In the recent case of Price v Spoor  HCA 20, the High Court has confirmed that parties to a contract may agree to exclude the application of statutory limitation periods. Accordingly, a party seeking to bring an action outside of a statutory limitation period which has been excluded by agreement can be confident that their action will not be barred for being out of time.
Spoor (as mortgagee) had entered into two mortgages with Price (as mortgagor). The loans secured by the mortgages were due to be repaid in July 2000. In 2017, Spoor brought proceedings in the Supreme Court of Queensland seeking possession of the mortgaged properties and payment of more than $4M as money owing under the mortgages.
Price argued that Spoor’s claim was statute-barred as it was commenced outside of the relevant statutory limitation period. Spoor argued that their claim could not be statute-barred as the mortgages included a clause purporting to exclude the operation of any statutory limitation period.
The primary judge dismissed Spoor’s claim. However, the Queensland Court of Appeal allowed an appeal and gave judgement in favour of Spoor. Price subsequently appealed to the High Court.
Legislation and mortgage provisions
The Limitation of Actions Act 1974 (Qld) (LAA) provides that:
- an action founded on simple contract will not be brought after the expiration of 6 years from the date on which the cause of action arose; and
- an action will not be brought by a person to recover land after the expiration of 12 years from the date on which the right of action accrued to the person.
Price sought to rely on the LAA to prevent Spoor’s claim for possession and damages. In contrast, Spoor sought to rely on clause 24 of the mortgage agreements, which provided that “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.”
The High Court was therefore required to determine if clause 24 of the mortgage agreements overrode the statutory limitation periods contained in the LAA.
Effectiveness of limitation periods and public policy
In its judgement, the High Court referred to previous decisions where it had evaluated statutory limitation periods. The High Court confirmed that limitation periods contained in statues do not act as an automatic bar to proceedings, but are instead statutory defences which must be pleaded by the party seeking to rely on such a defence.
The High Court also acknowledged that it had been previously established that a person upon whom a statute confers a right may waive or renounce that right unless it would be contrary to the statute to do so. The important considering to be taken into account when determining if a contractual waiver would be contrary to statute was whether or not the relevant contractual arrangements “operate to defeat or circumvent a statutory purpose or policy according to which statutory rights are conferred in the public interest, rather than for the benefit of an individual alone.”
The High Court acknowledged that statutory limitation periods, such as those contained in the LAA, are in the public interest as they promote finality of litigation and the orderly administration of justice. However, light of the fact that statutory limitation periods are defences which must be pleaded and not automatic restrictions on proceedings, the High Court determined that statutory limitation periods confer benefits on individuals and not in the public interest. Accordingly, Spoor could agree to contract out of the LAA.
Was the mortgage effective in excluding the LAA?
As it had determined that the LAA could be contracted out of, the High Court was then required to decide if the wording of clause 24 of the mortgage agreements was effective in excluding the operation of the LAA. The High Court held that the clause was effective, especially due to the use term “defeat” or “defeated”, as statutory limitation periods are used to “defeat” claims.
Impact of the decision
This decision of the High Court provides clarity that parties may agree to contract out of statutory limitation periods contained in limitation acts such as the LAA, and that such an agreement will not be contrary to public policy. Although this case concerned Queensland legislation, it is also likely to be relevant to other state jurisdictions.
It should be noted that the High Court recognised that it was never suggested that the mortgage agreements were “anything other than the product of free negotiation between parties contracting at arm’s length.” Accordingly, Australia’s unfair contract terms regime, which prohibits the use of unfair contract terms in standard form contracts and where consumers have little opportunity to negotiate, may operate to void agreements contracting out of statutory limitation periods. It remains to be seen if such a clause will be challenged under the unfair contracts term regime in the future.
If you have any questions or concerns related to statutory limitation periods and their effect on any contracts, please do not hesitate to contact us.