O'Keefe & Anor (In Their Capacity As Joint Liquidators of Level One Residential (Jersey) Ltd and Special Opportunity Holdings Ltd) v Caner & Ors

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.

The applicants are the joint liquidators of Level One Residential (Jersey) Limited (“Level One”) and Special Opportunity Holdings Limited (“Special Opportunity”) (together, “the Companies”). The Companies are incorporated in Jersey, but the centre of their main interest was in England and they went into administration in England on 18 November 2008 and into liquidation in England on 12 August 2012.

The first respondent is the ultimate beneficial owner of the Companies and was at all material times a director of each of the Companies. The second to fifth respondents were each professional directors of one or both of the Companies from time to time. The sixth respondent is a professional trust company that provided services to the Companies, including the provision of the second to fifth respondents to act as directors of the Companies; the claim against it does not raise any issue of limitation and it has accordingly not played any part in the trial of the preliminary issue.

The applicants’ case is as follows. Between 10 April 2007 and 10 June 2008 payments of some €16m from Level One’s bank accounts and payments of some €18m from Special Opportunity’s bank accounts were made to or for the benefit of the first respondent or companies owned beneficially by him. Those payments (“the Payments”) were not 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. Throughout the period when the Payments were made each of the Companies lacked sufficient reserves to permit distributions to be made and was insolvent. 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.

The duties relied on are set out in Article 74(1) of the Companies (Jersey) Law 1991 (“the Companies Law 1991”):

“A director, in exercising the director’s powers and discharging the director’s duties, shall—

(a)

act honestly and in good faith with a view to the best interests of the company; and

(b)

exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.”

The applicants contend that the directors also owed fiduciary duties to creditors of the Companies. The respondents deny that any such distinct fiduciary duties existed, but they acknowledge that in the case of an insolvent company the interests of the creditors are interests of the company for the purposes of Article 74(1)(a). Further, it was common ground before me that the limitation or prescription period applicable to the fiduciary duty under Article 74(1)(a) would also be applicable to any fiduciary duty owed by the first to fifth respondents to creditors of the Companies. I was not asked to, and do not, give separate consideration to any duty other than those under Article 74.

By applications dated 4 November 2015 pursuant to section 212 of the Insolvency Act 1986, the applicants seek declarations 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. Detailed particulars of claim have been served in support of these claims.

By their defences, the first to fifth respondents contend that the limitation period for the claims against them is 3 years, as being the relevant period applicable both to breach of trust and to tort under Jersey law, and that the claims are time-barred. The applicants contend to the contrary that the applicable limitation period is 10 years as being the default period applicable to personal claims under Jersey law. It is not necessary to recite the terms of the various statements of case.

On 20 June 2016 Ms Registrar Barber ordered that:

“1.

The following preliminary issue will be tried between the Applicants and the First to Fifth Respondents:

Are, as pleaded at paragraph 201 of the Second to Fifth Respondents’ Defence and paragraphs 3 to 6 of the First Respondent’s Defence, the claims made by the Applicants against each of the First to Fifth Respondents time barred as a matter of Jersey law (the Preliminary Issue)?

2.

If the answer to the Preliminary Issue is yes, the Applications brought pursuant to s. 212 Insolvency Act 1986 as against the First Respondent and the Second to Fifth Respondents shall be dismissed.”

The preliminary issue falls to be determined in accordance with the law of Jersey. The duties of the first to fifth respondents to the Companies were governed by the law of Jersey, being the place where the Companies were incorporated: Base Metal Trading Ltd v Shamurin [2005] 1 WLR 1157 (“Base Metal Trading”), per Tuckey LJ at para 56. Where a cause of action is governed by the law of a foreign jurisdiction, the applicable limitation period is governed by the law of that jurisdiction: sections 1(1) and 4(1) of the Foreign Limitation Periods Act 1984. Section 212 of the Insolvency Act 1986 is 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.

It is common ground that there is no authoritative decision of the Jersey courts that is determinative of the preliminary issue.

One further matter should be mentioned by way of introduction. The preliminary issue identified in the registrar’s order was formulated by reference to the statements of case as they then stood; I have summarised the claims in paragraph 4 above and the limitation issue in paragraph 7 above. However, in the course of the hearing of the preliminary issue I granted an application by the applicants for permission to amend the reply to the defence of the first respondent. The gist of the amendment is to contend, in reliance on the facts pleaded in the particulars of claim, that the first respondent is a constructive trustee of the moneys received by him personally or by the companies that he owned and controlled and that no limitation period applies to the claims against him for recovery of the moneys. The amendment is important only if the applicants lose on the preliminary issue. The considerations to which the amendment gives rise are closely related to but not identical with the considerations that arise on the preliminary issue. This judgment does not deal with the issues raised by the amendment; I shall give any necessary further directions in that regard after this judgment has been handed down.

I am grateful to counsel for their most helpful written and oral submissions.

The content of the law of Jersey, as of that of any other jurisdiction outside England and Wales, is a matter of fact, though fact “of a peculiar kind”: cf. Parkasho v Singh [1968] P 233, per Cairns J at 250. “[T]he evidence of expert witnesses is necessary for the Court to find that foreign law is different from English law. In the absence of such evidence, or if the judge is unpersuaded by it, then he must resolve the issue by reference to English law, even if according to the rules of private international law the issue is governed by the foreign law”: MCC Proceeds Inc v Bishopsgate Investment Trust plc [1998] EWCA Civ 1680 at para 10.

In accordance with permission granted by Registrar Barber, I have been assisted by evidence from three experts, each of whom is an Advocate of the Royal Court of Jersey: for the applicants, Mr Justin Harvey-Hills; for the first respondent, Mr John Kelleher; and for the second to fifth respondents, Mr James Gleeson. I am grateful to them for their detailed and careful evidence.

The judgment of the Court of Appeal in MCC Proceeds provides helpful guidance as to the respective roles of the judge and the expert witnesses in the determination of a question of foreign law. I have particular regard to the following passages concerning the role of the judge:

“13.

… Sometimes the foreign law, apart from being in a foreign language, may involve principles and concepts which are unfamiliar to an English lawyer. The English judge’s training and experience in English law, therefore, can only make a limited contribution to his decision on the issue of foreign law. But the foreign law may be written in the English language; and its concepts may not be so different from English law. Then the English judge’s knowledge of the common law and of the rules of statutory construction cannot be left out of account. He is entitled and indeed bound to bring that part of his qualifications to bear on the issue which he has to decide, notwithstanding that it is an issue of foreign law. There is a legal input from him, in addition to the judicial task of assessing the weight of the evidence given. …”

“17.

… The judgment [of the Court of Appeal in Bumper Development Corpn v Commissioner of Police of the Metropolis [1991] WLR 1362] also approved the following further passages from Dicey & Morris [The Conflict of Laws (12^th edition)]:

‘(1) An English court will not conduct its own researches into foreign law ....

(2)

If the evidence of several expert witnesses conflicts as to the effect of foreign sources, the Court is entitled, and indeed bound, to look at those sources in order itself to decide between the conflicting testimony ...’”

“19.

… [The judge] is entitled, indeed bound, to contribute his own legal skill and experience in reaching his conclusion, so much so that he may, in a suitable case, form his own view of the meaning of a statute which the expert witness tells him is the governing foreign law, even if the expert’s opinion as to its meaning is different from his own …. This is supported by the following dictum of Scrutton LJ: ‘I can see no reason why a court is bound to accept the evidence of an expert witness as to fact, when he supports it by a document the plain words of which render his opinion impossible’ (Buerger v New York Life Assurance Co (1927) 96 LJKB 930 at 937).

20.

The question then arises, whether the judge is only entitled to reject the expert’s opinion evidence as to the meaning of the statute when the witness has put forward an ‘impossible’ view… [I]n our judgment, the trial judge’s powers are not so limited … in a case where the English Court interprets the statute in accordance with English rules of construction, there being no evidence that different rules would govern the foreign court’s interpretation, and where there is no suggestion that any of the words of the statute has a special meaning, different from its ordinary meaning, in the foreign context. Then, the trial judge’s finding as to the meaning of the statute, which is distinct from his finding that the statute governs the issue before the court, is his interpretation of the words used. He was influenced, of course, by the factual ‘matrix’ as he found it to be … In the background throughout is the rule that, unless the evidence shows that the foreign rules of construction are different, the English Court interprets the statute according to the English rules. To that extent, the trial judge’s ‘finding’ is essentially a conclusion as to statutory interpretation, and as such it should properly be regarded as an issue of law.”

As regards the role of expert witnesses, the Court in MCC Proceeds said:

“23.

In our judgment, the function of the expert witness on foreign law can be summarised as follows:

1)

to inform the Court of the relevant contents of the foreign law, identifying statutes or other legislation and explaining where necessary the foreign Court’s approach to their construction;

2)

to identify judgments or other authorities, explaining what status they have as sources of the foreign law; and

3)

where there is no authority directly in point, to assist the English judge in making a finding as to what the foreign Court’s ruling would be if the issue was to arise for decision there.

