(iii) The Determination of When Time Starts to Run

The limitation period begins to run from the date the cause of action accrues. For the purposes of a claim founded on the reversal of the defendant’s unjust enrichment this is usually the point at which the defendant receives the enrichment.[1] Sometimes, however, the cause of action can only be established after the defendant has received the enrichment, as will be the case where the ground of restitution is total failure of basis. In such cases, time will only begin to run once the relevant ground of restitution can be estab- lished.[2] So, for example, it has been held that a restitutionary claim founded on frustration will only accrue once the contract is frustrated.[3] Similarly, in Nu Line Construction Group Pty Ltd v Fowler[4] it was held that an anticipated contract would be considered to have failed to materialize once the parties no longer share the common intention to make the contract, so that the basis will have failed at that point.

Despite certain dicta that a restitutionary cause of action will accrue only once the claimant has demanded the return of the enrichment,[5] the better view is that there is no such requirement, for otherwise the claimant would be able to postpone the date from which the limitation period begins to run until it suits him or her to inform the defendant of the restitutionary claim.[6]

There is, however an argument which can be run that claims for restitution of unjust enrichment, other than those which arise by virtue of statute, are not subject to any limitation period in practice, because the cause of action continuously accrues. It was recognized by Males J in Equitas Ltd v Walsham Bros and Co Ltd[7] that, where the defendant has received money which it was liable to pay the claimant in circumstances where there was a continuing duty to do so, the cause of action accrues each day the defendant failed to make remittance of the payment. Consequently where, for example, the claimant has paid money to the defendant by mistake, since the defendant is under a continuing duty to make restitution, the cause of action would arise anew each day after the payment had been made. It would follow that, if the claimant seeks restitution seven years later, this could be considered to be a new cause of action which had just arisen so that it is not time barred. Since, however, this would undermine the policy behind limitation periods, this idea of the cause of action arising each day should be rejected, at least in the context of a claim founded on the reversal of the defendant’s unjust enrichment.

There are a number of specific rules relating to the time from which the limitation period begins to run in certain cases.

(1) Claimant Subject to Incapacity

Where the claimant is a minor or is suffering from mental incapacity[8] the limitation period will not begin to run until the claimant has ceased to be under a disability or has died, and it will then run for a period of six years.[9]

(2) Claim Founded on Spontaneous or Induced Mistake

Where the claim is founded upon the defendant’s fraud,[10] or the defendant has deliberately concealed from the claimant any fact relating to the claimant’s action,[11] or where the claim relates to mistake,[12] the limitation period will not begin to run until the claimant has discovered the fraud, concealment or mistake or could have discovered it with reasonable diligence. In determining what amounts to ‘reasonable diligence’ to make the relevant discovery of fraud, concealment or mistake, the court should have regard to what an ordinary prudent person would have done if he or she had carried on a business of the relevant kind with adequate, but not unlimited, staff and resources, and motivated with a reasonable, but not excessive, sense of urgency.[13]

In Test Claimants in the FII Group Litigation v HMRC[14] the Supreme Court held that, to gain the benefit of the extended limitation period, the mistake had to constitute an essential element of the cause of action and not simply form the context of the claim. It follows that, in a case where the claimant seeks restitution of overpaid taxes, the extended limitation period will only be available where mistake is pleaded as the ground of restitution and not where the public law Woolwich ground is pleaded, although it was acknowledged that, where both grounds of restitution are available, the claimant is free to choose the mistake ground to gain the benefit of the extended limitation period. The significance of this extended limitation period for mistake-based claims for the recovery of overpaid taxes has, however, been reduced in significance, particularly because the key statutory provisions for restitution, relating to overpaid income tax, capital gains tax, and VAT,[15] constitute an exclusive regime for restitution of those taxes paid by mistake, for which the limitation period is four years. Also the application of this extended limitation has been retrospectively abrogated by statute as regards claims for recovery of taxes,[16] although the retrospective nature of both provisions have been held to infringe EU law in respect of their application to restitution of taxes paid in breach of EU law,[17] in not providing transitional provisions.

