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Limitation of actions – exclusion by agreement

In the High Court decision of Price v Spoor [2021] HCA 20 (23 June 2021), the High Court was required to determine whether a mortgagor’s promise not to plead the Limitation of Actions Act 1974 (Qld) (Limitation Act) as a defence to an action brought by the mortgagees was enforceable.

The respondents (mortgagees) brought proceedings in the Supreme Court of Queensland in which they claimed more than $4 million as money owed under, and secured by, two mortgages and possession of the mortgaged land. The appellants (mortgagors) raised two allegations in defence.

First, the mortgagors alleged that the mortgagees were statute-barred from bringing an action for debt by ss10, 13 and 26 of the Limitation Act. Second, the mortgagors alleged that the mortgagees’ title under the mortgages had been extinguished by virtue of s24(1) of the Limitation Act. The mortgagees, in reply, alleged that cl.24 of each mortgage amounted to a promise by the mortgagors not to plead the defence of limitation and, as such, the mortgagors were estopped from pleading it.

The mortgagees brought an application for summary judgment. At the hearing of their application, the mortgagees conceded that if the Limitation Act did apply their claims would be defeated. The primary judge went on to dismiss the mortgagees’ application and enter judgment for the mortgagors. The mortgagees then successfully appealed to the Court of Appeal and obtained judgment in their favour. The mortgagors, in turn, appealed to the High Court but the High Court unanimously dismissed their appeal.

As to the mortgagors’ first allegation (that the mortgagees’ claim was statute-barred), the High Court held that cl 24 of the mortgages prevented the mortgagors from raising this defence. In reaching this conclusion, the High Court first had to consider whether a right to plead the Limitation Act as a defence is a right that can be surrendered and, then, whether properly construed, cl.24 of the mortgages had the effect of surrendering that right.

In a joint judgment, Keifel CJ and Edelman J, citing The Commonwealth v Mewett (1997) 191 CLR 471 at 534 and The Commonwealth v Verwayen (1990) 170 CLR 394 (Verwayen)at 405, observed, at [10], that limitation provisions, like those in the Limitation Act, have been construed to “bar the remedy but not the right”. That is, the Limitation Act does not extinguish the claim (or underlying right) but, rather, arms the defendant with a defence (which must be pleaded).

Their Honours also observed, at [11]-[12], that a person may renounce any right conferred on them by statute unless it would be contrary to the statute to do so. Their Honours were guided by the conclusion reached by Mason CJ, in Verwayen, that the right (in the equivalent Victorian Act) was not dictated by public policy; it was an individual right conferred on the defendant and, accordingly, it could be given up by the defendant.

Gageler and Gordon JJ broadly make the same observations and reach the same conclusion at [39]-[41], as does Steward J at [85]-[86]. In construing, cl.24 of the mortgages, the High Court took an objective approach and determined the meaning of its terms by reference to what a reasonable person would have understood those terms to mean: Keifel CJ and Edelman J at [27], Gageler and Gordon JJ at [42] and Steward J at [65]-[67].

The High Court concluded that cl.24 was drafted in such a way as to capture the effect of the Limitations Act and prevent the mortgagors from pleading the act as a defence: Keifel CJ and Edelman J at [28]-[31], Gageler and Gordon JJ at [47]-[49] and Steward J at [65]-[67]. Unsurprisingly, the High Court rejected the mortgagors contention that, if cl.24 was enforceable, the mortgagees could only sue for damages for breach of contract. Their Honours noted the availability of in relief equity to restrain the mortgagees from breaching cl.24: Keifel CJ and Edelman J at [32]-[35], Gageler and Gordon JJ at [50]-[51] and Steward J at [100]-[106].

As to the mortgagors’ second allegation (that the mortgagees’ title was extinguished by s24(1) of the Limitation Act), the High Court held that s24 does not operate automatically or independently from s13 of the Limitation Act and will not extinguish title in the absence of a defence that a claim is statute-barred: Keifel CJ and Edelman J at [21]-[25], Gageler and Gordon JJ at [37] and Steward J at [107]-[118].

Dr Michelle Sharpe is a Victorian barrister practising in general commercial, real property, disciplinary and regulatory law, p: 03 9225 8722, email msharpe@vicbar.com.au. The full version of these judgments can be found at austlii.edu.au.

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