Can a statutory limitation period be ‘altered’ by parties? Case Note: Price v Spoor [2021] HCA 20

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By David Slatyer, Partner and Nica Manosca, Law Graduate 

In Price v Spoor [2021] HCA 20, the High Court recently reaffirmed the proposition that parties can ‘contract out’ of some statutory limitation periods and that an agreement to do so is enforceable and is not void against public policy.

Background Facts

In 2017, after the expiration of the limitation period, the mortgagees commenced proceedings in the Supreme Court of Queensland seeking payment of more than $4 million as monies owing under and secured by two mortgages, as well as recovery of possession of land, the subject of the mortgages. The mortgagors alleged that the mortgagees were statute barred pursuant to ss 10, 13 and 26 of the Queensland Limitation of Actions Act 1974 from enforcing any rights under the mortgages and bringing an action for debt. In response to this allegation, the mortgagees relied on terms of each mortgage which they argued amounted to an agreement by the mortgagors not to plead a defence of limitation.

Public Policy

The main point at issue on this appeal is whether parties may agree that one will not plead the statutory limitation by way of defence to an action brought by the other and whether such an agreement is unenforceable as contrary to public policy.

The High Court referred to comments made by other members of the court earlier in Commonwealth v Mewett[1], to the effect that a statutory bar does not go to the jurisdiction of the court to entertain the claim but rather to the remedy available, and therefore to the defences which may be pleaded. The cause of action is not extinguished by the statute unless a defence relying on the statute is pleaded; the time bar does not otherwise arise for consideration by the court.

The High Court also referenced comments made by Mason CJ in The Commonwealth v Verwayen[2], where his Honour observed that since the right to plead a limitations defence is conferred by statute, a contention that the right is susceptible of waiver “hinges on the scope of the policy” (in that case of the Victorian Limitation Act). Their Honours held that the same may be said of the question whether a person may abandon the statutory right to plead a defence of limitation by agreement.

It was also accepted in Westfield Management Ltd v AMP Capital Property Nominees Ltd[3] that a person upon whom a statute confers a right may waive or renounce that right unless it would be contrary to the statute to do so. This may be the case where there is an express prohibition against ‘contracting out’ of rights or where the statute, properly construed, is inconsistent with a person’s power to forgo statutory rights.

As the High Court observed, the Limitation Act contains no express prohibition against contracting out and that the Act read as a whole does not compel a different conclusion (there are provisions by which the remedy is barred but not the right of the plaintiff to bring the cause of action).

The mortgagors sought to establish that the Queensland Limitation of Actions Act 1974 aims to pursue the policy of public interest in the finality of litigation on the basis that in the interest of the public, disputes are to be settled as expeditiously as possible. Both the Court of Appeal and the High Court referred to the observations made by Mason CJ in Verwayen that the relevant consideration is not whether the provisions are beneficial to the public, but whether they are ‘not for the benefit of any individuals or body of individuals, but for considerations of State’ – the ‘critical question’, his Honour said, ‘is whether the benefit is personal or private or whether it rests upon public policy of expediency’.

Decision

The High Court held that contracting out of some statutory limitation periods is not contrary to public policy because it was for the defendant to raise the defence individually.

Further, the High Court also highlighted that it would be inconsistent with the principle of freedom to contract if parties were unable to contract out of the Limitation Act.

This reinforces the existing position.  Of course, as a general principle it is subject to the proper construction of the specific Limitation legislation and of course the conduct of the parties.

[1] (1997) 191 CLR 471 at 534-535.

[2] (1990) 170 CLR 394 at 405.

[3] (2012) 247 CLR 129 at 143-144 [46] per French CJ, Crennan, Kiefel and Bell JJ.

For further information, please do not hesitate to contact us.

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