Barnett & Anor v Creggy

An equitable account is available against a person who holds or has held another’s money in a fiduciary capacity. It is not generally available against an agent who merely exercises powers over money owned and held by a principal. Such an agent may instead be liable for misuse of those powers.

The court may order an account where it may disclose an enforceable claim and serve a useful purpose. A claim for an account is not necessarily barred because underlying breach-of-duty claims are time-barred. The reflective loss principle cannot be applied on an incomplete factual record where an established exception may arise. Equitable compensation for an unauthorised payment may attract simple interest based on an appropriate borrowing benchmark.

The claimants sought an account and related relief from their former solicitor, who had established offshore companies and bank accounts for them and acted as an authorised signatory. Most funds were legally and beneficially owned by those companies. The claimants alleged that sums had been misapplied and that approximately US$1.2 million had been transferred without authority to Dr Spiteri in Malta.

The court considered whether the defendant was accountable as a trustee or fiduciary, whether an account should be ordered, whether the claim was time-barred, whether reflective loss prevented personal recovery, and what compensation and interest were appropriate.

1. Account before August 1998. The funds in the offshore companies’ bank accounts were owned by those companies, not by the claimants or the defendant. The defendant was an authorised signatory who owed fiduciary duties in exercising powers of disposal, but he was not a trustee of the funds. An equitable account therefore did not lie against him in respect of those funds.
2. Account after August 1998. Funds received by or to the order of the defendant, including sums held through Thornton & Co and Queen Anne Street Registrars Ltd, were held for the claimants. Some remained unaccounted for and an account could serve a useful purpose. Limitation did not prevent the order, particularly because a claim to recover money retained or converted by the defendant might not be time-barred.
3. Transfer to Dr Spiteri. The defendant breached duties owed to the claimants by transferring US$1,192,836 from Pound and US$23,675 from Glacier without authority and to an unsuitable custodian. The reflective loss defence was not established. The issue depended on factual matters, including whether the companies had been deprived of their remaining resources by further wrongdoing, and it would be unfair to decide it on an incomplete record.
4. Limitation and compensation. The claim concerning Pound was preserved by the defendant’s letters, which amounted to acknowledgments under section 29(5) of the Limitation Act 1980. The letters did not preserve Peter Barnett’s separate claim concerning Glacier. Jeffrey Barnett was entitled to US$1,192,836 as equitable compensation.
5. Interest. The appropriate base was six-month US-dollar LIBOR, rather than US Prime Rate or the Federal Funds Rate. Interest was awarded at 3% above that rate, on a simple basis, from the date of transfer.

The claim for an account before 1 August 1998 failed. An account was ordered for sums received from 1 August 1998, and judgment was entered for Jeffrey Barnett for US$1,192,836 with interest.

First-instance judgment. No prior appellate decision is stated in the judgment.