Defendants fail to establish that a claim is time barred

12/12/2006

The English Courts have found against the defendant where the defendant has attempted to argue that a claim was time barred, in two recent actions. Firstly, in [i] Charles Church Developments Ltd v. Stent Foundations and another, Mr Justice Jackson held that:

Section 35(5)(a) of the Limitation Act 1980 and the expanded interpretation of CPR 17.4(2) gave the court a discretion, after the expiry of the limitation period, to allow a claimant to plead a new cause of action that arose out of substantially the same facts as had been put in issue by the defence of any defendant.

Section 35 of the 1980 Act provides, inter alia: '... (4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose. (5) The conditions referred to in subsection (4) above are the following (a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action ... '

The claimant sought to adopt the facts pleaded by one defendant by way of defence as a fresh claim against another defendant, after the expiry of the relevant limitation period, having regard to s 35(5)(a) of the Limitation Act 1980 and the expanded interpretation given to CPR 17.4(2) by the Court of Appeal ([2002] 1 All ER 620), namely that 'The court may allow an amendment whose effect will be to add ... a new claim, but only if the new claim arises out of the same facts or substantially the same facts as are already in issue on a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings'.

The first defendant resisted and claimed that a claimant could not do so in the light of the policy behind s 35 of the 1980 Act to protect defendants from fresh claims being raised after the expiry of the limitation period. It argued, unsuccessfully, that the words 'against that defendant' should be read into the expanded interpretation before the words 'in the proceedings'.

Secondly, in Cattley and another v. Pollard and another, the Court considered s.21 Limitation Act 1980, which 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. (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 cause of action accrued. For the purposes of this subsection, the right of action shall not be treated as having accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession'.

The claimants were trustees of an estate and brought proceedings against the wife of a deceased solicitor for damages arising from her knowing assistance in the fraudulent breaches of trust by the deceased. At the trial of certain preliminary issues questions were raised as to the scope of s 21(1)(a) and s 21(3) of the Limitation Act 1980.

The Court was asked (i) whether s 21(1)(a) of the Act applied to the dishonest assistance claims with the consequence that there was no applicable period of limitation and (ii) if the dishonest assistance claims were subject to the six year primary limitation under s 21(3) of the Act whether time had begun to run given that there were beneficiaries entitled to a future interest in the trust property which interest had not yet fallen into possession.

The claimants contended that for limitation purposes claims against a dishonest accessory to a fraudulent breach of trust were to be treated in the same way as claims against the fraudulent trustee: that by virtue of s 21(3), time had not started to run in relation to the beneficiaries. The court ruled:

(1) Section 21(1)(a) of the Act only applied to claims against express trustees and category 1 trustees.
The case against the defendant as regards the dishonest assistance claims could not fall within category 1 since there was no pre-existing trust relationship on the part of the defendant which had arisen before the transactions occurred. Accordingly s 21 (1)(a) did not apply to the dishonest assistance claims and the normal primary period of limitation of six years from the date of the accrual of the cause of action applied.

(2) Section 21 (3) of the Act applied by analogy to the claim brought by the trustees. The claimants as trustees had no personal interest in the outcome. The real litigants, those with a real interest in the out-come, were the beneficiaries. When s 21(3) referred to an action by beneficiaries, it included at least by analogy, actions brought exclusively on their behalf by trustees who did not have a personal interest in the outcome. It followed that s 21(3) applied to postpone the running of the primary period of limitation as regards the beneficiaries with future interests with the consequence that the second proceedings were not time barred.

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