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Price v Spoor: The High Court considers contracting out of statutory limitation periods

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This article was written by Paul Tamburro and Amy Munro

The High Court's recent decision in Price v Spoor [2021] HCA 20 has confirmed that parties can effectively contract out of limitation periods imposed by statute. The decision provides certainty as to the validity of a number contractual provisions, although some questions remain unanswered.

Facts

The case involved a claim for $4 million for unpaid amounts under a mortgage agreement. The mortgage repayment fell due in July 2000, but proceedings for the unpaid amount were not brought in the Queensland Supreme Court until 2017.

The appellants (the mortgagor) argued that the claim was statute-barred due to the Limitation of Actions Act 1974 (Qld) (Limitation Act), which provides that actions for breach of contract cannot be brought after 6 years and actions for the recovery of land cannot be brought after 12 years.

In response, the respondents argued a limitation defence could not be pleaded because of the following clause 24 in the mortgage agreement, which sought to prevent the parties from pleading any limitation defence:

'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 key issue for the High Court, therefore, was whether this clause 24 was enforceable and effective to prevent the appellants from pleading a limitation defence.

Public Policy

Earlier High Court decisions have confirmed that a statutory limitation period operates as a right or defence conferred on a defendant, which they may plead to defeat a claim.[1]

As a matter of law, a person may waive a statutory right conferred on them unless it would be contrary to the statute to do so.[2] This may be because the statue expressly prohibits it or because waiver of the statutory right would be contrary to public policy. This requires consideration of the purpose of the statute and whether the statutory right is conferred in the public interest or for the benefit of an individual alone.

In this case, while the High Court acknowledged that statutory limitation periods promote the public policy of finality of litigation, ensuring speedy resolution of disputes and orderly administration of justice, ultimately the Limitation Act conferred an individual benefit. It was therefore open to parties to contract out of the statutory limitation periods.

The High Court found that clause 24 in the mortgage agreement was effective to oust the limitation period. The clause was interpreted by reference to how a reasonable businessperson what have understood it. In this case, it was clear that the clause was intended to have a broad application, and use of the word "defeat" was sufficient to capture the effect of limitation provisions.

What the case means

While there have been previous comments from High Court judges on this issue, Price v Spoor sets a clear precedent that public policy ought not prevent parties contracting out of limitation periods at least in the Limitation Acts (although some care may need to be taken in jurisdictions where there are differences compared to the Queensland act). The decision also provides guidance on the contractual drafting required to do so.

That said, some questions remain unanswered. Firstly, the prohibition on unfair contract terms in the Australian Consumer Law may mean that some clauses seeking to contract out of Limitation Acts, particularly in standard form contracts, may be void. Secondly, some statutory limitation periods are imposed for different public policy reasons (for example, those found in building legislation across Australia) which may lead a court to reach a different conclusion reached in Price v Spoor.

Clauses that waive or limit limitation periods are often important for a contractual risk allocation. King & Wood Mallesons is able to advise businesses seeking to include such clauses, to ensure that the term is both effective and enforceable.


[1] WorkCover Queensland V Amaca Pty Ltd (2010) 241) CLR 420.

[2] Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129, 143.

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