Green & Ors v Gaul & Ors

This is an appeal from an order made on 18 March 2005 by Mr Justice Lawrence Collins in administration proceedings relating to the estate of the late Mr Ivor Andrew Loftus.

Mr Loftus died on 11 August 1990, intestate. His wife had predeceased him. There were six children of the marriage, five of whom survived their father. Letters of administration to the estate were granted to the deceased’s daughter, Mrs Margaret Gaul, on 10 December 1991. These proceedings were commenced by her three sisters on 20 January 2003. The remaining sibling, Mr Michael Loftus, was joined as the second defendant. He has taken no part in the proceedings.

The proceedings included a claim against the third defendant Mr Dexter Gaul - the son of Mrs Gaul – in respect of property known as the Yard (being land to the south of Headstone Drive, Middlesex) formerly comprised in the estate. The Yard had been the subject of an assent by Mrs Gaul in her own favour in June 1992. Mrs Gaul had transferred the property to her son in August 1999. By the order which he made on 18 March 2005 the judge declared that the Yard was held by the third defendant as trustee for the estate; and he made certain consequential orders for transfer of that property back to the estate and for an account. There is now no appeal on behalf of the third defendant in relation to the Yard.

The principal claim in the proceedings was for an order removing Mrs Gaul as personal representative and for the appointment of an independent solicitor in her place. There was an ancillary claim for an order that she deliver to the substituted administrator all documents in her custody and possession relating to the administration of the estate. And there was a claim that she account for the administration of the estate and pay to the substituted administrator such sum as might be found due on the taking of the account. The basis of the claims, as pleaded, was that, “despite being administratrix for nearly eleven years, the First Defendant has failed to provide any or any adequate accounts, failed to complete the administration of the Deceased’s estate and failed to make any distributions”. Further, it was said, Mrs Gaul had sworn an inventory and account in September 2002 – in response to an order made by the court – which was, to her knowledge, incomplete and incorrect. And, it was said, the inventory and account (although incomplete and incorrect) disclosed that Mrs Gaul had acted in breach of her duties as administratrix and had wasted the assets of the estate. The particulars of breach included the grant to Barclays Bank plc of a charge over the Yard in or about August 1999 and the transfer of the Yard to Mr Dexter Gaul in September 1999 “for no consideration alternatively at an undervalue”.

The substantive defence advanced on behalf of Mrs Gaul was that there had been a compromise agreement, made between the five siblings on 11 May 1992, under which each was to keep whatever assets derived from the estate which they then respectively controlled. On that basis, it was said, Mrs Gaul was entitled to deal as she wished with the Yard and other assets in the estate which were under her control.

The compromise agreement was said to have been made on 11 May 1992 informally and immediately following a formal meeting, with solicitors, at which no agreement had been reached. The formal meeting, it was said, had concluded on the basis that “negotiations would continue at a further meeting in late May 1992”. Sub-paragraphs (5), (6) and (7) of paragraph 4 of the re-re-amended defence are in these terms:

“(5)

Further and in any event, the proposed meeting for late May 1992 (at which it had been envisaged that the negotiations would continue) took place only between the parties’ respective professional representatives (either face to face or over the telephone), following which the parties took no further steps and all discussions between the parties in relation to the distribution of the deceased’s estate came to an end on the basis of the agreement reached on 11 May 1992 or alternatively on the basis of the provisional agreement reached on that date which thereby became final.

(6)

Further or alternatively, by reason of the acquiescence by the claimants and the second defendant in the above state of affairs (and in particular the 9½ year delay between the cessation of negotiations in May 1992 and the raising of any challenge to the first defendant’s administration of the deceased’s estate in December 2001, and the 12½ year delay between the deceased’s death in August 1990 and the issue of the present claim in January 2003) and the first defendant’s detrimental reliance in respect of the same, the claimants and the second defendant are now estopped from denying that they gave up any entitlement that they might otherwise have had to those assets then under the control of the first defendant.

(7)

Further and in any event, by reason of the matters set out above (and in particular the above delays of 9½ and 12½ years) the claimants ought to be denied relief under the doctrine of laches and/or the Limitation Act 1980, sections 21(3) and 22(a).”

The proceedings came before the judge for trial (over several days) at the end of January 2005. He rejected Mrs Gaul’s evidence that there had been a compromise agreement on 11 May 1992 – an agreement made, as she said, in the street outside the solicitors’ offices. There is no appeal from that finding of fact.

