Udeshi & Ors v Sieratzki

Claims alleging breach of fiduciary duty are generally subject to a six-year limitation period running from the breach, unless a statutory exception applies. The absence of a limitation period for recovery of trust property does not extend to claims concerning secret profits where no pre-existing trust property was misappropriated. A claimant must also have standing in the capacity in which relief is sought; individual shareholders cannot pursue company claims without using the appropriate representative or derivative procedure. On summary judgment, the court may decide a short point of law where the evidence is sufficient and there is no realistic prospect that a trial would alter the result. An incorrect issue fee does not, without culpable deliberate wrongdoing, invalidate proceedings.

The claim arose from a 2003 collective enfranchisement and a 2007 settlement concerning interests in non-participating flats. The claimants alleged that the defendant had acted as their agent or fiduciary, failed to disclose his intended benefits, procured an unlawful share allotment and caused the company to enter the settlement without proper consultation.

The defendant applied for strike-out or summary judgment, relying on limitation, lack of standing and procedural defaults. The company and the other defendants had been discontinued from the proceedings. The central issues were whether the claims were time-barred, whether the claimants had standing to seek recovery for the company or other shareholders, and whether the procedural defaults justified strike-out.

1. Summary judgment test. The court applied the principles in Easy Air Ltd v Opal Telcom Ltd [2009] EWHC399 (Ch). It was appropriate to decide the limitation and standing issues summarily because they were short points of law, the relevant contemporaneous documents were available, and there was no realistic prospect that a trial would materially alter the evidence.
2. Limitation. The pleaded claims arose from alleged breaches in 2003 and 2007. They were claims for breach of fiduciary duty, an account of profits or equitable compensation, and were subject to a six-year period. The claimants’ reliance on the land provisions of the Limitation Act 1980, and on Patel v Mirza [2016] UKSC 42, did not assist. Any fraud or deliberate concealment allegation would also have been time-barred because the claimants knew the material facts by 2003, or at latest by 2007.
3. Trust property exception. Applying Paragon Finance v Thakerar [1999] All ER 400, Gwembe Valley v Koshy (No 3) [2004] 1 BCLC 131 and First Subsea v Balltec [2018] Ch. 25, the court held that the claims concerned alleged secret profits arising from the impugned transactions. They did not involve misappropriation of pre-existing trust property. Accordingly, the six-year period in section 21(3) of the Limitation Act 1980 applied. Halton International v Guernoy [2006] EWCA Civ 801 and Burnden v Fielding [2018] A.C. 857 did not assist the claimants.
4. Standing. The claim was not a representative, class or derivative action and no permission had been obtained. The company was no longer a party, and the claimants sought recovery for persons who might not have been the persons owed the alleged duties. The claimants therefore lacked standing. The rule in Foss v Harbottle also supported the conclusion that a company’s loss gives rise to a company cause of action.
5. Procedural defaults and outcome. Service without a response pack caused no prejudice. The wrong issue fee was deliberate but not culpably so, and alone did not justify strike-out, although the balance would have been payable if the proceedings continued. The defendant was granted summary judgment because the claims were time-barred, the claimants lacked standing, and there was no compelling reason for a trial.