O’Keefe v Caner [2017] EWHC 1105 (Ch)

Analysis

This was a trial of the preliminary issue of whether claims made by the joint liquidators of two Jersey-incorporated companies against the respondents were time-barred as a matter of Jersey law.

In the proceedings, the applicants claimed that between 10 April 2007 and 10 June 2008 payments were made of €16m and €18m from ‘Level One’ and ‘Special Opportunity’ respectively, to or for the benefit of the first respondent or companies owned beneficially by him. Those payments were claimed not to have been made in good faith for a legitimate commercial purpose of the companies, and the companies did not receive any or any adequate consideration for the payments. On this basis it was claimed that in causing or permitting the payments to be made, the first to fifth respondents acted in breach of their duties as directors of the companies in that they did not (a) act honestly and in good faith with a view to the best interests of the companies or (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances in accordance with Art 74(1) of the Companies (Jersey) Law 1991 (the Companies Law 1991).

The applicants made applications under s212 of the Insolvency Act 1986 that the respondents were guilty of misfeasance and breach of duty in respect of the payments and an order for payment of a sum equivalent to the payments. The respondents asserted that the relevant limitation period was three years and that claims were time-barred. This argument was advanced on four distinct grounds; either (i) because of direct application of the three-year prescription period for tort; (ii) by analogy with the period for tort; (iii) applying the three-year period for breach of trust directly; or (iv) applying the three-year period for breach of trust by analogy. The applicants asserted that the applicable limitation period was ten years, being the applicable default limitation period to personal claims under Jersey law.

A trial was ordered on the preliminary issue of the relevant limitation period.

Held:

1. 1) The preliminary issue was to be determined in accordance with the law of Jersey, being the place where the companies were incorporated: Base Metal Trading Ltd v Shamurin [2005] 1 WLR 1157. The applicable limitation period was governed by law of that jurisdiction: s1(1), s4(1) Foreign Limitation Period Act 1984.
2. 2) Section 212 of the Insolvency Act 1986 was a procedural provision whereby an office-holder may vindicate a cause of action vested in the company; the relevant limitation period is that applying to the company’s cause of action: Re Eurocruit Europe Ltd [2008] Bus LR 146.
3. 3) Jersey does not have a separate and identifiable regime of equitable claims, nor does it have a specific prescriptive period for equitable claims as such. Jersey has no comprehensive legislation dealing with law of prescription, which is governed by customary law and various pieces of legislation. The is also a principle of ‘empêchement d’agir‘, which provides that prescription will not run against a person who is subject to an impediment which prevents him from bringing a claim or otherwise acting in the prosecution or defence of his rights.
4. 4) In some cases no specific legislative provision or judicial decision expressly stipulates the applicable period; that is the position as regards claims for breach of directors’ duties. When a question arises as to the applicable prescription period in a given case, the starting point is to characterise the nature of the action.
5. 5) In this case, each of the claims is within the general classification of an action personnelle mobilière: that is, a personal action, founded upon personal obligations, where the aim of the action is a money payment or recovery of an item of moveable property.
6. 6) The ten-year period is a general period which should be taken to apply to all personal actions and all actions concerning movables, save to the extent that they have already been held to be subject to a different period: Re Esteem Settlement [2002] JLR 53. It follows that the applicable prescription period is ten years unless either (a) some other period is directly applied by statute or case law or (b) ‘some other period is, by analogy, clearly more applicable’.
7. 7) Analogous application of prescriptive periods does not involve mere comparison of causes of action but involves having regard to considerations such as the coherence of the law and the practical convenience of departing from the ten-year default period in any given case.
8. 8) Dicta in Northwind and Alhamrani supported the argument that the default ten-year period applies to breaches of directors’ duties in Art 74: Northwind Yachts Ltd, In re [2005] JLR 137; Alhamrani [2007] JLR 44.

Direct application of a prescription period (Art 71(1)(a) – duty of honesty/good faith)

1. 9) The duty in Art 74(1)(a) is a fiduciary duty in the strict sense explained by Millet LJ in Bristol and West Building Society v Mothew [1998] Ch 1. Fiduciary duties are distinct from tortious duties in a number of important respects, and the position at Jersey law is substantially identical to English law in this regard: In the Matter of the E, L, O and R Trusts [2008] JRC 150; Vilsmeier v AI Airports International Ltd [2014] JRC 257. The argument that these duties were tortious in nature did not succeed.
2. 10) The argument that the breach of duty in question was a breach of statutory duty and therefore deemed to be a tort to which a three-year limitation period applied, failed for the following reasons:
3. a. the authorities did not support the conclusion that any actionable breach of duty that exists by virtue of a statutory provision is ipso facto a tort;
4. b. the concept of breach of statutory duty in Jersey law was adopted from English law and English law does not regard every actionable breach of duty contained in a statute as tort. The Trustee Act 2000 imposes duties, the breach of which give rise to an action in breach of trust, with the remedy of equitable compensation;
5. c. fiduciary duties and tortious duties are different in their nature;
6. d. formerly fiduciary duties remain fiduciary duties notwithstanding that they have been given statutory form; and
7. e. the consequence of the argument was that any breach of a trustee’s duties under the trust law would be an action in tort, but this was implausible and unsupported by authority.
8. 11) The period for breach of trust did not apply directly. As a matter of construction, the provisions in the Trusts Law 1984 applying a three-year limitation period had no direct application to an action based on breach of a director’s duties under the Companies Law 1991. The position at English law was that the trustee-like nature of directors’ duties meant that limitation periods applicable to trustees were applied either directly or by analogy. By contrast, the Trusts Law 1984 has very precise definitions which apply only to trusts in the strict sense. They exclude the case of a company director, as in Jersey (as in England) the company holds its own property.

Direct application of a prescription period (Art 71(1)(b) – duty of care, diligence and skill)

1. 12) English law maintains a clear distinction, grounded in principle, between equitable duties owed by fiduciaries and any duties that they might also owe at common law. Moreover, there was no Jersey authority to support the proposition that the duty of care in Art 74(1)(b) was tortious, or that before the Companies Law 1991 came into force, the director’s duty of care and skill gave rise to tortious duties. The duty in question refers to the specific duty that a director owes qua director. The director’s duty of care and skill was best viewed as an equitable duty arising out of the relationship of a director to his company.

Analogous application of prescription periods

1. 13) In the case of Art 71(1)(a), the most obvious candidate for analogous application was the three-year period for breach of trust, given the close similarities between directors and trustees (cf the position at English law for limitation purposes).
2. 14) In the case of Art 71(1)(b), if any period other than the ‘default’ ten-year period was to be applied by analogy in the case of Art 74(1)(b), it was the three-year period for claims in tort. The similarities between the statutory duty and tort of negligence were obvious.
3. 15) However, the purpose of analogical reasoning was to decide if some other period was more clearly applicable than the ten-year default period. It was important as a matter of coherence that the same period should apply to Art 74(1)(a) and Art 74(1)(b). There was not any good reason to apply a period other than that normally applying to actions personnelles immobilières.
4. 16) Accordingly, under Jersey law the prescriptive period for both causes of action under Art 74 is ten years (NB that this is a finding of fact not a finding of law).

JUDGMENT HHJ KEYSER QC: Introduction [1] This is my judgment upon the preliminary issue whether the claims made by the applicants against each of the first to fifth respondents are time-barred (prescribed) as a matter of Jersey law. [2] The applicants are the joint liquidators of Level One Residential (Jersey) Ltd (Level One) and Special …

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