24.

The first and second of these require the exercise of judgment in deciding what the issues are and what statutes or precedents are relevant to them, but it is only the third which gives much scope in practice for opinion evidence, which is the basic role of the expert witness. And it is important, in our judgment, to note the purpose for which the evidence is given. This is to predict the likely decision of a foreign court, not to press upon the English judge the witness’s personal views as to what the foreign law might be. Thus, in G & H Montage GmbH v Irvani [1990] 1 WLR 667 (C.A.), Mustill LJ said this:

‘The fact that the plaintiffs’ expert was not able to do more than assert, in this novel situation, his own view on how the German court would react when faced with a similar problem does not disqualify his evidence from being relied upon. There are many fields of law in which the books provide no direct answer and where the skill of the lawyer lies precisely in predicting what answer should be given. If the judge concludes that the expert’s prediction is reliable, he is fully entitled to give effect to it’ (684G).

This passage emphasised that the expert witness is entitled to give opinion evidence in the absence of direct authority, but we would underline the restrictions which it places upon him. His role is to ‘predict’ what the foreign court would decide, and only in this sense should he say ‘what answer should be given’.”

The legal system of Jersey derives from Norman customary law but has developed under the influence of French civil law and, more recently, English common law. The principal sources of law are customary law, legislation and judicial decision. Where legislation makes no provision and there is an absence of Jersey judicial authority, the greatest weight is attached to writers on the law of Jersey, such as Poingdestre, Le Geyt and Le Gros. Other writers of distinction have been influential insofar as their writings on the law of Normandy or the law of France before the introduction of the Code Civil in 1804 provide useful guidance as to Norman customary law; among such writers Pothier is pre-eminent. Modern French law may be of assistance but is used with caution: unless it can be seen to rest on principles derived without great change from the old customary law, its significance will lie only in a comparative consideration of how another legal system has addressed common problems. (On this, see the observations of Birt DB in Re Esteem Settlement and the No. 52 Trust [2002] JLR 53 (“Esteem”) at paras 167-168.) In more recent times, substantial areas of English law have been closely followed by legislation or by judicial decision; among these, and relevant to this case, are the laws relating to companies, trusts and torts. Other areas of law retain their distinctive character derived from Norman and French customary law: for example, land law, wills and succession, and contract.

The court of first instance in Jersey is the Royal Court, where a Judge (the Bailiff, the Deputy Bailiff, or a Commissioner) sits with two assessors of fact (Jurats). The Master of the Royal Court is a procedural and interlocutory judge, from whose decisions an appeal lies as of right to the Royal Court. Appeals from the Royal Court go to the Jersey Court of Appeal. The final court of appeal is the Judicial Committee of the Privy Council.

Jersey courts are not bound by precedent in the same manner as are English courts, but the role of precedent has become increasingly important. The Royal Court is not bound by its own earlier decisions on points of law but will only depart from such a decision if satisfied that it was wrongly decided. The Royal Court will follow a decision of the Jersey Court of Appeal and a decision of the Privy Council sitting as an appeal court in a Jersey case; decisions of the Privy Council on appeal from other jurisdictions are persuasive only. The Jersey Court of Appeal is not bound by decisions of the Royal Court, though where such decisions have remained unchallenged for a period of time it will not depart from them unless persuaded that they were contrary to earlier authority or are the cause of practical injustice. Decisions of the courts of other jurisdictions may be persuasive but are never binding.

The principles and techniques of statutory interpretation are the same in the courts of Jersey and of England. Further, where, as in the case of the Companies Law 1991, Jersey statutory provisions follow closely UK statutory provisions, Jersey courts will have careful regard to judgments of the English courts affecting the interpretation of the UK provisions: see Attorney General v Contractors Plant Service Ltd 1967 J.J. 785, per Bois DB at 786.

Jersey has no parallel to the historic development of equity to mitigate the deficiencies of the common law. In Re Viscount Wimborne [1983] JJ 17, the Royal Court stated that it was a court of equity in the “widest sense”. This appears to be a reference to the French concept of equité, which is less well-defined than is the English concept of equity. Mr Kelleher’s evidence, which I accept on this point, is that “in seeking to redress wrongs the Jersey Courts have sometimes called in aid English equitable principles (and employed its terminology) and sometimes a wider local jurisdiction”: first report, para 34. But 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.

As mentioned above, Jersey law in respect of tort, trusts and companies is closely similar to and in large measure based on English law. I need to say a little more about these relevant areas of law.

As regards the law of tort, it will suffice for present purposes to refer to two passages from judgments of the Jersey Court of Appeal, each of them delivered by Southwell JA. In Arya Holdings Ltd v Minories Finance Ltd 1997 JLR 176 (“Arya”) he said at 181:

“The Jersey law of torts derives primarily from the Jersey common law which has its origins in the Norman law of the ancienne coȗtume. In relation to the tort of negligence, Jersey follows the law of England (T.A. Picot (C.I.) Ltd v Crills 1995 JLR 33) except as regards any point on which a different rule has been established in Jersey. In relation to other torts or other aspects of the law of tort, although careful attention is paid to decisions on English common law, the courts of Jersey have to found themselves on the common law of Jersey. Thus there may be causes of action in tort which are available in England but not in Jersey, and vice versa. …

We were referred to the definition of tortious liability in English law formulated by Sir Percy Winfield in The Law of Tort, at 32 (1931) and quoted in Clerk & Lindsell on Torts, 17^th ed., para 1-01, at 1 (1995): ‘Tortious liability arises from the breach of a duty primarily fixed by the law: such duty is towards persons generally and its breach is redressible [sic] by an action for unliquidated damages.’ This definition was cited with some measure of approval as applying to torts in Jersey law by Ereaut, Bailiff, in Watson v Priddy 1977 J.J. at 152-154. This definition is, however, even as applied to English law, not without difficulties. There are duties ‘fixed by the law’ which give rise to liability outside the law of torts, the meaning of the adverb ‘primarily’ is wholly unclear and there are tortious duties owed to particular persons and not to ‘persons generally.’ But this definition is of some use in deciding whether a right of action under Jersey law gives rise to tortious liability rather than some other form of liability.”

In Jersey Financial Services Commission v A.P. Black (Jersey) Ltd 2002 JLR 443 (“Black”) Southwell JA in the Jersey Court of Appeal said:

“20.

The essentials of a right of action in tort, and therefore of an action ‘founded on tort’ for the purposes of Article 2(1) of the 1960 Law, were considered by me when delivering the judgment of the Court of Appeal in Arya Holdings Ltd v Minories Finance Ltd (1997) JLR 176 (“Arya”).  Those essentials include a duty owed to the plaintiff by the defendant otherwise than by virtue of a contract or trust, and whether pursuant to Jersey common law or statute, a breach of this duty by the defendant, and actual or threatened damage caused by and flowing from the breach (which in some torts may be assumed), giving rise accordingly to a right of action which the plaintiff can require the Court to uphold.

21.

Arguments have been advanced as to the extent to which ‘tort’ (in French) as part of Jersey common law may differ from ‘tort’ (in English) as part of English common law.  One example of a difference between Jersey law and English law in this regard can be seen in Arya, where a Jersey right of action described as a ‘D’Allain claim’, unknown to English law, was held to be a right of action in tort in Jersey law.  What is significant for the present case is that a D’Allain right of action involves, just as much as other rights of action in tort in Jersey law, the three essentials of duty, breach of duty and damage.  Whatever differences there may be between Jersey law and English law as to the range of torts on which reliance may be placed under either legal system, torts under each system involve the existence of those three essentials.”

The concept of a trust is derived not from customary law or civil law but from English law. As Jersey law does not have the historic division between courts of law and courts of equity, trusts “were accordingly longer in coming to Jersey, and less easy to sustain”: Matthews and Sowden, The Jersey Law of Trusts (3^rd edition), cited by Mr Gleeson in his first report at para 6.6. Trusts had however been recognised in Jersey law before the enactment of the Trusts (Jersey) Law 1984 (“the Trusts Law 1984”). As the Trusts Law 1984 is not a codifying statute the customary law remains relevant. Both the customary law and the Trusts Law 1984 have close similarities to the English law of trusts, and accordingly English authorities and writings are frequently cited in and by the Royal Court on matters of trust law.

As for company law, the Companies Law 1991 is primarily based on the UK Companies Act 1985, though it also draws on the UK Companies Act 1948. The previous statutes were the Loi (1861) sur les Sociétés à Responsabilité Limitée, as amended, and the Companies (Supplementary Provisions) (Jersey) Law 1968, together known as the Companies (Jersey) Laws 1861 to 1968. (The Loi of 1861, though in French, was based, at least in part, on an earlier UK statute.) However, neither the former nor the present statutory provisions amount to comprehensive codifications of company law, and customary law remains relevant. The evidence before me is that the duties in Article 74 were not in statutory form prior to the coming into force of the Companies Law 1991 on 30 March 1992; rather they existed in customary law. I might add that I did not receive any detailed evidence as to the historical origins of company law in Jersey.

