Williams v Central Bank of Nigeria

Heard on 4 and 5 November 2013

Lord Sumption, (with whomLord Hughesagrees)

The facts of this case can fairly be described as exotic, but very few of them are relevant to the present appeal. Dr Williams claims to be the victim of a fraud instigated by the Nigerian State Security Services which occurred in 1986. His case is that he was induced to serve as guarantor of a bogus transaction for the importation of foodstuffs into Nigeria. In connection with that transaction, he paid $6,520,190 to an English solicitor, Mr Reuben Gale, to be held on trust for him on terms that it should not be released until certain funds had been made available to him in Nigeria. Dr Williams says that in fraudulent breach of that trust, Mr Gale, knowing that those funds were not available to him in Nigeria, paid out $6,020,190 of the money to an account of the Central Bank of Nigeria with Midland Bank in London, and that he pocketed the remaining $500,000. The Central Bank is said to have been party to Mr Gale's fraud. The Bank applied for an order setting aside the permission given to Dr Williams to serve the claim form and particulars of claim on the Central Bank in Nigeria and declaring that the English court lacked, or at any rate should not exercise, jurisdiction in respect of it. That in turn depended on whether there was a serious issue to be tried.

Supperstone J, who heard the matter in the High Court, held that of the various claims then advanced by Dr Williams, the only ones which raised a serious issue to be tried on the pleaded facts were the so-called "1986 trust claims": [2011] EWHC 876 (QB). Dr Williams no longer challenges that. The 1986 trust claims comprised (i) a claim to require the Central Bank to account for the $6,520,000 on the footing that it dishonestly assisted Mr Gale's breach of trust; (ii) a claim to require it to account for $6,020,190 on the footing that it received that sum knowing that it was being paid by Mr Gale in breach of trust; and (iii) a claim to trace the $6,020,190 in the Central Bank's hands. As far as these claims were concerned, the issue turns wholly on whether they were subject to statutory limitation by virtue of section 21 of the Limitation Act 1980, which deals with time limits for actions in respect of trust property. It is common ground that so far as any of the 1986 trust claims is subject to statutory limitation, the limitation period has expired and that on that footing those claims would give rise to no serious issue to be tried. Since Supperstone J gave judgment, Dr Williams has received permission to amend his Particulars of Claim to add three further causes of action, collectively known as the "Nigerian law claim". This court has not been concerned with that claim, and I say nothing more about it. The result is that regardless of the outcome of this appeal, permission to serve out of the jurisdiction will stand, so that the Nigerian law claim may be tried.

Section 21 of the Limitation Act 1980 provides (so far as relevant) as follows:

"21. (1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action

(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy ; or

(b) to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.

…

(3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued."

Section 23 provides:

"An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account."

Section 38(1) of the Limitation Act 1980 , defines the terms "trust" and "trustee" as having "the same meanings, respectively, as in the Trustee Act 1925". This is a reference to section 68(17) of the Trustee Act 1925, which provides that subject to immaterial exceptions,

"the expressions 'trust' and 'trustee' extend to implied and constructive trusts… and to the duties incident to the office of a personal representative, and 'trustee' where the context admits includes a personal representative."

As applied to the 1986 trust claims, these provisions give rise to two questions. The first is whether a stranger to a trust who is liable to account (as the Central Bank is alleged to be) on the footing of dishonest assistance in a breach of trust or knowing receipt of trust assets is a trustee for the purposes of section 21(1)(a). If the answer to that question is No, then the second question is whether an action "in respect of" any fraud or fraudulent breach of trust to which the trustee was a party or privy includes an action against a party such as the Central Bank which is not itself a trustee.

Both questions were argued before Supperstone J. He held that the Central Bank could not be described as a trustee, but that it was at least arguable that section 21(1)(a) was not confined to actions against the trustee and extended to an action against the Bank arising out of its participation in the trustee's fraud. He therefore refused to set aside the order for service. Before the Court of Appeal (Sir Andrew Morritt C, Black and Tomlinson LJJ), Dr Williams conceded the first question, as a result of which only the second was argued: [2013] QB 499. They decided that question in favour of Dr Williams, and affirmed the judge's decision. Before this court, Mr Adkin QC, who appeared for Dr Williams, has partially withdrawn his concession on the first issue. He still accepts that a person liable to account on the footing of dishonest assistance in another's breach of trust is not a trustee. But he says that a person liable to account on the footing of knowing receipt is a trustee. Mr Philipps QC, appearing for the Central Bank did not object to his being allowed to take this point, and was clearly right not to do so. Not only is it a pure question of law, but a proper understanding of section 21 requires an examination of both questions.

We are not concerned (as the Judge thought he was) with the question whether Dr Williams' case on limitation is merely arguable. Dr Williams' case is certainly arguable, and has been exceptionally well argued. Both parties now accept that we can and should decide whether it is right. In my opinion it is not. The 1986 trust claims are time barred, essentially because section 21(1)(a) of the Limitation Act 1980 is concerned only with actions against trustees and the Central Bank is not a trustee. This is because a constructive trust of the kind alleged against the Bank is not a true trust. To explain why this is so, it is necessary to examine the rather complicated interaction between the successive statutes of limitation and the equitable rules regarding the limitation of actions against trustees.

The combined effect of the definition sections of the Limitation Act 1980 and the Trustee Act 1925 is that in section 21 of the Limitation Act a trustee includes a "constructive trustee". Unfortunately, this is not as informative as it might be, for there are few areas in which the law has been so completely obscured by confused categorisation and terminology as the law relating to constructive trustees.

The starting point for any consideration of this subject remains the well-known statement of principle of Lord Selborne in Barnes v Addy (1874) LR 9 Ch App 244, 251:

"Now in this case we have to deal with certain persons who are trustees, and with certain other persons who are not trustees. That is a distinction to be borne in mind throughout the case. Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees."

It is clear that Lord Selborne regarded as a constructive trustee any person who was not an express trustee but might be made liable in equity to account for the trust assets as if he was. The problem is that in this all-embracing sense the phrase "constructive trust" refers to two different things to which very different legal considerations apply. The first comprises persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment. They may be trustees de son tort, who without having been properly appointed, assume to act in the administration of the trusts as if they had been; or trustees under trusts implied from...