Analysis
A Jersey fiduciary services provider known as the Lavy Hancox Group (the LH Group) was, during the 1990s, the forum for fraudulent activities by its beneficial owner, Mr Raymond Bellows (Bellows).
The plaintiff/appellant (a BVI company) was administered by the LH Group. They alleged that the LH Group, unlawfully and without authority, caused US$480,000 to be transferred to an account (the Midland account) held in the name of a subsidiary company, Lavy Hancox Management Ltd.
The defendant/respondent was also in receipt of the LH Group’s fiduciary services: Levy Hancox Trustees Ltd acted as the trustees of a Guernsey trust (the trust) into which the respondent had caused certain of his offshore assets to be settled. The trust owned a company called Beaufort Properties Ltd (Beaufort), which was also administered by the LH Group and of which Bellows was a director.
In September 1996, Beaufort made a secured loan of US$1.5m to an independent third party. The appellant alleged that this money was paid out of the Midland account and was therefore made up, in part, from the converted funds of their $480,000.
Bellows’ fraud was exposed in 1997 and all the LH Group companies were put into liquidation. At around the same time repayment of Beaufort’s loan became due. The respondent, allegedly concerned that the monies would somehow be lost in the LH Group liquidation, collected a bearer cheque for $1,513,520.55 from the third-party borrower. He caused the cheque to be paid into a Liechtenstein Anstalt of which he was the owner and from which he received the monies (in Switzerland and England) by way of various tranches.
In July 2006, some ten years after the events in question, the appellant filed an Order of Justice, making claims in both restitution and knowing receipt against the respondent and Beaufort. Upon a request for further particulars, the appellant, in November, abandoned all claims against Beaufort and dropped the claim in knowing receipt. The respondent accordingly sought a trial of preliminary issues, namely that there could be no valid claim for restitution in the alleged places of receipt (Switzerland, England or Liechtenstein). The master made an order in those terms on 22 January 2008.
On 23 December 2008 the appellant issued a summons seeking leave to re-amend the Order of Justice in order to plead a claim in knowing receipt. The master refused to grant leave to amend on 20 July 2009 and the appellants duly appealed.
Held (dismissing the appeal):
- (1) The respondent had an arguable limitation defence and would not be deprived of his opportunity to rely on it (paras 44-46):
- (i) there was a strong basis for supposing that the English court’s interpretation of s21(1) of the Limitation Act 1980 would be equally applicable to Art 57(1) of the Trusts (Jersey) Law 1984: the latter provision was clearly based on the former and Jersey law was similar in relation to constructive trusts;
- (ii) the fact that Art 57(1) did not refer to claims by a ‘beneficiary’ did not displace the English courts’ interpretation: the Privy Council, in Taylor v Davies [1920] AC 636, had considered a provision that similarly made no reference to claims by beneficiaries; and Art 57(2), which refers to claims by a beneficiary, refers back to Art 57(1) thereby inferring that they are intended to deal with the same type of claim;
- (iii) an alternative construction would produce surprising and illogical results, whereby a secondary party might face liability unlimited in time while the trustee in breach of duty would be entitled to avail himself of a statutory limitation period.
- (2) While the proposed Order of Justice did not meet the standards of particularisation necessary and the appellant’s litigation conduct had been unsatisfactory, these matters alone would not have led to a refusal of this appeal (paras 59 and 61).
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