P & O Nedlloyd BV v Arab Metals Co & Anor

Background

This is an appeal by P&O Nedlloyd B.V. (“P&O”) against that part of an order made by Tomlinson J. on 5^th October 2006 by which the judge refused its application for an order for specific performance by the third respondent, Ireland Alloys Ltd (“Ireland Alloys”), of a contract of carriage of two containers of scrap metal entered into in May 1998.

Although the history of this matter is extensive, the events which gave rise to the dispute can be summarised relatively briefly. On 1^st May 1998 Ireland Alloys entered into a contract with the second respondent, Stena Trading AB, then called Stena Non-ferrous Metals AB, (“Stena”) for the purchase of a quantity of scrap metal c.i.f. Felixstowe. In order to enable it to perform that contract Stena entered into a contract on 7^th May 1998 with the first respondent, Arab Metals Co (“Arab Metals”), for the purchase of a similar quantity of scrap metal on corresponding terms. The goods were shipped on board the vessel UB Tiger by Arab Metals at Alexandria the same day for carriage to Felixstowe in two containers under a bill of lading issued by P&O. The goods were discharged in Felixstowe just before the end of May and transferred to P&O’s container depot at the port. The bill of lading, which had been indorsed by Stena in favour of Ireland Alloys on 18^th May, was surrendered to P&O when the goods were discharged from the vessel.

On 27^th May 1998 forwarding agents by the name of Wm. Martin & Co (Marine) Limited (“Wm. Martin”) acting on behalf of Ireland Alloys sent a fax to P&O requesting delivery of the containers to Ireland Alloys’ premises in Hamilton and as a result both containers were carried by road from Felixstowe to P&O’s depot at Coatbridge. On 1^st June the first of the two containers was taken to Ireland Alloys’ premises, but a Geiger counter passed over it at the weighbridge just inside the entrance to the yard registered the presence of radioactive materials and as a result Ireland Alloys refused to accept delivery of either container. The container was taken back to the Coatbridge depot where it remained with its companion while investigations were undertaken.

On 3^rd June the containers and their contents were examined by the National Radiological Protection Board. The sacks of scrap metal, which included parts salvaged from pumps and other oilfield equipment, were found to contain various items whose surfaces were contaminated by radioactive material. Apparently this is a well-known phenomenon in the case of oilfield equipment and results from the concentration within the equipment of radioactive materials occurring naturally within the earth’s crust. Although the level of radiation was low (an expert asked to advise the parties some years later described the level as lower than that to be found in some household smoke alarms), in a report issued on 12^th June 1998 the surveyor from the National Radiological Protection Board classed the material as radioactive waste, thus bringing it within the scope of the regulations dealing with the transport and storage of radioactive material. A few days later P&O reported the position to the Scottish Environmental Protection Agency (“SEPA”) and sought its advice.

The classification of the material as radioactive waste created many problems. SEPA’s response was that the containers should be returned to Egypt and as a result P&O made contact with Arab Metals who agreed to accept their return. However, it was first necessary to obtain permission from the Egyptian authorities to import the goods into Egypt. Initially that did not appear to present a problem because on 23^rd August 1998 the Egyptian Atomic Energy Authority gave permission for the containers to be returned to Alexandria, provided they were held at the port until it had examined their contents. Unfortunately, however, things did not go smoothly thereafter. Arab Metals had already had difficulty in finding a carrier willing to handle the goods, but that problem could no doubt have been overcome since P&O itself could have fulfilled that role if asked to do so.

Although at this early stage Arab Metals appears to have been willing to accept the return of the containers, practical arrangements fell foul of bureaucracy at both ends. In Scotland a good deal of time was spent obtaining information and advice from SEPA and in Egypt it became clear that it would be prudent, if not essential, to obtain formal confirmation from bodies other than the Atomic Energy Authority that any carrier would be allowed to land the containers in Egypt. Thus in October 1999 P&O’s agents at Alexandria, Naggar Shipping Co, warned that they could not advise it to attempt to return the containers until it had obtained formal written confirmation from the Ministry of Health, the Port Authority and the operator of the container terminal that the containers would be accepted. By that time the British Embassy in Cairo had become involved in an attempt to persuade the Egyptian authorities to lend their assistance, but to no avail.

It might have been thought that, if the containers could not be returned to Egypt, their contents could be decontaminated or disposed of in this country. However, that has so far not proved possible. There are facilities in the United Kingdom that could undertake that work, but it seems that the cost would be considerable and that it would require a specific permit since the operator’s existing permits do not cover the processing of radioactive waste emanating from abroad. In April 2000 P&O asked SEPA whether the material could be disposed of in Scotland, but was told in July of that year that it could not. Since that time the authorities in the United Kingdom, including the Department for Transport, have insisted that Egypt has a responsibility to accept the return of the containers and while they seek to implement that solution they have been unwilling to grant permission for the scrap to be disposed of within the United Kingdom. The Egyptian Atomic Energy Authority has now withdrawn its permission for the containers to be returned to Alexandria, in part because of the delay. It seems to be accepted by everyone that the Radioactive Material Transport Division of the Department for Transport is the competent authority to give permission for the carriage of the containers back to Egypt, but it will not authorise their transport without confirmation from Egypt that they will be accepted on arrival. Such confirmation has not so far been forthcoming and it must now be doubtful whether it ever will be. In effect, therefore, the position has become one of stalemate.

While P&O continued to operate the Coatbridge depot there was no pressing need to remove the containers since there was room to accommodate them there and SEPA was satisfied that they posed no environmental or health hazard. However, no doubt frustrated by the lack of progress in resolving the matter and conscious of the passage of time, on 20^th February 2004 P&O gave formal notice to Ireland Alloys under section 12 of the Torts (Interference with Goods) Act 1977 that the containers were ready for delivery. The purpose of doing so was to give rise to an obligation on Ireland Alloys to accept delivery of the containers. On 8^th March 2004 P&O commenced these proceedings against Arab Metals, Stena and Ireland Alloys seeking (among other things) a declaration as to the ownership of the containers, a declaration that the defendants were under an obligation to take delivery of them, damages for breach of contract and an order for specific performance of the contract of carriage by taking delivery of them.

In August 2005 P&O was acquired by the Danish shipping company A.P. Moller-Maersk A/S. That led to a restructuring of the businesses operated by P&O and to a decision to close down the Coatbridge depot and to sell it for development. The removal of the containers has now acquired a certain amount of urgency, therefore, because the presence of radioactive material on the site is likely to hinder its sale.

On 15^th April 2004 P&O served the claim form on Ireland Alloys together with particulars of claim; the documents were served on Stena on 29^th April 2004. Arab Metals was served in Egypt with the permission of the court, but has taken no part in the proceedings. The claim was made under the bill of lading which was said to cover through carriage from Alexandria to Hamilton. However, in their defences which were served on 22^nd July 2004 both Stena and Ireland Alloys denied that the bill of lading contract covered the carriage from Felixstowe to Hamilton. As a result P&O applied for permission to amend its particulars of claim to allege that the contract had been varied to cover that stage of the journey or, alternatively, that the instructions given by Wm. Martin for the carriage of the containers from Felixstowe to Hamilton had given rise to a separate contract of carriage (what became known as the “alternative contract”). The application was resisted by Ireland Alloys on the grounds that these new claims were all time-barred and did not arise out of the same, or substantially the same, facts as the existing claims.

