Drawing the right analogy: limitation and claims for equitable relief

Of the various legal problems created by the Limitation Act 1980 (LA 1980), a strong contender for the most difficult is working out whether it applies to a given claim for equitable relief.

Section 36(1) of the LA 1980 provides that the various time limits under it:

The default position, therefore, is that claims for equitable relief are not subject to statutory time limits (they may of course be subject to the doctrine of laches, but that is a different matter). There is an exception, however, if the time limit in question may be applied “by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before 1st July 1940”.

In other words, a statutory will apply if both:

• It has a statutory predecessor (a “corresponding time limit”) in a Statute of Limitations predating the Limitation Act 1939.
• The earlier time limit was applied by the courts “by analogy” to the claim for equitable relief in question.

A defendant may be lucky enough to unearth a pre-1940 authority that is indistinguishable from its own and cite that as evidence of how the relevant time limit was applied by analogy. But it is not critical that they do, because in Cia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 WLR 112 (see Legal update, Limitation periods and equity) it was held that the words “was applied” can be read as “would have applied”. Therefore, if an identical case cannot be found, one must “identify if possible the principle which the courts of equity adopted and … apply a similar principle now” (Clarke LJ at paragraph 125).

This raises the question: what is the “principle” which led courts of equity to adopt the Statute of Limitations?

A narrow principle: The UB Tiger and Royal Mail

The decision of the Court of Appeal in P & O Nedlloyd BV v Arab Metals Co (The UB Tiger) [2006] EWCA Civ 1717 is the most important recent decision in this area. The issue in that case was whether a claim for the equitable remedy of specific performance of a contract was subject by analogy to section 5 of the Limitation Act 1980, which applies a six-year limitation period to claims for breach of contract.

Following an extensive review of the authorities, Moore-Bick LJ, with whom Jonathan Parker and Buxton LJJ agreed, concluded that for equity to apply a limitation period by analogy, there needed to be a “correspondence” between both:

• The common law and equitable remedies.
• The circumstances in which those remedies are available (that is, the underlying cause of action).

Moore-Bick LJ held that, because there was no “coercive remedy” comparable to a decree of specific performance available at common law, and because specific performance was (in theory) available even where the defendant had not breached the contract in question, neither requirement was satisfied, with the result that claims for specific performance were not subject to limitation by analogy.

The reasoning in The UB Tiger was applied in the recent case of Claimants in the Royal Mail Group Litigation v Royal Mail Group Ltd [2021] EWHC Civ 1173 (see Legal update, Judicial precedent dictates that injunction claims are not subject to any limitation period (Court of Appeal)). There the question arose whether a claim for an injunction to compel the defendant to perform its statutory duty to issue VAT invoices in respect of vatable supplies was subject to section 2 of the LA 1980, on the basis that it was “analogous” to a claim in tort for damages for breach of the statutory duty in question.

In a joint judgment by Lewison and Asplin LJJ and Sir Timothy Lloyd, the Court of Appeal considered that a claim for an injunction to enforce a statutory duty was, for limitation purposes, indistinguishable from a claim for specific performance of a contract. The court therefore concluded that it was bound by The UB Tiger to hold that claims for an injunction were not subject to limitation.

The court appears to have reached this conclusion with some reluctance and expressed doubt about the correctness of Moore-Bick LJ’s analysis in The UB Tiger (at paragraph 182 of the judgment, they said that they had “reservations” about the reasoning). Even so, it rejected the defendant’s invitation to treat The UB Tiger as having been decided per incuriam owing to its inconsistency with Cia de Seguros. (It was right to do so because Cia de Seguros was not only cited in The UB Tiger but moreover contributed significantly to its reasoning. The per incuriam doctrine, as explained in Young v Bristol Aeroplane Ltd [1944] KB 718, is not engaged simply because the Court of Appeal disagrees with the reasoning of an earlier Court of Appeal.)