The effect of the extended limitation period under the Limitation Act 1980 is that it is always necessary to identify with care what the ground of restitution is on which the claim is based. Provision is only made for fraud, mistake, and deliberate concealment. This is unfortunate. Where, for example, the claimant has been subjected to duress surely time should not begin to run until the duress has ceased, for the claimant who has succumbed to the defendant’s threats cannot be expected to commence restitutionary proceedings until the threats have ceased to operate.[18]

(3) Recovery of Debts or Other Liquidated Pecuniary Claims

Where the claimant seeks to recover a debt or any other liquidated pecuniary claim and the defendant has acknowledged the claim or has made any payment in respect of it, time will only begin to run from the date of acknowledgement or payment.[19] The acknowledgement or payment by the defendant will only be relevant if it relates to the particular debt or other liquidated pecuniary claim which the claimant seeks to be paid.[20]

This provision should be applicable to all claims for money had and received and claims for money paid to the use of the defendant because these are liquidated pecuniary claims which are assessed by reference to the amount of money received by the defendant. In principle the provision could not be extended to cover claims for the reasonable value of services or goods because such remedies depend on the assessment of the court as to the value of the benefit received by the defendant and so do not constitute a liquidated claim. But in Amontilla Ltd v Telefusion plc[21] it was held that a quantum meruit claim for the reasonable value of building services constituted a liquidated pecuniary claim within section 29(5). This is a highly dubious decision.

(iv) Should a Different General Limitation Period Be Recognized?

Is six years an appropriate limitation period for most restitutionary claims founded on unjust enrichment? All limitation periods are arbitrary but, in the light of the recognition of the defence of change of position, a case can be made that the limitation period for restitutionary claims should be longer than for contract and tort claims, simply because the defence of change of position exists to give the defendant some security in his or her receipt. But, since that defence is generally interpreted restrictively, its potential application should not result in longer limitation periods for unjust enrichment claims. Consequently, it is entirely appropriate that the limitation period for restitutionary claims is consistent with that for other forms of civil liability.

  • [1] Kleinwort Benson v South Tyneside MBC [1994] 4 All ER 972, 978 (Hobhouse J).
  • [2] Guardian Ocean Cargoes Ltd v Banco de Brasil (No 2) [1994] 2 Lloyd’s Rep 152, 160 (Saville LJ).
  • [3] BP Exploration Co (Libya) Ltd v Hunt [1983] 2 AC 352, 373 (Lord Brandon of Oakbrook).
  • [4] [2014] NSWCA 51.
  • [5] See Freeman v Jeffries (1869) LR 4 Exch 189, 198 (Martin B) and 200 (Bramwell B).
  • [6] See BakervCourage and Co [1910] 1 KB 56, 65 (Hamilton J); FullervHappy ShopperMarkets Ltd [2001]
  • [7] 1 WLR 1681, 1689 (Lightman J). 21 [2013] EWHC 3264 (Comm).
  • [8] Limitation Act 1980, s 38(2). 23 Ibid, s 28. 24 Ibid, s 32(1)(a). 25 Ibid, s 32(1)(b).
  • [9] 26 Ibid, s 32(1)(c).
  • [10] 27 Paragon Finance v D B Thakerar & Co [1999] 1 All ER 400, 418 (Millett LJ). See also Peco Arts Inc vHazlitt Gallery Ltd [1999] 2 AC 349.
  • [11] 28 [2012] UKSC 19, [2012] AC 337. See also Hemming (trading as Simply Pleasure Ltd) v The Lord Mayor
  • [12] and Citizens of Westminster [2013] EWCA Civ 591, [138] (Beatson LJ).
  • [13] 29 See p 409, above.
  • [14] 30 Finance Act 2004, s 320 for payments made before 8 September 2003 but where the claim was
  • [15] commenced after that date; Finance Act 2007, s 107 where the claim was commenced before that date.
  • [16] 31 As recognized in FII Group Litigation v HMRC [2012] UKSC 19, [2012] AC 337 concerning Finance Act
  • [17] 2007, s 107; Case C-362/12 Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue andanother [2014] 2 CMLR 33 concerning Finance Act 2004, s 320.
  • [18] See McLean, ‘Limitation of Actions in Restitution’, 481. Cf the equitable doctrine of laches which will not
  • [19] apply in cases of undue influence until the claimant has ceased to be unduly influenced by the defendant. Seep 742, below. 2 Limitation Act 1980, s 29(5).
  • [20] Kleinwort Benson v South Tyneside MBC [1994] 4 All ER 972, 981 (Hobhouse J).
  • [21] (198 7) 9 Constr LR 139.
 
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