Colman J. had little difficulty in holding that the new claims for damages and declaratory relief, whether based on the contract of carriage as varied or on the alternative contract, were time-barred. More difficult was the question whether the new claims for specific performance were time-barred as well. This is a question to which it will be necessary to return in some detail, but it is sufficient for present purposes to say that he accepted the argument of Ireland Alloys that the limitation period in section 5 of the Limitation Act 1980 applies by analogy to a claim for specific performance and held that those claims were time-barred as well. He concluded that none of the new claims arose out of the same, or substantially the same, facts as the existing claims and so refused permission to amend. However, he gave permission to Ireland Alloys to amend its defence to plead laches, a defence which, if made out, would provide an answer to the claim for specific performance both of the contract as originally pleaded and of the alternative contract.

On appeal this court (Tuckey, Carnwath and Thomas L.JJ.) took a different view of P&O’s application. It held that the new claims did arise out of same facts as the original claims and that therefore, even if the new claims were time-barred, it had jurisdiction to allow the amendment. In reaching that conclusion the court found it unnecessary to consider the question of limitation and declined to express any view on it. The amended particulars of claim were served on 31^st March 2006. On 19^th May 2006 Ireland Alloys served an amended defence raising the defence of laches in response to all the claims for specific performance.

On 20^th June 2006 P&O issued an application under CPR Part 24 seeking summary judgment on a number of its claims, including the claim for specific performance. It also sought, but only as an alternative remedy, an interim mandatory injunction requiring Ireland Alloys to accept immediate delivery of the two containers. The application came before Tomlinson J. for hearing on 4^th August. In his judgment delivered on 5^th October 2006 the judge doubted whether it mattered which view of the contractual position was correct, though he himself thought that P&O remained liable after the discharge of the goods at Felixstowe to carry them to Hamilton if asked to do so. Whatever was the true view, however, he considered it indisputable that there was a contract between P&O and Ireland Alloys pursuant to which P&O had agreed to carry the containers from Felixstowe to Hamilton and there deliver them to Ireland Alloys at its premises. He considered the contrary to be unarguable and therefore held that Ireland Alloys was under a contractual obligation to P&O to take delivery of the containers, regardless of whether it was the owner of the goods. Accordingly, he ordered that judgment be entered for P&O against Ireland Alloys for damages to be assessed.

The application for summary judgment on the claim for specific performance gave rise to more difficult questions. Much of the argument revolved around the question whether the defence of laches, which had been raised by Ireland Alloys in its defence, is available to defeat a claim which is subject to a statutory limitation period or to a limitation period which equity applies by analogy, as Colman J. had held was the case with claims for specific performance. Tomlinson J. did not find it necessary to decide that question, however, because he held that the critical question was whether it was just in all the circumstances that P&O should be confined to its remedy in damages, citing in support Evans Marshall v Bertola [1973] 1 W.L.R. 349, 379 per Sachs L.J. In paragraph 46 of his judgment he explained his conclusion as follows:

“ . . . . . . . I am not sure that I would characterise the delay of which P&O has been guilty as “unconscionable”, at any rate if I were examining it in isolation, or by reference to the conscience of P&O. Of more importance for present purposes in my judgment is the overall effect of the conduct of all parties insofar as it contributes to what is now the justice of the case as between P&O and IA. The critical feature here is not I think delay simpliciter but rather P&O’s failure to keep IA informed of what it was doing and what progress, or lack of progress, it was achieving. Although it must be seriously open to question whether IA could or would have been any more successful than were P&O in finding a practical solution to the problem, whether assisted by an expert such as Mr Cheshire or not, had it had the burden of dealing with it from an earlier stage, the fact is that IA have effectively been deprived of the opportunity even to attempt to deal with the situation by reason of having been induced to believe that the problem had long since been dealt with by P&O. If it had been brought unequivocally to the attention of IA that, notwithstanding their protestations of non-responsibility on 18 and 23 June 1998, they would not just be held responsible for the financial consequences of non-disposal of the material but also moreover that they were expected to take positive steps towards removal of the goods from the UK or their disposal by other means, they would at the very least have made or been forced to have made an informed decision whether at that early stage to make their own efforts towards removal or disposal. Although it was no doubt open to IA at all times it is, in the circumstances, in my view somewhat unrealistic to expect that IA would solicitously enquire as to P&O’s progress and offer their own assistance. The longer the silence continued the more implausible is it to contend that such a response could realistically have been expected. It must also I think be recognised that since P&O have, albeit unsuccessfully, been engaged with the various agencies in attempting to find a solution for over 8 years, any transfer now of the immediate de facto responsibility for taking the matter forward is likely to lead to yet further and possibly considerable delay in achieving a satisfactory removal or disposal of the material. For these reasons I have, after anxious consideration and, I confess, contrary to my first inclination, concluded that it is just that P&O should be confined to their remedy in damages.”

As a result he made an order that “specific performance is refused”. In other words, as I understand it, he gave summary judgment for Ireland Alloys on this element of P&O’s claim. It inevitably followed that the application for an interim injunction was dismissed.

It is against that part of the order that this appeal is brought with the judge’s permission. The main ground of appeal is that the defence of laches is unsustainable as a matter of law in this case and that there is therefore no basis for refusing to grant P&O a decree of specific performance. It is also said that even if the judge did not think it appropriate to grant summary judgment on this part of P&O’s claim, he should not have dismissed it altogether, both because Ireland Alloys had not relied in its defence on a general discretion in the court to refuse relief in this form and because the material before him, on what was no more than an application by P&O for summary judgment, did not justify his taking that course. Ireland Alloys has served a respondent’s notice in which it seeks to uphold the judge’s decision on the grounds that there is scope for the operation of the defence of laches in circumstances such as those of the present case, as well as on the grounds that the judge was justified in refusing relief by way of specific performance in the exercise of his discretion.

The argument put forward by Mr. Rainey Q.C. in this case that there is no defence to P&O’s claim for specific performance is based on two propositions: (a) that the six year limitation period which applies to claims founded on simple contract by virtue of section 5 of the Limitation Act 1980 applies to a claim for specific performance of such a contract; and (b) that since the equitable doctrine of laches operates to bar a claim on the grounds of delay, it can have no operation in a case where a statutory limitation period applies or where a corresponding limitation period applies by analogy in equity. Accordingly, since in this case P&O’s claim for specific performance is, as Colman J. held, subject to a six-year limitation period by analogy, it cannot be barred by laches and the only surviving defence pleaded by Ireland Alloys must therefore fail.

Section 5 of the Limitation Act 1980 provides that

“An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.”

Since “action” includes any proceeding in a court of law, including an ecclesiastical court (section 38(1)), proceedings seeking relief by way of specific performance would on the face of it fall within the scope of section 5 as being an action “founded on simple contract”. However, section 36 makes specific provision for equitable remedies in the following terms:

“(1)

The following time limits under this Act, that is to say—

. . . . . . . . . .

(b)

the time limit under section 5 for actions founded on simple contract;

. . . . . . . . . .

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.

(2)

Nothing in this Act shall affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise.”

