Burnden Holdings (UK) Ltd v Fielding

The Court of Appeal held that the company’s cause of action in respect of an allegedly unlawful distribution accrued on 12 October 2007 and that the claim was not susceptible to summary dismissal on limitation grounds. The court concluded that section 21(1)(b) of the Limitation Act 1980 can cover trust property transferred to a company directly or indirectly controlled by a trustee, so that no limitation period applies to actions to recover such trust property or its proceeds. Alternatively, the court held that the question whether the postponed limitation period under section 32 applied (because of deliberate concealment) raised factual issues, including the state of knowledge of the non‑wrongdoing directors, which could not properly be resolved on an application for summary judgment.

The appellant company (in liquidation) sued two former directors, Mr and Mrs Fielding, for breaches of fiduciary and statutory duties in relation to a distribution in specie of the company’s sole shareholding in Vital on 12 October 2007 and subsequent transfers. The particulars alleged that the distribution was unlawful under the then Companies Act 1985 because the company lacked sufficient accumulated, realised profits, and that the distribution conferred benefit ultimately on the defendants to the detriment of the company. The company sought remedies including an account of profits or equitable compensation.

Procedural posture: the defendants obtained summary judgment from HH Judge Hodge QC in the High Court on limitation grounds. Permission to appeal was granted and the Court of Appeal heard the matter.

Issues framed by the court:

• When did the company’s cause of action accrue?
• Whether any limitation period was disapplied by section 21(1)(a) or (b) of the Limitation Act 1980.
• Alternatively, whether the postponed limitation period under section 32(1)(b) applied because of deliberate concealment of relevant facts.
• Whether these matters could be determined on summary judgment.

The court reasoned that the cause of action accrued on 12 October 2007 when the share in Vital was distributed to BHUH; the later transfers were re‑arrangements of indirect ownership and did not constitute later receipt by the defendants. The court construed section 21(1)(b) purposively to include cases where trust property is transferred to a company controlled by a trustee so as to prevent trustees avoiding liability by interposing companies; therefore no limitation period applies to recover such property or its proceeds. The court also held that, alternatively, whether section 32 postponed limitation depended on factual questions (for example the knowledge of the other directors and whether any deliberate concealment had occurred) which could not fairly be resolved on a Part 24 summary application. The Court of Appeal allowed the appeal and directed that the proceedings should be focused on whether the distribution was lawful and ordered steps to obtain case management directions.

Appeal allowed. The Court of Appeal held that the company’s cause of action accrued on 12 October 2007 and that section 21(1)(b) of the Limitation Act 1980 can cover trust property transferred to a company controlled by a trustee, so that no limitation period applies to recover that property or its proceeds. Alternatively, the court held that whether limitation was postponed under section 32 depended on factual issues (including the knowledge of non‑wrongdoing directors and whether there was deliberate concealment) which could not be resolved on summary judgment.

Appeal from the High Court of Justice, Chancery Division (His Honour Judge Hodge QC, 3LV30284). Permission to appeal was granted by Floyd LJ. The Court of Appeal ([2016] EWCA Civ 557) allowed the appeal.