What in English law is called limitation is in Jersey law generally called prescription. (In fact, although both terms are used in Jersey law, often interchangeably, their meanings may not be identical; see chapter 1 of the Jersey Law Commission’s Consultation Paper[:] Prescription and Limitation (2008). The distinction if any is not important for present purposes.) Jersey has no comprehensive legislation on the matter akin to the UK Limitation Act 1980; instead, the periods of prescription are governed by customary law and by various pieces of legislation dealing with specific cases. There is also a long-established principle of customary law called 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. Such impediment may be legal (for example, minority) or practical (for example, on account of concealment or reasonable ignorance of the facts); the former is empêchement de droit and the latter is empêchement de fait.

Certain kinds of claim are subject to particular prescription periods; for example, there is a 10-year period for claims for breach of contract and, more importantly for present purposes, a 3-year period for claims for tort. 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.

Although the precise characterisation of the claims in the present case is in issue between the parties, it is common ground that 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. Such an action is to be distinguished from an action réelle (a real action for regaining possession of a thing) and an action personnelle immobilière (a personal action concerning immovable property).

In Esteem the Royal Court (Birt DB) considered the decisions and writings relating to prescription periods and said:

“252.

The Jersey law of prescription is, by and large, based upon judicial precedent and it is hard to find a consistent theme or principle which underlies the various prescriptive periods. But where there is no precedent, it is helpful to have regard to the nature of the action.

…

257.

… We think that the time has come to hold that the 10-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, e.g. tort, actions concerning estates etc, or that some other period is, by analogy, clearly more applicable.”

That dictum has been followed in other Jersey cases, has not been doubted or disapproved or overruled in any Jersey case, and is agreed to be a correct statement of Jersey law. (Cf. for approval by the Jersey Court of Appeal, Rockhampton Apartments Ltd v Gale 2007 JLR 332 (“Rockhampton”) at paras 177-8.) It follows that the applicable prescription period is 10 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”.

The Jersey courts have not given a definitive explanation of how a prescription period might be applied by analogy. However, in my judgment the underlying idea is essentially a fairly simple one and the general approach is well illustrated by the decision of the Royal Court in J.M. Nolan v Minerva Trust Company Ltd [2014] JRC 078A,2014 (2) JLR 117 (“Nolan”). The question was what period of prescription was applicable to an action for dishonest assistance in a breach of trust, for which neither legislation nor judicial decision had established a period. The plaintiffs contended for the 10-year default period in Esteem on the ground that no other period was by analogy clearly more applicable. The defendant contended that dishonest assistance in a breach of trust was analogous to an economic tort and that the 3-year period for actions in tort was applicable and relied in particular on dicta in two non-Jersey cases. In Cattley v Pollard [2007] Ch 353, Mr Richard Sheldon Q.C., sitting as a deputy High Court judge, said: “I consider it clear that the dishonest assistance claims are analogous to claims for deceit or knowingly procuring a breach of contract.” In Royal Brunei Airlines v Tan [1995] 2 AC 378, at 387, Lord Nicholls of Birkenhead had this to say on the same point:

“The rationale is not far to seek.  Beneficiaries are entitled to expect that those who become trustees will fulfil their obligations. They are also entitled to expect, and this is only a short step further, that those who become trustees will be permitted to fulfil their obligations without deliberate intervention from third parties. They are entitled to expect that third parties will refrain from intentionally intruding in the trustee-beneficiary relationship and thereby hindering a beneficiary from receiving his entitlement in accordance with the terms of the trust instrument.  There is here a close analogy with breach of contract.  A person who knowingly procures a breach of contract, or knowingly interferes with the due performance of a contract, is liable to the innocent party.  The underlying rationale is the same.”

The Royal Court in Nolan accepted the defendant’s argument. At para 501 Hunt, Commr, said:

“Jersey law does not have the historical divide between equity and the common law which arose in England.  Accordingly analogies based on that historical divide are, we think, unhelpful in the context of the test in Esteem that ‘some other period is, by analogy, clearly more applicable’.  In particular we reject the [plaintiffs’] argument that there can only be an analogy if two causes of action are based on the same facts and give rise to concurrent remedies.  According to Esteem, what has to be analogous is the period, not the cause of action.  In applying the Esteem test, we find the observations of Mr Sheldon Q.C. in Cattley, the judgment of the Privy Council in Royal Brunei and the decision in Peconic Ind. Dev. Ltd v Lau Kwok Fai (2009) 11 ITELR 844 compelling.  Conversely we do not find the case of In re Northwind Yachts Ltd 2005 JLR 137 to be of any assistance in this context.  Accordingly we accept [the defendant’s] submission that as a matter of Jersey law the prescriptive period applicable to actions for dishonest assistance in a breach of trust is, by analogy with economic torts, three years, not ten.”

The approach taken in Nolan makes good sense of the concept of analogy in this context. As the first three sentences of para 501 make clear, the courts are not concerned with the analogous application to equitable claims of periods that apply to legal claims where the remedies are similar (cf. Knox v Gye (1872) LR 5 HL 656, per Lord Westbury at 674); the historical context that made such use of analogy relevant in England is not that of Jersey. Rather, the approach of the Royal Court was, to put it simply, as follows: procuring someone to breach his contract with another is closely and relevantly similar to assisting someone to breach the terms of a trust that he holds for another; and on account of this analogy between the two cases the period of prescription applicable to the one case ought to apply to the other. An essentially similar process of analogical reasoning was employed by the Royal Court, in a different legal context, in Robertson v Lazard 1994 JLR 103.

The Commissioner’s statement in Nolan that “what has to be analogous is the period, not the cause of action” does not make good sense, does not accurately state what was said in Esteem—the fact that a period applies by analogy does not mean that any period is an analogue—,and does not reflect the Royal Court’s own reasoning in Nolan. Perhaps the intended point is that the test is not whether there is an analogy between the causes of action but whether a particular period is to be analogously applied. That distinction has some relevance for this case, as I shall seek to explain later.

It does not follow, however, that the application of a prescriptive period by analogy turns mechanically on the similarities and dissimilarities between different causes of action. In In the matter of Northwind Yachts Ltd, 2005 JLR 137, (“Northwind”), the principal reason why Birt DB did not favour the analogous application of the prescriptive period for breach of trust to a claim for breach of a director’s fiduciary duties was that it was more logical and convenient for all claims for breach of duty by a director to be subject to the same period; as some claims would lie in contract, to which a 10-year period applies, the 10-year default period should apply to other claims for which there was no specified prescriptive period. The same reasoning commended itself to Page, Commr, in the Royal Court in Alhamrani v Alhamrani 2007 JLR 44 (“Alhamrani”). The dicta in those cases indicate that the judges of the Jersey courts have not understood analogous application of prescriptive periods to involve mere comparison of causes of action but have had regard to considerations involving the coherence of the law and the practical convenience of departing from the 10-year default period in any given case. Such considerations seem to me to be quite different from the sort of policy considerations—for example, an opinion that in modern society a shorter or longer period is more desirable—that are properly the preserve of the legislature; cf. Rockhampton at para 177.

As well as indicating how the Jersey courts understand analogous application of prescription periods, the dicta in Northwind and Alhamrani have particular relevance to the present case inasmuch as they support the applicants’ contention that the default 10-year period applies to breaches of the directors’ duties in Article 74.

Northwind concerned an application for permission to bring a derivative action in the company’s name against a director for breach of fiduciary duty. The application was refused on the ground that liquidation would be an adequate alternative remedy. For that reason the Royal Court did not have to decide the other ground on which the application was resisted, namely that the application was prescribed by the 3-year period for breach of trusts in Article 53 (now Article 57) of the Trusts Law 1984. However, the judgment of Birt DB discussed the matter at some length. In paragraphs 30 and 31 he expressed the opinion that Article 53 did not apply directly to a director’s breach of fiduciary duty. In paragraph 33 he said that he inclined to the view that Article 53 did not apply by analogy either, though he expressly prescinded from deciding the point. I shall consider his reasoning regarding breach of trust in more detail later. For the present it suffices to note how he expressed his provisional conclusion at para 33:

“Many directors are employed by companies. Some breaches of a director’s duty will be a breach of contract and others will be a breach of his fiduciary duty in the special sense described [that is, by Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1; see paragraph 48 below]. If [the Advocate for the respondent] is right, the former will have a 10-year prescriptive period, whereas the latter will have a 3-year prescriptive period. This does not seem very logical or convenient as there will then be endless argument as to whether a particular breach falls within one category or the other. For these reasons, we incline to the view—but, as we say, we make no decision because it is not necessary—that, as set out in Esteem, the 10-year period should apply to all breaches of duty by a director, whether being described as breaches of contract or breaches of fiduciary duty.”

