Introduction: Central Bank of Nigeria v Williams [2012] EWCA Civ 415 (03 April 2012)
We are pleased to welcome again Solicitor Mr Anis Waiz who recently joined forces with Simon Mckay of Mckay law. They are soon to launch a new firm Mckay Law LLP.
In another in depth case review, as published on CaseCheck, Anis consider this important decision on Limitation. This surrounded a number of technical issues on Limitation and the reader is referred to the Judgment in full.
At its heart lay some very fine distinctions. However at the outset it will be noted the court was not asked to consider whether the Trustee Act 1888 was intended to abolish the distinction between express and constructive trustees, introducing a single regime of limitation that would apply to constructive trustees of both categories. Neither was it invited to consider the approach the Privy Council took in Taylor v Davies [1920] AC 636.
Background
In essence this was a claim by the claimant to recover monies as a result of a fraud by his solicitor. He alleged that in May 1986 the solicitor fraudulently paid away $6,020,190 of monies held by him for the claimant to an account of the central Bank ofNigeria(“CBN”) inEnglandand that CBN was a party to the fraud.
CBN sought to Appeal an order dismissing their application that service of the claim form and amended particulars of claim be set aside.
Crucially for these proceedings and the issue of limitation the claim against CBN was:
1 CBN received and/or retained $6,020,190 paid by the solicitor into its account knowing that they were paid in breach of trust and/or in circumstances where it would be unconscionable to retain this sum.
2 By reason of its dishonest assistance in the breach of trust CBN is liable to account to him as a constructive trustee of $6,520,190 paid away by the solicitor in fraudulent breach of trust.
The Limitation issue
It was not disputed that the Claimant’s claim was
1 an action by a beneficiary under a trust
2 in respect of a fraudulent breach of trust
3 to which the trustee the Solicitor was a party.
In other words as against the solicitor the claim fell within section 21 of the Limitation Act 1980 (“the Act”) and therefore there was no period of Limitation.
The key issue was whether the claim against CBN fell within section.21 (1) (a) of the Act “to which the trustee was a party or privy” and thus triggered an exception to the time bar prescribed by s.21(3) to actions brought against that trustee.
CBN’s argument was that to come within section 21(1)(a), the action has to be against the trustee. Thus CBN sought to argue that s.21(1)(a) did not extend to actions brought against anyone other than the trustee who was party or privy to the relevant breach of trust.
Section 21 of the Act provides:
“(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action-
(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.
(3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued.
Derivation
The Court of Appeal went on to consider the derivation of section 21 of the Act. The reader is referred to the Judgment. However of note are the following points:
1 The first statute to provide for a period of limitation in respect of actions for a breach of trust was Trustee Act 1888. S.8(1) “In any action or other proceeding against a trustee or any person claiming through him except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use, the following provisions shall apply…
2 The expression ‘trustee’ was defined by s.1(3) as including “a trustee whose trust arises by construction or implication of law as well as an express trustee.” S.1(4) provided that the provisions of the Act relating to a trustee should apply as well to several joint trustees as to a sole trustee. Each of those persons is entitled to rely on the time bar for which sub-section (1)(b) provides but subject to exceptions comparable to those for which s.21(1) now provides. Ss. 1 and 8 Trustee Act 1888 remained unaltered until 1939.
3 The Limitation Act 1939 was both an amending and consolidating measure. Its enactment was preceded by the Law Revision Committee’s Fifth Interim Report… At paragraph 11 it considered “Limitations of Actions against Trustees”. Having referred to the terms of s.8 Trustee Act 1888 it noted that those provisions were considered to be satisfactory when Trustee Act 1925 was enacted.
4 The committee noted “It is difficult to find any real justification for the rule that an executor or other person holding property as a trustee, but not on an “express” trust, can plead the statute, though he still retains the trust property or has converted it to his own use.
5 The Limitation Act 1939 incorporated the definition of trustee contained in s.68 (17) Trustee Act 1925. “The expressions “trust” and “trustee” extend to implied and constructive trusts”.
6 Section .21 of the 1980 Act reproduces without any relevant change the provisions of s.19 of the Limitation Act 1939. That subsection provides that subject to an immaterial exception “the expressions “trust” and “trustee” extend to implied and constructive trusts”.
7 Section 19 provided:
(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action –
(a) In respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
(b) To recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.
(2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued.
The parties submissions
CBN argued that section .21(1)(a) did not extend to actions brought against anyone other than the trustee who was party or privy to the relevant breach of trust .Counsel for CBN contended that just as s.21(1)(b) is limited to claims against the trustee s.21(1)(a) should be similarly regarded because there was no justification for treating that paragraph as including an action against anyone else.
CBN also sought to argue that if s.21(1)(a) was not restricted in its application to claims against the trustee then the time bar for which the section provides is inconsistent with the substantive law and would give rise to undesirable consequences. This submission was based on the decision of the Privy Council in Royal Brunei Airlines v Tan [1995] 2 AC 378 and of the Court of Appeal in Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, 450.
