Williams v Central Bank of Nigeria

For limitation purposes, a constructive trustee is a true trustee whose fiduciary status preceded the transaction complained of. A person liable solely because of dishonest assistance or knowing receipt incurs ancillary equitable liability and is not a trustee within section 21 of the Limitation Act 1980.

Section 21(1)(a) applies only to an action against a trustee in respect of that trustee’s own fraud or fraudulent breach of trust. It does not remove the limitation period from claims against non-trustee accessories or recipients. Such claims therefore fall within the six-year period under section 21(3), subject to any applicable postponement under section 32.

Dr Williams alleged that an English solicitor held $6,520,190 on trust for him but fraudulently paid most of it to the Central Bank of Nigeria and retained the balance. He claimed against the Bank for dishonest assistance, knowing receipt and tracing. The Bank applied to set aside permission to serve the proceedings in Nigeria.

The High Court held that the Bank was not a trustee, but that it was arguable that section 21(1)(a) of the Limitation Act 1980 nevertheless applied: [2011] EWHC 876 (QB). The Court of Appeal affirmed that decision: [2013] QB 499. The Supreme Court had to determine whether an ancillary wrongdoer was a trustee for section 21 and whether section 21(1)(a) extended to proceedings against a person who was not a trustee.

1. Appeal allowed by a majority of three to two. Lord Sumption and Lord Neuberger gave the controlling reasons, with Lord Hughes agreeing. Lord Clarke agreed on the first issue but dissented on the second. Lord Mance dissented on both issues.

2. A person liable solely for dishonest assistance or knowing receipt is not a trustee within section 21 of the Limitation Act 1980. The statutory expression includes express trustees and de facto trustees, including persons whose fiduciary status lawfully preceded the impugned transaction. It does not include a stranger whose liability arises only from participation in the misapplication of trust assets.

   The latter liability is ancillary and remedial. A knowing recipient takes adversely to the beneficiary, has no trustee’s powers of administration and is principally obliged to restore the property. Liability to account as if a trustee does not create a true trust. The same conclusion applies with greater force to a dishonest assister who never received the property.

3. Section 38(1) of the Limitation Act 1980 adopts the meaning of “trust” and “trustee” in section 68(17) of the Trustee Act 1925. That Act concerns the powers and duties of true trustees. Its definition cannot be enlarged in the limitation legislation to encompass ancillary wrongdoers. The distinction drawn in Paragon Finance Plc v DB Thakerar & Co (a firm) between an institutional trust and a remedial formula was approved. The contrary obiter observations in Soar v Ashwell were disapproved.

4. Section 21(1)(a) is confined to actions against trustees for fraud or fraudulent breach of trust to which the trustee sued was party or privy. The definite article, the function of the words “party or privy”, the relationship between paragraphs (a) and (b), and the legislative history supported that construction. Parliament did not make a non-trustee’s limitation defence depend upon the independent honesty or dishonesty of the trustee.

   Lord Mance and Lord Clarke considered that the ordinary words “in respect of” extended paragraph (a) to a dishonest assister in the fraud of a trustee. That construction did not command a majority.

5. The claims for dishonest assistance, knowing receipt and tracing were subject to the six-year period in section 21(3), which had expired. The appeal was allowed, and the Court declared that the English court had no jurisdiction which it ought to exercise over the 1986 trust claims. Those claims were struck out. The separately pleaded Nigerian-law claim was unaffected.

1. United Kingdom Supreme Court: In Williams v Central Bank of Nigeria [2014] UKSC 10 , the court allowed the Bank’s appeal by a majority of three to two and ordered the 1986 trust claims to be struck out.
2. Court of Appeal: [2013] QB 499 . The court held that section 21(1)(a) of the Limitation Act 1980 was capable of applying to the claim against the Bank although it was not a trustee, and affirmed the High Court’s decision.
3. High Court: [2011] EWHC 876 (QB) . Supperstone J held that the Bank was not a trustee but that the wider construction of section 21(1)(a) was arguable. He refused to set aside permission to serve the trust claims outside the jurisdiction.