High Court provides helpful guidance on interpretation of time-bar clause

A recent decision in the High Court has given useful guidance on the interpretation of a contractual time-bar clause: Arab Lawyers Networks Company v Thomson Reuters (Professional) UK Limited [2021] EWHC 1728 (Comm).

The clause prevented either party from bringing a claim more than one year after "the basis for the claim becomes known to the party desiring to assert it". In deciding a summary judgment application brought by the defendant, the court considered what was meant by the expression the "basis for the claim", and also what it meant for a claim to "become known" to a party.

While each clause in a contract will be construed on its own terms, and in its own context, these words (or ones like them) are often used in time-bar clauses – and so the court's decision will be of interest to parties with potential claims which are subject to contractual limitation provisions. The decision illustrates that claimants will be well-served by taking a cautious approach to limitation, as the judge found that at least part of the claimant's claim was time-barred.

The decision is particularly interesting for its analysis of the extent to which the Limitation Act 1980 was relevant to the interpretation of the contractual time-bar clause. The clause – perhaps inevitably – used words or concepts similar to those found in the statute. But the judge held that there was nothing in the agreement to suggest that the contractual words should be defined in accordance with their statutory meaning. This meant that the concept of "knowledge" of a claim was given its natural and ordinary meaning, rather than the statutory definition (which, if applicable, would arguably have started the limitation clock ticking earlier in time).

Background

The claimant Arab Lawyers Networks (ALN) was a supplier of legal resources. Under an Agreement  dated 2 February 2011, ALN provided the defendant Thomson Reuters (TR) with certain publications, mainly encyclopaedias of Gulf state legislation.

The Agreement contained a strict contractual time-bar clause at clause 14.2:

"No claim… which in any way arises out of this Agreement or the parties’ performance of this Agreement may be made, nor action based upon such a claim brought, by either party more than one year after the basis for the claim becomes known to the party desiring to assert it."

TR terminated the Agreement by notice and it came to an end on 1 February 2015.

On 13 June 2017, ALN issued claims against TR in relation to (a) the alleged non-payment of certain royalties and (b) the alleged continued use of its publications after the termination of the Agreement. TR applied to the High Court for summary judgment against ALN, arguing that ALN had no real prospect of success as the claims were time-barred under clause 14.2 and there was no other compelling reason why the claims should be disposed of at trial.

The question for the court was whether ALN had a real prospect of establishing that the start of the period specified in clause 14.2 had not been triggered before 13 June 2016, which was one year before ALN issued its claims. If it had been triggered before that date, ALN's claims were timed out.      

Decision

The High Court (Peter MacDonald Eggers QC, sitting as a Deputy Judge) granted summary judgment in respect of the royalty claims which had accrued on or before 13 June 2016, but dismissed the application in respect of the remaining royalty claims and the claims regarding the alleged continued use of publications.

He began by outlining a number of relevant principles concerning the interpretation of time-bar provisions:

• If the time-bar clause is ambiguous, the court should generally adopt a construction which is favourable to the claimant, given it is unlikely the parties would intend to surrender valuable legal rights without using clear words to that effect: Nobahar-Cookson v Hut Group Ltd [2016] EWCA Civ 128. But this principle is only relevant if the clause is genuinely ambiguous, after the court undertakes the exercise of construing the provision with regard to its language, purpose, contextual background and place in the contract as a whole. It is not triggered simply because the superficial meaning of the language is capable of two or more meanings.
• While a time-bar provision does involve the surrendering of legal rights, it is not a complete exemption from liability: it only takes effect if the action is not instituted within the specified time. In addition, there is a valuable commercial purpose behind such provisions which the court must recognise: they ensure potential claims are quickly brought to the defendant's attention, allowing the defendant to investigate the claim soon after it is made, rather than many years after the event.

The judge also noted that, for the purpose of determining whether a time-bar defence is available, the court should assume that the claimant's allegations are true.

First claim: Unpaid royalties

In relation to the claim for unpaid royalties, the judge had to decide when the "basis for the claim" became known and what the parties meant by that term.

The judge held that "the basis for the claim" meant the facts and circumstances which constitute a right or cause of action at law ie the ingredients for an accrued cause of action. The judge was therefore concerned with identifying when all the circumstances were known which, if pleaded, would constitute a contractual entitlement on the part of ALN to claim the royalty payments.

The judge concluded that ALN was contractually entitled to be paid the royalties no later than 60 days after the end of the relevant quarter. He rejected ALN's argument that it was only entitled to be paid royalties when it submitted an invoice for those amounts. The invoice registered sums already due and owing rather than creating the actual entitlement to be paid.

As a result, to the extent ALN's claims were in respect of royalties that accrued before 13 June 2016, the judge held that the claims were time-barred.

Second claim: Continued use of publications

In relation to the continued use claim, the issue turned on when the basis of the claim "became known" to ALN and what the parties meant by that term.

TR submitted that the degree of "knowledge" required to trigger the time-bar clause should be no higher than the degree of knowledge required under sections 11, 12, 14 and 14A of the Limitation Act 1980. TR relied on the Supreme Court decision in AB v Ministry of Defence [2012] UKSC 9 to argue that the concept of "knowledge" is inherently subjective. TR said that ALN had a sufficiently confident subjective belief in the claim on 13 October 2015 at the latest, when ALN wrote to TR intimating a claim against it. That meant the claimant had until 13 October 2016 to issue its claim to avoid being timed-out; whereas the claim was not issued until 13 June 2017.

The judge did not accept TR's submission on this point. He did not agree that the meaning of "becomes known" under clause 14.2 of the Agreement was the same as the meaning of "knowledge" under the Limitation Act 1980. There was no indication in the Agreement that the parties intended knowledge to be defined in accordance with the statutory meaning. "Knowledge" was therefore given its natural and ordinary meaning:

• Knowledge did not mean that ALN needed to have an unwavering conviction in the belief in the truth of the basis for the claim, but there must be a sufficient measure of confidence in the belief which was justified by evidence, experience or reasoning.
• Mere suspicion, even if supported by some indeterminate evidence, was not sufficient to constitute "knowledge" for this purpose.

Applying this test, the judge decided that the claimant had a real prospect of defeating the time-bar defence on the basis that the continued use claim did not become known until after 13 June 2016 (being one year before the claim form was issued). ALN's evidence was that the statements in its 13 October 2015 letter were no more than a suspicion based on a lack of information from TR. The question of when ALN had the requisite knowledge for the purposes of clause 14.2 would require an assessment of the evidence, which the court was not in a position to make on a summary basis. That was a matter for trial.