In a debt claim, the limitation period is “refreshed” (section 29(5) Limitation Act 1980) to six years from the date of an acknowledgment of the debt?
This is oprovided the claim is not out of time already (section 29(7)).
As a general rule, under section 29(5) of the Limitation Act (“LA 1980”), the limitation period for a debt claim will be “refreshed” by an acknowledgment or part payment, so that the right to recover the debt is treated as having accrued on the date of that acknowledgment or part payment (as the case may be).
In practical terms, this would be like the resetting of a clock, with the result that in a debt claim, the limitation period will run for six years from the date of acknowledgment or part payment.
Under section 29(7) of the LA 1980, the “refreshment” of limitation can only occur during a current limitation period – in other words, once the limitation period expires, the claim cannot be revived by a later acknowledgment or payment.
Acknowledgment and part payment
The statutory rules on acknowledgment and part payment are found in sections 29-31 of the LA 1980.
For debt claims, the provisions referred to below are likely to be of particular relevance.
Section 29(5)(a) of the LA 1980 – effect of acknowledgment or part payment
The effect of this provision is that where a person liable or accountable for a debt or other liquidated pecuniary claim acknowledges the claim or makes any payment in respect of it, the right of recovery is treated as having accrued on the date of the acknowledgment or payment.
What constitutes an acknowledgment under section 29(5) of the LA 1980?
The leading authority on acknowledgment for the purpose of section 29(5)(a) is Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565.
In Surrendra, Kerr J identified the test to be applied as “…the debtor must acknowledge his indebtedness and legal liability to pay the claim in question…”. Kerr J also observed that the statement relied upon as an acknowledgment must be taken as a whole: in other words, the creditor cannot cherry pick the useful parts and ignore any unhelpful ones.
It is not necessary that the acknowledgment should specify the amount of the debt if it can be ascertained by other means (Dungate v Dungate [1965] 1 WLR 1477).
Interesting questions can arise where an acknowledgment is made in the context of without prejudice discussions or correspondence, as there is some tension between the without prejudice rule and the admissibility of acknowledgments for the purpose of section 29(5) of the LA 1980.
The general position seems to be that the without prejudice rule will protect a defendant whilst he is seeking to compromise a dispute over the existence or the extent of a liability, but that it will not protect him if he discusses, on an open basis, repayment of an admitted liability (as by this stage, there is no dispute).
See further Bradford & Bingley PLC v Rashid [2006] UKHL 37 and Ofulue v Bossert [2009] UKHL 16.
In Lia Oil S.A. v ERG Petroli S.P.A [2007] EWHC 505 (Comm), Julian Flaux QC (sitting as a deputy high court judge) held that a worksheet of demurrage calculations shown to the claimant during without prejudice discussions, and then re-sent to the claimant under cover of a later e-mail, was not an acknowledgment of a claim for the purposes of section 29(5), LA 1980. On the facts of the case, the worksheet was never handed over as an “open statement of position”. It is worth noting that the judge does not seem to have been referred to Rashid, and that the reasoning underpinning his decision.
Section 29(6) – effect of a part payment of rent or interest due
This qualifies section 29(5) of the LA 1980 by providing that a part payment of the rent or interest due at any time will not extend the period for claiming the remainder then due, but any payment of interest shall be treated as a payment in respect of the principal debt. In other words, a payment of interest is effective as an acknowledgment in respect of the principal debt.
McGee (paragraph 18.005)gives the following explanation of how this provision operates: “…time continues to run from the original date in respect of the remainder of the rent or interest but begins to run afresh in respect of the principal debt when interest is paid.”
Where both interest and principal are due, important questions may arise as to whether a specific payment was made in respect of principal or interest (or both).
On this point, see McGee at paragraphs 18.005 and 18.047.
Section 29(7) – a barred claim cannot be revived by later acknowledgment or payment
This provides that subject to section 29(6), a current limitation period may be repeatedly extended by further acknowledgments or payments. However, once a right of action is barred under the Act, it cannot be revived by any subsequent acknowledgment or payment.
Section 30 – formal requirements for a valid acknowledgment
To be effective for the purposes of section 29 of the LA 1980, an acknowledgment must be in writing and signed by the person making it.
In addition, for the purposes of section 29, any acknowledgment or payment may be made by the agent of the person by whom it is required to be made under that section, and must be made to the person (or to an agent of the person) whose title or claim is being acknowledged or in respect of whose claim the payment is being made.
For further discussion of acknowledgment by an agent, see McGee at paragraphs 18.013-18.015.
Section 31 – the effect of acknowledgment or part payment on third parties
In debt claims, I think that the following two subsections are most likely to be relevant:
31(6): “An acknowledgment of any debt or other liquidated pecuniary claim shall bind the acknowledger and his successors, but not any other person.”
31(7): “A payment made in respect of any debt or other liquidated pecuniary claim shall bind all persons liable in respect of the debt or claim.”