If The UB Tiger and Royal Mail were correctly decided, it would mean that the analogy principle recognised by section 36 is a narrow one because it would apply only where the equitable claim in question is almost indistinguishable from its common law counterpart. This would be a surprising outcome. The courts have consistently recognised that the law of limitation serves an important public policy function, and there is therefore no reason to assume that when courts of equity adopted the provisions of the statute into their own rules of procedure, they did so reluctantly.

Was The UB Tiger wrongly decided?

It is suggested that the law took a wrong turn in The UB Tiger and that the doubts expressed in Royal Mail were justified. To understand how the wrong turn came to be made, one must start with the case from which Moore-Bick LJ derived his twofold test, namely Knox v Gye (1872) LR5 HL 656.

Mr Knox, who was the personal representative of Mr Thistlethwayte, claimed an account of profits of a partnership alleged to have been entered into between the deceased and Mr Gye. The House of Lords dismissed the claim on the ground of limitation because, although the Limitation Act 1623 only applied to actions for an account at law, equity adopted the statute by analogy in respect of claims for an account in equity.

At paragraph 674 of the judgment, Lord Westbury said:

Moore-Bick LJ saw things differently, however. What mattered was not the correspondence between the two remedies in the context of the case in question, but rather their correspondence for all purposes.

Moore-Bick LJ went on to say that, since, as the Privy Council decided in Hasham v Zenab [1960] AC 316, specific performance may be ordered even though the defendant has not (yet) breached the contract in question, it was “wrong in principle to treat specific performance as merely an equitable remedy for an existing breach of contract” (at paragraph 47). But this is to throw the baby out with the bathwater. Just because there may be fact patterns where the claim for specific performance does not correspond to a claim for damages, it does not follow that the two remedies can never correspond.

Evidence of a wider principle

A somewhat puzzling aspect of Moore-Bick LJ’s judgment in The UB Tiger is that he not only cited, but in fact quoted the key passage from, a decision that contradicts his conclusion on specific performance. The case is Redgrave v Hurd (1881) 20 ChD 1, in which the Court of Appeal held that it is no defence to a plea of fraudulent misrepresentation that the claimant could have discovered the fraud with due diligence. Jessel MR, with whom Baggallay and Lush LJJ agreed, said at paragraph 13:

“If a man is induced to enter into a contract by a false representation it is not a sufficient answer to him to say, “If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself of them.” I take it to be a settled doctrine of equity, not only as regards specific performance but also as regards rescission, that this is not an answer unless there is such delay as constitutes a defence under the Statute of Limitations. That, of course, is quite a different thing.”

The Master of the Rolls was making the point here that “delay” by the representee in finding out the truth was only a defence to a claim for rescission if it gave rise to a limitation defence. Significantly for present purposes, the Master of the Rolls said that it was “a settled doctrine of equity” that the limitation-by-analogy principle applied both to claims for specific performance and to claims for rescission.

In The UB Tiger, Moore-Bick LJ referred to this passage from Redgrave v Hurd when considering a different point, which was whether laches can operate as a defence to a claim for equitable relief even if that claim is subject to a statutory limitation period by analogy. His view was that it could, but only if it had a prejudicial effect on the defendant. What is unclear is why, when considering the limitation-by-analogy principle, he did not touch on the Master of the Rolls’ statement in Redgrave v Hurd that specific performance was a remedy that was subject (or potentially subject) to the Statute of Limitations.

The second case which may be said to undermine Moore-Bick LJ’s narrow approach in The UB Tiger is the Court of Appeal’s decision in Molloy v Mutual Reserve Life Insurance Company (1906) 94 LT 756. Mr Molloy claimed rescission of an insurance policy that had been fraudulently mis-sold to him. The Court of Appeal dismissed Mr Molloy’s claim on the basis that it was brought more than six years after he was placed on notice of the defendant’s fraud.

In reaching this conclusion, all three judges (Collins MR and Romer and Cozens-Hardy LJJ) proceeded on the basis that it was well established that the limitation-by-analogy doctrine applied to claims for rescission. At paragraphs 761-2, Romer LJ said: