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The calculation of limitation period for “midnight deadline” cases – Does the clock start ticking on the stroke of 00:00?

2021-02-01

Introduction

When calculating the limitation period for a claim, it is the usual case that the time starts to run on the subsequent day on which the cause of action accrues. But for “midnight deadline” cases, when the cause of action is entirely constituted at the very beginning of a day, should that day be counted as the first day of the limitation period, or the day following? In the case of Matthew v Sedman [2019] EWCA Civ 475, the English Court of Appeal (the “CA”) clarified the correct computation of limitation period when cases involve “midnight deadlines”.


Background

The Claimants are the current beneficiaries and trustees of a trust (the “Trust”) and the Defendants were the former trustees of the Trust who were also accountants. The principal assets of the Trust were the shares in Cattles Plc (“Cattles”). This company later acquired Welcome Financial Services Limited (“Welcome”). In April 2009, the trading in Cattles’ shares was suspended and at that time, there were almost 162,000 shares in the Trust valued at approximately £393,000.

Cattles and Welcome then entered into court sanctioned schemes of arrangements (the “Schemes”). It was expressly provided in the Schemes that claims under the same had to be submitted “on or prior to the Bar Date (i.e. 2 June 2011)”. Therefore, a claim had to be brought by midnight on 2 June 2011 (Thursday) for it to be made in time.

However, the Defendants failed to submit claims before the Bar Date which prevented the Claimants from bringing claims against Welcome under the Schemes. On 5 June 2017 (Monday), the Claimants issued proceedings against the Defendants for professional negligence.

Pursuant to the statutory six-year time-limit, the Defendants submitted that the last day for bringing a claim fell on 2 June 2017 (Friday) and accordingly, they applied for and were successful in having the part of the Claimant’s claim regarding the Schemes struck out on grounds that the claim was time-barred.

In reliance on the long-standing principle that the day of accrual of an action should be excluded for the purpose of calculating the limitation period, the Claimants appealed.


The Court of Appeal’s decision

At issue was whether, when the cause of action is completely constituted at the first moment of a day, that day falls to be included or excluded for the calculation of the applicable limitation period.

It is well-established that, where a cause of action accrues during the day, that day is excluded for the computation of limitation purposes as courts do not recognize “fractions” of a day as being counted towards the limitation period.

The Claimants argued that their claim arose just after the midnight deadline, i.e. that the cause of action accrues not on the stroke of midnight but rather, a “nanosecond” right after. For that reason, the “nanosecond” constituted as being a “fragment” of the day and therefore should not be counted towards the limitation period as the Claimants did not have the whole of 3 June 2011 to bring forth a claim against the Defendants.

The case of Gelmini v Moriggia [1913] 2 KB 549 was relied on by the Defendants in which it was clearly stated that, for situations where an action cannot be brought until the following day of a midnight deadline (e.g. the cause of action involves a failure to do something by the end of a specified day), since the cause of action is completed at the commencement of that following day, a claimant has the entire day to bring a claim against the intended defendant and hence, that day should be counted. As the cause of action in this case accrued by the very first moment of 3 June 2011, it was the Defendants’ case that this day should be included in the limitation period.

The CA agreed with the Defendants and followed the decision of Gelmini. The CA found that a “midnight deadline” case was different from the other cases in the sense that the deadline provides a definite indication as to the point in time when the action accrued. The cause of action had already accrued by the first moment in the day after midnight, rather than accruing on the day following midnight. As such, no “fractions” of a day arise in midnight deadline cases as there was no time at all on the day after midnight that the Claimants cannot bring their claim. Accordingly, 3 June 2011 does fall to be included in the computation of time for limitation purposes. The limitation period ended on 2 June 2017 (Friday) and the claim brought on 5 June 2017 (Monday) was out of time.


Conclusion

This case is of significant importance for claimants who wish to lodge claims with “midnight deadlines”. In any event, potential claimants are minded of the dangers of waiting until the very last moment close to the expiry of the limitation period before issuing a claim.

Following the two unfavourable judgments against the Claimants, they have appealed to the Supreme Court and the case was heard on 19 January 2021. It would be interesting to see if the Supreme Court would be following the early 20th Century authority of Gelmini or to rule that the long standing principle of excluding the day on which the cause of action accrues should also cover “midnight deadline” cases. Further clarity and certainty as to the timing and calculation of the limitation period for cases alike are anticipated.




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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2021


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