Limitation of Actions Consultation - Law Commission

(3) Relief from Consequences of Mistake
8.21 The third exception under section 32 applies where the action is “for relief for the
consequences of a mistake”. In such a case, time will run from the moment the
plaintiff has discovered the mistake, or could with reasonable diligence have
discovered it. There have been few cases on this exception. Phillips-Higgins v
Harper, 50
a case on section 26(c) of the Limitation Act 1939 51
concerned an
agreement made in 1939 between the plaintiff and the defendant that the
defendant would pay the plaintiff as assistant solicitor a salary and a share of the
annual profits of the practice. The plaintiff believed that she was entitled to a third
share of the profits. The defendant paid her a quarter of the profits. The plaintiff
did not appreciate this until 1951, when she brought proceedings against her
employer for a declaration that she was entitled to a third share of the profits, and
an account of those profits. She argued that section 26 (c) of the Limitation Act
1939 applied. Pearson J held that the mistake needed to be an essential element of
the cause of action. Here the cause of action was for breach of contract. He noted
that the only consequence of the mistake made by the plaintiff was that she had
not instituted proceedings in time to avoid the operation of the Limitation Acts.
The action was not therefore for the consequences of a mistake within section
26(c).
8.22 A more recent case on section 32(1) of the 1980 Act discussed the action which
should be taken by a plaintiff exercising “reasonable diligence” to discover a
mistake. In Peco Arts Inc v Hazlitt Gallery Ltd, 52
the plaintiff had brought a
drawing wrongly attributed to Ingres from the defendants. Both plaintiffs and
defendants acted under the belief that the drawing was genuine, and the plaintiff
did not discover the mistake until eleven years after buying the painting. The
plaintiff issued proceedings for the return of the purchase price and interest as
money paid under a mutual mistake of fact (with alternative claims for the
rescission of the contract in equity and for damages under the Misrepresentation
Act 1967 for negligent misrepresentation). It was accepted that had the mistake
not been made the plaintiff would not have brought the drawing. The defendant
argued that had the plaintiff acted with reasonable diligence, she would have
discovered the mistake far sooner. Webster J said that “reasonable diligence” for
the purposes of section 32(1)(c) meant
not the doing of everything possible, not necessarily the using of any means
at the plaintiff’s disposal, not even necessarily the doing of anything at all;
but that it means the doing of that which an ordinarily prudent buyer and
possessor of a valuable work of art would do having regard to all the
circumstances, including the circumstances of the purchase. 53
He held that the plaintiff had used reasonable diligence and was therefore able to
rely on section 32(1)(c), so that the action was not time-barred.
50 [1954] 1 QB 411.
51 The equivalent of s 32(1)(c) of the 1980 Act.
52 [1983] 1 WLR 1315.
53 [1983] 1 WLR 1315, 1323.
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