The following points may be noted about the discussion of prescription in Northwind. First, it was obiter. Second, as will be mentioned below, the Court expressed a firm view against the direct application of what is now Article 57 of the Trusts Law 1984. Third, the Court’s opinion that what is now Article 57 ought not to be applied by analogy was tentative, both because the discussion of the point was obiter and because the Court had not received full argument. Fourth, it does not appear to have been argued that the applicable prescriptive period was that for claims in tort; the judgment does not even consider that possibility. Fifth, however, the reasoning of Birt DB in respect of analogous application of what is now Article 57 applies equally to the analogous application of any period in place of the default 10-year period established by Esteem. Sixth, accordingly, the view of the Court, though both obiter and tentative, was that the 10-year period did indeed apply to a director’s breach of fiduciary duty.

In Alhamrani the plaintiffs applied to amend their pleadings to allege breaches of the duty of care in Article 74(1)(b) of the Companies Law 1991, which is not a fiduciary duty in the specific sense explained in Bristol and West Building Society vMothew. [1998] Ch 1 (“Mothew”). The application was refused on the ground that the new claims had no prospect of success; therefore the Royal Court was not required to make a decision on the respondents’ argument that the new claims were prescribed because “the statutory company law duty alleged can only be tortious in nature” (para 45) and the claims were subject to the 3-year period applicable to claims in tort. Para 46 of the judgment of Page, Commr, implicitly rejected the submission that breach of the duty in Article 74(1)(b) was a tort; I shall say more on this point below. The judge then cited the remarks of Birt DB at para 257 in Esteem and para 33 in Northwind and at para 49 said, with particular reference to the latter passage:

“There was, as one can see, no specific reference here to a company director’s duty of care, diligence and skill—as opposed to fiduciary and contractual duties. But the considerations of logic and convenience that evidently weighed heavily with the court in this passage, coupled with the observations from Esteem cited above, suggest that the court would have expressed the same view about claims on that basis. … The result is that if I had to decide the matter here and now, I would follow that view and rule that the relevant limitation period for a claim of the kind sought to be pleaded is, as with other forms of personal claim against company directors, 10 years.”

Here again, the remarks were both obiter and made tentatively in the absence of full argument. However, the views of Birt DB in Northwind were clearly given considerable weight; in particular, the logic of the final sentence in the foregoing passage apparently rests on the premise that the 10-year period did indeed apply to claims against company directors for breach of fiduciary duty. Page, Commr, was impressed by the same “considerations of logic and convenience” that had weighed with Birt DB in favour of having a single 10-year period of prescription for all non-fraudulent breaches of duty by a director. That is an argument against the analogous application of the prescription period for tort under either limb of Article 74(1).

MacFirbhisigh v C.I. Trustees and Executors Ltd [2015] JRC233 (“MacFirbhisigh”) did not concern breach of directors’ duties; the claims included allegations of negligent misstatement and breach of fiduciary duty against financial advisers. The claims were dismissed and the Royal Court did not have to decide the question whether the prescriptive period applicable to the claim for breach of fiduciary duty was 3 years, as the defendants contended, or 10 years, as the plaintiffs contended. Nonetheless the judgment of Hunt, Commr, contains an obiter discussion of the point. Having referred to Esteem and Northwind, the Commissioner concluded:

“337.

… In the circumstances of the present case it seems to us that some other period, namely the three year period in respect of claims in tort, is clearly more applicable.  The claim against Mr Gidley and Mr Killmister for breach of fiduciary duty was a personal claim; it alleged a duty which was, in effect, simply a duty of care, hence the reliance by the Plaintiffs on the same facts in support of their claims both in negligent misstatement and for breach of fiduciary duty.  It would, in our view, do a disservice to the law of Jersey for the limitation period in respect of the negligent misstatement claim to be three years, and for that in respect of the identical fiduciary duty claim to be ten years.  In this context we do not find the decision in Northwind, where the alleged fiduciary duty was very different from that alleged in the present case, to be of any assistance. 

338.

Accordingly we conclude that all of the causes of action relied on by the Plaintiffs are subject to a three year limitation period.”

These dicta must be seen in the context of the facts in MacFirbhisigh. The Royal Court found that the defendants were not at the material time fiduciaries. Apart from one particular head of the relief claimed, which failed on other grounds, the claim for breach of fiduciary duty added nothing to the claim for negligent advice, and it rested on the very facts that were said to have given rise to an assumption of responsibility and a duty of care. The alleged and so-called fiduciary duty “was, in effect, simply a duty of care”; it was therefore not a fiduciary duty in the strictsense, as the duty under Article 74(1)(a) is; see paragraph 48 below. In truth, the plea of breach of fiduciary duty was inapt and was thrown in for good measure, in a manner that is unhappily not uncommon in the courts of England. It is not in the least surprising that the Royal Court should have thought that the prescriptive period would be the same as for the claim in tort and that Northwind was not in point.

Having set out the legal framework in which the preliminary issue falls to be determined, and the dicta that have some bearing on the preliminary issue, I turn to the particular causes of action in this case: breach of the director’s fiduciary duty; and breach of the director’s duty of skill and care. In respect of each cause of action two questions arise. First, does a particular prescription period apply directly by reason of legislative provision or judicial decision? Second, if no period applies directly, is any other period, by analogy, clearly more applicable than the default 10-year period? For the purposes of clarity of analysis, if perhaps not of exposition, I shall consider the first question in respect of each cause of action in turn, before turning to the second question as it might arise in respect of either or both of the causes of action.

The duty under Article 74(1)(a) of the Companies Law 1991 is a duty to act honestly and in good faith with a view to the best interests of the company. The expert witnesses were agreed that, where a company is insolvent or at risk of insolvency, the interests of the company’s creditors effectively displace the interests of the shareholders for the purposes of the duty.

The opinions of the expert witnesses regarding the prescription period for breach of the duty in Article 74(1)(a) of the Companies Law 1991 may be summarised as follows:

The prescription period for torts was a year and a day until 1960 but is now three years. Article 2 of the Law Reform (Miscellaneous Provisions) (Jersey) Law 1960 (“the Reform Law 1960”) provides as follows:

“(1)

The period within which actions founded on tort may be brought is extended to 3 years from the date on which the cause of action accrued.

(2)

The provisions of this Article shall be without prejudice to any rule of law allowing for the extension of such period as aforesaid.

(3)

Nothing in this Article shall revive any right of action which was barred by prescription before the commencement of this Law.

(4)

This Article shall not apply to any action for which a period of prescription is provided by any other enactment.”

Mr Kelleher’s opinion is that the 3-year prescriptive period for claims in tort applies to claims for breach of duty under both Article 74(1)(a) and (b). He gave two independent but not inconsistent arguments in support of that opinion.

With respect to the duty in Article 74(1)(a), Mr Harvey-Hills and Mr Gleeson disagreed with both of these arguments and the conclusion drawn from them.

For purposes of exposition, it is convenient to consider the Tortious Nature Argument first. As the two arguments are independent of each other and are not mutually inconsistent, nothing significant is lost by doing so.

It was common ground that the duty under Article 74(1)(a) is a fiduciary duty in the strict sense explained by Millett LJ in Mothew at 18:

“This leaves those duties which are special to fiduciaries and which attract those remedies which are peculiar to the equitable jurisdiction and are primarily restitutionary or restorative rather than compensatory. A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr. Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.

…

The nature of the obligation determines the nature of the breach. The various obligations of a fiduciary merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty.”

As a matter of English law, fiduciary duties do not give rise to causes of action in tort (that is, if one may so put it, they are not “tortious duties”). Several obvious differences between fiduciary duties and tortious duties may be mentioned. Fiduciary duties arise in equity, whereas tortious duties arise at common law. The remedies for breach of fiduciary duty are primarily restitutionary or restorative, whereas the principal remedy for tort is an award of damages. Equitable compensation for breach of fiduciary duty is not awarded on the same principles as equitable compensation for breach of an equitable duty of care and skill; the latter resembles common law damages, but the former, though based on the same underlying principles of fault and causation, does not: cf. Mothew, per Millett LJ at 17; also the speech of Lord Browne-Wilkinson in Target Holdings v Redferns [1996] 1 AC 421; and more recently AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503, which is briefly considered below. Damage is generally an essential element of a tort; such few genuine exceptions as there are relate to wrongful use of another’s person or property. (For the distinction between damage-based and use-based torts, see for example Ripstein, Private Wrongs (2016), pp. 43-51.) By contrast, damage is not a necessary requirement for a claim based on breach of fiduciary duty, and such breach can exist without either damage to or wrongful use of another’s person or property. More fundamentally, tortious duties do not of their nature arise from pre-existing relationships or depend on the existence of other duties—this, I think, is probably what Winfield’s definition was getting at; fiduciary duties, in stark contrast, are essentially a method whereby equity regulates particular relationships by requiring single-minded loyalty in the discharge of the obligations and powers to which those relationships give rise. On these various matters, see for example: Mothew, per Millett LJ at 16-18; the speech of Lord Browne-Wilkinson in Target Holdings v Redferns [1996] 1 AC 421; Regal (Hastings) Ltd v Gulliver (1942), [1967] 2 AC 134n; Conaglen, Fiduciary Loyalty[:] protecting the due performance of non-fiduciary duties (2010), passim.

