COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
HIS HONOUR JUDGE RICH QC
Strand, London, WC2A 2LL |
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B e f o r e :
Vice-President of the Court of Appeal (Civil Division)
LORD JUSTICE MUMMERY
and
LORD JUSTICE SCOTT BAKER
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RIDGEWAY MOTORS (ISLEWORTH) LTD |
Appellant |
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- and - |
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ALTS LTD |
Respondent |
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Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
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MR ROGER BARTLETT (instructed by Messrs Kenneth Elliott & Rowe) for the Respondent
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Crown Copyright ©
Lord Justice Mummery :
The Limitation Issue
"(1) An action shall not be brought upon any judgment after the expiration of six years from the date on which the judgment became enforceable."
The Legal Position
A. Interpretation of 1939 Act: the case of Lamb.
B. Report of the Law Reform Committee
"4.16 ….that the special 12-year period for an action on a judgment should be abolished and the normal six-year period should apply instead."
" Until 1852, an action on a judgment was the simplest way in which a judgment creditor could recover his money after a year and a day had elapsed since the judgment; and a judgment was, until 1864, chargeable per se on, and payable out of, the proceedis of sale of real property. In view of this latter rule it is understandable that the period for an action on a judgment has since 1833 been the same as that for an action relating to land. Actions on a judgment are, however, nowadays very rare indeed and we do not think that the special provisions for judgments should be preserved."
"4.14 The authorities [three cases, including Lamb, are cited] show that section 2(4) has caused difficulties in practice, because it has been held apt to bar certain (though not all) forms of execution. We think that the law of limitation of actions ought not to interfere with the rules in relation to execution, which currently provide for a period for issue of a writ of execution of six years, which may be extended with the leave of the court. We think that provisions of this kind are the appropriate method of dealing with execution and that they could, if necessary, be extended to cover those methods of execution which, because they are not caught by the current rule, are subject to the twelve-year period."
C. Authorities on s24(1) of the 1980 Act
" The first question is whether section 24(1) bars execution of a judgment after six years, or whether it only bars the bringing of a fresh action on the judgment." [ The second question related to interest]
The Appeal
Conclusion
" The courts have expressed at least three differing reasons supporting the existence of statutes of limitation, namely (1) that long dormant claims have more of cruelty than justice in them; (2) that a defendant might have lost the evidence to disprove a stale claim; and (3) that persons with good causes of action should pursue them with reasonable diligence."
" There are good policy reasons for distinguishing between action and execution. Limitation statutes are intended to prevent stale claims, to relieve a potential defendant of the uncertainty of a potential claim against [him] and to remove the injustice of increasing difficulties of proof as time goes by. These considerations do not apply to execution. If it is unfair to have a judgment debt outstanding with interest running at a high rate, the debtor has the remedy of paying the debt or taking out his own bankruptcy if he cannot pay it."
Other Points
(1) Ordinary creditorsThis case is not concerned with the position of an ordinary creditor who has not established his debt by a judgment. Section 24(1) does not apply, as there is no judgment on which to bring an action, let alone base a petition. It does not follow, however, that a person owed a debt by a company under a contract is entitled to present a petition after the expiration of 6 years from the accrual of his cause of action. If the debt is statute barred at the time of the presentation of the winding up petition, the petitioner is not at that date a "creditor" of the company and has no standing under s124 of the Insolvency Act 1986 to present a petition in that capacity: see, for example, the judgments of the majority in the High Court of Australia in Motor Town Co Pty Ltd v. Liberty Insurance Ltd (1966) 116 CLR 177.
(2) Proof of debts in liquidation
The context of the s24(1) point is an application to strike out a winding up petition, based on an assigned judgment debt, on the ground that it is statute-barred. If a winding up order is subsequently made on the petition, a question may arise as to whether ALTS, as assignee of the judgment creditor, is entitled to prove in the liquidation for the amount of the judgment debt. It would certainly seem odd if a judgment creditor, who was not prevented by the 1980 Act from presenting a winding up petition, was prevented from proving in the liquidation for the judgment debt on which the petition was based and on which the winding up order was made. Under s143 the functions of the liquidator of a company which is being wound up by the court are to secure that the assets of the company are got in, realised and "distributed to the company's creditors" and, if there is a surplus, to the persons entitled to it. Under the Insolvency Rules 1986 (4.179(1)) the assets of the company are applied in the winding up of the company in discharge of the company's liabilities. The judgment creditor is still a "creditor" of the company and the debt owing is still one of the "liabilities" of the company, even after the expiration of 6 years from the date when his judgment became enforceable. The judgment creditor does not cease to be a creditor as a result of s24(1) applying to prevent him from bringing an action on the judgment for a second judgment. This is different from the position of the ordinary creditor whose cause of action for non-payment of a contract debt is barred after the expiration of 6 years from the date of the accrual of his cause of action: he is no longer a creditor of the company and is neither entitled to present a winding up petition nor to prove for the statute barred debt in the liquidation: see Re Overmark Smith Warden Ltd [1982] 1 WLR 1195 at 1202E per Slade J on the combined effect of s257(1) of the Companies Act 1948 and s2(1)(a) of the Limitation Act 1939.
Result
Lord Justice Brooke:
"But where a specific remedy is provided for the recovery of such damages or sums of money, this mode of proceeding cannot be resorted to, as in the case of the new County courts, on the judgments of which an action will not lie."
Lord Justice Scott Baker