As I have already mentioned, in his judgment on P&O’s application for permission to amend its particulars of claim Colman J. held that the statutory limitation period in section 5 of the Act applies by analogy to a claim for specific performance of a simple contract, but although this court allowed P&O’s appeal against the judge’s refusal of permission to amend, it did not hear argument on that point and expressed no view on it. Nonetheless, Mr. Rainey submitted that Colman J.’s decision remained binding on the parties by reason of the doctrine of issue estoppel and it is therefore convenient to consider that question first.

Issue estoppel is a form of estoppel by record which ultimately rests on a principle of public policy that there should be finality in litigation. Its recognition and development in the modern law is often credited to the following passage in the judgment of Diplock L.J. in Thoday v Thoday [1964] P. 181, 197-198:

“The particular type of estoppel relied upon by the husband is estoppel per rem judicatam. This is a generic term which in modern law includes two species. The first species, which I will call “cause of action estoppel,” is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e., judgment was given upon it, it is said to be merged in the judgment, or, for those who prefer Latin, transit in rem judicatam. If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam. This is simply an application of the rule of public policy expressed in the Latin maxim “Nemo debet bis vexari pro una et eadem causa.” In this application of the maxim “causa” bears its literal Latin meaning. The second species, which I will call “issue estoppel,” is an extension of the same rule of public policy. There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.

But “issue estoppel” must not be confused with “fact estoppel,” which, although a species of “estoppel in pais,” is not a species of estoppel per rem judicatam. The determination by a court of competent jurisdiction of the existence or nonexistence of a fact, the existence of which is not of itself a condition the fulfilment of which is necessary to the cause of action which is being litigated before that court, but which is only relevant to proving the fulfilment of such a condition, does not estop at any rate per rem judicatam either party in subsequent litigation from asserting the existence or non-existence of the same fact contrary to the determination of the first court.” (Emphasis added.)

Diplock L.J. returned to the question of issue estoppel in Fidelitas Shipping Co. Ltd v V/O Exportchleb [1966] 1 Q.B. 630, 641 where he said:

“The final resolution of a dispute between parties as to their respective legal rights or duties may involve the determination of a number of different “issues,” that is to say, a number of decisions as to the legal consequences of particular facts, each of which decisions constitutes a necessary step in determining what are the legal rights and duties of the parties resulting from the totality of the facts. To determine an “issue” in this sense, which is that in which I shall use the word “issue” throughout this judgment, it is necessary for the person adjudicating upon the issue first to find out what are the facts, and there may be a dispute between the parties as to this. But while an issue may thus involve a dispute about facts, a mere dispute about facts divorced from their legal consequences is not an “issue.” (Emphasis added.)

In In re State of Norway’s Application [1990] 1 A.C. 723 it became necessary for this court to consider again the ambit of the principles relating to issue estoppel. Having referred to the judgment of Diplock L.J. in Thoday v Thoday and other authorities, and having cited extensively from Spencer Bower and Turner, The Doctrine of Res Judicata, 2^nd edition, the court (May, Balcombe and Woolf L.JJ.) held that the only decisions capable of giving rise to an issue estoppel are those which are necessary to the court’s substantive decision. At page 752 Balcombe L.J. cited with approval the following passage from Spencer Bower and Turner:

“In order to make this essential distinction [between the fundamental and the collateral] one has always to inquire with unrelenting severity - is the determination upon which it is sought to found an estoppel so fundamental to the substantive decision that the latter cannot stand without the former. Nothing less than this will do.”

In the third edition of this work, edited by Mr. Justice K. R. Handley of the Court of Appeal of New South Wales and entitled Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, the position is described as follows:

“How to distinguish the fundamental from the collateral

202

. . . . . In order to make this distinction one has to enquire whether the determination was so fundamental to the decision that the latter cannot stand without it.”

Mr. Rainey accepted the principles encapsulated in these passages. His primary submission was that since the decision of Colman J. on the issue of limitation was fundamental to the order dismissing the application before him and had not subsequently been overruled, it remained binding on the parties and therefore gave rise to an issue estoppel, even though the judge’s decision on the question whether P&O should have permission to amend was reversed by this court.

When the matter came before it on appeal this court approached the question from a different direction. At the outset of the hearing, as is reflected in paragraph 11 of the judgment of Thomas L.J., the court directed that it would hear argument first on the question whether the new claims arose out of the same, or substantially the same, facts as the existing claims and on the exercise of its discretion. In the event the court was satisfied that the new claims did arise out of the same facts as the existing claims and exercised its discretion in favour of permitting the amendment. Thomas L.J., with whom Carnwath and Tuckey L.JJ. agreed, concluded his judgment with these words:

“25.

For these reasons, therefore, I consider that, on the assumption that the claims are time barred, they arise out of the same facts as originally pleaded and the court should exercise its discretion to allow the amendments. In the circumstances, therefore, the issues on limitation so carefully and clearly considered by the learned judge do not arise. We have heard no argument on the issues and I express no view upon them.”

There can be no doubt, in my view, that the court was concerned to make it clear that it was neither indorsing nor disapproving the decision of Colman J. on the limitation question. It did not need to do so because, having concluded that the new claims arose out of the same facts as the existing claims, it was satisfied that it had jurisdiction to permit the amendment, whether the claims were time-barred or not. In the event, it set aside Colman J.’s order and substituted its own.

Mr. Rainey was quite right in saying that this court did not overturn the judge’s decision on limitation, but despite that I am unable to accept that his judgment is any longer capable of giving rise to an estoppel in relation to that issue. The effect of the order made on appeal is to avoid entirely the order made by the court below. In Spencer Bower, Turner and Handley at paragraph 60 the matter is put as follows:

“When a tribunal with original jurisdiction has granted, or refused, the relief claimed and an appellate tribunal reverses the judgment or order at first instance, the former decision, until then conclusive, is avoided ab initio and replaced by the appellate decision, which becomes the res judicata between the parties.”

The authority cited in support of that proposition is The Commissioner for Railways (New South Wales) v Cavanough [1935] 53 C.L.R. 220, a decision of the High Court of Australia. During his employment by the Commissioner the respondent was convicted of theft and was suspended from duty with a consequent loss of salary. After his conviction was set aside on appeal he was reinstated and sued the Commissioner for arrears of salary in respect of the period of his suspension. The Commissioner sought to rely in his defence on a section of the Government Railways Act 1912 (N.S.W.) which provided that an officer convicted of felony should be deemed to have vacated his office. The court held that the respondent was entitled to succeed on the grounds that a conviction once quashed is avoided ab initio. Mr. Rainey submitted that the case is different from that with which we are concerned because it deals with the effect of a successful appeal against a conviction, but in its essentials I do not think it is. As a matter of principle, when an appellate court sets aside the order of a lower court that order ceases to have any effect and the decision of the appellate court alone is determinative of the issue between the parties. That is sufficient to determine the present case. Although the decision of Colman J. was originally capable of giving rise to an issue estoppel, it could no longer do so once it had been set aside on appeal, regardless of the grounds on which this court made its order. Issue estoppel is a form of estoppel by record and depends, as the cases mentioned earlier demonstrate, on a decision of the court disposing of a substantive dispute between the parties. On a purely formal level it may be said that the setting aside of the order below expunges the only record from which an estoppel was capable of deriving its force. At a substantive level the setting aside of the order means that there is no longer any disposal to which the decision on the issue in question can be regarded as fundamental.