The judge went on to say this, [2005] EWHC 406 (Ch):

“[138] [Mrs Gaul] has raised defences of limitation, laches and estoppel. . . . The argument . . . is as follows. First, from the date of the assent in June 1992 [she] would have held the Yard as trustee and not as personal representative. The relevant limitation period would be 6 years under section 21(3) of the Limitation Act 1980 . . . Any claim would therefore have become statute barred by June 1998.

. . .

[140] Second, if she did remain a personal representative, the relevant limitation period would be the 12 year period in section 22(a). On that basis, the limitation period would have expired on August 10, 2002, which was 12 years after Mr Loftus' death, and five and a half months before the commencement of these proceedings on January 20, 2003.

. . .

[143] [Third], should it be found that no period of limitation applies (whether by reason of section 21(1) or otherwise), then the claim will be barred by laches. . . . ”

Section 21(3) of the Limitation Act 1980 provides that, subject to the provisions of subsections (1) and (2) of the 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. Given that the Yard has been recovered from Mr Dexter Gaul, the question whether Mrs Gaul could have relied on section 21(3) of the 1980 Act does not now arise. It is not the subject of any issue on this appeal.

Section 22 of the Limitation Act 1980 is in these terms, so far as material:

“Subject to section 21(1) and (2) of this Act -

(a)

no action in respect of any claim to the personal estate of a deceased person or to any share or interest in any such estate (whether under a will or on intestacy) shall be brought after the expiration of twelve years from the date on which the right to receive the share or interest accrued;

(b)

. . .”

As the opening words of the section make clear, section 22 of the 1980 Act applies “subject to section 21(1) and (2)”. Section 21(1) is in these terms:

“(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”.

It has not been suggested that paragraph (a) of that sub-section has any application in this case. Nor is section 21(2) of the Act said to be in point. The effect of that sub-section is to limit the liability of a trustee who is also a beneficiary – in an action brought against him in reliance on section 21(1)(b) after the end of the six year period prescribed by section 21(3) of the Act – to the excess over his proper share (as beneficiary) in the trust property.

The issue before the judge (in relation to the limitation defence) was whether – if section 22(a) of the 1980 Act had any application – the twelve year period under that section began to run against the claimants from the date of the death of Mr Loftus or (if at all, given that the administration was not complete) from some later date. If the period ran from the date of death (11 August 1990) the proceedings (commenced on 20 January 2003) were out of time. The judge held that section 22(a) of the Act did apply to the claim to remove Mrs Gaul as personal representative; but that the earliest date from which the twelve year period began to run against the claimants was “the end of the executor’s year” – that is to say 11 August 1991. But he went on to hold (at paragraph [150] of his judgment) that, if he were wrong in that, then “most of the claim would fall within section 21(1)(b), for which there is no limitation period, and in relation to which laches does not apply”.

The judge found support for the proposition that, if the claim fell within section 21(1)(b) of the 1980 Act, the defence of laches was not available in observations made by Lord Justice Mummery in Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ 1478, [140]; [2004] 1 BCLC 131, 173. But he went on to consider whether, had laches been an available defence, it would have been made out on the facts. In that context, he accepted that there had been substantial delay on the part of the claimants. But he held that Mrs Gaul had been well aware that she was vulnerable to proceedings: she had deposed, in an affidavit dated 25 November 1993 made in proceedings against her brother and his company, MP Loftus Ltd, that “I am aware that my brother and sisters have threatened to bring proceedings in the High Court to remove me as an administratrix. Such proceedings have not been commenced and, at present, I remain in such capacity”. The judge concluded, at paragraph [167] of his judgment, that, “this would [not] have been (had laches been available as a defence) a case where the conduct of the claimants can reasonably have been regarded by [Mrs Gaul] as a waiver of their rights or have caused injustice to [Mrs Gaul].”

Accordingly the defences of limitation and laches failed. Nevertheless, by his order of 18 March 2005, the judge gave Mrs Gaul permission to appeal “in relation to the application or otherwise of sections 22(a) and 21(1)(b) Limitation Act 1980 in this matter and in particular (a) the date from which the right to receive accrues under section 22(a) of the Limitation Act 1980 and (b) the application of laches in circumstances in which section 21(1)(b) of the Limitation Act 1980 applies”.

