Boot v Boot & Anor

For a loan repayable on demand, the common-law rule is that the debt is immediately due; demand is not a condition precedent to suing. Under the Limitation Act 1980, section 6, a loan without a fixed repayment date may receive limitation protection where repayment is not effectively conditional on demand. Collateral security must be assessed by notionally reading its terms into the loan. A promissory note requiring payment on demand does not remove that protection where, under the common-law rule, the debt is already due. The exception in section 6(2) applies only where the collateral terms would themselves take the loan outside section 6. In such a case, the six-year period under section 5 runs from written demand rather than from the date of the loan.

The appellant had lent his son and daughter-in-law £8,000 towards the purchase of a property. The balance was secured by a jointly signed promissory note promising payment on demand. After the marriage ended and the property was transferred to the daughter-in-law, the appellant demanded payment and sued her when nothing was paid.

A district judge refused to strike out the claim as statute-barred. On appeal, His Honour Judge Cotterill held that the collateral promissory note brought the loan within the exception in section 6 of the Limitation Act 1980, so that limitation ran from the date of the loan. The central issue was the proper construction and application of section 6(2) to the loan and its collateral security.

1. Appeal allowed. The Court of Appeal unanimously restored the order refusing to strike out the action, with the formal order varied so as to dismiss the defendant’s appeal against the district judge.
2. Lord Justice Waite delivered the leading judgment. Sir Iain Glidewell agreed, and Lord Justice Leggatt agreed with the reasoning and result. The court applied the common-law rule stated in J Brown’s Estate [1893] 2 Ch 300: where there is a present debt and a promise to pay on demand, the obligation to repay arises immediately. Demand is not a condition precedent to commencing proceedings.
3. Sections 5 and 6 of the Limitation Act 1980 must be read together. Section 6 preserves the right to sue on a qualifying loan, namely one with no fixed or determinable repayment date and no effective term making repayment conditional on demand or another matter.
4. Where collateral security is given, its terms must be read notionally into the loan agreement. The question is whether those terms, if they applied directly to repayment of the debt, would exclude section 6. The loan satisfied both statutory conditions. The promissory note also contained no fixed repayment date and, because of the common-law rule, did not effectively make repayment conditional on demand.
5. The county court judge had reversed the statutory exception by treating it as an exception to the non-application of section 6. Properly construed, the closing words of section 6(2) were an exception to the application of section 6, and were not engaged here. The loan therefore remained protected by section 6 and was not statute-barred from the date it was made.
6. The defendant was ordered to pay the costs of the appeal to the County Court Judge, subject to the stated enforcement restriction. An order nisi was made against the Legal Aid Board concerning the appellant’s Court of Appeal costs, with legal aid taxation of both parties’ costs.

1. Court of Appeal (Civil Division) — Allowed the appellant’s appeal and restored the order refusing summary dismissal: [1996] EWCA Civ 1352.
2. Taunton County Court — On 12 April 1995, His Honour Judge Cotterill allowed the defendant’s appeal and held that the claim was statute-barred.
3. District Judge Turner — Refused the defendant’s summons to dismiss the action and ordered that it continue.