Mr. Rainey’s alternative submission was that this court had adopted, if only by implication, Colman J.’s decision so that it had, in effect, become fundamental to its own decision. He submitted that that conclusion followed from the fact that the court had proceeded on the express assumption that the new claims were time-barred and because it was exercising its jurisdiction under section 35 of the Limitation Act 1980 and CPR rule 17.4. In my view, however, that places too much emphasis on a literal interpretation of the language used by Thomas L.J. in paragraph 25 of his judgment and pays too little regard to the meaning of the passage taken as a whole. I have already drawn attention to the fact that in that paragraph he went out of his way to emphasise that he expressed no view on the question of limitation on which the court had heard no argument and the earlier part of the paragraph must be read with that in mind. Having reached the conclusion that the new claims arose from the same facts as the existing claims, the court had jurisdiction to set aside the order of Colman J. and exercise its own discretion. The jurisdiction to permit the amendment did not depend on the claims’ being time-barred or on the court’s ability to exercise the jurisdiction given by rule 17.4, since in the light of its finding the court could give permission to amend whether they were time-barred or not. In my view the use of the expression “on the assumption that the claims are time-barred” in paragraph 25 of the judgment must be understood as meaning “even if the claims are time-barred”. An acceptance that the claims were time-barred is clearly not necessary to support the court’s decision which cannot therefore give rise to an issue estoppel in favour of P&O in relation to the question of limitation.

It is necessary to consider next the alternative submission by which P&O sought to prevent Ireland Alloys from challenging the decision of Colman J. on limitation. Mr. Rainey submitted that since Ireland Alloys had argued, and indeed had argued successfully, before the judge that the limitation period applied by analogy to claims for specific performance, it would be an abuse of process for it now to contend that the judge was wrong and that the limitation period did not apply.

At first sight there is much to be said in favour of that conclusion, but on closer inspection the argument loses much of its strength. The fact is that both parties have been seeking to obtain tactical advantage as and when they can. Ireland Alloys began by seeking to exclude from the court’s consideration the alternative bases of claim, despite the fact that they represented little more than different ways of analysing the same relationship between the parties, the substance of which was incapable of dispute. In order to do so it raised the question of limitation by analogy. P&O, having managed to beat off that attack, was then met by the plea of laches. At the time Ireland Alloys made its application for permission to amend to plead laches it does not seem to have occurred to P&O that it might be resisted on the ground now advanced before us, namely, that if claims for specific performance are subject to a limitation period, the defence of laches was bound to fail. However, the potential significance of the argument has now been recognised and P&O is seeking on this appeal to deploy it against Ireland Alloys. That means that unless it can rely on an issue estoppel (which in my view it cannot) it must seek to persuade the court, contrary to the position it adopted before Colman J. and before this court on the previous appeal, that his decision was correct and that the statutory limitation period applicable to claims founded on a simple contract applies by analogy to claims for specific performance. Ireland Alloys, of course, must take the opposite position.

In these circumstances I think there is little to choose between the parties. Each of them is seeking to make use of or challenge the decision reached by Colman J. without regard to any consistency of stance. I do not blame them for that since, unless the previous decision is binding, they are entitled to pursue whatever arguments they think best serve their respective cases, provided, of course, the court does not consider it an abuse of process for them to do so. In the present case neither party can complain that the other’s change of position has or will cause it any serious prejudice since the point at issue is one of law and has not had any significant bearing on the nature or volume of evidence served in connection with the application under Part 24 or this appeal. The prospect of having the matter decided in accordance with the correct view of the law, which is all that is really at stake, can hardly be regarded as constituting prejudice to P&O. In my view the position adopted by Ireland Alloys in the particular circumstances of this case does not involve an abuse of the process, much less one that would justify excluding argument on a point of law of some general importance.

Section 36 (1) of the Limitation Act 1980 provides that the time limit under section 5 for actions founded on simple contract shall not apply to a claim for specific performance 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. Prior to 1^st July 1940 the corresponding time limit applicable to claims based on simple contract was that contained in the Limitation Act 1623 and section 3 of the Civil Procedure Act 1833, the former of which introduced for the first time the current six-year limitation period. Section 36(1) of the 1980 Act therefore requires one to ask whether before 1^st 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 such as that with which we are concerned. Unfortunately, despite the industry of counsel it has not been possible to find any case decided prior to that date which provides definitive answer to the question. It is therefore necessary to resort to general principle.

It is convenient to begin with the case of Knox v Gye (1872) L.R. 5 H.L. 656. The claimant filed a bill in equity claiming, as personal representative of T, an account of the profits of a partnership alleged to have been entered into between the defendant and T. The bill was filed almost ten years after T’s death. A claim for an account could be made either at law or in equity, but an action at law for an account was subject to a six-year limitation period under the Statute of Limitations 1623. The House of Lords held that equity would apply the statutory limitation period and that the claim was therefore barred by lapse of time. Lord Westbury explained the position as follows:

“That a Court of Equity will not, after the lapse of six years without acknowledgment, decree an account between a surviving partner and the estate of a deceased partner has been long settled by various decisions. The rule, of course, must be the same where the parties are reversed, and the representative of the deceased partner is the Plaintiff. The general principle was laid down as early as the case of Lockey v. Lockey Prec. in Ch. 518, where it was held that where a Court of Equity assumes a concurrent jurisdiction with Courts of Law no account will be given after the legal limit of six years, if the statute be pleaded. If it could be doubted whether the executor of a deceased partner can, at Common Law, have an action of account against the surviving partner, the result will still be the same, because a Court of Equity, in affording such a remedy and giving such an account, would act by analogy to the Statute of Limitations. 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. This is the meaning of the common phrase, that a Court of Equity acts by analogy to the Statute of Limitations, the meaning being, that where the suit in Equity corresponds with an action at Law which is included in the words of the statute, a Court of Equity adopts the enactment of the statute as its own rule of procedure. But if any proceeding in Equity be included within the words of the statute, there a Court of Equity, like a Court of Law, acts in obedience to the statute. I have no doubt, therefore, of the Statute of Limitations being a bar to the whole of the relief sought by the Appellant as executor of Thistlethwayte.”

Lord Chelmsford said:

“After carefully reconsidering the question, I feel compelled to adhere to the opinion upon which I proceeded in making the decree appealed from, that the Statute of Limitations applies to the case, . . . . . . . Now, although the action of account at the time of the passing of the Statute of James was one of a peculiar description in the Courts of Common Law (which has since become obsolete), the Courts of Equity, upon bills for an account, considered “that they were bound to act” - not merely by analogy to the statute, but, in the words of Lord Redesdale in Hovenden v. Lord Annesley 2 Sch. & Lef. 607, 631 et seq., “in obedience to it;” and he adds: “I think the statute must be taken virtually to include Courts of Equity, for when the Legislature by statute limited the proceedings at Law in certain cases, and provided no express limitations for proceedings in Equity, it must be taken to have contemplated that Equity followed the Law, and therefore it must be taken to have virtually enacted in the same cases a limitation for Courts of Equity also.””

