Nolan v Wright

A discrete limitation issue may properly be treated as a preliminary issue where resolving it could avoid substantial costs of preparing and trying an unnecessary substantive claim. An apparently contradictory or weak plea under section 32 of the Limitation Act 1980 may nevertheless justify permission to appeal where the issue determines whether the substantive claim can proceed. A net costs order cannot reliably reflect reciprocal percentage liabilities without information about the parties’ actual costs. In a second appeal, a substantial change in the scope of the case caused by the first appeal may justify permission on additional grounds despite the stricter permission test.

Nolan brought proceedings to recover a substantial sum under an unregulated credit agreement and legal charge. Wright sought to set aside the loan documentation as a sham or as procured by undue influence or misrepresentation, and alternatively sought to reopen the transaction as an extortionate credit bargain under the Consumer Credit Act 1974.

District Judge Needham refused summary judgment. On appeal, HHJ Hodge Q.C. determined preliminary limitation issues in [2009] EWHC 305 (Ch). He held that the extortionate-credit-bargain claim was subject to a 12-year limitation period and was out of time, but left open a possible section 32 case based on fraud or deliberate concealment. He also made a percentage-based costs order and did not disturb the district judge’s costs order. The central issue was whether permission should be granted to challenge those decisions.

1. Substantive issue. The Court of Appeal granted permission to appeal against the decision to leave Wright’s section 32 point open. The plea appeared internally contradictory: if the documents were a sham, there was no credit agreement to reopen; if fraud or undue influence succeeded, the agreement would be set aside. Nevertheless, the point was logically discrete and its resolution could determine whether the extortionate-credit-bargain issue needed to be tried.
2. Case management. In a case involving potentially substantial costs, a limitation issue should, where appropriate, be isolated and determined preliminarily if failing to do so may result in wasted preparation and trial of the substantive claim. Lloyd LJ expressed no view on the likely outcome of the section 32 argument.
3. Costs. The court considered it arguable that the percentage-based net costs order involved an error of principle or a flawed exercise of discretion. Without information about the parties’ actual costs, it was impossible to know whether a net order could achieve the intended equivalent of reciprocal percentage orders. It was also arguable that the costs consequences of issues struck out should have been addressed separately.
4. There was sufficient scope to challenge the failure to revisit the district judge’s costs order because the later limitation rulings had materially changed the litigation landscape. Although that issue involved the exercise of discretion, permission was appropriate.
5. This was formally a second appeal, but the first appeal had substantially changed the scope of the case by directing a preliminary limitation issue. That justified permission on the additional grounds despite the more stringent second-appeal test. The application was granted on all grounds of appeal. The appeal was directed to be listed before a three-judge court with at least one judge having Chancery experience.

1. Court of Appeal (Civil Division): On oral renewal, Lord Justice Lloyd granted permission to appeal on all grounds. The appeal was directed to be listed for four hours before a three-judge court, including at least one judge with Chancery experience.
2. High Court, Chancery Division, Manchester District Registry: HHJ Hodge Q.C. determined the preliminary limitation issues in [2009] EWHC 305 (Ch), held the extortionate-credit-bargain claim out of time subject to the section 32 issue, refused summary judgment generally, and made the challenged costs order.
3. District Judge: District Judge Needham had refused the claimant’s application for summary judgment.