The recent case of Smith and another v Royal Bank of Scotland plc [2023] UKSC 34 highlights the importance of time limits in litigation.

Under English law, claims are subject to a limitation period after which parties cannot bring a claim. For a contractual claim, this is typically six years after the relevant breach. If you bring your claim too late, it is an absolute defence, regardless of how strong your claim might otherwise be.

The case of Smith v Royal Bank of Scotland (RBS) concerned two claimants (Ms Smith & Mr Burrell) who were sold payment protection insurance (PPI) stemming from credit card agreements with RBS. Ms Smith had terminated her PPI policy in 2006 and Mr Burrell terminated his in 2008. However, their credit card agreements remained live until 2015 and 2019 respectively. Whilst Ms Smith and Mr Burrell had their credit cards, RBS received significant commission from the insurers. The claimants sought relief under the Consumer Credit Act 1974 for undisclosed commission paid to RBS by the insurers. The basis of the claim under the act was that the commission paid to RBS was so significant that it rendered the relationships between RBS and the claimants unfair. The County Court was asked to consider whether the claimants' claims were time-barred given that they were brought more than six years after the claimants' PPI policies ended, but less than six years after the claimants' credit card agreements had ended.

The County Court found in favour of the claimants holding that their claims were brought before the relevant time limit expired. However, the Court of Appeal overturned this decision, holding that the “unfair” relationship ended when the PPI policy ended.

The claim went all the way to the Supreme Court which held that the clock started ticking for limitation purposes at the end of the parties’ “relationship”. Although the PPI policy had ended long before the credit agreements, the Court found the element of unfairness in the parties’ relationship had continued beyond the end of the policy until the end of the credit relationship. Lord Leggatt noted “Ms Smith was financially worse off as a result of having paid the PPI premiums which she would never have paid if the bank had disclosed the amount of its commission which persisted throughout that period of around nine years”. As a result, he considered that the relationship was still unfair when it ended in 2015.

This case serves as a reminder of the importance of establishing the applicable limitation period at the outset of any litigation. The limitation period may differ depending on the nature of the claim and the factual background so the earlier legal advice can be sought in respect of limitation, the better. Better to be safe than sorry!