In Paragon Finance plc v D. B. Thakerar & Co [1999] 1 All E.R. 400 this court considered the question of limitation in the context of a claim for relief based on the existence of a constructive trust. Millett L.J., with whom Pill and May L.JJ. agreed, discussed at pages 408f to 410d the position in relation to such claims prior to the passing of the Trustee Act 1888. Having drawn attention to the distinction between a constructive trustee who really is a trustee by virtue of having received property under a transaction which was intended to constitute him a trustee of it and one who is treated in equity as a constructive trustee by virtue of having acquired property by fraud, he explained that in the second case equity in the exercise of its concurrent jurisdiction applied the limitation period by analogy. In such cases equity was simply giving a more effective form of relief in respect of the same wrongdoing as gave rise to a cause of action at law for fraud. In a later passage Millett L.J. referred to the case of Nelson v Rye [1996] 1 W.L.R. 1378, which concerned a claim by a musician against his manager for an account of fees, royalties and expenses. In relation to such actions he said:

“The law on this subject has been settled for more than a hundred years. An action for an account brought by a principal against his agent is barred by the statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he received: see Burdick v Garrick (1870) LR 5 Ch App 233, Knox v Gye (1872) LR 5 HL 656 and Re Sharpe, Re Bennett, Masonic and General Life Assurance Co v Sharpe [1892] 1 Ch 154. A claim for an account in equity, absent any trust, has no equitable element; it is based on legal, not equitable rights: see How v Earl Winterton [1896] 2 Ch 626 at 639 per Lindley LJ. Where the agent’s liability to account was contractual equity acted in obedience to the statute: see Hovenden v Lord Annesley (1806) 2 Sch & Lef 607 at 631 per Lord Redesdale. Where, as in Knox v Gye, there was no contractual relationship between the parties, so that the liability was exclusively equitable, the court acted by analogy with the statute. Its power to do so is implicitly preserved by s 36 of the 1980 Act.”

These passages support the conclusion that if a statutory limitation provision, properly interpreted, applies to the claim under consideration, equity will apply it in obedience to the statute, as indeed it must. However, even if the limitation period does not apply because the claim is for an exclusively equitable remedy, the court will nonetheless apply it by analogy if the remedy in equity is “correspondent to the remedy at law”. In other words, where the suit in equity corresponds with an action at law a court of equity adopts the statutory rule as its own rule of procedure.

In Companhia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 W.L.R. 112 the claimant began proceedings in September 1995 seeking to recover damages from the defendant for breach of various agreements made between May 1977 and April 1979 and for damages for negligence and breach of fiduciary duty, as well as other relief. Upholding the decision of the judge on a trial of preliminary issues this court held that although the claim for equitable damages or equitable compensation was a claim for equitable relief to which section 36(1) of the Limitation Act applied, sections 2 and 5 of the Limitation Act 1980 should be applied by analogy to the claim for breach of fiduciary duty and that the claim was therefore time-barred. Having referred to the speech of Lord Westbury in Knox v Gye and to Spry, The Principles of Equitable Remedies, 5^th ed. (1997) at pages 419-420 Waller L.J. said at page 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.”

Later, at page 124, he approved and adopted as applicable to the case before him the following passage from the judgment of Mr. Jules Sher Q.C. in Coulthard v Disco Mix Club Ltd [2000] 1 W.L.R. 707, 730:

“Mr Bate argues that the court of equity will apply the statute by analogy only where the equitable remedy is being sought in support of a legal right or the court of equity is being asked to decide a purely legal right, and he cites passages from Hicks v Sallit (1854) 3 De G M & G 782, 43 ER 307 and Hovenden v Lord Annesley (1806) 2 Sch & Lef 607. I have no doubt that the principles of application by analogy to the statute (or, in obedience to the statute, as Lord Redesdale LC preferred to describe it in its application to the facts of Hovenden’s case), are quite apposite in the situations envisaged by Mr Bate. But, in my judgment, they have a much wider scope than that: one could scarcely imagine a more correspondent set of remedies as damages for fraudulent breach of contract and equitable compensation for breach of fiduciary duty in relation to the same factual situation, namely, the deliberate withholding of money due by a manager to his artist. It would have been a blot on our jurisprudence if those selfsame facts gave rise to a time bar in the common law courts but none in the court of equity.”

Clarke L.J., agreeing with Waller L.J., said at page 125:

“I would certainly have expected a court of equity to apply the common law time limits by analogy on the facts of this case. As Waller LJ has pointed out, and as the judge demonstrated by a detailed analysis of the points of claim, the essential nature of the pleaded case is the same whether it is put as damages for breach of contract, damages for breach of duty or damages (or compensation) for breach of fiduciary duty. The only additional element is the defendant’s alleged intention, which on the facts here adds nothing of substance to the claim for damages. Indeed it would be quite unnecessary to include this claim if it were not thought necessary to do so in order to advance the time bar argument.”

Later, at page 126, he said:

“To adopt the words of Spry, there is a sufficiently close similarity between the exclusive equitable right in question, namely the claim for compensation for breach of fiduciary duty, and the legal rights to which the statute applies, namely the claim for damages for breach of contract founded on simple contract and the claim in tort for damages for breach of duty, that a court of equity would (and will) ordinarily act on the statute of limitation by analogy. There is nothing in the particular circumstances of the case to make it unjust to do so. On the contrary, it is just to do so because there is no reason why, if the claims for damages for breach of contract and tort are time barred, the claim for damages for breach of fiduciary duty should not be time barred also. As Spry put it, the relevant equitable rules should accord with the comparable legal rules.”

It is not surprising that equity should apply by analogy the limitation periods applicable to claims at law for an account and for damages for breach of duty, whether in contract or tort, to claims for an account and for equitable compensation. In each case the same facts give rise to a claim, whether at law or in equity, and the same kind of relief is obtainable. A claim for specific performance raises different considerations, however, both because relief comparable to that available from the courts of equity was not available from the common law courts and because the facts needed to support a claim for specific performance are not in all respects the same as those necessary to support a claim for breach of contract. The latter point is demonstrated by the case of Hasham v Zenab [1960] A.C. 316. The defendant in that case had agreed to sell a parcel of land to the plaintiff on terms that a deposit was to be paid immediately and the balance on completion within six months. Immediately after signing the contract the defendant repudiated it, but the plaintiff elected to affirm the contract and proceed with the sale. About six weeks before the date for completion the plaintiff began proceedings for specific performance. The defendant contended that the action had been commenced prematurely since the date for completion had not arrived and there had been no failure of performance. The Privy Council held that a cause of action sufficient to support proceedings at law was not necessary to support a claim in equity for specific performance. All that was required was the existence of circumstances that would justify the intervention of a court of equity.

The fact that the common law courts could not grant a coercive remedy comparable to a decree of specific performance strongly suggests that there is no case in which (to use the language of Lord Westbury in Knox v Gye) “the remedy in equity is correspondent to the remedy at law” or “the suit in equity corresponds with an action at law”. At most it can be said that there are some cases in which the facts giving rise to a claim at law for damages for breach of contract will also be sufficient to justify the intervention of equity. I find it a little surprising, therefore, that the question whether equity would have applied a statutory limitation period by analogy to a claim for specific performance should have occasioned such a divergence of views among the commentators. However, that it is the case can be seen from the valuable essay of Professor Jack Beatson (now Beatson J.) entitled Limitation Periods and Specific Performance published in Contemporary Issues in Commercial Law, Essays in Honour of Professor A.G. Guest, (1997) (ed. Lomnicka and Morse) in which he discusses the different views and the authorities on which they are based.

