Haysport Properties Ltd & Anor v Ackerman

A director who is conflicted because he is acting for both a company and a connected beneficiary must properly consider the company’s interests and obtain appropriate independent advice. Disclosure to a fellow director is insufficient where disclosure is required to the shareholders. Under section 21(1)(b) of the Limitation Act 1980, there is no limitation period where a fiduciary uses the beneficiary’s money, or causes the beneficiary to incur a liability, to benefit a company controlled by the fiduciary. A director’s deliberate failure to disclose his own breach may postpone limitation under section 32. Dishonesty is not established merely because the fiduciary acted in breach of duty; the applicable test requires both dishonesty by ordinary standards and the defendant’s awareness of that dishonesty.

Haysport Properties Limited and Twinsectra Limited, charitable-company subsidiaries, claimed against their former director Joseph Ackerman for breach of fiduciary duty. In 2005 he caused Haysport and Twinsectra to provide security and a £4 million unsecured loan in support of a property acquisition by New Liberty Property Holdings Company, a company connected with a trust of which Mr Ackerman was a beneficiary.

The claim concerned the propriety of the transactions, Mr Ackerman’s conflicts of interest and alleged failure to disclose them, and whether the claims were statute-barred. The central limitation issues were whether section 21(1)(a) or (b), or section 32(1)(b) and (2) of the Limitation Act 1980, prevented the limitation defence.

1. Fiduciary breach. Mr Ackerman was hopelessly conflicted because he promoted the transaction for a company in which he and family members had an interest while acting for the Claimants. He failed properly to consider their interests, failed to obtain separate advice for them and caused them to assume substantial unsecured or inadequately remunerated risks. The purported board resolutions were a paper exercise and did not demonstrate genuine consideration of the transactions.
2. Section 21(1)(b). Following Re Pantone 485 Ltd, Miller v Bain [2002] 1 BCLC 266, where a fiduciary uses the beneficiary’s money to confer a benefit on a company he controls, he denies the beneficiary’s title to the money for his own purposes. The same principle applies where he causes the beneficiary to incur a liability for that company’s benefit. The claims therefore fell within section 21(1)(b) of the Limitation Act 1980 and were not statute-barred.
3. Dishonesty. Applying the approach in Gwembe Valley Development Co Ltd v Koshy (In Receivership) [2004] 1 BCLC 131, dishonesty required conduct dishonest by ordinary standards and awareness by Mr Ackerman that it was dishonest by those standards. He honestly believed that the transactions benefited the Claimants and was not recklessly indifferent. The claim under section 21(1)(a) therefore failed.
4. Deliberate concealment. A director has a positive duty to disclose his own wrongdoing. Mr Ackerman deliberately failed to disclose his breaches, and that concealment continued while he remained a director. Under section 32(1)(b) and (2) of the Limitation Act 1980, limitation did not begin until his removal and the appointment of an independent board on 27 April 2011. The limitation defence consequently failed on this ground also.
5. Mr Ackerman was liable for the breaches and the Claimants’ losses, subject to determination of appropriate relief and the form of order at hand-down.

Not stated in the judgment.