It was common ground that Millett LJ’s observations in Mothew represent the law of Jersey and that the modern law of Jersey on fiduciary duties was imported from and substantially identical to the English law. Two cases demonstrate this clearly. In In the Matter of the E, L, O and R Trusts [2008] JRC 150 (“E, L, O & R”), Birt DB said at para 26:

“[I]t is helpful to remind oneself of the nature of a fiduciary duty.  A convenient summary of certain key aspects of such a duty is to be found in the judgment of Millett LJ in Bristol & West Building Society v Mothew [1996] 4 All ER 698.  The passage at 710 – 715 repays reading in full.  The following summary is drawn from Millett LJ’s observations which, in our judgment, are equally applicable under the law of Jersey. 

(i)

The expression ‘fiduciary duty’ is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties.  For example, the obligation of a trustee (who is undoubtedly a fiduciary) to use proper skill and care in the discharge of his duties is not a fiduciary duty nor is the duty of a director (who undoubtedly owes fiduciary obligations to his company) to exercise skill and care in the performance of his duties.

(ii)

A fiduciary duty is one which is special to fiduciaries which attracts those remedies which are peculiar to the equitable jurisdiction and are primarily restitutionary or restorative rather than compensatory.  A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. 

(iii)

The distinguishing obligation of a fiduciary is the obligation of loyalty.  The principal is entitled to the single-minded loyalty of his fiduciary.  

(iv)

This duty of loyalty gives rise to certain specific obligations:-

(a)

A fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to the other.  This is sometimes described as the ‘double employment rule’.  Breach of the rule automatically constitutes a breach of fiduciary duty. 

(b)

Even if a fiduciary is properly acting for two principals with potentially conflicting interests (i.e. because he has their consent) he must act in good faith in the interests of each and must not act with the intention of furthering the interests of one principal to the prejudice of those of the other.  This is ‘the duty of good faith’.  But it goes further than that.  He must not allow the performance of his obligations to one principal to be influenced by his relationship with the other.  He must serve each as faithfully and loyally as if he were his only principal.  Conduct which is in breach of this duty need not be dishonest but it must be intentional.  An unconscious omission which happens to benefit one principal at the expense of the other does not constitute a breach of fiduciary duty, though it may constitute a breach of the duty of skill and care.  This is because the principle which is in play is that the fiduciary must not be inhibited by the existence of his other employment from serving the interests of his principal as faithfully and effectively as if he were the only employer.  Millett LJ referred to this as the ‘no inhibition principle’.

(c)

The fiduciary must take care not to find himself in a position where there is an actual conflict of duty so that he cannot fulfil his obligations to one principal without failing in his obligations to the other.  If he does, he may have no alternative but to cease to act for at least one and preferably both.  The fact that he cannot fulfil his obligations to one principal without being in breach of his obligations to the other will not absolve him from liability.  This can be referred to as ‘the actual conflict rule’.”

Vilsmeier v AI Airports International Ltd [2014] JRC 257 (“Vilsmeier”)involved an allegation that the plaintiff as director of the defendant companies owed to them the duty under Article 74(1)(a). The Royal Court (Bailhache DB) referred to the duty as a “fiduciary duty … set out in statutory form”: para 94. The analysis of fiduciary duties that followed in paras 96ff, encompassing both statutory and non-statutory duties, included citation with obvious approval of passages from the judgment of Jonathan Crow QC in the English case of Extrasure Travel Insurances Ltd v Scattergood [2003] 1 BCLC 598:

“87.

It is trite law that a director owes to his company a fiduciary duty to exercise his powers (i) in what he (not the court) honestly believes to be the company’s best interests and (ii) for the proper purposes for which those powers have been conferred on him.  Mere incompetence is not a breach of fiduciary duty:  it might give rise to a claim for breach of a tortious or contractual duty of care, but the claim in this case was based entirely on alleged breaches of fiduciary duty.”

“89.

…  Fiduciary duties are not less onerous than the common law duty of care:  they are of a different quality.  Fiduciary duties are concerned with concepts of honesty and loyalty, not with competence.  In my view, the law draws a clear distinction between fiduciary duties and other duties that may be owed by a person in a fiduciary position.  The fiduciary may also owe tortious and contractual duties to the cestui que trust:  but that does not mean that those duties are fiduciary duties.  Bearing all that in mind, I find nothing surprising in the proposition that crass incompetence might give rise to a claim for breach of duty of care, or for breach of contract, but not for a breach of fiduciary duty.”

Mr Kelleher accepted that in no Jersey case had it been held or even argued that breach of a fiduciary duty was a tort. He also accepted that damage was generally a necessary constituent of tort in Jersey law and that damage was not a necessary constituent of a breach of fiduciary duty. However, he maintained that Jersey law would properly classify breach of fiduciary duty as a tort. The first strand to his argument was that, although both the language and the modern law of fiduciary duty are drawn from English law, materially similar duties of good faith and fair dealing in the context of particular special relationships, such as those of attorneys towards their constituents and those of curators towards interdicts, were recognised in Jersey from at least the late nineteenth century: “ample authority and material suggest… that the fiduciary concept does form part of the island’s jurisprudence and has not been grafted on by reception from English law in recent decades”: Simon Howard, “Positions De Confiance Under Jersey Law”, Jersey Law Review 1997. The second strand to Mr Kelleher’s argument was to stress the independence of Jersey tort law from English tort law and the wide scope of the liabilities that could fall under Jersey tort law.

In this latter regard, Mr Kelleher placed much reliance on the analysis of the law in the judgment of the Royal Court (Bailhache B) in Black, 2002 JLR 294, which he thought to be of continuing value despite the reversal of the Royal Court’s decision on appeal. The plaintiff sought an order under Article 20(7) of the Collective Investments Funds (Jersey) Law 1998 requiring the defendants to pay compensation to investors. The preliminary issue was whether the action was prescribed. The defendants’ primary argument was that the action lay in tort and was subject to the three-year period for tort actions. The Royal Court held that the action lay in tort and was prescribed, but the Jersey Court of Appeal held that the action was sui generis and was not prescribed. Paras 24 – 33 of the judgment of Bailhache B in the Royal Court contain a concise but valuable historical survey of the development of Jersey tort law. In para 32 the Bailiff cited Southwell JA’s dictum in Arya (paragraph 23 above) in support of his view that “a combination of indolence by counsel and acquiescence by the court”, namely in relying on English jurisprudence rather than analysing cases by reference to the principles of Jersey law, had not sufficed to bring about a fundamental change in Jersey tort law. Having referred to Winfield’s definition of tort, he continued at para 34, on which Mr Kelleher placed particular reliance:

“It is certainly true that it is difficult to shoe-horn the right of action under Article 20(7) of the CIF Law into the Winfield definition.  The principal difficulty arises from the requirement that the breach of duty should be redressable by an action for unliquidated damages.  Mr Binnington argued that tort in Jersey was a wrong-based concept with less emphasis on the remedy.  He referred to Pothier, Introduction Générale aux Coûtumes, Chap IV, para 116, at 61 (1821 ed): ‘On appelle délits et quasi-délits les faits illicites qui ont causé quelque tort à quelqu’un, d’où naît l’obligation de le réparer.’ In my judgment this submission is correct.  In determining whether a right of action is ‘founded on tort’ it is necessary to ascertain whether the cause of action is based upon wrong-doing of some kind.  The precise remedy available to the victim or to the body representing the victim is not of significance.  The important factor is that the cause of action gives rise to a remedy of some kind – it is not essential that the remedy should be what English law would describe as ‘damages’.  In support of this submission counsel referred to Hamon v Mourant (1852) 173 Ex 425.  The Court held (173 Ex at 426):

‘Attendu que la présente action est instituée dans la vue d’obtenir du défendeur un dédommagement pour un tort que l’actrice pretend avoir éprouvé par sa faute ou négligence …. [L]a Cour a jugé que le défendeur n’est maintenant actionnable et l’a déchargé de l’action.’

‘Dédommagement’ may be translated as ‘compensation’.  The wrong in that case was an alleged failure to comply with a statutory obligation. This approach seems to me also consistent with Chapter 51 of the Grand Coutumier, to which I have referred above.”

The Bailiff’s conclusion was then set out:

“36.

The failure to comply with a statutory obligation with the result either that profits accrue to that person or that losses are suffered by investors must surely be an example of wrongdoing. … Is it significant that the Commission is not the party suffering loss?  It seems to me that no significance attaches to that fact.  The statute empowers the Commission to bring what is in effect a representative action. … Finally, counsel for the Commission objected that the discretion conferred on the Court as to the making of an order was inconsistent with a right of action founded on tort.  This argument seems to me again to place undue emphasis on the remedy provided by the statute. … In my view the courteous use of the permissive form does not deprive the Commission of its legal right to a remedy on the assumption that the statutory preconditions to its cause of action are made out.

…

38.

