| LIMITATION OF ACTION — Fraudulent breach of trust — Transfer of part of proceeds to third party — Claim by beneficiary to recover from third party — Whether third party in position of fiduciary or merely accessory to breach — Whether exception to normal limitation period applicable to such a claim — Limitation Act 1980, s 21(1), (3)
Statek Corpn v Alford and another [2008] EWHC 32 (Ch); [2008] WLR (D) 10
Ch D: Evans-Lombe J: 24 January 2008
S 21(1) of the Limitation Act 1980 applied to a claim by a beneficiary under a trust against an accessory to fraudulent breaches of trust committed by other people so that no limitation period applied to such claims.
Evans-Lombe J, so held in the Chancery Division when giving judgment for the claimant, Statek Corp, against the first defendant, David Alford, in the sum of US $2,426,385⋅40 after finding that Mr Alford, who was closely involved in the running of the company, had failed to account for certain sums of Statek’s that were in his control and in respect of which he owed the company fiduciary duties.The action against the second defendant, Mrs Alford, was discontinued.
More than US $29m was misappropriated from the claimant company by its two directors, J and S, and a series of payments were made from the assets of the claimant into the defendant’s personal bank accounts.
The defendant contended that the claimant’s claims were statute barred since they fell within s 21(3) of the Limitation Act 1980 which applied a six-year limitation period to trust actions. However, the exception in s 21(1) provided that no limitation period applied to an action by a beneficiary under a trust brought in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy. The defendant submitted that since the claim against him was that he was only an accessory to the fraud of others, the exception in subs (1) did not apply.
EVANS-LOMBE J said that the defendant was, at all material times, a de facto director of the claimant company and owed it fiduciary duties in respect of the company’s assets within his control. He, accordingly, fell within the first category of defendants sued as trustees as identified by Millett LJ in Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400. It followed that s 21(1) applied and that no limitation period applied to the claim against him. The same conclusion would be reached if, alternatively, the defendant was to be treated as an accessory to the fraudulent breaches of trust committed by the claimant’s directors, following the decision of Dankwerts J in GL Baker Ltd v Medway Building and Supplies Ltd [1958] 1 WLR 1216 and the obiter dicta of Lord Esher in Soar v Ashwell [1893] 2 QB 390, 394–395 . It followed that the defence of limitation was not available to the defendant and judgment would be ordered against him.
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