Is the claim statute barred?
30Section 14(1) of the Limitation Act 1969 (NSW) relevantly provides:
An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims:
(a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,
(b) ...,
...
Section 23 of the Act provides:
Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief.
31The Limitation Act 1969 was based on the Limitation Act 1939 (UK), which in turn consolidated a number of Imperial statutes that formed part of the received law of New South Wales. The New South Wales Act was enacted following a report of the New South Wales Law Reform Commission: see First Report on the Limitation of Actions (LRC 3), 1967. According to that report, s 23 "states the position reached by judicial decision on the enactments whose place is taken by the provisions mentioned in the section" (para 132). It appears, however, that there were no judicial decisions at the time the Act was passed dealing with the application of the statutory limitation period for a cause of action founded on contract to a cause of action for specific performance of a contract; and there are surprisingly few cases dealing with that question even now.
32The leading decision in England is the decision of the Court of Appeal of England and Wales in P&O Nedlloyd BV v Arab Metals Co (No 2) [2006] EWCA Civ 1717; [2007] 1 WLR 2288. That case concerned the application of a limitation period for contractual claims imposed by the Limitation Act 1980 (UK) (1980 Act) to a claim for specific performance of a contract. That Act replaced the 1939 Act. Section 36(1) of the 1980 Act relevantly provides:
The following time limits under this Act, that is to say-
(a) ...
(b) the time limit under section 5 for actions founded on simple contract;
(c) ...;
...;
shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before 1st July 1940.
33The judgment of the Court was given by Moore-Bick LJ, with whom Jonathan Parker and Buxton LLJ agreed. As Moore-Bick LJ pointed out, s 36 requires "one to ask whether before 1 July 1940 a court of equity would have applied by analogy the six-year statutory limitation period to a claim for specific performance of a simple contract" (at [34]). Despite "the industry of counsel" no case prior to that date dealing with the question had been found. Consequently, it was necessary to resort to general principle.
34Moore-Bick LJ concluded that general principle required that the analogy exist between the relevant right and remedy in equity and a corresponding right and remedy at common law. The analogy was not to be drawn simply between the facts giving rise to rights or obligations recognised by the common law and equity. Lord Westbury, in a passage quoted by Moore-Bick LJ at [35], stated the principle in these terms in Knox v Gye (1872) LR 5 HL 656 at 674:
For where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations, a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation.
As Moore-Bick LJ pointed out, later cases have examined the similarity in the facts giving rise to the relevant cause of action at common law and in equity as well as the nature of the relief available in determining whether the principle applies. So, for example, in Cia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 WLR 112, the Court of Appeal held that a claim for equitable compensation for breach of fiduciary duties was sufficiently analogous to a claim for damages for negligence to apply the limitation period in respect of the latter claim to the former. In reaching that conclusion, the Court emphasised the similarity in the facts and remedies available for both types of claim. Waller LJ (with whom Sir Christopher Staunton and Clarke LJ agreed) put the point in these terms (at 121):
In my view the authorities cited by Mr Gross and the broad principles set out in the above quotations support the submission that equity would have taken the view that it should apply the statute by analogy to a claim for damages or compensation for a dishonest breach of fiduciary duty. I say that because what is alleged against Heaths as giving rise to the dishonest breach of fiduciary duty are precisely those facts which are also relied on for alleging breach of contract or breach of duty in tort. It is true that there is an extra allegation of "intention" but that does not detract from the fact that the essential factual allegations are the same. Furthermore, the claim is one for "damages". The prayer for relief has now been amended with our leave to add a claim for "equitable compensation", but the reality of the claim is that it is one for damages, the assessment of which would be no different whether the claim was maintained as a breach of contract claim or continued simply as a dishonest breach of fiduciary duty claim.
35In the case of a claim for specific performance of a simple contract, the facts giving rise to the claim for specific performance are not always the same as the facts giving rise to a claim for damages. In some cases, where a contracting party has evinced an intention not to comply with a contract, the innocent party may be entitled to an order for specific performance even when the time for the performance of the relevant contractual obligations has not arrived: see, for example, Hasham v Zenab [1960] AC 316. Consequently, it is "very arguable" (to use the words of Moore-Bick at [47]) that a cause of action for specific performance arises at the time the contract was entered into, not at the time of breach, as in the case of a common law action for damages. More significantly, there is nothing comparable to an action for specific performance available at common law. Plainly, an action for damages is not comparable to an order for specific performance. For that reason, Moore-Bick LJ concluded that a claim for specific performance of a contract was not analagous to a claim for damages for breach of contract and the limitation period in respect of the former did not apply to the latter.
