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Queensland Judgments

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Authorised Reports & Unreported Judgments
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Spoor & Ors v Price & Ors  
Unreported Citation: [2019] QSC 53
EDITOR'S NOTE

The point of note in this decision is whether it was open to the parties to a mortgage to contract out of the Limitation of Actions Act 1974 (the Act). Her Honour concluded that it was open to the parties to a loan or mortgage document to agree never to raise a limitations defence to an action to recover monies due to the lender. However, the position was different in relation to a promise not to raise a limitations defence in an action to recover possession of land because the relevant provision of the Act provided for the extinction of title rather than a bar to the remedy. On the facts in this case, her Honour held that the relevant clause in the mortgage did not refer to the Act and accordingly, the plaintiffs’ claim was made out of time.

Dalton J

12 April 2019

The defendants mortgaged land as security for a loan from the plaintiffs. [2]–[3]. The defendants failed to repay the monies owing under the mortgages. [3]. The plaintiffs commenced proceedings claiming the monies due and recovery of possession under the mortgages. [1]. The defendants pleaded that the plaintiffs’ claims were barred because the relevant limitation periods had expired. [5]–[9]. In reply, the plaintiffs relied upon a clause in the mortgages as a covenant that the defendants would not plead a limitation defence. [10]. The clause provided (“the contracting-out clause”):

“The Mortgagor covenants with the Mortgage[e] that the provisions of all statutes now or hereafter in force whereby or in consequence whereof any o[r] all of the powers, rights and remedies of the mortgagee and the obligations of the Mortgagor hereunder may be curtailed, suspended, postponed, defeated or extinguished shall not apply hereto and are expressly excluded insofar as this can lawfully be done.” [13].

The issue was whether the Limitation of Actions Act 1974 (“the Act”) applied to defeat the plaintiffs’ claims. [1]. The preliminary question of law for Dalton J that is considered in this note was whether it was possible to contract out of the Act. [21]. Her Honour held that the question was to be determined according to the principles set out by Mason CJ in Commonwealth v Verwayen (1990) 170 CLR 394:

“Undoubtedly, some statutory rights are capable of being extinguished by the person for whose benefit they have been conferred … However, some statutory rights may also operate as a condition precedent to a court’s jurisdiction … More importantly, some rights may be conferred for reasons of public policy so as to preclude contracting out or abandonment by the individual concerned … It is therefore necessary to examine the statutory provision in this case in order to ascertain whether it is susceptible to extinguishment in this way.” [23].

Her Honour noted that there are numerous examples of courts upholding contracts not to plead the limitation period, instancing the decision in Newton, Bellamy & Wolfe v State Government Insurance Office (Qld) [1986] 1 Qd R 431 and Lindsay v Smith [2002] 1 Qd R 610. [24]. Her Honour referred with apparent approval to a statement in a leading textbook that “parties may agree not to plead a limitation period”, and that “[s]uch an agreement, if supported by consideration, will be binding as a contract and will have the effect of allowing the plaintiff to proceed after the limitation period has expired”. [24].

Her Honour noted that the existing cases dealt with agreements that were made at a time when a cause of action had arisen and it was foreseeable that a particular limitation period would come to an end. [25]. However, she held that as a matter of principle the fact that in the present case the contracting out occurred when the mortgage agreements were made, well in advance of any cause of action arising, was not a distinguishing feature. [25].

Accordingly, her Honour concluded that “there is no reason to doubt the validity of a borrower’s promise in a loan or mortgage document never to raise a limitations defence to an action to recover monies due to the lender”. [26]. She held, however that “the position is different in relation to a promise not to raise a limitations defence in an action to recover possession of land”. [26]. This was because s 24(1) of the Act does more than simply bar a remedy; it provides for the extinction of title. [27]. Her Honour held that it was not possible to exclude its operation by contract. [27].

Her Honour also rejected an argument that s 24 of the Act applied only to old system land because a mortgagee of Torrens land had no title, an argument that s 24 also extinguished the plaintiffs’ personal right to rely on the contracting-out clause, and an argument that the contracting-out clause was itself subject to the operation of the Act and that the time for reliance upon it had expired. [28]–[32], [33]–[34], [35]–[41].

Her Honour concluded that the contracting-out clause was ambiguous and that it should be construed contra proferentem; accordingly, her Honour was not prepared to construe the clause as referring to the Act. [43]–[54].

M J Hafeez-Baig