28 November 2019
Under Section 5(1)(a) the Limitation of Actions Act 19578 (Vic) (“the Act”) a party is barred from bringing an action in contract, including contract implied in law, more than six years after the date on which the cause of action arose.
A cause of action for breach of contract arises at the date on which a party to a contract commits the breach. By way of example:
The restriction imposed by Section 5(1)(a) is, in most cases, fatal to the claim of a potential litigant seeking to bring an action after the limitation period has elapsed. Using the above example, A would be barred from bringing an action against B as of 21 November 2025.
An exception to the restriction imposed by Section 5(1)(a) is contained in Section 24(3)(b) of the Act which states as follows:
“Where any right of action has accrued to recover any debt or other liquidated pecuniary claim or any claim to the personal estate of a deceased person or to any share or interest therein and the person liable or accountable therefore acknowledges the claim or makes any payment in respect thereof – the right shall be deemed to have accrued on and not before the date of the acknowledgement or the last payment”
To illustrate, if B breaches their contract with A on 20 November 2019, but, in acknowledgment of their debt to A, makes a part payment to B on 20 November 2022, A’s cause of action will arise on the date of that payment and their entitlement to bring an action against B will then expire on 20 November 2028.
In Stephen John Michell v Onroad Offroad Pty Ltd [2018] VSC 648 (“Michell v Onroad”), Justice Digby of the Victorian Supreme Court provides important guidance on the circumstances in which a party is entitled to rely on this exception.
Facts
Limitation Defence
As part of its defence, Onroad argued:
Michell sought to rely on Section 24(3)(b) and to that end, adduced evidence of payments made by Onroad to Hill in 2013. Michell argued that:
Decision
Justice Digby rejected Michell’s argument with respect to Section 24(3)(b) and offered the following commentary:
Discussion
The implications of this case are clear with respect to Section 24(3)(b); it is insufficient for a party to rely on mere inference, rather, they must be able to clearly establish that payment from a debtor is made in connection with and in reduction of the debt the subject of the dispute.
Written by Joshua Flory