As I have said, the judge declared, by his order of 18 March 2005, that the Yard was held by Mr Dexter Gaul as trustee for the estate. He also declared (on Mrs Gaul’s counterclaim) that monies in certain off-shore bank accounts under the control of one or more of the claimants belonged to the deceased’s company, I Loftus & Son Limited. He ordered (on the counterclaim) that the claimants account for assets of the estate which had come into their hands. And he ordered Mr Dexter Gaul to transfer the Yard back to the estate and to account to the estate for rents and profits in respect of the Yard which had come into his hands. But, although it had appeared from the appellant’s notice, filed on her behalf on 9 May 2005, that Mrs Gaul sought to appeal from the whole of the order of 18 March 2005, it became clear in the course of the appeal that she did not pursue an appeal against the parts of the order to which I have just referred. In particular, it was accepted on her behalf that she could not appeal against the order that her son return the Yard to the estate, the order that he account for rents and profits, or the order for costs made against him.

In addition to the declarations and order to which I have just referred, the judge ordered that Mrs Gaul be removed as personal representative; he appointed Miss Amanda King-Jones, a solicitor and partner in the firm of Thomas Eggar, as personal representative in her place; he ordered that Mrs Gaul deliver to the new administratrix all documents in her custody and possession relating to the administration of the estate; he ordered that an account be taken of the property of the deceased which had come into her hands or into the hands of any other person or persons to her order and that she should pay to the new administratrix such amount as should be found due to the estate on the taking of that account; and he ordered that she pay 60% of the claimants’ costs of the claim and counterclaim. It is from those parts of the order that Mrs Gaul now seeks to appeal. It can be seen that they fall under two heads. First, the removal of Mrs Gaul as administratrix and the appointment of a new administratrix in her place. In that context I should make it clear that there is no challenge to the suitability of Miss King-Jones as an appointee; the challenge is as to the need for any appointment. Second, Mrs Gaul’s liability to account for property which had come into her hands as administratrix. There is not, as I understand the appellant’s case, an independent challenge to the order for costs; rather, it is said, the costs order should not stand if she succeeds under either of the other heads.

The issues on the appeal are, of course, limited by the permission granted by the judge. No more extensive permission has been granted by this Court. Given that constraint, the primary contention advanced on behalf of Mrs Gaul on this appeal is that the judge was correct to take the view that the claims against her in these proceedings were claims to which section 22(a) of the 1980 Act applied – that is to say, that the application of section 22 was not displaced by section 21(1) of the Act – but that he was wrong to hold that the period of twelve years for which section 22(a) provides did not begin to run against the claimants from the date of death. In the alternative, and as a secondary contention, it is said that – if section 22 is displaced by section 21(1), so that there is no period of limitation prescribed by the Act – the judge was wrong to hold (i) that the doctrine of laches had no application in such a case and (ii) that, on the facts, laches would provide no defence in this case in any event.

It is, I think accepted – and, if it is not accepted, I would hold – that it is not open to the appellant to seek to challenge the judge’s findings of fact in relation to delay and detriment, having regard to the limited permission under which this appeal is brought. But, the judge having given permission to appeal on the issue which he described as “(b) the application of laches in circumstances in which section 21(1)(b) of the Limitation Act 1980 applies”, he must have intended, as it seems to me, that if the appellant were to persuade this Court that a defence of laches was available in principle, the Court would go on to consider whether that defence had been made out on the facts. If that were not the judge’s intention, then the permission on issue (b) would be incapable of being of any benefit to the appellant.

The claimants, as respondents to the appeal, support the judge’s conclusion that the claims against Mr Gaul in these proceedings were claims to which section 22(a) of the 1980 Act applied; and they are content to uphold his further conclusion that the twelve year period under that section did not run against them until the end of one year from the death (11 August 1991). But, if the judge were wrong on that latter point, the respondents – by notice filed on 26 May 2005 - advance the submission that the twelve year period does not run against them until the completion of the administration; a point in time which, as they contend, has not yet been reached. In the alternative – by an amendment to their respondents’ notice prompted, perhaps, by observations from the Court – they contend that the period did not begin to run against them until the date on which letters of administration were granted to Mrs Gaul (10 December 1991). They seek, also, to uphold the judge’s conclusion that laches is not an available defence in this case (either on the law or on the facts) on grounds which go beyond those on which the judge relied.

