Fraudulent breach of trust and the limits of the Limitation Act 1980

A recent Supreme Court decision that the Limitation Act 1980, s 21(1)(a) does not disapply the statutory limitation period for actions against accessories to a fraudulent breach of trust is examined by Emily Campbell, of Wilberforce Chambers.

Original news

Williams v Central Bank of Nigeria [2014] UKSC 10, [2014] All ER (D) 172 (Feb)

The Supreme Court decided that a stranger to a trust who was liable to account on the grounds of dishonest assistance in a breach of trust or knowing receipt of trust assets was not a trustee for the purposes of section 21(1)(a) of the Limitation Act 1980 (LA 1980). The court further decided that an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy did not include an action against a party which was not itself a trustee.

What key issues did the case raise?

The case concerned Dr Williams, who claimed to be the victim of a fraud instigated by the Nigerian state security services in 1986. Dr Williams had paid more than $6m to a solicitor, who he claims paid out the money in breach of trust to an account held by the Central Bank of Nigeria with Midland Bank in London. The central bank was said to have been party to the fraud, with Dr Williams claiming it was a constructive trustee and liable in dishonest assistance and for knowing receipt.

The Supreme Court heard an appeal by the bank which argued that service out of the jurisdiction should be refused on the basis that the claims were statute-barred.

It therefore fell to the Supreme Court to interpret LA 1980, s 21(1)(a) which states that no period of limitation prescribed by the LA 1980 shall apply to an action by a beneficiary under a trust, being an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy.

The appeal raised two questions:

  1. whether a stranger to a trust who is liable to account on the footing of dishonest assistance in breach of trust or knowing receipt of trust assets is a trustee for the purposes of LA 1980, s 21(1)(a)
  1. if the answer to that is ‘no’, whether an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy includes an action against a party, such as the central bank, which was not itself a trustee

The Supreme Court by a majority decided that a stranger to a trust of the type mentioned is not a trustee and that the claim against such a stranger was not an action in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy. In other words, the limitation period was not disapplied by LA 1980, s 21(1)(a). Accordingly, the bank’s appeal was allowed.

Did the judgement clarify the law in relation to the limitation period?

It appears to have been common ground that, unless it was disapplied by LA 1980, s 21(1)(a), the limitation period in LA 1980, s 21(3) applied to the claim. The reasoning of the majority may call into question whether in fact the limitation period in LA 1980, s 21(3) applied at all, because the wording in both subsections is somewhat similar. Indeed, this similarity was referred to in the dissenting judgments. In a future case, it may therefore be possible to argue that LA 1980, s 21(3) does not apply at all.

What should lawyers advising in this area take from this decision?

Claims for accessory trust liability are subject to a six-year limitation period, even if the defendant is said to have committed a fraud. However, the possibility of extending the limitation period under LA 1980, s 32 for as long as the fraud remains undiscovered should not be overlooked.

Are there any trends in this area of law?

This decision might be send to be contrary to the trend and policy of the law generally to put parties to a fraud in a special category such that more onerous rules are applied to them.

Interviewed by Robert Matthews

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