36The decision of the Court of Appeal has been criticised on the basis that the Court failed to distinguish between cases where equity applies a limitation period by analogy to a purely equitable claim and cases where it grants relief in aid of a legal right. In the latter case, according to Spry, the question of analogy does not arise and equity should always apply the statute:
Where legal rights, such as contractual or tortious rights, have been barred, it is not desirable (and it is contrary to principle) that the barring be circumvented by the grant of auxiliary equitable remedies such as specific performance or injunctions.
See ICF Spry, The Principles of Equitable Remedies, 8th ed (2010) Lawbook Co at 245.
37In Australia, there are several cases which are relevant to the issue. The first is R v McNeil [1922] HCA 33; (1922) 31 CLR 76. The issue in that case was whether a limitation period of 12 months in respect of contractual claims against the Crown, which was imposed by s 37 of the Crown Suits Act 1898 (WA), could be extended where the contracting party did not know of a breach by the Crown as a result of fraud on the part of the Crown's servants. The Court held that it could not. In discussing the issue, Isaacs J dealt with an argument that equity disregards statutes of limitation in cases of fraud. In dismissing that argument, his Honour set out the true position of equity in these terms (at 100):
The position may be shortly stated. Where a court of equity finds that a legal right, for which it is asked to give a better remedy than is given at law, is barred by an Act of Parliament, it has no more power to remove or lower that bar than has a court of law. But where equity has created a new right founded on its own doctrines exclusively, and no Act bars that specific right, then equity is free. It usually applies, from a sense of fitness, its own equitable doctrine of laches and adopts the measure of time which Parliament has indicated in analogous cases, but, when a greater equity caused by fraud arises, it modifies the practice it has itself created and gives play to the greater equity. (emphasis in original)
This statement of the law supports the position taken by Spry.
38In a later decision of the High Court, Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, the Court did grant specific performance of a contract for the sale of land 26 years after the contract had been entered into. However, at the time there was no applicable limitation period. Consequently, it was not necessary for the Court to consider the principle stated by Isaacs J or the question whether a limitation period should be applied by analogy. On the question of delay, Dixon CJ and Fullagar J said (at 433) this:
We have said that the second question of substance in the case is whether the very long delay of the respondent in seeking to enforce his contract is such as ought to induce a court of equity, in the exercise of its discretion, to refuse specific performance. This is, of course, a separate and distinct question, but what has already been said goes a long way towards answering it. There appear to be no circumstances, apart from delay as such, which would make it inequitable to decree specific performance. The land is said to have increased greatly in value over the years, but that cannot be a material consideration. Improvements may have been effected, but, if so, these can be provided for in any ultimate decree. There has been no prejudicing alteration in the position of the vendor or his estate: delay may indeed be said to have been to the advantage of the vendor, who enjoyed all the benefit to be derived from sole possession from 1932 to his death. There are no third parties whose interests may be affected. In these circumstances equity does not, we think, refuse specific performance unless it thinks that the plaintiff ought to be regarded as having abandoned any rights he ever had. And reasons have been given for saying that no abandonment can be inferred here.
39Commenting on Isaacs J's dictum in R v McNeil, the authors of Meagher, Gummow & Lehane's Equity Doctrines and Remedies, 4th ed (2002) Butterworths say at [34-070]:
This would be consonant with the reasoning of Dixon J in J C Williamson & Co Pty Ltd v Lukey (1931) 45 CLR 282; [1931] ALR 157 that specific performance of a contract rendered unenforceable by the Statute of Frauds should be declined. However, there is also some English authority to the contrary (Talmash v Mugleston (1826) 4 LJ Ch 200), and it is not easy to see how such a view can be reconciled with the decision of the High Court in Fitzgerald v Masters (1956) 95 CLR 420.
However, for the reasons already given, the reliance on Fitzgerald v Masters seems to be misplaced.