For my part, notwithstanding the consensus between the parties that the judge was correct on the point, I do not find it self-evident that the claims made by the claimants in these proceedings are claims to which section 22(a) of the Limitation Act 1980 applies. First, I find it difficult to accept, without examination, that proceedings to remove a personal representative and appoint a substitute in his or her place fall within the descriptive words “action in respect of any claim to the personal estate of a deceased person”. Second, I find it difficult to understand why a claim against an administrator for an account of the assets an unadministered estate which have come into his or her hands (and for payment of the amount found due on the taking of that account) should not fall within section 21(1) of the 1980 Act – read with section 23 of the Act. And, if the claim does fall within section 21(1) of the Act, it will not be within section 22.

It seems to me, therefore, that the correct approach to this appeal is to decide, first, whether either of the two heads of claim made against Mrs Gaul (and in respect of which she has appealed) are claims to which section 22(a) of the 1980 Act has any application. That will require the Court to decide whether the claims to an account and payment fall within sections 21(1)(b) and 23 of the Act. It is not suggested that, if the claim to remove Mrs Gaul as administratrix and appoint another in her place does not fall within section 22(a) of the 1980 Act, there is any other provision of the 1980 Act which limits the period within which that claim must be brought. Second, if the claims to an account and payment do fall within 21(1)(b) of the 1980 Act, the Court must decide whether the judge was correct to hold that the defence of laches is not available. Third, if (in principle) the defence of laches is available, the Court must decide whether that defence is made out – and in respect of which claims (if any) - on the facts which were found by the judge.

Section 22(a) of the 1980 Act applies to an “action in respect of any claim to the personal estate of a deceased person or to any share or interest in any such estate (whether under a will or on intestacy)”. The section is derived from section 40 of the Real Property Limitation Act 1833 (3&4 William IV Cap 27) and section 13 of the Law of Property Amendment Act 1860 (23&24 Victoria Cap 38). Section 40 of the 1833 Act was in these terms (so far as material):

“ . . . no Action or Suit or other Proceeding shall be brought, to recover . . . any Legacy, but within Twenty Years next after a present Right to receive the same shall have accrued to some Person capable of giving a Discharge for or Release of the same . . .”

Section 13 of the 1860 Act extended that provision to

“ . . . the Personal Estate, or any Share of the Personal Estate, of any Person dying intestate, possessed by the legal personal representative of such Intestate, . . .”

The period of limitation was reduced from twenty years to twelve years by section 8 of the Real Property Limitation Act 1874. The suggestion that, after 1874, the twelve year period applied only to claims to recover legacies and that the twenty year period continued to apply to claims by next of kin to a share in an intestate estate – which is found in the judgment of this Court in In re Diplock, Diplock v Wintle [1948] 1 Ch 465, 509 - overlooks, as it seems to me, the terms in which section 13 of the 1860 Act was enacted and the effect of that section when read with section 9 of the 1874 Act. But nothing turns on that.

It is, I think, clear that, as enacted in 1874 – and in the earlier statutes – the section had no application to a claim to remove a personal representative and to appoint another in his or her place; if only for the reason that, prior to the Judicial Trustees Act 1896, the Court had no power to make such an order – see the observations of Mr Justice Kekewich in In re Ratcliff [1898] 2 Ch 352, 356. The power to appoint a judicial trustee in place of an existing administrator of the estate of an intestate was conferred by section 1(1) and (2) of the 1896 Act. The power to remove and replace a personal representative (without the need for the appointment of a judicial trustee) was conferred, for the first time, by section 50 of the Administration of Justice Act 1985, following a recommendation in the Report of the Review Body on the Chancery Division of the High Court 1981 (Cmnd 8205). Section 50(1) of the 1985 Act is in these terms (so far as material):

“Where an application relating to the estate of a deceased person is made to the High Court under this subsection by or on behalf of . . . a beneficiary of the estate, the court may in its discretion – (a) appoint a person . . . to act as personal representative of the deceased in place of the existing personal representative . . . ”

The reference, in the Law of Property Amendment Act 1860 and in the Real Property Limitation Act 1874, to “the personal estate of the intestate” is explained by the rule that, at the time when those statutes were enacted, real estate did not vest in the personal representative. That position did not alter until, first, the enactment of the Land Transfer Act 1897 – which provided that, where real estate had been vested in a deceased without the right of any other person (the heir) to take by survivorship, the land would devolve on the deceased’s personal representatives who should hold it upon trust, as though it were personal estate, for the persons beneficially entitled thereto – and, second, the more general reform introduced by the Administration of Estates Act 1925. Section 1 of the 1925 Act assimilated the devolution of real and personal estate. Nevertheless, when the provision now in section 22(a) of the Limitation Act 1980 took its present form (in section 20 of the Limitation Act 1939), it continued to refer only to “the personal estate of a deceased person”.