I conclude that the right of action created by Article 20(7) of the CIF Law is founded on tort and that it is subject to a prescription period of three years pursuant to Article 2(1) of the 1960 Law.”

While accepting that the Royal Court’s conclusion could not stand in the light of the decision of the Jersey Court of Appeal, Mr Kelleher opined that the underlying analysis of Jersey tort law remained sound. In particular, the origins of Jersey tort law were to be found in Chapter 51 of the Grand Coutumier, where “tort” was used in its French rather than English sense and the notion of “injury”, in the French “oultrage” and the Latin “iniuria”, had the broad sense of “any contumelious disregard of another’s rights or personality” (cf. Nicholas, Introduction to Roman Law (1962), at 215-6). And the availability of an award of damages was not a requirement of a tort.

In my judgment, Mr Kelleher’s argument is not well founded. The fact that duties of good faith and fair dealing, substantially similar to fiduciary duties, were recognised in Jersey law before the influence of English law does not indicate that actions for breach of such duties lay in tort, and there is no authority for holding breach of fiduciary duty to be a tort in Jersey. Further, the Jersey law of fiduciary duty is acknowledged even by Mr Kelleher to be now the same as the English law.

Mr Kelleher’s reliance on a supposedly broad view of tort in Jersey fares no better. The narrow ground of the decision of the Jersey Court of Appeal in Black was that the statutory provision on which the plaintiff relied conferred a regulatory power rather than a right of action in tort; this was by contrast with Article 21 of the Collective Investments Funds (Jersey) Law 1998, which provided that a failure to comply with particular provisions of the Law was actionable by a person who suffered loss as a result of the failure, and thereby gave a right of action in tort. In reaching that conclusion the Jersey Court of Appeal analysed the requirements of tort; see paras 20 and 21 in the judgment of Southwell JA (paragraph 23 above). Although the detailed content of Jersey tort law does not closely follow English law except in respect of negligence (cf. the decision of the Jersey Court of Appeal in Rockhampton), that analysis is of general application. At para 24 Southwell JA robustly dismissed efforts to enlarge the scope of tort in Jersey by reference to the supposedly wider ambit of the French word “tort”:

“24.

Mr Binnington argued (at length in his written submissions) that ‘tort’ (in French) in Jersey law has a much wider scope than the English law of tort, citing for this purpose many texts and cases.  I will not lengthen this judgment by extended reference to those texts or cases, for these reasons: first, Article 20(7) can by no stretch of imaginative licence be forced into the mould of ‘tort’ (in French) in Jersey law even if all the texts and earlier cases are read in the way that Mr Binnington seeks to read them (which is in my judgment much overstated); and secondly, in Arya this Court has, after detailed examination of the Jersey law of tort, reached the conclusion which I have already stated, that the three essential elements of tort are substantially the same in Jersey law and in English law.”

This seems to me sufficiently to dispose of Mr Kelleher’s Tortious Nature Argument, having regard to the other improbabilities under which it labours. When I discuss the cause of action under Article 74(1)(b), I shall return to Mr Kelleher’s attempts to enlarge the proper scope of torts. For now, however, I turn to consider his Statutory Duty Argument.

Mr Kelleher referred to the decision of the Royal Court in Cole v Postal Administration Committee and States of Jersey Police [2003] JRC 152, 2003 JLR 461 (“Cole”). The first defendant offered the plaintiff a job but withdrew the offer when the second defendant, the police, disclosed that he had previous convictions. The plaintiff sued for damages for, inter alia, breach of Article 4 of the Data Protection (Jersey) Law 1987 and the third data protection principle in Schedule I to the 1987 Law. The Royal Court held that the duties had not been breached. In addition, at paras 35 to 40 of his judgment (using the JRC numbering; the paragraphs are differently numbered in the JLR), Birt DB considered and rejected the plaintiff’s contention that there was a private cause of action for breaches of the duties relied on. At para 36 he said:

“The leading authority on the principles to be applied in determining whether a breach of a statutory duty confers a private law cause of action on a person who has suffered loss as a result of such a breach is X (minors) v Bedfordshire County Council [1995] 3 WLR 152.  See in particular the comments of Lord Browne-Wilkinson at 166 where he said –

‘The principles applicable in determining whether such statutory cause of action exists are now well established.  Although the application of those principles in any particular case remains difficult, the basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty.  There is no general rule by reference to which it can be decided whether a statute does create a right of action, but there are a number of indicators.  If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection that the statute was intended to confer.  If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action; Cutler v Wandsworth Stadium Limited [1949] AC 398; Lonrho Limited v Shell Petroleum Co. Limited (No 2) [1982] AC 173. The mere existence of some other statutory remedy is not necessarily decisive.  It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy.  Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statutes of criminal penalties for any breach;  See Groves v Wimborne (Lord) [1898] 2QB 402.’”

Mr Kelleher’s opinion was that a Jersey court would construe the relevant statute, here Article 74(1) of the Companies Law 1991, to determine whether it prescribed a duty and conferred a private law cause of action on a person who suffered loss resulting from a breach of that duty; and that, if the statute did so, the cause of action it conferred would be a tort under Jersey law. For this last proposition he relied on the decision of Sumption, Commr, in the Royal Court in Syvret v Chief Minister [2011] JRC 116, 2011 JLR 343 (“Syvret”). The Commissioner struck out an action alleging breaches of duties under two statutory provisions. At para 52 he observed that “the statutory duties of public authorities will not normally be enforceable by a civil action unless the duty was imposed for the protection of a limited class of persons of whom the plaintiff is one, and even then not unless the statute as a matter of construction confers a private right of action on members of that class”. He continued:

“53.

Secondly, it has been held ever since Gorris v Scott (1874) LR 9 Ex. 125 that any right of action for breach of a statutory duty will be limited to claims in respect of loss of a type which it was the object of the statute to prevent.  This principle, which was once regarded as a particular feature of actions for breach of statutory duty, can now been seen as illustrating a more general principle that an action in tort lies only to recover loss which it was the object of the relevant duty to prevent: Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883 at [128] (Lord Hoffmann).  The limitation has been applied to actions in negligence (South Australia Asset Management v. York Montagu Ltd [1997] AC 191); to actions in torts of strict liability, such as conversion (as in the Kuwait Airways case); and to intentional torts such as misfeasance in public office (Three Rivers DC v. Bank of England (No. 3) [2003] 2 AC 1, 195).”

Mr Kelleher says that para 53 establishes that actionable breach of duty contained in a statute is a tort. Although he states that conclusion as an opinion regarding Jersey law, the Commissioner’s remarks were based entirely on English law; if the conclusion is correct as regards Jersey law, it results, at least so far as this dictum is concerned, from acceptance of English law on this point.

Mr Kelleher also relies on the decision of the Master in Neal v Kelleher [2014] JRC 233 (“Neal”). The defendant (Mr Kelleher himself) had been appointed curator of the plaintiff’s late husband (the interdict) pursuant to the provisions of the Mental Health (Jersey) Law 1969. As curator he owed duties to manage and administer the affairs of the interdict. Those duties were owed under the 1969 Law; Article 43(2) provided that, from the date when the 1969 Law came into effect, “the law, whether customary or enacted, relating to curatelles shall cease to have effect, except insofar as expressly provided by this law.” The plaintiff brought an action alleging that the defendant had breached his duties as curator. The defendant applied to the Master to strike out the action on the ground, inter alia, that the claims were prescribed. The plaintiff contended that the applicable period was 10 years because the action lay in quasi-contract. The defendant contended that the applicable period was 3 years because the action lay in tort. The Master accepted that by customary law an action against a curator for breach of duty had lain in quasi-contract, but he held that the effect of Article 43(2) was that any such action was now for breach of statutory duty. His reasoning appears from paras 46 and 52 of his judgment:

“46.

A claim for breach of statutory duty is clearly a claim in tort (see Cole v Postal Administration & Anor [2003] JLR 460, Dobson v Public Services Committee [2003] JLR 446, Syvret v Chief Minister [2011] JLR 343 and Classic Herd Limited v JMMB [2014] JRC 127.”

“52.

In view of the clear language of Article 43(2), the effect of the Mental Health Law coming into force made the obligations of a curator statutory although they were previously quasi-contractual.  The previous customary rules were clearly abolished.  As the obligations have become statutory in nature, I consider I am bound by the previous decisions of the Royal Court cited above which provide that a claim for breach of statutory duty is a claim in tort.  Accordingly, the applicable limitation period is three years.”

The further cases mentioned by the Master are of limited assistance. Dobson v Public Services Committee [2003] JLR 446 (“Dobson”)was a decision of Birt DB on appeal from the Master’s refusal to strike out the case. The action was for damages for breach of the defendant’s statutory duty to maintain and repair the highway under Article 1 of the Loi (1914) sur la Voirie, as amended. In holding that there was no private cause of action for breach of the statutory duty, the Deputy Bailiff cited and applied the dictum of Lord Browne-Wilkinson in the X (Minors) case. The record of the argument in para 11 of the judgment might indicate implicit acceptance that, if a private cause of action existed at all, it would lie in tort. But the judgment does not contain anything that goes so far as to hold or imply that any breach of a duty contained in a statute is always and necessarily actionable if at all only in tort.