It was said there would be an anomaly if dishonesty on the part of the trustee was not a necessary ingredient of the cause of action against the dishonest assistant but was required if the dishonest assister is to remain liable after the expiration of the limitation period. Thus the extension of the application of s.21(1)(a) for which the claimant contended would lead to an increase in the number of stale claims requiring determination and the complexity of the defences of laches and acquiescence compared to the relative simplicity of a time bar.
For the claimant Counsel disputed both these propositions. First, there was nothing anomalous in allowing the beneficiary to sue outside the limitation period only if the trustee was dishonest. Second, the relative merits of a time bar and the defences of laches and acquiescence were either irrelevant or a matter for Parliament, not a court.
The claimant relied upon a number of authorities including G.L.Baker Ltd v Medway Building and Supplies Ltd [1958] 1 WLR 1216. In that case the plaintiff sought to recover from the defendant money of the plaintiff the defendant had received from the auditor of the plaintiff who had dishonestly misappropriated it more than six years previously. The question arose whether the defendant was entitled to rely on the time bar.
Danckwerts J concluded that the claim was not time barred, in part because of the terms of s.19(1)(a). At p.1221 the judge observed:
… “The point is taken by counsel on behalf of the defendant that the defendant does not claim through the fraudulent trustee. He also said with regard to s 19(1) that the action was not in respect of any fraud or fraudulent breach of trust, because the action against the defendant in the present case is based on the receipt by it without any fraud of moneys which were part of the trust fund belonging to the plaintiff. I think that the words “in respect of any fraud or fraudulent breach of trust” are wide enough to cover the present case, because it is the fraudulent payment by Titley to the defendant which is the origin of the proceedings against the defendant. It is because the defendant received that payment by virtue of Titley’s fraudulent breach of trust that the plaintiff is able to bring this action against it. Consequently, so far as those words are concerned the provision seems to me wide enough”
The Decision
The Court of Appeal noted:
1 The Limitation Act 1939 was an amending act. It could not be assumed that s.19 of the 1939 Act was intended exactly to reproduce the effect of s.8 Trustee Act 1888.
2 It did not follow that the distinction between category 1 and category 2 constructive trusts in Taylor v Davies [1920] AC 636 when considering the Canadian equivalent to s.8 Trustee Act 1888 has been imported into the definition of trust and trustee contained in s.68(17) Trustee Act 1925 and applied to Limitation Act 1939 by s.50 .
3 The time bar imposed by s.19(2) was intended to cover all claims by a beneficiary to recover trust property or in respect of any breach of trust, other than those excepted by s.19(1), against whomsoever the claim was made, not only the trustee and others claiming through him.
4 The expressions ‘trust’ and ‘trustee’ used in s.19 extend to implied and constructive trusts generally without reference to any particular category of constructive trust.
5 CBN submissions that the claimant construction would produce an anomaly or inconsistency with the substantive law was rejected. The requirement in paragraph (a) of fraud or fraudulent breach of trust on the part or with the privity of the trustee was a restriction on the range of claims available against a dishonest assistant because the decision of the Privy Council in Royal Brunei Airlines v Tan [1995] 2 AC 378 only requires dishonesty on the part of the assistant. Thus the addition of this requirement does not involve any extension of the range of cases for which no limitation period is prescribed.
6 Section 19 was re-enacted in s.21 Limitation Act 1980. It is in the latter context that the proper construction of the relevant provision must be ascertained. That context includes the decision of Danckwerts J in G.L.Baker Ltd v Medway Building and Supplies Ltd.
7 The principle of Farrell v Alexander [1977] AC 59 applied namely that the legislative history of an unambiguous provision in a consolidating act is irrelevant.
8 The Court of Appeal was not prepared to assume that section 19 of the Limitation Act 1939 was merely section 8 of the Trustee Act 1888 clothed in slightly different clothing.
Conclusion
In essence the Court of Appeal rejected a technical argument by a defendant and held that there was no explicit requirement that to be within section 21 (1)(a) the action must be against the trustee.
As noted above some fine distinctions were made by the Defendant in order to rely upon a technical Limitation defence. However clearly the Court of Appeal would not allow historical legislative ambiguity to defeat what on the face was a claim to recover monies paid away as a result of a fraud.
Perhaps an application of the maxim Equity will not allow a statute to be used as a cloak for fraud rings true.
Kind regards
Anis Waiz
Latest posts by Anis Waiz (see all)
- Mortgage Terms Incorporation Case Update: Alexander (“Property118 Action Group”) v West Bromwich Mortgage Company [2016] EWCA Civ 496 - November 19, 2016
- Important commercial law decision on limitation Central Bank of Nigeria v Williams - April 17, 2012
- Cornelius, R v [2012] EWCA Crim 500 (14 March 2012) - March 19, 2012