Section 33 of the Administration of Estates Act 1925, as enacted, provided that “on the death of a person intestate as to any real and personal estate, such estate should be held by his personal representatives – (a) as the real estate upon trust to sell the same; and (b) as to the personal estate upon trust to call in sell and convert into money such part thereof as may not consist of money, with power to postpone such sale and conversion for such period as the personal representatives, without being liable to account, may think proper . . . ”. It is impossible to suppose that, when section 20 of the Limitation Act 1939 was enacted – and when that section was re-enacted as section 22(a) of the Limitation Act 1980 - the legislature did not appreciate that the Administration of Estates Act 1925 continued to draw a distinction between real estate and personal estate in the hands of the personal representative of an intestate. And it is impossible to suppose that, with that knowledge, the legislature intended the words “any claim to the personal estate of a deceased” to mean “any claim to the real and personal estate of the deceased”: indeed, section 38(1) of the 1980 Act defines “personal estate” in terms which plainly exclude real estate. Those conclusions are unaffected by the amendments to section 33 of the 1925 Act which were introduced by section 5 of the Trusts of Land and Appointment of Trustees Act 1996.

The true position, as it seems to me, is that it was not contemplated by the legislature that section 22(a) of the 1980 Act would apply to claims against the personal representative of an intestate in respect of real estate which remained unsold or (as to claims in respect of personal estate) at a time when the estate remained unadministered – in the sense that the costs, funeral and testamentary and administration expenses, debts and other liabilities properly payable thereout had not been paid and any pecuniary legacies provided for.

The judge found assistance in the observation of Mr Justice Chitty in In re Johnson, Sly v Blake (1885) 29 ChD 964. The intestate had died on 2 October 1848. Letters of administration had been granted to the administrator on 30 October 1848. Mr Justice Chitty held that (subject to the short suspensory period for which the 1860 Act provided) section 13 of that Act had effect in relation to deaths which had occurred before it was enacted. He went on, at page 970:

“. . . the Defendants contend that the Plaintiff’s right was barred at the end of twenty years from his death, or at all events of twenty-one years, the additional year being conceded in conformity with the general rule that an executor or administrator is allowed in an administration one year to complete the administration of the estate. In the absence of any special circumstances relating to the getting in of an intestate’s estate, I think the latter contention is correct . . .”

But Mr Justice Chitty made it clear, at page 971, that the “present right to receive” could not accrue to the beneficiary claimant until the asset was in the possession of the administrator.

There are a number of factors which lead me to the conclusion that the observations in In re Johnson are of less assistance than the judge thought. First, the problem to which section 33 of the Administration of Estates Act 1925 now gives rise (the devolution on the personal representative of both real and personal estate) did not arise in that case: real estate did not devolve on a personal representative in 1848. Second, it was unnecessary, on the facts in that case, for Mr Justice Chitty to address the question whether the twenty year period began to run from the date of the death (2 October 1848) or the date of the grant of letters of administration (30 October 1848): section 5 of the Statute of Distribution 1670, then still in force, prevented the administrator from distributing the personal estate until the expiry of one year from the death of the intestate. Third, there was nothing in the facts (so far as they appear from the report) which suggests that the administrator was not in a position to distribute assets in his hands (after paying funeral, testamentary and administration expenses and debts) by the end of one year from the death. I do not, myself, find support in In re Johnson for the proposition that the period for claims to which section 22(a) of the Limitation Act 1980 applies will, necessarily, begin to run from the end of one year from the death of the intestate.

As I have said, the better view is that the period under section 22(a) of the 1980 Act (in cases to which that section applies) will not begin to run until the administrator has paid the costs, funeral and testamentary and administration expenses, debts and other liabilities properly payable out of the assets in his hands, and provided for the payment of any pecuniary legacies. It is not until then that he is in a position to distribute the residuary estate to those entitled under section 46 of the Administration of Estates Act 1925; because it is not until then that “the residuary estate of the intestate” can be identified – section 33(4) of that Act. That is not, of course, to say that a beneficiary has no remedy against an administrator who delays in getting in the assets and paying the administration expenses and debts: it is only to say that, in such a case, time does not run against the beneficiary under section 22(a) of the Limitation Act 1980.