Classic Herd Limited v Jersey Milk Marketing Board [2014] JRC 127(“Classic Herd”) was a decision by the Master on an application to strike out an action for breach of statutory duty as being prescribed by the 3-year period for actions in tort. At para 50 the Master expressly identified the question: “Firstly, I need to consider whether a claim for breach of statutory duty is a claim in tort.” It was in this connection that he cited para 20 of the judgment of Southwell JA in Black (paragraph 23 above). The Master also cited Dobson and Syvret, though apparently only with regard to identifying whether a statute was to be construed as conferring a private right of action. Paras 51 and 52 of the Master’s judgment proceed on the basis that a claim for breach of statutory duty is a claim in tort, though that basis is not further explained; if it was not treated as self-evident, presumably it was thought to be supported by Southwell JA’s statement of the essentials of a right of action in tort.

I reject the Statutory Duty Argument for the following reasons.

First, the only express support for the Statutory Duty Argument in the case-law is in the Master’s decisions in Neal and in Classic Herd. But the authorities relied on by the Master do not support the conclusion that if an actionable duty exists by virtue of a statutory provision then breach of that duty is a ipso facto a tort.

Second, as already mentioned, the authorities relied on, in particular Cole and Syvret, themselves rested entirely on the reasoning in the English cases. In cross-examination Mr Kelleher accepted (a) that the concept of a cause of action in breach of statutory duty in Jersey law was adopted from English law, (b) that the analysis of breach of statutory duty as a tort in Jersey law was adopted from English law, and (c) that he did not assert that the analysis of breach of statutory duty as a tort in Jersey law had introduced any element that went beyond the English analysis. Those concessions are supported by the matters referred to in evidence and argument. It would seem therefore that, if the authorities relied on by Mr Kelleher establish the conclusion under Jersey law that he seeks to draw from them, they must equally do so under English law. However, it simply is not correct that English law regards every actionable breach of a duty contained in a statute as a tort, despite the fact that the passages set out above from the judgments in Cole and Syvret accurately represent English law. There are plenty of examples of statutory duties that are not tortious in nature, because they arise in quite different legal contexts and are recognised as belonging to different parts of the law. So, for example, the Trustee Act 2000 imposes on trustees a duty of care (section 1), a duty to take advice (section 5) and a duty of review (section 22); each of these duties is actionable, but the cause of action lies in breach of trust, not in the tort of statutory duty, and the remedy is equitable compensation, not common-law damages. (Cf. Lewin on Trusts, 19^th edition, para 39-017.) Again, Chapter 2 of Part 10 of the Companies Act 2006 places on a statutory footing a range of duties that formerly existed at common law or in equity. Section 170(3) and (4) make clear that the new statutory duties have taken the place of the previous duties but that it is their basis, not their nature or the way that they are to be interpreted or applied, that has changed. Several of these duties are fiduciary in nature; they would not be regarded as tortious just because they are now contained in a statute. Indeed, section 178, which makes provision for the civil consequences of breach of the new statutory duties, clearly indicates that they remain fiduciary duties.

Third, fiduciary duties and tortious duties are different in their nature. See paragraph 49 above and the brief remarks on AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503, in paragraph 95 below. This difference is of critical importance.

Fourth, Vilsmeier clearly recognises that what were formerly fiduciary duties remain fiduciary duties notwithstanding that they have been given statutory form; see paragraph 51 above.

Fifth, Mr Kelleher’s reliance on Neal is unpersuasive. Quite apart from the fact that it is a decision of the Master and so not binding on the Royal Court, it concerned a quite different circumstance. Under customary law the relationship between curator and interdict arose by quasi-contract; this meant that, although the relationship did not arise and the curator’s services were not performed under a contract, the curator had entitlements in respect of his services (for example, for reimbursement) and also lay under certain obligations in respect of those services. However, the Mental Health (Jersey) Law 1969 removed the customary basis of the very relationship; it now existed solely by virtue of statute. It would therefore plainly be wrong to say that the obligations of the office were quasi-contractual; the office did not arise from quasi-contract. As Mr Kelleher accepted, the position of a company director is different, in that his office is not a creature of statute and is governed both by customary law and by legislation. Neal does not demonstrate that a previously non-tortious fiduciary duty must now be considered tortious by reason of having received statutory form.

Essentially the same difficulty attends Mr Kelleher’s reliance on the decision of the Royal Court in Hamon v Mourant (1852, unreported), 173 Ex 425. The plaintiff, a creditor of a bankrupt, had lost her rights against the bankrupt’s estate because of the failure of the administrator of the bankrupt’s estate to give her notice of the bankruptcy, as required by Article 28 of the Loi des Décrets. Article 30 of the Loi made the administrator responsible for his own negligence in the conduct of the bankruptcy. On the defendant’s application, the Royal Court struck out the action because it had been commenced more than a year and a day (then the prescription period for tort) after the alleged negligence. Again, however, the administrator’s office and appointment arose only under the Loi.

Sixth, insofar as reliance is placed on a supposed fourfold classification of obligation, derived from Pothier, as arising in contract, quasi-contract, injuries (“delits”) or acts in the nature of injuries (“quasi delits”), the argument cannot bear the weight put on it. Several other sources of obligation exist, including trusts and land law. Further, Pothier himself did not attempt to bring all obligations within the fourfold classification; he noted “the mere authority of the law, or the mere force of natural equity”, each of which was capable of explaining both obligations within the fourfold classification and obligations falling outside it. I discuss this more fully below in the context of the Article 74(1)(b) duty, where the relevant passages from Pothier’s work are set out.

Seventh, the Statutory Duty Argument would appear to entail that an action for breach of a trustee’s duties under Articles 21 to 23 of the Trusts Law 1984 would be an action in tort. Indeed, Mr Kelleher expressly affirmed that conclusion. But it is implausible.

It might be said that the conclusion that statutory duties of a trustee are tortious is incorrect, because the definition of tort in Arya and Black expressly excludes causes of action based on trusts. Such a response would only serve to demonstrate that there is no need to suppose the nature of a duty to alter upon being put into statutory form; presumably that is why Mr Kelleher did not give this response. More generally, the words “otherwise than by virtue of a contract or trust” in para 20 of Southwell JA’s judgment in Black are not to be read as though they were a statute. Causes of action may lie in quasi-contract or land law; simply adding exceptions to the list as one thinks of more and more of them is unhelpful inasmuch as it gives the impression that one is working with, or towards, a purportedly definitive definition (cf. para 149 in the judgment of McNeill JA in Rockhampton). The point is simply that, even if a right of action would satisfy the basic requirements of a right of action in tort, it will not be such an action if it arises under a different area of law. The specific mention of trusts in Black is neither arbitrary nor anomalous.

The prescription period for breach of trust is laid down by Article 57 of the Trusts Law 1984”:

“(1)

No period of limitation or prescription shall apply to an action brought against a trustee—(a) in respect of any fraud to which the trustee was a party or to which the trustee was privy; or (b) to recover from the trustee trust property (i) in the trustee’s possession, (ii) under the trustee’s control, or (iii) previously received by the trustee and converted to the trustee’s use.

(2)

Where paragraph (1) does not apply, the period within which an action founded on breach of trust may be brought against a trustee by a beneficiary is 3 years from—(a) the date of delivery of the final accounts to the beneficiary; or (b) the date on which the beneficiary first has knowledge of the breach of trust, whichever is earlier.

(3)

Where paragraph (1) does not apply but, when the breach occurs, the beneficiary (a) is a minor, (b) is an interdict or (c) is under any other legal disability, the period to which paragraph (2) refers shall not begin to run before the beneficiary ceases to be a minor or interdict or under that other legal disability (as the case may be), or sooner dies.

(3A) Where paragraph (1) does not apply, the period within which an action founded on breach of trust may be brought against a trustee by an enforcer is 3 years from—(a) the date of delivery of the final accounts to the enforcer; or (b) the date on which the enforcer first has knowledge of the breach, whichever is earlier.

(3B) Where paragraph (1) does not apply, the period within which an action founded on breach of trust may be brought against a former trustee by a trustee is 3 years from the date on which the former trustee ceased to be a trustee.

(3C) Where paragraph (1) does not apply, no action founded on breach of trust may in any event be brought against a trustee by any person after the expiry of the period of 21 years following the occurrence of the breach.

(4)

This Article does not apply to a foreign trust whose proper law is the law of a jurisdiction to which the Convention on the law applicable to trusts and on their recognition, signed at The Hague on 20^th October 1984, for the time being extends.”

The relevant provision for the purpose of considering the preliminary issue is Article 57(2). (I note in passing that the purpose of the amendment of the reply to the defence of the first respondent, for which I gave permission as already mentioned, is to plead reliance as against him on Article 57(1)(b).)