As Prof. Beatson’s article shows, it is possible to find dicta in many of the older cases which are capable of supporting different conclusions on this question, but, in the end I do not think that it is necessary to look further than the decisions to which I have already referred in order to reach a satisfactory answer. Knox v Gye, Coulthard v Disco Mix Club Ltd and Companhia de Seguros Imperio v Heath are all cases in which the facts giving rise to the claim were sufficient to found an action at law and a suit in equity and in which substantially identical relief (an account in the first two cases and damages or equitable compensation in the third) was available in each case. In such circumstances one can well see why equity took the view that the limitation period applicable to a claim at law should also apply to a claim in equity. To hold otherwise, even at a time in the 19^th century when the jurisdictions of the common law courts and the courts of equity were separate, would have undermined the statutory provisions; in the modern legal world, in which the same courts apply the rules of both law and equity, the consequences would be even more anomalous and unacceptable. However, in cases where the facts capable of supporting a claim for equitable relief differ from those capable of supporting a claim at law, or where the equitable remedy differs in a material respect from that available at law, there is not the same reason to deprive the court of the power to grant equitable relief in an appropriate case by adopting the statutory limitation period by analogy.

In the present case Colman J. recognised in paragraph 29 of his judgment that the decision of this court in Companhia de Seguros Imperio v Heath was based on a combination of the similarity between the underlying facts necessary to give rise to a cause of action at law and those that would support a claim in equity and the intrinsic similarity between the remedies themselves. However, in reaching his conclusion that the limitation period applied by analogy he appears to have considered that the absence of similarity in remedies was of no significance. In paragraph 31 of his judgment he said:

“Having considered the authorities referred to both in Dr Spry’s book and in Companhia de Seguros Imperio v. Heath, I have reached the conclusion that a claim alleging breach of contract and claiming specific performance and/or damages and/or an indemnity should be treated as entirely time-barred if brought more than six years after the breach relied upon occurred or commenced. Whereas there is an intrinsic dissimilarity in the remedy in equity from that at law, the underlying facts are identical and there is no question of any equitable right to property or anything in the nature of a trust being involved. The essence of the matter is that a continuing breach of contract is alleged for which damages are claimed and in relation to which the granting of the equitable remedy will simply put an end to the continuing accumulation of loss. In such a case the function of that remedy is to diminish the loss which would otherwise sound in damages. To conclude that the availability of this remedy went on existing (laches apart) beyond the time when the claim for damages or an indemnity or a declaration of right ceased to be available would be to contemplate such an implausible remedial facility as to suggest most strongly that no court of equity would have so proceeded before July 1940.”

No doubt it is true that most claims for specific performance are made in response to an existing breach of contract, but as Hasham v Zenab shows, an accrued right of action for breach of contract is not a necessary precondition to obtaining relief of that kind. It is therefore wrong in principle to treat specific performance as merely an equitable remedy for an existing breach of contract. Moreover, since a claim for specific performance may be made as soon as the contract has been entered into, it is very arguable that, if the limitation period were to be applied by analogy, it would be necessary to regard the cause of action as accruing at that moment with the unfortunate result that the claim could become time-barred before any need for relief had arisen. This lends further support to the conclusion that the application of the limitation period by analogy is not appropriate in relation to claims for specific performance.

Quite apart from these considerations, however, whatever may be said about the undesirability of allowing a claim for specific performance to be brought more than six years after a breach of contract has occurred, the absence of a corresponding legal remedy makes it impossible in my view to say either that the remedy in equity is “correspondent to the remedy at law” or that “the suit in equity corresponds with an action at law”. It is also worth noting that the passage in Spry, The Principles of Equitable Remedies to which Colman J. referred and which was cited with approval by this court in Companhia de Seguros Imperio v Heath, does not support the conclusion that the application of a limitation period by analogy ousts the discretion of the court to grant a remedy where the circumstances would make it unjust to withhold it. The passage includes the following statement of principle:

“ . . . . . the court may decide that the material equitable right is so similar to legal rights to which a limitation period is applicable that that limitation period should be applied to it also. In this latter case the limitation period is said to be applied by analogy, and the principles that govern cases of this kind are that if there is a sufficiency close similarity between the exclusive equitable right in question and legal rights to which the statutory provision applies a court of equity will ordinarily act upon it by analogy but that it will so act only if there is nothing in the particular circumstances of the case that renders it unjust to do so. What is regarded by courts of equity as a sufficiently close similarity for this purpose involves a question of degree, and reference must be made to the relevant authorities. The basis of these principles is that, in the absence of special circumstances rendering this position unjust, the relevant equitable rules should accord with comparable legal rules.” (Emphasis added.)

(The whole passage appears unaltered in the sixth edition of the work published in 2001.)

In support of his submission that no limitation period applies to claims for specific performance Mr. Davey drew our attention to the following cases in which such claims were held to be barred by laches as a result of a much shorter delay than would be required to exhaust any limitation period: Watson v Reid (1830) 1 Russ. & M. 236 (1 year), Cowell v Watts (1850) 2 H. & T.W. 224 (18 months), Pollard v Clayton (1855) 1 K. & J. 462 (11 months), Barclay v Messenger (1874) 30 L.T. 351 (4½ months) and Glasbrook v Richardson (1874) 23 W.R. 51 (3½ months). His argument (which owed something to Prof. Beatson’s essay) was that if the doctrine of laches did not operate when a claim was subject to a limitation period, no limitation period could have been applicable in any of these cases.

For more than two hundred years delay on the part of the claimant has been recognised as an defence to a claim for specific performance, which, like all equitable remedies, is discretionary. Lord Alvanley M.R.’s words in Milward v. Earl Thanet (1801) 5 Ves. 720n have passed into Chancery folklore:

“. . . . . a party cannot call upon a Court of Equity for specific performance, unless he has shewn himself ready, desirous, prompt, and eager.”

See also Lord Cranworth in Eads v. Williams (1854) 4 De G. M. & G. 674:

“Specific performance is relief which this Court will not give, unless in cases where the parties seeking it come promptly, and as soon as the nature of the case will permit.”

Any suggestion that a claimant can delay for years in bringing his suit for specific performance is therefore contrary to well-established principle.

However, although the cases to which Mr. Davey drew our attention demonstrate that specific performance may be refused on the grounds of laches well before the expiration of the ordinary six-year limitation period, I do not think they provide as much assistance as he suggested. In some of them (Cowell v Watts, Pollard v Clayton and Glasbrook v Richardson), the court was prepared to infer that the defendant had altered his position on the understanding that he would not be required to perform the contract. In such cases it is not difficult to see why the court should have considered that relief should be withheld on equitable grounds regardless of any limitation period. In others (Barclay v Messenger and perhaps Watson v Reid, though the report of the case is so brief as to be uninformative) greater emphasis is placed on the plaintiff’s failure to act with the necessary diligence, but in the absence of any discussion of this question I do not think that one can derive any principle from these decisions other than that the court will withhold relief whenever it considers that it would be unjust in all the circumstances to grant it. It can be said that these cases are consistent with the conclusion that no limitation period applies to claims for specific performance, but they are also consistent with the conclusion that delay may, in appropriate circumstances, give rise to the defence of laches before any limitation period has expired. In these circumstances I do not think they provide much assistance in answering the question we have to decide.

