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(B) ESTABLISHING LACHES

The key test for establishing laches is whether the lapse of time in commencing proceedings is such that it would be unconscionable for the claimant to assert his or her rights.[1] It was recognized in Cattley v Pollard[2] that establishing such unconscionability depended on all of the circumstances of the case, but usually required some unconscionable conduct on the part of the claimant. When deciding whether the laches defence should bar a restitutionary claim judges must exercise their discretion to decide where the balance of justice lies. A number of factors have been identified to assist in the exercise of this discretion. Particularly important factors are the extent of the delay, the degree of prejudice suffered by the defendant as a result of the delay, the extent to which this was caused by the claimant and whether the claimant knew that the defendant would suffer prejudice from the delay.[3] Lengthy delay will usually not be sufficient in itself to bar relief. Neither is it necessary to show that the prejudice suffered by the defendant was caused by the delay. Although laches is a separate defence from that involving limitation periods, the statutory limitation period is a useful indicator of what constitutes a reasonable time in which the action should be commenced.[4]

Where the claimant has been subject to undue influence time will start to run only once the claimant is free to exercise an independent choice, in other words once the undue influence has ceased to operate.[5] But, once the influence has been removed, the claimant has a reasonable time in which to bring proceedings.

Laches will only be established where the claimant knew of his or her claim, or was aware of the possibility that he or she might have such a claim.75 So, for example, in

Lindsay Petroleum Co v Hurd[6] the claimant successfully rescinded a conveyance of land on the ground of fraudulent misrepresentation, even though he sought to rescind the conveyance 15 months after it had been made. This was because the claimant had acted promptly once he had discovered the fraudulent misrepresentation. In Leaf v International Galleries," however, rescission on the ground of innocent misrepresentation was barred since five years had passed since the claimant had entered into the transaction. But the claimant had only discovered that the defendant had made an innocent misrepresentation shortly before he sought to rescind the contract and he could not reasonably have discovered this any earlier. Perhaps the stricter approach to the application of the doctrine which was adopted in this case can be justified on the ground that the misrepresentation was innocent rather than fraudulent, so that the balance of justice was not so much in the claimant’s favour.

An important decision which illustrates how the judge determines whether the restitutionary claim should be defeated by the defence of laches is Nelson v Rye.[7] In this case the claimant was a professional musician who had appointed the defendant to manage his affairs. It was agreed that the defendant would pay the claimant annually the net profits which the claimant had earned. After 10 years the defendant terminated the relationship without having paid the claimant any of the profits which were due to him. Fourteen months later the claimant commenced proceedings to recover these profits on the ground of the defendant’s breach of fiduciary duty. The claim was only partially successful since it was held that, in respect of the profits due from the first five years of the business relationship, the claimant’s delay in bringing proceedings had caused the defendant substantial prejudice so that it would be unreasonable and unjust to allow the claimant to assert his right to an account for this period. This was because the judge found that the claimant had wilfully refused to involve himself in his own financial affairs. The judge concluded that the defendant had suffered prejudice as a result of the delay because the defendant’s ability to give evidence as to what was actually due to the claimant, after the deduction of expenses, had been prejudiced by the delay, since the defendant had destroyed many invoices and receipts which were more than six years old and the defendant’s memory would become less reliable over the passage of time.

REFORM OF THE LAW ON LIMITATION PERIODS

The Law Commission has recommended the reform of the law on limitation periods[8] so that a core regime should regulate limitation periods for claims, including restitutionary claims. According to this regime there would be an initial limitation period of three years from the date when the claimant knew or ought reasonably to have known of the existence of the cause of action. In addition, the claimant would not be able to bring a claim more than 10 years after the date of the act or omission which gave rise to his or her claim. The courts would not have a discretion to disapply this limitation period. If the law on limitation periods was reformed in this way it would bring much needed certainty to an area of the law which is of great practical importance but is unnecessarily complicated.

  • [1] Petroleum Co v Hurd (1874) LR 5 PC 221, 240 (Sir Barnes Peacock).
  • [2] [2006] EWHC 3130 (Ch), [2007] Ch 353, [1514] (Richard Sheldon QC).
  • [3] Nelson v Rye [1996] 1 WLR 1378, 1398 (Laddie J).
  • [4] Allcard v Skinner (1887) 36 Ch D 145 186 (Lindley LJ).
  • [5] Ibid, 187 (Lindley LJ). 75 Ibid, 192 (Bowen LJ).
  • [6] (18 73) LR 5 PC 221. 4 [1950] 2 KB 86.
  • [7] 400, but on a different point, relating to statutory limitation periods, and the analysis of laches was notcriticized.
  • [8] Limitation of Actions (Law Com No 270, 2001), para 4.78.
 
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