Limitation Act 1980

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Not to be confused with that monstrous eulogy to Schadenfreude, the statue of limitations.

The Limitation Act 1980, known fondly as the statute of limitations, is a piece of UK legislation dealing with limitations on legal claims under contracts, tort and so on.

  • Tort: An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued: Section 2.
  • Contract: Claims on a simple contract are limited to six years from the date the cause of action accrued: Section 5. Where — Section 6 — it was a contract of loan without a defined repayment date — for example, we think, a deposit — then (contrary to popular wisdom and ancient cases[1]) the cause of action does not accrue immediately upon deposit, but only upon a demand in writing for your money back. Hence the problem banks have with “gone away” clients to whom it still owes money. This money can be trapped indefinitely on the balance sheet, since there is no one there to demand it, so a limitation period never begins to run. Hence the Dormant Bank and Building Society Accounts Act 2008 regime where banks can transfer the cash (and associated liability) away to charitable purposes.
  • Defamation and malicious falsehood: no such action shall be brought after the expiration of one year from the date on which the cause of action accrued.

See the text in the act itself for more tedious detail about what happens in the case of personal injury or death.

It extinguishes the right to take legal action, not the debt

Of particular interest to regulated financial services firms. The expiry of a limitation period takes away a claimant’s right to litigate; it does not extinguish a debt in itself. Primarily, this means a would-be plaintiff loses the right to argue that it is owed money. If you are definitely owed money, and you know this, and so does your debtor, and six years after you were entitled to be paid that money you still haven’t got round to putting your foot down and insisting it is paid to you then, more fool you for being asleep at your own switch for so long that you’ve lost a big stick with which to threaten your debtor, but the debtor does, in the abstract, still owe you the money. He can’t write it off his balance sheet altogether. If your debtor happens to be a regulated financial services provider — you know, a bank — its obligations to treat its customers fairly, which will be policed not by the Queen’s Bench Division but the Financial Conduct Authority. The FCA would look very dimly on an institution that reneged on a debt just because its customer no longer was entitled to go to the court to enforce it. It also rather cuts the nose off the cheese vis-a-vis the commercial imperative and the JC’s favourite sage savoury: non mentula esse.

Set-off, Geoffrey Boycott’s grandmother and Der fliegende Holländer

Curious coda: The Limitation Act’s limitation period may deprives you of your right to take legal action to recover a debt, but doesn’t extinguish the debt itself. The limitation is on the remedy not the right.

An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

The debt still exists, like a damned old Dutch sea-captain, constrained to roam the endless seas for all eternity, carrying that asset but never able to bring it ashore, except by sleight of hand or cool trickery. If you can compel your debtor to acknowledge it — or to forget to notice the limitation — somehow, all is not lost. A debtor that pays in ignorance that the claim has become time-barred cannot reclaim its money.

Now, you might say a promise a fellow has, but about which he can’t put himself at the mercy of Her Majesty’s Courts isn’t much use when you are dealing with the kind of ninjas we see in the financial markets — Sir Geoffrey Boycott’s dear grandmother facing down the West Indies’ pace attack with a stick of rhubarb comes to mind — but there are a few pieces of legal conjuring that might yet avail you: in particular, the negligence of your opponent’s counsel, should they fail to plead the Limitation Act, and, even better than that, set-off.

For Her Majesty’s judiciary are not needed to effect a set-off: it is a self-help remedy you can mend and make do on your own. Should you owe the same debtor some money under a live obligation, you might seek to set that off against your dead one. Authority for this — though it is hard to find a copy online — is Royal Norwegian Government v Constant & Constant [1960] 2Lloyd’sRep 431

Simple contracts

Of course, what we finance types care about are claims under contracts. About those, and that curious expression “simple contracts”:

Simple contract” is one that is not a “specialty” — a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt, such as a deed — and Limitation Act also puts it in contrast to:

(a) does not provide for repayment at a fixed or determinable date; and
(b) does not make the repayment obligation conditional on a repayment demand by the creditor (or on any other matter);
[warning:strap yourselves in for this next bit]
“except where in connection with taking the loan the debtor enters into any collateral obligation to pay the amount of the debt or any part of it (as, for example, by delivering a promissory note as security for the debt) on terms which would exclude the application of this section to the contract of loan if they applied directly to repayment of the debt.”

We quote that last bit in full because, for a short piece of text, it is bloody hard to decipher. There are no explanatory notes to the Limitation Act 1980 — in the good old days, you were just meant to figure it out for yourself — but for help we do have that Law Commission bunker buster which says “section 6 does not apply where the debtor enters into a collateral obligation to pay the amount of the debt or any part of it on a fixed or determinable date or conditional on a demand for repayment (or other condition).” So if the promissory note itself is a demand loan, but it is pledged as collateral for another debt which isn’t, then it counts as having a payment date. That's the best I can do.

The covenant to pay

Hence why the covenant to pay in the terms of a secured note issue is also repeated in the security trust deed — it converts itself from a simple contract to a specialty. This is a bity of a cheeky run-around, in our view, but still.

This was designed to ameliorate the common law position from difficult cases like Re Brown’s Estate [1893] 2Ch 300[2], that a loan repayable on demand is treated as being repayable immediately, and the limitation period runs from the day the loan is advanced. Re Brown’s Estate [1893] 2Ch 300[3] was an utterly bonkers decision, by the way: it means if you ask for your deposit to be repaid five years and 364 days after you placed it — being the day before the limitation period expires — you must immediately launch court proceedings to recover your money, or lose it altogether.

Anyway, all fixed now: If you don’t have an obligation to repay the money at a particular time, absent a demand, the limitation period only starts to run from the date of demand.


Lots of good fun, particularly in the area of latent defects in the construction of houses, for forensic examination of precisely when a cause of action accrues, of course. The Limitation Act 1980 was the subject of a 320 page law commission monograph in 2015[4] so clearly someone sees the opportunity to change the law. But at least it is better than it was after Re Brown’s Estate [1893] 2Ch 300[5].

See also