In my view that question must be answered by reference to the nature of the remedy and the circumstances in which it is available. Both factors point to the conclusion that claims for specific performance fall outside the scope of the principle identified by Lord Westbury in Knox v Gye and applied by this court in Companhia de Seguros Imperio v Heath: the remedy is available in circumstances where no cause of action exists at law, so the factual circumstances giving rise to a claim need not be the same as those which would support a claim for breach of contract, and no comparable remedy is available at law. It follows that despite the powerful arguments put forward by Colman J. in favour of holding that the same limitation period applies to claims for specific performance as to claims for damages for breach of contract, I think he was wrong in reaching the conclusion that P&O’s claim was time-barred as a result of the application by analogy of the limitation period contained in section 5 of the Limitation Act 1980. Moreover, with all respect to the judge this is not in my view such an implausible position when one bears in mind that in general under English law limitation bars the remedy and not the right itself. Nor does it mean that claimants can delay with impunity safe in the knowledge that, although their claims for damages may become time-barred, their right to obtain specific performance can still be asserted. As one can see from the cases mentioned earlier, one can find many examples of the court’s refusing relief by way of specific performance as a result of delay far shorter than is necessary to bar a claim for damages. The equitable doctrine of laches, to which I shall turn in a moment, provides the court with ample power to refuse relief when delay on the claimant’s part would make it inequitable to grant it and I should be surprised if there were many cases in which, in the absence of fraud, the court would be willing to grant relief by way of specific performance if the claim had not been made within six years after the contract was due to be performed.

For these reasons I have reached the conclusion that P&O’s claim is not subject to any limitation period and that, since the defence of laches is not bound to fail on that ground (being the only ground relied on by P&O), its application for summary judgment must fail.

That makes it unnecessary to decide whether the existence of a limitation period would exclude the application of the equitable doctrine of laches, but since the point was fully argued and is of some general importance I propose to express my view on it as shortly as I can.

In Meagher, Gummow and Lehane’s Equity, Doctrines and Remedies, 4^th ed. (2002) the learned authors, having considered the leading authorities on the doctrine of laches say in paragraph 36-050 that

“. . . . . . it is important to note the different senses in which the word “laches” is used. Sometimes it is used as a synonym for “delay”: . . . . . Sometimes it is used to describe the lapse of a sufficient period of time to draw the inference that the plaintiff had previously approved of the status quo which, by his suit, he wishes to disturb. . . . . . More often , it is used not only in the second sense just mentioned but also to comprehend that degree of delay which when coupled with prejudice to the defendant or third parties, will operate as a defence in equity. ”

In my view it is as well to keep this in mind when considering the decided cases.

Whatever else is meant by “laches”, one factor that must be present is delay. Moreover, since laches is an equitable doctrine developed to enable the court to withhold relief in cases where it would be unjust to grant it, Mr. Rainey’s submission that it can have no application in any case where a limitation period applies, either directly or by analogy, immediately strikes one as doubtful. However, at an early stage in his submissions he made it clear that he was limiting his argument to cases in which there has been what might be called “mere delay”, that is, delay that has had no adverse consequences for the defendant or any third party.

In support of his submission Mr. Rainey relied on four authorities: Rochdale Canal Co v King (1851) 2 Sim. (N.S.) 78, Archbold v Scully (1861) 9 H.L.Cas. 360, Redgrave v Hurd (1881) 20 Ch. D. 1 and Re Pauling’s Settlement Trusts [1962] 1 W.L.R. 86; [1964] 1 Ch. 303. In each of those cases one can find dicta to the effect that, where the claim is subject to a limitation period, a claimant does not prejudice his position by simply taking no action, until, that is, the limitation period has expired. In Rochdale Canal Co v King the defendants were entitled to draw water from the plaintiff’s canal only for the purposes of condensing steam, but in fact they drew water for the purposes of all the operations involved in running their cotton mill. The plaintiff brought an action and obtained judgment for nominal damages. The defendants continued to draw water from the canal as before and the plaintiff therefore sought an injunction to prevent them from doing so. The court held that because the plaintiff had stood by when the defendants were laying the pipes necessary for drawing water from the canal, despite being aware of their capacity and the purposes for which they were being laid, it had acquiesced in their wrongdoing. The case was therefore far from being one of mere delay and it is not surprising in the circumstances that the court should have refused to grant relief. However, in the course of his judgment Kindersley V.-C. said at page 89:

“Such conduct, even if it be not sufficient to sustain a plea of leave and licence in bar to an action [sc. at law], certainly incapacitates the Plaintiffs from obtaining any assistance in a Court of Equity . . . . .Now I entirely assent to the argument, very ably urged by Mr. Baily, that mere acquiescence (if by acquiescence is to be understood only the abstaining from legal proceedings) is unimportant. Where one party invades the right of another, that other does not, in general, deprive himself of the right of seeking redress merely because he remains passive: unless, indeed, he continues inactive so long as to bring the case within the purview of the Statute of Limitations.”

Mr. Rainey also relied on a passage in the speech of Lord Wenslydale in Archbold v Scully at page 383 in which he said:

“So far as laches is a defence, I take it that where there is a Statute of Limitations, the objection of laches does not apply until the expiration of the time allowed by the statute.”

and on the following statement of Sir George Jessel M.R. in Redgrave v Hurd at page 13:

“If a man is induced to enter into a contract by a false representation it is not a sufficient answer to him to say, “If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself of them.” I take it to be a settled doctrine of equity, not only as regards specific performance but also as regards rescission, that this is not an answer unless there is such delay as constitutes a defence under the Statute of Limitations. ”

In re Pauling’s Settlement Trusts is the only modern authority on this point to which Mr. Rainey drew our attention. It is a complex case involving an action by beneficiaries of a settlement against the trustees for breaches of trust in which they had themselves concurred. The trustees raised various defences including limitation, laches and acquiescence. Having held that section 19(2) of the Limitation Act 1939 operated to preserve the plaintiffs’ rights Wilberforce J. said:

“There being an express statutory provision, providing a period of limitation for the plaintiffs’ claims, there is no room for the equitable doctrine of laches.”,

a statement that was subsequently approved by this court without discussion.

Finally it is necessary to mention a passage in Halsbury’s Laws of England, 4^th ed. vol. 16(2) at §910 where the editors describe the position as follows:

“910.

The defence of laches. A claimant in equity is bound to prosecute his claim without undue delay. This is in pursuance of the principle which has underlain the statutes of limitation ‘equity aids the vigilant, not the indolent’ or ‘delay defeats equities’. A court of equity refuses its aid to stale demands, where the claimant has slept upon his right and acquiesced for a great length of time. He is then said to be barred by his unconscionable delay (‘laches’). The defence of laches is, however, allowed only where there is no statutory time bar. If there is a statutory time bar operating either expressly or by way of analogy, the claimant is entitled to the full period before his claim becomes unenforceable; and an injunction in aid of a legal right is not barred until the legal right is barred, although laches may be a bar to an interim injunction.”

In one of the footnotes to this paragraph, however, the editors note that the term “laches” is not used in a uniform sense in the authorities, a point echoed in Meagher, Gummow and Lehane.

