impermissibly transcend practical reality" if a miniscule division of time at or immediately after the stroke of midnight resulted in the concept of undivided days no longer being appropriate.

The claimants also relied on a number of cases which established that, where a cause of action accrues part way through a day, the day is excluded for the purposes of limitation. Lord Stephens pointed out that none of those cases considered the position where there is a midnight deadline, and the only existing authority for such a situation, as considered by the lower courts, is Gelmini v Moriggia [1913] 2 KB 549. Lord Stephens did not accept the claimants' argument that Gelmini was inconsistent with previous authority, or that it had been implicitly disapproved by the Court of Appeal in Pritam Kaur v S Russell & Sons Ltd [1973] 1 QB 336 applying Marren v Dawson Bentley & Co Ltd [1961] 2 QB 135. He noted that  that there had been no analysis of the midnight deadline factual circumstance in either case and Gelmini should have been distinguished in Marren. When viewed as an exception to the general rule on partial days, Gelmini was not inconsistent with earlier authority and had not been disapproved.

In addition, Lord Stephens considered the different interpretations of HHJ Hodge  and Irwin and Underhill LJJ as to whether the cause of action accrues on the day of the midnight deadline or on the very start of the subsequent day, noting that this issue was not clear in Gelmini. Ultimately, Lord Stephens held that there was "no significant difference" as to whether the cause of action accrued at the expiry of 2 June 2011 or at the very start of 3 June 2011, because 3 June 2011 was "for practical purposes a complete undivided day".