A party brings a claim within the limitation period, but can the defendant counterclaim, even though the limitation period for their own claim expired before the claimant’s claim was issued? In Al-Rawas v Hassan Khan & Co (a firm)  EWCA Civ 42, the Court of Appeal considered the effect of s. 35 of the Limitation Act 1980 on the limitation period of an original set off or counterclaim and ruled that the answer to the question was “no”.
Two firms of solicitors (Cs) sued two former clients (Ds) for legal fees and disbursements. The claims were brought within the limitation period. Ds served Defences and Counterclaims seeking to set off against the claims counterclaims (in contract and tort) for damages for professional negligence. The usual limitation periods for the counterclaims had expired before the claims were issued. Therefore, had Ds issued fresh claims for damages, those claims would have been limitation barred.
The Court of Appeal was asked to decide whether the fact that Ds had issued their claims as counterclaims to Cs claims rather than as separate claims meant that they were not limitation barred.
Here is what it says.
and “third party proceedings” means any proceedings brought in the course of any action by any party to the action against a person not previously a party to the action, other than proceedings brought by joining any such person as defendant to any claim already made in the original action by the party bringing the proceedings.
For the purposes of this subsection, a claim is an original set-off or an original counterclaim if it is a claim made by way of set-off or (as the case may be) by way of counterclaim by a party who has not previously made any claim in the action.”
Cs and Ds agreed that Ds had each pleaded an “original set off and counterclaim” within the meaning of s. 35(3).
Ds argued that on the proper interpretation of s. 35(3), a Defendant wishing to rely on an original set off and counterclaim could do so despite the expiry of the limitation period. On their proposed interpretation, the prohibition imposed by s. 35(3) on bringing new time-expired claims in the course of any action (except as provided by the rules of court and by section 33 of the Act) applied to all new claims made in the course of an action “other than an original set off or counterclaim”. Consequently, they argued, an original set off or an original counterclaim could be brought after the expiry of any limitation period that would apply if the claim were brought as a fresh action.
Cs argued that s. 35(3) had a more limited effect on the limitation period for an original set off and counterclaim. The effect was that the original set off and counterclaim was deemed to have been issued at the date that the claim was issued, rather than the latter date on which the court actually issued the set off and counterclaim.
The Court of Appeal accepted Cs’ interpretation of s. 35(3). It concluded that an “original set off and counterclaim” was excepted from the special restrictions which s. 35(4)-(5) and the rules of court made pursuant to those provisions otherwise applied to the addition of time-expired claims made in the course of proceedings. Furthermore, for limitation purposes, the deemed commencement date of the original defence and counterclaim was the commencement date of the claim, thus giving an original defence and counterclaim the benefit of the doctrine of relation back. However, s. 35(3) afforded no greater benefit to an original defence and counterclaim.
The result appears sensible. If the Court of Appeal had accepted Ds’ position, it would have enabled Defendants to issue claims – by way of counterclaim – that would otherwise have been many years out of time for limitation purposes. Instead, the benefit of s. 35 to a defendant with an original defence and counterclaim is merely that, if the limitation period for the counterclaim ran out in the relatively short period of time between the issue of the claim and the issue of the counterclaim, the defendant would be able to avoid limitation. This would therefore assist defendants in cases where claims were brought against them very close to the expiry of the limitation period.
Winston Jacob / 7th Feb 2017
The information and any commentary on the law contained on this web site is provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member of Chambers. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site. No responsibility is accepted for the content or accuracy of linked sites.
If you like what you've read but want to know more about how we can help you, simply call us:
Alternatively you can send us an email and a member of our team will contact you as soon as possible.