In the recent case of Oyesanya v Mid-Yorkshire Hospital NHS Trust(2015), the Court of Appeal considered the merits of a limitation defence. While the decision ultimately turned on the specific facts of the case, the Court of Appeal also emphasised that a limitation argument is part of the defence that must be proved, not a jurisdictional threshold.  Therefore, if the defence is struck out, there is no limitation question to decide.

Background

The Claimant had taken a job working for the Defendant through an agency in 2000. After a period of some months, he was offered a short term contract of employment, due to last from 14 August 2000 until 31 March 2001. It was eventually established before the Court of Appeal that although a draft contract was produced, no contract was ever signed.

The Claimant resigned on 30 November 2000. He later brought an action for due remuneration, claiming £16,929.35 plus interest. The papers and fees relating to the action were lodged at the court office on 30 November 2006. The claim form was issued the following day on 1 December 2006.

First instance decision

At first instance, two key limitation issues were decided by the Court:

(a)    Could the limitation arguments be heard before an application to strike out the defence?

The Claimant had previously made an application for specific disclosure of contemporaneous internal documents held by the Defendant. Upon the Defendant's failure to produce any documents, the Claimant applied to have the defence struck out. The strike out application was yet to be resolved by the time of the first instance hearing. The question therefore arose as to whether the limitation issues could be determined before the strike out application. The Claimant argued that to decide the issues in that order would be to "put the cart before the horse." The Judge disagreed, finding that the limitation question must be decided first.  This was on the basis that if the limitation arguments were successful, there would be no claim and the strike out application would be redundant.

(b)    Was the claim statute-barred?

Section 5 of the Limitation Act 1980 provides that a contractual action cannot be brought once six years have expired since the date on which the cause of action accrued. The lodging of the papers and fees at court was sufficient to establish that the claim had been "brought" for limitation purposes on 30 November 2006, even though the claim form had not been issued until the following day.

The next question was when the cause of action had "accrued", or in other words, when the breach of contract giving rise to the payment entitlement had occurred.  The Claimant argued that the whole debt of unpaid salary was owed to him on the day he resigned: 30 November 2000. On that basis, by bringing the claim on 30 November 2006, he was just within the time limit to claim the full sum. The Defendant submitted that as employees were usually paid at the end of each month, the contractual cause of action for each monthly payment arose on the last day of each month. Taking that argument to its logical conclusion, the Claimant was only in time to be able to claim the remuneration due for November 2000. A claim to any other monthly payment was statute-barred.

The Judge found that no contract existed and the Claimant could therefore not claim for the total amounts due under the alleged contract.  However, the Claimant was entitled to a quantum meruit for the November 2000 payment.

Court of Appeal decision

The Court of Appeal held as follows:

(a)    The Judge had been wrong to decide on limitation before hearing the strike out application. The limitation argument was a defence, not a question of jurisdiction. If the defence was struck out, there would therefore be no question of limitation to decide. The Claimant had been right to argue at first instance that to decide limitation before strike out was "to put the cart before the horse."

However, given that the defence had some merit, and that the Defendant's conduct had not been seriously deficient, it would have been unlikely that the defence would have been struck out if the correct order had been followed.

(b)    Even if the Judge had been correct in considering the limitation issue first, the wrong decision had been reached on limitation. Despite the lack of any signed written contract, during the period of employment the parties had conducted themselves as though they had entered into a contract. Therefore, from 30 November 2000 onwards, once there was no longer a continuing contract, a debt obligation for unpaid salary arose. As the cause of action had accrued on 30 November 2000, the claim brought on 30 November 2006 was just in time to avoid being statute-barred.

Comment

This case has made it clear that a defendant must prove a limitation defence.  The mere existence of a valid limitation defence does not mean that the defendant can avoid becoming embroiled in litigation (including disclosure) prior to the court's determination of the limitation issue.  In order to avoid unnecessary costs, defendants should therefore consider early determination of any limitation defence, such as an application for summary judgment or trial of a preliminary issue.

In relation to the substance of the limitation defence in this case, the decision illustrates that the lack of a signed contract between the parties does not mean that there is no enforceable agreement.  Although each case will turn on its own facts, the court will review the evidence closely to determine whether the existence of a contract can be inferred from the parties' conduct.