40In Bourke v Hooper [2007] NSWSC 1516 at [78], McDougall J expressed the view that equity would apply s 14(1)(a) of the Limitation Act by analogy to a claim for specific performance of a contract. His Honour cited the 7th edition of Spry at 244-5 in support of that proposition, which was substantially to the same effect as the passage quoted above from the 8th edition. It appears that his Honour's attention was not drawn to the decision in P&O Nedlloyd BV v Arab Metals Co (No 2) [2006] EWCA Civ 1717; [2007] 1 WLR 2288. Moreover, the position taken by Spry is not that the analogy should be drawn, but rather that the question of analogy does not arise. According to Spry, a claim for specific performance of a contract is a claim brought in the "auxiliary" jurisdiction; and in that jurisdiction equity follows the law.
41The approach taken by Spry and by Isaacs J in R v McNeil was also approved by Brereton J in In the Matter of Auzhair Supplies Pty Ltd (in Liq) [2013] NSWSC 1. That case concerned the question whether the court would apply the limitation period in respect of a claim for statutory compensation under the Corporations Act 2001 (Cth), s 1317H, by analogy to a claim for equitable compensation for fraudulent breach of trust. His Honour, however, discussed the application of limitation periods by analogy more broadly. He began by observing (at [28]) that:
It is important to recognise that Limitation Act, s 23, is not the source of or authority for the application by analogy in equity of limitation periods fixed by statute; it merely recognises the longstanding principle that Courts of Equity follow the law in this respect [see Belan v Casey [2003] NSWSC 159 ; (2003) 57 NSWLR 670, [146]].
42After an exhaustive review of the authorities, his Honour summarised the position in these terms:
[61] In my view, the authorities to which reference has been made establish the following.
[62] First, in equity's auxiliary jurisdiction, where the Court is asked to give a superior remedy for a legal right, Equity applies the legal limitation period: it obeys the law.
[63] Secondly, even in equity's exclusive jurisdiction, where the cause of action is Equity's own creature, then if there is an analogue between the equitable claim and a legal or statutory right to which a limitation period applies, a court of equity will ordinarily apply the limitation period: in this, equity follows the law, and applies the limitation period as an aspect of the doctrine of laches. The existence of an analogue can only be determined by considering each of the equitable claim, the legal or statutory right and their respective remedies in the context of the facts and circumstances of the case; but it does not depend on a minute comparison between the claim in equity and the supposed analogue; while differences in the elements of the respective causes of action are relevant, and possibly significant, not every difference justifies not applying the statute by analogy. Further, because, in this context, application of the analogous limitation period is an aspect of laches, it is also subject to exceptions where the greater equity outweighs it; thus it is relevant to consider the plaintiff's knowledge of the plaintiff's rights and in particular of the impact of fraud, as equity will not apply a time limit in a case of "concealed fraud". The relevant enquiry is therefore to consider, first, whether the equitable claim and the corresponding legal right are so similar that the time limit applicable to the latter should be applied to the former; and, secondly, where such a similarity exists, whether it would nevertheless be inequitable to apply the analogous limitation period.
43A number of the cases his Honour refers to certainly support the propositions his Honour summarised and, in particular, the proposition stated in para [62]. Included among those is the decision in Hovenden v Lord Annesley (1806) 2 Sch & Lef 607 and, of course, the dictum of Isaacs J R v McNeil. In the former case, Lord Redesdale said (at 630):
But it is said that Courts of Equity are not within the statutes of limitations. This is true in one respect: they are not within the words of the statutes, because the words apply to particular legal remedies: but they are within the spirit and meaning of the statutes, and have been always so considered. I think it is a mistake in point of language, to say that Courts of Equity act merely by analogy to the statute; they act in obedience of it. ...Equity, which in all cases follows the law, acts or legal titles, and legal demands, according to matters of conscience which arise and which do not admit of the ordinary legal remedies: nevertheless, in thus administering justice, according to the means afforded by a Court of Equity, it follows the law.
However, that proposition has not received universal approval, as the decsion in P&O Nedlloyd BV demonstrates.
44There are a number of other Australian decisions that have touched on the issue. In Duke v Royalstar Pty Ltd [2001] WASCA 273 the Western Australian Full Court observed (at [25]) that, in the absence of a specific limitation period in respect of a claim for specific performance of a contract, there were a number of possibilities. One was that the claim was barred because the plaintiff could not sue at law for damages for breach of contract - applying Isaacs J's dictum in R v McNeil. Another was that the statute imposing a limitation period in respect of contractual claims would be applied by analogy. A third was to apply the doctrine of laches. In that case, the Court concluded that the plaintiff had failed to make out any prima facie case for being able to overcome the doctrine of laches. Consequently, it was not necessary to consider the other grounds on which the claim might be barred.
