Summary

Whilst an alleged conscious and deliberate breach of fiduciary duty had occurred more than six years before proceedings were issued, the claim was not statute-barred as the Limitation Act 1980 s.32 applied to prevent time from running until the concealment could have been discovered by the claimants when acting with reasonable diligence.

Facts

The first applicant company (V) and its directors, the second and third applicants (B and H), applied to strike out the claims of the respondent company (W), and B and H applied for summary judgment. V had been retained by W to act as its property finder and adviser. W later alleged that on a number of occasions V, instead of informing W that a particular freehold was for sale, had advised W to enter into a lease of the property concerned, while at the same time arranging for the freehold to be acquired by V's business associates or clients. W believed that the granting of the leases substantially increased the freehold value, which then enabled the acquirer of the freehold to make a quick and substantial profit, in some instances by selling the freehold to W. W suspected that the applicants had profited from those deals. W raised concerns with V about one transaction in particular and copied his letter to B and H. However, B's letter of reply effectively stated that nothing was amiss. Consequently, the proceedings had been issued over six years after the alleged breach of contract had occurred and after the transactions had been made. W submitted that the applicants were liable for breach of contract, negligence and breach of fiduciary duty. W further argued that they were liable for deceit on the basis that they had remained silent about what was really happening. W contended that eight transactions had involved a fraudulent breach and that another two had involved a deliberate and conscious breach of fiduciary duty. V argued that it did not owe any fiduciary duty to W as, unless an agent had power to bind his principle legally, he was not a "full blown" agent. The applicants submitted that W's claims were statute-barred under the Limitation Act 1980.

Held

(1) There was an arguable cause of action in deceit if any applicant had fiduciary obligations to W, which included an obligation to disclose either the availability of freeholds or the applicants' own financial interests in transactions relating to those freeholds and if the applicants dishonestly failed to make disclosure, Conlon v Simms (2006) EWHC 401 (Ch), (2006) 2 All ER 1024 considered. The facts alleged were capable of giving rise to that cause of action. (2) It was not a necessary condition that an agent should have power to bind a principal in order for duties to arise. Identifying W as the potential occupier of a particular property and deliberately presenting W with a less favourable deal than it could have obtained was capable of amounting to a breach of the duty of loyalty. Furthermore, the making of offers purportedly on behalf of W, but without authority, if made to entice a property owner to enter into negotiations, and with a view to "switching" the transaction to another client or a business associate, was capable of amounting to a breach of the duty not to use its position as agent to its own advantage without the informed consent of W. (3) The alleged breach of the duty of loyalty by diverting opportunities to enter into favourable transactions away from W towards other clients was capable of constituting a breach of fiduciary duty where the fiduciary obligations preceded the acts complained of, and accordingly, if that breach was fraudulent within the meaning of the s.21 of the Act, the claim was not statute-barred, DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH v Koshy (Account of Profits: Limitations) (2003) EWCA Civ 1048, (2004) 1 BCLC 131 applied. Thus, if the facts in relation to the transactions involving alleged fraudulent breaches could be proven there was a real prospect that the claims would not be statute-barred. (4) The claims in relation to a deliberate and conscious breach of fiduciary duty were, in principle, subject to the limitation period under s.21(3) of the Act unless that period was extended by s.32 of the Act, which provided that deliberate concealment for the purposes of s.32(1) included a deliberate breach of duty where that breach was unlikely to be discovered "for some time". A deliberate concealment might take place at any time during what would otherwise have been the running of the period of limitation and when it did, time did not begin to run until the concealment had been discovered, Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd (1996) AC 102 applied. A deliberate breach of duty required intentional wrongdoing, as was alleged in the instant case, Cave v Robinson Jarvis & Rolf (2002) UKHL 18, (2003) 1 AC 384 applied. The alleged involvement of the applicants in a transaction in which they had secretly preferred the interests of other clients over those of W might satisfy the requirement that the breach would not be discovered immediately. If there was no relevant trigger for an investigation, the period of reasonable diligence provided for in s.32(1) of the Act would not begin. If the facts as alleged were true, the second applicant's explanation in his letter was not true, so it concealed facts relevant to W's cause of action, which amounted to deliberate concealment. Moreover, it occurred during the period of limitation and would have prevented time from running until the concealment could have been discovered with reasonable diligence. It was not suggested that once W was alerted to the possibility that the explanation was untrue it acted otherwise than with reasonable diligence. The limitation defence was, therefore, not so clear as to warrant summary dismissal of the claim.

Applications refused