17 December 2018
Reading time (1-10 minutes): less than 2
Sophistication level (1 (idiot) – 10 (expert)): 6
Entertainment value (1 (turgid) – 10 (side-splitting)): 5
Background – what’s in a deed?
If you want to enter into a contract with someone, each side needs to give the other what is known as ‘consideration’. You can’t get something for nothing. The law is a bit silly here and it’s largely a formality, as the value of the ‘consideration’ is irrelevant. That’s why lots of contracts say something like ‘I will do this and that in consideration of you paying me £1’. In the old days people used to talk about peppercorns a lot as a form of nominal consideration which did the job to turn something into a binding contract.
But sometimes you don’t want to do this. That’s where deeds come in. A deed is a special kind of very solemn and important document which means that you are committed to doing what you have said you will do in it even where there is no consideration. A deed is legally binding.
When I started in the law all deeds by individuals and companies had to be made under seal. We solicitors had large supplies of red waxy wafer things which we used for sticking on documents, which was great fun. But in 1989 a new Act of Parliament changed the law to say that deeds no longer had to be made under seal, but could just be executed in a certain way and make clear that they were intended to take effect as deeds.
But there was still a separate law under the Limitation Act 1980 which said that the limitation period for bringing legal actions under simple contracts was 6 years, whereas it was 12 years if bringing legal actions under something called a ‘specialty. The Limitation Act did not define what a ‘specialty’ was, but all the law before it seemed to indicate that a ‘specialty’ meant a document under seal.
Notwithstanding this, everyone has gone about their business since 1989 assuming that if you properly execute a document as a deed, without a seal, the limitation period for bringing a legal action under it will be 12 years.
However, someone recently challenged this in court. The case involved someone who had sold their company in 2007. The company provided financial advice. The share sale agreement said that the buyer had an 18 month window after completion to bring any claims (a standard clause used to override the normal limitation periods) but it went on to say that this did not apply to claims where there had been ‘wilful concealment’. The share sale agreement was entered into as a deed (but not under seal). Part of the court hearing was to consider whether there had been wilful concealment of various regulatory issues which contradicted various warranties which the sellers had given. However, the court also had to look at whether if this was the case the limitation period should be 6 years (in which case the buyer was still out of time to bring a court action) or 12 years.
If the seller had been a company it wouldn’t have been a problem because the Companies Acts effectively say that a document executed as a deed could be treated to all intents and purposes as if it had been made under seal. But what about documents executed by individuals, as here?
This was the first time any court had been asked the question of whether the new-fangled (since 1989) form of deed without a seal amounted to a ‘specialty’ for the purposes of the 1980 Limitation Act.
What did the court say?
The judge looked into the whole history of deeds and seals. According to one of the ‘bibles’ of legal commentary a deed is apparently ‘the most solemn and authentic act that a man can possibly perform’. But even in the old days courts were quite relaxed about what it took to properly ‘seal’ something. In an 1870s case a judge said that so long as the appropriate degree of solemnity was displayed in some way, something could be sealed ‘with the end of a ruler or anything else’; and that ‘to constitute a seal, neither wax, nor wafer, nor a piece of paper, nor even an impression is necessary’. So, the key issue was intention, rather than form.
Having established this, the judge found it very easy to rule that the ‘new’ (nearly 30 years later) type of deed, without a seal, showed enough intention to qualify as a ‘specialty’. So the 12 years limitation period would apply.
None really. Pretty bleeding obvious decision to make.
Case: Liberty Partnership Ltd v Tancred  EWHC 2707 (Comm) (18 October 2018)