Al-Rawas v Hassan Khan (a firm) [2017]:

Are counterclaims affected by rules of limitation?

The background

Hassan Khan, a firm of solicitors, brought action against the Appellant to recover its fees in August 2013. The Appellant brought a counterclaim against the Respondent firm claiming professional negligence in April 2014, but the counterclaim itself had become time-barred in 2012.

The Respondent stated that the counterclaim was barred by limitation, applying to the Court for summary judgment and requesting that the counterclaim be struck out. The Appellant argued that, as it had not previously presented a counterclaim, it was able to do so under this action.

The Respondent’s application was allowed by the High Court; the Appellant took the matter to the Court of Appeal.

The law

The Court of Appeal considered s.35 of the Limitation Act 1980:

“For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action…

…In this section a new claim means any claim by way of set-off or counterclaim…”

Further, the Act provides that:

“…neither the High Court not any county court shall allow a new claim…other than an original set-off or counterclaim, to be made in the court of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.”

The Limitation Act goes on to state that a claim will constitute an original counterclaim if it is a claim by a party who has not previously made any claim in the action.

The Court of Appeal in this case needed to consider interpretation of the Limitation Act wording. The Respondent brought a claim against the Appellant in time; the Appellant counterclaimed but this new action was out of time and the Court of Appeal was asked whether the Limitation Act allowed the Appellant to bring the counterclaim as a matter of right.

In its conclusions, the Court of Appeal referenced a comment in the judgement of in Roberts v Gill [2010] whereby the Limitation Act 1980 was referred to as ‘not a model of clarity’. The Act sets out ordinary time limits, which are then subject to extension or exclusion as set out in subsequent parts of the Act. The Court may exclude time limits in certain cases, for example libel or slander actions, or in respect of personal injuries or death.

The decision

S.35 of the Act applies to new claims made in the course of an action, including set-off or counterclaim and claims where a new cause of action or new party is added or substituted. It enables a party to amend its case out of time and claim in another capacity, or to add another party out of time to allow a claim to succeed.

The Court of Appeal held that, on interpretation of s.35, counterclaims were brought on the date of commencement of the action, as opposed to on the date that the counterclaim was first made. S.35 does not disapply the limitation period for the counterclaim.

The appeal was dismissed; the time limits set out in the Limitation Act did apply in this case.

JB Leitch’s Phil Parkinson comments on the decision:

“Defendants may bring historic issues into cases as a counterclaim; the Al-Rawas case provides a useful authority that these counterclaims are time-barred under the Limitation Act 1980 and will therefore be struck out.”