The interesting point in this case is whether parties can agree to contract out of pleading a limitations defence prior to the accrual of a cause of action. The issue arose in the context of a proceeding to recover monies owed and secured by mortgages given in 1998. The initial amount of $320,000 was due to be repaid in 1999 but had not been repaid. By reason of interest accruing on the monies the total amount being sought had risen to $4,014,969.22. On appeal, the Court of Appeal confirmed that it was open to the parties to agree not to plead a limitations defence, and concluded that the relevant clause in the mortgages had achieved that result here. Accordingly, the primary judge had erred in dismissing the proceeding.
Sofronoff P and Gotterson and Morrison JJA
17 December 2019
In 2017 the appellant commenced a proceeding against the respondents to recover monies owing and secured by mortgages given in 1998. , . The mortgages were to secure $320,000 due to be repaid in 1999, but was not repaid. . By reason of interest accruing on the monies, the total amount now sought was $4,014,969.22. . The respondents denied liability for the amount claimed on the basis that the appellant was statute barred by operation of the Limitation of Actions Act 1974 (“the Act”). . In reply, the appellant sought to rely on a clause in the mortgage which, it alleged, contained a covenant that the respondents would not plead any limitations defence. .
At first instance, the primary judge found that the relevant clause of the mortgage did not prevent the respondents from pleading a limitations defence (having found it to be ambiguous, and therefore construing it contra proferentem against the appellant). –. Further, the primary judge concluded that, in any event, s 24(1) of the Act had operated to “extinguish the mortgagee’s title to the subject lands before the proceeding was commenced”. .
The appellant appealed against the primary judge’s orders. The respondent contended that the primary judge’s decision should be affirmed on alternative grounds, including because an agreement to not plead a limitations defence is void as against public policy. . Gotterson JA (with whom Sofronoff P and Morrison JA agreed) gave the reasons of the Court.
Whether it is possible to agree not to plead a limitations defence
Gotterson JA noted that there appeared to be “no Australian authority” in which specific consideration had been given to whether it was possible for a party to contract that it would not plead a limitations defence prior to any cause of action having arisen. . However, “judicial observations at the highest level in this country” suggested that such contractual provision was possible (and would not be void for that reason). .
In particular, his Honour noted that in Commonwealth v Verwayen (1990) 170 CLR 394, both Mason CJ and Brennan J had described limitations statutes as conferring “a right on a defendant to plead as a defence the expiry of a limitation period”. . Although the limitations statutes reflected public policy considerations, the policy had not been implemented by depriving the jurisdiction of the courts, but by conferring such rights. It could be inferred that “it was compliable with public policy” that individuals have “complementary rights to choose not to become entitled in the first place to plead limitations defences”. . As a plurality of the High Court has held, “a person upon whom a statute confers a right may waive or renounce his or her rights unless it would be contrary to the statute to do so” (Westfield Management v AMP Capital Property Nominees Ltd (2012) 247 CLR 129). .
The appellant’s appeal
The appellant argued that the primary judge had erred in two key ways: firstly, in concluding that a clause in the mortgage did not prevent the respondents from pleading a limitations defence. Secondly, in concluding that s 24(1) of the Act had extinguished their title to the mortgaged property. .
As to the first alleged error, cl 24 of the mortgage provided that (at ):
“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.”
Gotterson JA held that the primary judge had erred in concluding that this language was ambiguous and did not refer to limitations statues, such as the Act. . In particular, his Honour said that the word “defeat” in cl 24 “aptly describes the effect of limitations provisions” (citing judicial usage of this word to describe such an effect). –. Accordingly, cl 24 did include a covenant not to invoke limitations rights. .
In relation to the second alleged error, s 24(1) of the Act provided that (at ):
“where the period of limitation prescribed by this Act within which a person may bring an action to recover land (including a redemption action) has expired, the title of that person to the land shall be extinguished.”
His Honour considered that although the word “title” in this provision was “apt to include the title that a mortgagee has to its interest as a registered mortgagee of land”, the provision only operated to extinguish that title where the relevant period of limitation had expired. –. However, because cl 24 of the mortgage operated at all times to prevent the limitation period applying, it had never expired (and therefore no extinguishment of title had occurred). .
In the result, the appeal was successful on both grounds. The primary judge’s dismissal of the appellant’s proceeding was set aside. .