It is unnecessary for present purposes to decide whether, leaving aside the application of a limitation period, simple delay, however long, can give rise to a defence in equity. Although dicta in some of the cases suggest that it cannot, others indicate the contrary and I would not wish to rule out the possibility that the court would regard it as inequitable to allow a claim to be pursued after a very long period of delay, even in the absence of evidence that the defendant or any third party had altered his position in the meantime. However, if and to the extent that a limitation period is applicable to the claim, it is difficult to see why mere delay should defeat the claim until the limitation period has expired. I think Mr. Rainey’s submission was right, therefore, being confined, as it was, to cases of that kind. I also think that the distinction between mere delay and delay which has an adverse effect on the position of the defendant or others is sufficient to explain the dicta in the cases on which he relied. Equally, however, I can see no reason in principle why, in a case where a limitation period does apply, unjustified delay coupled with an adverse effect of some kind on the defendant or a third party should not be capable of providing a defence in the form of laches even before the expiration of the limitation period. The question for the court in each case is simply whether, having regard to the delay, its extent, the reasons for it and its consequences, it would be inequitable to grant the claimant the relief he seeks. This was emphasised by Lord Selborne L.C. delivering the opinion of the Privy Council in The Lindsay Petroleum Co v Hurd (1874) L.R. 5 P.C. 221 when he said at page 240:

“Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”

This makes it important to consider with some care the way in which Ireland Alloys puts its case in relation to laches. On an application by the claimant for summary judgment under Part 24 the defendant is entitled to file evidence with a view to establishing that he has a real prospect of succeeding in his defence. He cannot be strictly confined to what appears in his existing statement of case (if indeed he has already served one), though no doubt if he has already served a defence and wishes to rely on matters that do not appear in it, the court will have to consider the need for an amendment if the case is to proceed to trial. In the present case the evidence filed on behalf of Ireland Alloys seeks to suggest that it may have suffered some disadvantage as a result of the passage of time during which it was labouring under the misapprehension that P&O had arranged for the containers to be returned to Egypt. I would not wish to make too much of that, however, because, as the judge pointed out, it is not easy to see what practical steps it could have taken to improve matters even if it had known the true position. However, even if one confines oneself to the terms of the amended defence, I do not think that it is quite correct to say that Ireland Alloys relies on nothing beyond the mere lapse of time. Paragraph 18 reads as follows:

“Furthermore, it is denied that the claimants are entitled to an order for specific performance or other equitable relief. Any such claim is barred by laches on the grounds that to make such an order now would be inequitable in all the circumstances. The third defendants will rely on the following facts and matters:

(1)

The third defendants refused to accept delivery of the containers at their premises on or about 1^st June 1998;

(2)

On or about 18^th June 1998 the claimants served a notice on the third defendants requiring to remove the containers. The said notice was served on the third defendants on an incorrect basis, namely that the third defendants were the owner of the containers and/or their contents, which they were not.

(3)

Prior to the service by the claimants of a further notice on 20^th February 2004, the claimants had not communicated with the third defendants since the notice sent in June 1998. As a result of this lack of communication the third defendants were under the impression that the containers had been returned to the first defendants in Egypt.

(4)

In the premises the claimants slept on their alleged rights against the third defendants for nearly 6 years and it would be inequitable for an order for specific performance now to be made.”

Mr. Rainey submitted that the rather broad plea that it would be “inequitable in all the circumstances” to make an order for specific performance is limited by the particulars that follow. That may be so, but the allegation that for nearly six years Ireland Alloys had been under the impression that the problem had been resolved and (by implication) had been conducting its affairs on that basis is just enough in my view to take the allegation beyond one of mere delay. It is right to say that neither the case as pleaded nor the evidence filed in response to the application give grounds for thinking that the defence of laches is particularly strong, but nonetheless the case is not one of mere delay and for that reason, even if a limitation period were applicable to the claim, I do not accept Mr. Rainey’s submission that the defence would be bound to fail at trial.

Had the judge reached the same conclusion, whether for the same or different reasons, he would ordinarily have dismissed P&O’s application and given such directions as might be necessary to bring the case to trial. In the present case, however, the judge did not take that course. He went somewhat farther, holding that specific performance is a discretionary remedy which the court is entitled to withhold if justice so requires and that in this case because of the lapse of time P&O should be restricted to its remedy in damages. On that basis he made an order refusing the claim for specific performance and, in effect, gave summary judgment for Ireland Alloys on that part of P&O’s claim.

It is not quite clear how that came about, but it is right to bear in mind that P&O was seeking summary judgment on a variety of claims, including a claim for declaratory relief and a claim for damages to be assessed. Those claims were straightforward; there was no answer to them and the judge quite rightly gave judgment on them, thereby finally disposing of them, save for the assessment of damages. There has been no appeal against that part of his decision. However, it seems that when he came to deal with the claim for specific performance he lost sight of the fact that he was dealing with an application under Part 24 and proceeded to deal with it as if it were a preliminary issue. I think he was wrong to do that for a number of reasons.

CPR rule 24.6 provides that when a court determines an application for summary judgment it may give directions as to the filing and service of a defence and further directions about the management of the case. This rule seems to assume, therefore, that the application will normally be made by the claimant, although it is clear from other rules within Part 24 that applications may be made by defendants as well as claimants. Paragraph 5 of the Practice Direction supplementing Part 24 reflects that: it states that the orders the court may make on an application under Part 24 include giving judgment on the claim, striking out or dismissing the claim, dismissing the application and making a conditional order.

I do not think that the judge particularly had in mind paragraph 5 of the Practice Direction; as I have said, I think that at that point he simply overlooked the fact that he was dealing with a Part 24 application. However, in case there should be any doubt about the matter, I wish to make it clear that I do not think that paragraph 5 of the Practice Direction can be read as giving the court a general power (which does not appear in the rules themselves) to dismiss the claim without warning when the matter is before it on an application by the claimant for summary judgment. In my view the range of orders mentioned in that paragraph (which does not purport to be exhaustive) simply reflects the fact that applications may be made by claimants or defendants and may therefore result in the claim going to trial or being determined in favour of one party or the other. It is important to ensure that a person against whom an order may be made is given an opportunity to address the court and to place before it any relevant material before the order is finally made. That in turn means that he must be put on notice that the court is being asked to make such an order. (Special provision is made for cases in which the court makes an order of its own initiative: see rule 3.3).

In the present case, however, P&O came to court seeking summary judgment on its claim for specific performance and found that summary judgment had been given against it without (apparently) any warning. If Ireland Alloys had wanted to seek summary judgment dismissing that part of the claim it could, of course, have issued its own application under Part 24, but it had not done so. In those circumstances the judge was wrong to give judgment against P&O on this part of its claim in any event. If, having heard argument on a Part 24 application, the judge comes to the conclusion that the claim, rather than the defence, has no real prospect of success (as may well happen in some cases), he should invite further submissions from the parties before deciding what course to take. If necessary, he can make an order of his own initiative under rule 3.3, subject to the safeguards which it provides. However, in my view this is not a case in which it can be said that the claim for specific performance has no real prospect of succeeding at trial. Despite the long delay in seeking relief, the evidence filed by P&O in this case, which includes evidence relating to the nature and extent of the harm it is likely to suffer if the containers cannot be moved from the Coatbridge site as well as the harm likely to be suffered by Ireland Alloys if it is required to accept delivery of them, is sufficient to give rise to a real prospect of success. The matter will therefore have to go to trial.

For these reasons I would allow the appeal, set aside paragraph 2 of the judge’s order and substitute for it an order dismissing P&O’s application for summary judgment.

I agree

I also agree