Dismissing an appeal from the Supreme Court of Queensland, the High Court of Australia in Price v Spoor considered three principle questions:
In 2017, the respondents brought an action as mortgagees against the appellants in the Supreme Court of Queensland. It claimed approximately $4 million as monies owing under and secured by two registered mortgages, together with possession of the land subject to the mortgages. This claim was brought more than 12 years after the respondents became entitled to bring the action.
By way of defence and counterclaim, the appellants argued that the respondents were statute barred from bringing the action pursuant to sections 10, 13 and 26 of the Act. The consequence of this being that the respondents were said to be barred from enforcing their rights under any of the mortgages. The appellants also submitted that the respondents’ title to the land had been extinguished pursuant to section 24 of the Act.
In reply, the respondents relied on clause 24 of each mortgage – described by the High Court to be a generic ‘contracting out’ clause – whereby the appellants had agreed that they would not plead any defence of limitation under the Act in enforcement proceedings brought by the respondents.
As a starting point, the Court confirmed that limitation of time provisions only bar the remedy available but not the right to bring the action. This therefore creates a defence which may be pleaded.
With reference to the Court’s earlier decision in Westfield Management Ltd v AMP Capital Property Nominees Ltd, it was noted that an individual upon whom a statute confers a right may waive or renounce that right unless it would be contrary to statute to do so. For example, where there is an express prohibition against contracting out of the statute, when properly construed, it is inconsistent with the right to waive or renounce (for example, if the right was conferred in the public interest).
The appellants relied upon the public interest in the finality of litigation as being the primary policy which the Act looks to uphold.
It was accepted by the Court, relying on the reasons of Chief Justice Mason in The Commonwealth v Verwayen, that by giving an individual the right to plead the expiry of a limitation period as a defence, the purpose of the Act was to confer a benefit on the individual, rather than to meet some public need. As an individual can choose whether to forgo that right, a ‘contracting out’ clause was entirely compatible with the Act and the policy of finality of litigation that it underpins.
Section 24 of the Act provides that where the 12 year limitation period to bring an action to recover land expires, the individual’s title to the land ‘shall be extinguished’.
The Court understood the appellants’ argument to be that section 24 operated independently from section 13 such that at the end of the 12 year period, it automatically extinguished the respondents’ interest in the land as mortgagee.
The Court disagreed. By referring to a limitation period as the time within which a person ‘may bring’ an action to recover land, section 24 was said by the Court to require that a defence of limitation first be made and be successful. If section 24 automatically extinguished title, there would be no utility in the requirement for a defendant to raise a limitation defence in order to defeat a claim; there would remain no right or title in respect of which a remedy could be given.
Clause 24 of each mortgage stated:
“The Mortgagor covenants with the Mortgagee that the provisions of all statutes now or hereafter in force whereby or in consequence whereof any o[r] all of the powers rights and remedies of the Mortgagee and the obligations of the Mortgagor hereunder may be curtailed, suspended, postponed, defeated or extinguished shall not apply hereto and are expressly excluded insofar as this can lawfully be done.“
The appellants submitted that the language of clause 24 was too generalised and vague, and strong words were required to contract out of a benefit conferred by statute.
As the mortgages were commercial contracts, the Court noted that the meaning of the mortgage terms was to be determined according to what a reasonable business person would understand those terms to mean.
On its proper construction, clause 24 was held to be available to the respondents to defend against the appellants’ limitation defence. The words “provision of all statutes” plainly included the Act. The use of the word “defeated” was sufficient to describe the effect of successfully pleading a limitation defence under the Act.
Justice Steward also pointed out that there was no suggestion that the mortgages, including clause 24, were anything other than the result of free negotiation between the parties entering into the contracts at arm’s length.
This decision confirms that parties may choose to ‘contract out’ of a statutory limitation period. To do so is not contrary to the policy of finality of litigation, which underpins provisions of this kind.
For mortgagees in particular however, this decision serves as a clear reminder that their interest in land is not automatically extinguished at the end of the statutory limitation period. Rather, extinguishment will only occur when a limitation defence is successfully pleaded.
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Fidelis McGarrigan, Partner
Hannah Tsavalas, Solicitor
  HCA 20.
 (2012) 247 CLR 129 at 143-144 .
 (1990) 170 CLR 394 at 405.
 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 40 at 656-657.