The primary remedy of a beneficiary who complains of unjustified delay by an administrator in getting in the assets, paying the administration expenses and debts and distributing the residuary estate is an administration action. The power to appoint a judicial trustee, conferred by the 1896 Act, may be seen as “a middle course in cases where the administration of the estate by the ordinary trustees had broken down and it was not desired to put the estate to the expense of a full administration” – per Mr Justice Jenkins in In re Ridsdel, Ridsdel v Rawlinson [1947] Ch 597, 605. The power conferred by section 50 of the Administration of Justice Act 1985 may be seen as a further route towards that end. It is clear that the power is exercisable in circumstances where the beneficiary could have commenced an administration action. In a case where time would not run against the beneficiary in an administration action, there is no reason why it should run if the only relief sought is the removal of the administrator and the appointment of another in his or her place.

For those reasons I would hold that section 22(a) of the Limitation Act 1980 has no application to the claim to remove Mrs Gaul as administratrix. It is unnecessary to decide whether the judge was correct to hold that, if time did run under that section, the limitation period commenced at the end of one year from the death. But, for my part, I do not see how the twelve year period under section 22(a) of the 1980 Act could begin before the date of the grant of letters of administration; or, if there were successive grants, the date of the first grant. And, for reasons which I have explained, I think that the better view is that the period could not begin until the administrator is first in a position to distribute the residuary estate: that is to say, until he has paid the costs, funeral and testamentary and administration expenses, debts and other liabilities properly payable out of the assets in his hands, and provided for the payment of any pecuniary legacies.

Section 21(1)(b) of the Limitation Act 1980 applies to an action by a beneficiary under a trust 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”. In that context “trustee” includes a personal representative and “trust” includes the duties incident to the office of personal representative – section 68(17) of the Trustee Act 1925 and section 38(1) of the Limitation Act 1980. Section 23 of the 1980 Act is in these terms:

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

In my view there can be no doubt that the claims against Mrs Gaul to an account and payment are claims in respect of property, real and personal, which came into her hands as administratrix of the deceased’s estate; that those claims fall within section 21(1)(b) of the 1980 Act – either directly or indirectly, by reason of section 23 of that Act; and that having regard to the opening words of section 21, “no period of limitation prescribed by [the 1980 Act] shall apply” to those claims. Further, because they are claims within section 21(1)(b) of the Act, they are not claims to which section 22 of the Act has any application.

Section 36(2) of the Limitation Act 1980 provides, in terms, that:

“Nothing in this Act shall affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise.”

It is not, I think, in doubt that “acquiescence” in that context includes conduct which would lead a court of equity to refuse relief on the grounds of laches. At first sight, therefore, it is difficult to see how an express provision in the 1980 Act that no period of limitation prescribed by the Act shall apply to the claim – or, more generally, the absence of any provision in the Act which does, on a true analysis, prescribe a period of limitation in respect of the claim – can have the effect of excluding a defence of laches if, on the facts, such a defence would otherwise be available.

The judge addressed the point at paragraphs [161] to [163] of his judgment. After observing that no limitation period applied to the claim to recover the proceeds of trust property or property previously received and converted to the trustee’s use – section 21(1)(b) of the Limitation Act 1980 – he said this:

“[161] . . . The doctrine of laches has no application to cases to which the Statutes of Limitation apply either expressly or by analogy: Re Pauling's Settlement Trusts [1964] Ch 303 at 353.

[162] Where section 21(1)(b) applies, because it expressly prescribes that there shall be no period of limitation, laches is not therefore available: Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ 1478, [2004] 1 BCLC 131 (CA), where Mummery LJ said (at 173):

‘The defence of laches is not available. As already explained no period of limitation is specified by the 1980 Act in respect of the cause of action for dishonest breach of fiduciary duty. The effect of s 21(1)(a) is that either as a result of direct application, or of analogy, there is no period of limitation applicable to that cause of action.’

[163] Although this was a decision on section 21(1)(a) there is no possible principled distinction between section 21(1)(a) and section 21(1)(b) which share the opening words of section 21(1): "No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action …”

In In re Pauling’s Settlement Trusts, Younghusband and others v Coutts & Co [1962] 1 WLR 86, Mr Justice Wilberforce held, at page 115, that the plaintiffs’ rights were preserved by the proviso to section 19(2) of the Limitation Act 1939 (now section 21(3) of the 1980 Act). The effect of the proviso – being a proviso to a sub-section which prescribed a limitation period of six years from “the date when the right of action accrued” – was to postpone the date at which the right of action accrued to a beneficiary entitled to a future interest in the trust property until the interest fell into possession. He went on to say this (ibid):

“Laches. There being an express statutory provision, providing a period of limitation for the plaintiffs’ claims, there is no room for the equitable doctrine of laches.”