45In Hoon v Westpoint Management Ltd [2011] WASC 239 Corboy J, after referring to P&O Nedlloyd BV, concluded that the law was sufficiently uncertain that it could not be determined at an interlocutory hearing (for the extension of a caveat). In Italiano Oliveri v Invocare Australia Pty Limited [2008] NSWSC 1138, McLaughlin AsJ expressed the view (at [47]) that the limitation period in s 14 of the Limitation Act could not apply by analogy to a claim for specific performance since s 14 expressly applied to a cause of action founded on contract and "[s]uch a cause of action apppears to me to be a cause of action in common law, which would result only in an award of damages to a successful plaintiff".
46In my opinion, the starting point in answering the limitation question in this case is s 23 of the Limitation Act. Although, as Brereton J pointed out in In the Matter of Auzhair Supplies Pty Ltd (in Liq), that section is not the source of or authority for the application by analogy in equity of limitation periods fixed by all statutes, it is the source of the application by analogy in equity of the limitation periods fixed by, relevantly, s 14 of the Act. Section 23 does two things. First, it states that the limitation periods fixed by, among other sections, s 14 do not apply to a cause of action for specific performance of a contract or for an injunction or for other equitable relief. Second, it creates an exception to that rule in the case of and to the extent that those limitation periods may be applied by analogy. Consequently, if the limitation period set out in s 14 applies to a cause of action for specific performance of a contract, it must apply by analogy. Generally, in answering the question whether the analogy can be drawn, it is appropriate to apply common law principles. Whatever the status of the principle that is said to operate where the claim is for equitable relief in aid of a legal right, s 23 leaves no room for the operation of that principle where the limitation period is imposed by s 14.
47There is one other point to be noted about s 23 in this context. It appears to be implicit in the section that the limitation period set out in s 14(1)(a) does not apply by analogy to a cause of action for specific performance of a contract. The section creates an exception to the operation of s 14 for all forms of equitable relief but mentions two specifically - a cause of action for specific performance of a contract and a cause of action for an injunction. However, the specific reference to a cause of action for specific performance of a contract adds nothing to the operation of s 23 if the limitation period set out in s 14(1)(a) applies by analogy to causes of action of that type. In that event, s 23 says that causes of action of that type are not the subject of the limitation period set out in s 14(1)(a) and the exception to that exception says that they are subject to that limitation period (by analogy). In other words, if the analogy can be drawn, the exception to s 14(1)(a) which is specifically provided for by s 23 in the case of a cause of action for specific performance of a contract is taken away by the (analogy) exception to that section. On that basis, the words "for specific performance of a contract" are otiose. They can only be made to do some work if it is assumed that the analogy exception does not apply to causes of action of that type. Then the section makes it clear that a limitation period does not apply to causes of action for specific performance of a contract. That suggests that s 23 was not intended to have the effect of applying the limitation period in s 14(1)(a) to causes of action for specific performance of a contract. That approach is consistent with the general principle of statutory interpretation that courts will strive to adopt a construction which gives some meaning to every word of the statute and will seek to avoid an interpretation which renders words of a statute redundant or tautologous: see Leon Fink Holdings Proprietary Limited v Australian Film Commission [1979] HCA 26; (1979) 141 CLR 672 at 679 per Mason J; see also Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [71] per McHugh, Gummow, Kirby and Hayne JJ.
48Leaving aside what might be implicit in the section, it appears to be generally accepted that, in asking the question whether a limitation period can apply by analogy, it is necessary to consider both the facts which are said to give rise to the cause of action as well as the nature of the relief that is available. That approach is consistent with the wording of s 23, which describes the cause of action in terms of the relief that is granted rather than the facts which must be proved in order to establish a right or obligation recognised by the law. For the reasons given by Moore-Bick LJ in P&O Nedlloyd BV, in my opinion, a cause of action for specific performance of a contract is not analogous to a cause of action founded on contract that is recognised by the common law - that is, a claim for damages for breach of contract. The nature of the relief is completely different and the circumstances in which the relief is available in relation to the two causes of action are not the same. It follows that the limitation period set out in s 14(1)(a) of the Limitation Act does not apply to AFPL's claim for specific performance.