Court's Power to Extend Limitation Period

Court of Appeal

Published March 25, 2008
Giles v Rhind and Another (No 2)

Before Lord Justice Buxton, Lord Justice Sedley and Lady Justice Arden

Judgment February 28, 2008

The court had power to extend the limitation period where a party, allegedly in breach of duty, had entered into a transaction defrauding creditors.

The Court of Appeal so held when dismissing an appeal by the second defendant, Caroline Rhind, from Mr Justice David Richards ([2007] Bus LR 1470) who had granted permission to Edward John Giles to amend his particulars of claim in an action concerning a transaction which allegedly fell within section 423 of the Insolvency Act 1986, and where, for the purposes of the Limitation Act 1980, there was alleged to have been a deliberate concealment of relevant facts.

The second defendant asserted that the claim was statute-barred since the relevant transaction was entered into outside the relevant limitation period.

Mr Giles and the first defendant, Roderick Middleton Rhind, had been the directors and principal shareholders of a company. By a shareholders’ agreement in 1980, Mr Rhind owed Mr Giles an express duty of confidence in relation to the company’s affairs.

Following Mr Rhind’s resignation as director and the sale of his shares he agreed with Mr Giles the claimant personally not to breach his obligation of confidence: ( The Times October 23, 2002) Mr Giles challenged the allocation of the proceeds of sale of the property, governed by a deed, apparently dated 1992, as between the defendants. He contended, inter alia, that the deed was a transaction in fraud of creditors to which section 423 applied.

Ms Georgia Bedworth for Mrs Rhind; Mr Richard O’Dair, by the direct access scheme, for Mr Giles; Mr Rhind did not appear and was not represented.

LADY JUSTICE ARDEN said the expression “breach of duty” in section 32(2) in the 1980 Act included a claim under section 423 of the 1986 Act.

Section 32(2) was enacted pursuant to the recommendations of the Law Reform Committee’s Final Report on Limitation of Actions (1977) (Cmnd 6923) and the court could look at that report to see the mischief to which section 32(2) was directed. The committee did not recommend that the new provision should be limited only to some causes of action.

Her Ladyship could not think of any reason why Parliament should wish to restrict section 32(2) to only some of the causes of action within section 32(1): namely actions for breach of trust, breach of contract or tort.

The limitation period applicable to actions for recovery of land was capable of extension under the concealed fraud provision in the Real Property Limitation Act 1833, which postponed the limitation period until the claimant for rent or possession could reasonably have known that he had been deprived of possession by fraud.

Furthermore, a transaction under section 423 was a type of transaction of which there was likely to be concealment and thus there would be a heightened policy reason for application of section 32(2) to claims under that section.

Her Ladyship would reject the proposition that because section 423 was so widely drafted and could have applied to events occurring over a considerable period of time, section 32(2) should not be interpreted to extend beyond breaches of duty in the narrow sense.

If Parliament created a cause of action which applied over a long period of time and a large variety of transactions, it would be wrong for the court to impose an indirect restriction on section 423 by excluding it from section 32(2) if that provision would otherwise on its natural meaning apply to it.

Lord Justice Sedley and Lord Justice Tuckey agreed.
Solicitors: Hewitsons.