But he then addressed, under a separate head, the question whether the plaintiffs’ claims were barred by acquiescence: “the question is whether the plaintiffs have by their conduct done anything which is equivalent to a release of their claims or upon which an estoppel may be founded against them”.

In re Pauling’s Settlement Trusts went on appeal to this Court, [1964] Ch 303. At page 353, in the judgment of the Court, the point was addressed shortly:

“The bank pleads the Limitation Act 1939, and as to this we wholly agree with what the judge said and need not repeat it. So, too, as to the defence of laches. As to acquiescence, we think this must be looked at rather broadly.”

The Court plainly recognised that a defence of acquiescence might be run, notwithstanding the express statutory provision; and, indeed, that is what section 36(2) of the 1980 Act requires. But, on the facts, the defence failed because “a party cannot be held to have acquiesced unless he knew, or ought to have known, what his rights were”.

In re Pauling’s Settlement Trusts is authority for the proposition that, where the Limitation Act provides an express period of limitation, a claimant is not to be denied the benefit of that period by the operation of what was, in that case, understood to be the doctrine, or defence, of laches. It is not authority for the proposition that, where the Limitation Act prescribes no period of limitation, the defence of laches cannot be invoked. Nor, as it seems to me, is that case authority for the proposition that, where the Act prescribes a period of limitation, no defence of acquiescence (in so far as that may differ from what was, in that case, understood to be a defence of laches) can be relied upon. The judge’s error, in the present case, was to read section 21(1) of the 1980 Act as if the opening words were “No period of limitation shall apply to an action, etc.” rather than “No period of limitation prescribed by this Act shall apply to an action, etc.”

I find it more difficult to understand what this Court had in mind in the passage in its judgment in Gwembe Valley Development Co Ltd and another v Koshy and others (No 3) [2003] EWCA Civ 1048, [140]; [2004] 1 BCLC 131, 173 to which the judge referred. It is clear that, on the facts in that case, the defence of laches or acquiescence was not available. The Court said so, in terms, at paragraph [141]:

“[141] In any event there were no grounds of applying the doctrine of laches; the delay in starting the proceedings was not inexcusable; no substantial prejudice had been cause to Mr Koshy by the delay; and the balance of justice favoured the granting, rather than the withholding, of relief by way of an account.”

On one view, when this Court said, in paragraph [140] of its judgment, that “The defence of laches is not available”, it may have meant no more than that the defence was not available on the facts. It went on to say, in the same paragraph, that “As already explained, no period of limitation is specified by the 1980 Act in respect of the cause of action for breach of fiduciary duty”. That followed from the conclusion that the Court should not interfere with the finding of dishonesty made by the trial judge – see paragraph [135] of its judgment, read with paragraphs [120] and [121]. The claim fell within section 21(1)(a) of the 1980 Act.

But the Court continued, in paragraph [140] of its judgment in the Gwembe Valley case, with this sentence: “The effect of s 21(1)(a) is that either as a result of direct application, or of analogy, there is no period of limitation applicable to that cause of action”. In one sense that observation is self-evidently correct: the effect of section 21(1)(a) of the 1980 Act is that there was no period of limitation prescribed by the Act. Nor was there any scope for applying a period of limitation “by analogy” – for the reasons which the Court had explained at paragraphs [80] to [82] of its judgment. But the application of statutory time limits to equitable claims “by analogy” is one thing: the power to refuse equitable relief on the grounds of acquiescence or otherwise is another. The former is preserved by section 36(1) of the 1980 Act; the latter by section 36(2) of that Act.

If the Court were saying, in the Gwembe Valley case, that there is no scope for a defence of laches or acquiescence in a case where the 1980 Act prescribes no period of limitation, I would respectfully disagree; although, of course, if that proposition were binding upon me I would have no choice but to apply it. But the Court did not say that in terms; and, because I think the proposition obviously wrong, I am not persuaded that the Court intended to be understood as endorsing it. Further, the proposition cannot stand with the observations of Lord Justice Mummery (with whom the other members of the Court agreed) in his judgment in Patel and others v Shah and others [2005] EWCA Civ 157, [22]:

“It is common ground that the claims are not statute-barred. No period of limitation is prescribed by the Limitation Act 1980 for an action by a beneficiary under a trust 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 own use (section 21(1)(b)). It was accepted that section 36 of the 1980 Act preserved equitable jurisdiction to refuse relief on the grounds of acquiescence or otherwise and that that would include laches. . . .”

