Limitation of Actions Consultation - Law Commission

PART XIV
OPTIONS FOR REFORM IV: ADDITIONAL
ISSUES
1 AGREEMENTS TO CHANGE THE LIMITATION PERIOD
14.1 The 1980 Act is silent on the issue whether it is possible for parties to contract out
of a statutory limitation period by agreeing to extend or shorten the limitation
period. There is authority to suggest that such agreements will be recognised by
the courts, but the position is not entirely clear. 1
Few issues are raised by an
agreement between the parties to apply a shorter limitation period to a dispute
than would be permitted by statute: providing that the terms of the agreement
comply with the Unfair Contract Terms Act 1977, 2
there is no reason to limit the
power of the parties to enter into such an agreement. The position with respect to
agreements to lengthen a limitation period may be different. As noted above 3
it is
not in the interests of the public or the legal system for disputes to be brought to
trial years after the events giving rise to the claim, when the available evidence may
have deteriorated to the point where it is no longer possible to give a fair trial to
the issues. However, unless the agreed extension is considerably greater than the
statutory limitation period, there may be no adverse implications for the public
interest. It may assist the parties to a dispute to extend a limitation period
sufficiently to allow for further negotiations to settle a dispute, and to avoid
incurring the costs associated with litigation until this is essential. 4
Moreover it
may be argued that the defendant’s agreement to an extension of time - so that
there is no obvious unfairness to him or her in allowing the action to proceed -
outweighs any public interest in ensuring a “fair” trial.
14.2 Law reform bodies in other common law jurisdictions which have discussed this
issue have been influenced by the nature of the limitation defence. The New
Zealand Law Commission noted:
We see no reason why parties to a dispute should not be able effectively to
agree that a limitation defence not be taken for a particular period (or at
all). This also follows from the nature of the limitation defence, which
does not extinguish the underlying right, and may be waived by a
defendant by simply choosing not to plead passage of the limitation period
as an affirmative defence. 5
14.3 Similarly, the Alberta Law Reform Institute commented:
1 See paras 9.7 - 9.11 above.
2 See para 14.6, n 8, below.
3 See Part I.
4 Particularly where the parties are complying with the terms of a “pre-action protocol”
adopted in accordance with recommendations made by Lord Woolf, Access to Justice: Final
Report to the Lord Chancellor on the Civil Justice System in England and Wales (1996), Chapter
10.
5 Report No 6, Limitation Defences in Civil Proceedings, NZLC R6 (1988), para 266.
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