In my view a defence of laches or acquiescence is not excluded by section 21(1)(b) of the 1980 Act. It is necessary, therefore, to go on to consider whether the judge was correct to hold (as he did) that the defence must fail on the facts.

The modern approach to the defences of laches, acquiescence and estoppel was considered by this Court in Frawley v Neill ([2000] CP Reports 20, but otherwise unreported, 1 March 1999) to which reference was made in the judgement of Lord Justice Mummery in Patel v Shah ([2005] EWCA Civ 157, [32]). After reviewing the earlier authorities – and, in particular, observations in Lindsay Petroleum v Hurd (1874) LR 5 Privy Council 221, 229 and Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1279 - Lord Justice Aldous (with whom the other members of the Court agreed) said this:

“In my view the more modern approach should not require an inquiry as to whether the circumstances can be fitted within the confines of a preconceived formula derived from earlier cases. The inquiry should require a broad approach, directed to ascertaining whether it would in all the circumstances be unconscionable for a party to be permitted to assert his beneficial right. No doubt the circumstances which gave rise to a particular result in the decided cases are relevant to the question whether or not it would be conscionable or unconscionable for the relief to be asserted, but each case has to be decided on its facts applying the broad approach.”

The relevant circumstances in the present case appear from the judge’s findings of fact. There is no permission to appeal from those findings. The starting point, as it seems to me, is that by May 1992 there were mutual claims as between the claimants and Mr Michael Loftus, on the one hand, and Mrs Gaul, on the other hand, in relation to the deceased’s estate. It is important to have in mind, in that context, that the judge found that balances standing to the credit of off-shore accounts in the joint names of the deceased and the second claimant and in the joint names of the deceased and Mr Michael Loftus belonged to the company, I Loftus & Son Limited, the shares of which were assets of the estate. The judge ordered the claimants to account for property comprised in the estate which had come into their respective hands.

Those mutual claims were not resolved by agreement in May 1992. The judge found that, despite the allegations in her defence, Mrs Gaul knew that there had been no compromise: his findings are set out at paragraphs [131] to [136]. At paragraph [129] he said that he was satisfied that she had “made up” the account of a meeting outside the solicitor’s offices on 11 May “some years later”. At paragraph [167] he said this:

“[167] [Mrs Gaul] was well aware that she was vulnerable to proceedings. In an affidavit dated November 25, 1993, made in the proceedings against MP Loftus Ltd and Michael, [she] said: ‘I am aware that my brothers and sisters have threatened to bring proceedings in the High Court to remove me as administratrix. Such proceedings have not been commenced and, at present, I remain in such capacity.’”

He went on:

“ . . . I do not consider that this would have been (had laches been available as a defence) a case where the conduct of the claimants can reasonably have been regarded by Mrs Gaul] as a waiver of their rights or have caused an injustice to [her]. It also follows that I do not consider that any of the promissory elements of estoppel are present.”

Mrs Gaul was the administratrix of her father’s estate. It was her duty, as such, both to take steps to recover for the estate the assets of the estate that were in the hands of her siblings and to account for the assets that were in her hands. It may well be that she hoped that, if she took no action to recover assets from her siblings, they would be content to let matters rest and would take no action against her. But there was no evidence – and no finding – that the claimants did anything to encourage that hope. The decision not to take steps to recover assets from the claimants was her own unprompted decision. It seems to me impossible for her to assert that it is unconscionable for the claimants now to assert their rights in circumstances in which they had never led her to believe that they would not do so; and in which it had suited her to let matters rest rather than carry out her duties as administratrix and so push them into a position where they would be bound to do so.

The effect of the judge’s order is that the claimants are required to account to the new administratrix for assets which have come into their hands; just as Mrs Gaul is required to account for assets which have come into her hands. It is said on her behalf that that is unfair; on the grounds that it is likely, now, to be difficult to verify the account which the claimants will make or to identify assets which they have not revealed. But, if those difficulties exist, they are of Mrs Gaul’s making. They arise from her decision not to pursue estate assets as administratrix once she knew, in 1992, that there was to be no compromise.

In my view the judge was correct to reject the defence of laches and acquiescence on the facts.

I would dismiss this appeal.

I agree.

I also agree.