Significantly, none of the expert witnesses expressed the opinion that a Jersey court probably would hold that the 3-year period in Article 57(2) of the Trusts Law 1984 directly applied to a breach of a director’s duty under Article 74(1)(a) of the Companies Law 1991. Even so, Mr Kelleher and Mr Gleeson thought that it was properly arguable that Article 57(2) did indeed apply directly.

In my judgment, as a matter of the construction of the Trusts Law 1984, Article 57(2) has no direct application to an action based on breach of the director’s duties under Article 74(1) of the Companies Law 1991.

In English law, directors are not by virtue of their office trustees of the company’s property. This is because a company is the legal and beneficial owner of its property; the directors do not qua directors hold the company’s assets. However, directors are often described as trustees and are treated as such for some purposes, including in particular the application of section 21 of the Limitation Act 1980, which provides in part as follows:

“(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.”

“(3)

Subject to the preceding provisions of this 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 provisions of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued. For the purposes of this subsection, the right of action shall not be treated as having accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession.”

Dicta in three cases will suffice to set out the position in English law. First, in Bairstow v Queen’s Moat Houses plc [2001] EWCA Civ 712,[2001] 2 BCLC 531, Robert Walker said at para 50:

“There is ample authority, spanning well over a century, establishing that although company directors are not strictly speaking trustees, they are in a closely analogous position because of the fiduciary duties which they owe to the company. Lord Porter put the matter succinctly in Regal (Hastings) Ltd v Gulliver (1942) [1967] 2 AC 134n, 159: ‘Directors, no doubt, are not trustees, but they occupy a fiduciary position towards the company whose board they form.’”

In J J Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1467, [2002] 1 BCLC 162, Chadwick LJ, with whom Laws LJ and Sir Anthony Evans agreed, said:

“25.

I start with four propositions which may be regarded as beyond argument: (i) that a company incorporated under the Companies Acts is not trustee of its own property; it is both legal and beneficial owner of that property; (ii) that the property of a company so incorporated cannot lawfully be disposed of other than in accordance with the provisions of its memorandum and articles of association; (iii) that the powers to dispose of the company’s property, conferred upon the directors by the articles of association, must be exercised by the directors for the purposes, and in the interests, of the company; and (iv) that, in that sense, the directors owe fiduciary duties to the company in relation to those powers and a breach of those duties is treated as a breach of trust. ...

26.

It follows from the principle that directors who dispose of the company’s property in breach of their fiduciary duties are treated as having committed a breach of trust that a person who receives that property with knowledge of the breach of duty is treated as holding it upon trust for the company. He is said to be a constructive trustee of the property. …

27.

It follows, also, from the principle that directors who dispose of the company’s property in breach of their fiduciary duties are treated as having committed a breach of trust, that a director who is, himself, the recipient of the property holds it upon a trust for the company. He, also, is described as a constructive trustee. But, as Lord Justice Millett explained in Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400, at page 408g-409g, his trusteeship is different in character from that of the stranger. He falls into the category of persons who, in the words of Lord Justice Millett (at [1999] 1 All ER 400, 408j) ... ‘though not strictly trustees, were in an analogous position and who abused the trust and confidence reposed in them to obtain their principal’s property for themselves.’

…

29.

There is no doubt that Lord Justice Millett regarded it as beyond dispute that a director who obtained the company’s property for himself by misuse of the powers with which he had been entrusted as a director was a constructive trustee within the first category. He referred to ‘directors and other fiduciaries’ in that context – at [1999] 1 All ER 400, 408h-j. There is also no doubt, if I may say so, that he was correct to do so – see In re Sharpe, In re Bennett, Masonic and General Life Assurance Company v Sharpe [1892] 1 Ch 154, 172, Soar v Ashwell [1893] 2 QB 390, 398. The reason is that a director, on appointment to that office, assumes the duties of a trustee in relation to the company’s property. If, thereafter, he takes possession of that property, his possession ‘is coloured from the first by the trust and confidence by means of which he obtained it’. His obligations as a trustee in relation to that property do not arise out of the transaction by which he obtained it for himself. The true analysis is that his obligations as a trustee in relation to that property predate the transaction by which it was conveyed to him. The conveyance of the property to himself by the exercise of his powers in breach of trust does not release him from those obligations. He is trustee of the property because it has become vested in him; but his obligations to deal with the property as a trustee arise out of his pre-existing duties as a director; not out of the circumstances in which the property was conveyed.”

In Gwembe Valley Development Co Ltd (in receivership) v Koshy (No. 3) [2003] EWCA Civ 1048, [2004] 1 BCLC 131, the director had made a personal profit by reason both of his breach of the “no-profit rule” and of his dishonest breach of fiduciary duty involving the misapplication of the company’s assets; the profit belonged in equity to the company (cf. paras 6, 31 and 43-44). Delivering the judgment of the Court of Appeal, Mummery LJ said:

“83.

The trustee-like nature of directors’ duties has always been recognised as very relevant to the statutory limitation periods for actions by beneficiaries against express trustees for breach of trust and for the recovery of trust property, whether those periods are applied directly or by analogy: Re Lands Allotment Company [1894] 1 Ch 616 at 631-632, 638-639 and 643 (a case of a company director being treated as a trustee within the limitation provisions of ss1(3) and 8(1) of the Trustee Act 1888 in respect of a claim that unauthorised investments had caused loss to the company); Re Sharpe [1892] 1 Ch 154 at 166-167 (misapplication of company money in the form of ultra vires payments of interest to shareholders treated as breach of trust by the directors); Bairstow v. Queen’s Moat Houses [2002] 2 BCLC 531 at 548c-549f paragraphs 49-54 (accountability of directors for unlawfully paid dividend); and JJ Harrison v. Harrison [2002] BCLC 162 at 173 (insufficient disclosure by director on purchase of property from the company).

…

111.

… [I]t is possible to simplify the court’s task when considering the application of the 1980 Act to claims against fiduciaries. The starting assumption should be that a six year limitation period will apply – under one or other provision of the Act, applied directly or by analogy – unless it is specifically excluded by the Act or established case-law. Personal claims against fiduciaries will normally be subject to limits by analogy with claims in tort or contract (1980 Act s 2, 5; see Seguros). By contrast, claims for breach of fiduciary duty, in the special sense explained in Mothew, will normally be covered by section 21. The six-year time-limit under section 21(3), will apply, directly or by analogy, unless excluded by subsection 21(1)(a) (fraud) or (b) (Class 1 trust).

112.

In the present case, it is clear that these principles were applicable to a director in Mr Koshy’s position. He had ‘trustee-like responsibilities’ in the exercise of the powers of management of the property of GVDC and in dealing with the application of its property for the purposes, and in the interests, of the company and of all its members. In our view, accordingly, the claim for an account, if it was based on a failure in the exercise of those responsibilities, was within the scope of section 21. It was in principle subject to a six-year time-limit under section 21(3). The question is whether it was excluded under either of the two statutory exceptions in section 21(1)(a) and (b).”

Turning to Jersey law, however, I find that Article 57 cannot have direct application to company directors. This is because of the very precise definitions contained in the Trusts Law 1984. Article 1 contains definitions, among which the following are particularly relevant:

“‘breach of trust’ means a breach of any duty imposed on a trustee by this Law or by the terms of the trust;”

“‘terms of a trust’ means the written or oral terms of a trust, and also means any other terms made applicable by the proper law;

‘trust’ includes—(a) the trust property; and (b) the rights, powers, duties, interests, relationships and obligations under a trust;

‘trust property’ means the property for the time being held in a trust”.

Article 2, headed “Existence of a trust”, provides:

“A trust exists where a person (known as a trustee) holds or has vested in him or is deemed to hold or have vested in him property (of which he is not the owner in his own right)—

(a)

for the benefit of any person (known as a beneficiary) whether or not yet ascertained or in existence;

(b)

for any purpose which is not for the benefit only of the trustee; or

(c)

for such benefit as is mentioned in sub-paragraph (a) and also for any such purpose as is mentioned in sub-paragraph (b).”

These provisions seem clearly to apply only to trusts in the strict sense, namely, where the property is legally owned by someone who is not its beneficial owner. That would exclude the case of a company director, because in Jersey as in England a company holds its own property; the property is not vested in the directors.

Mr Kelleher’s primary argument against this conclusion is that in Article 2 the words “is deemed” are to be taken to govern “to hold or have vested in him” rather than the sub-paragraphs. Both Mr Harvey-Hills and Mr Gleeson disagree with Mr Kelleher’s construction of Article 2. In my judgment, they are right to do so. My reasons are as follows. First, Mr Kelleher’s construction breaks down on the initial point that there is no evidence before me that the notion of being deemed to hold property or have property vested in one has any substance in Jersey law. He said in cross-examination that he was not aware of any authority, whether in Jersey or elsewhere, for the proposition that a company’s property is deemed to be held by or vested in its directors; though he said that he believed it was so deemed. This lack of evidence indicates to me that the words are unlikely to have the meaning he attributes to them. Second, if Mr Kelleher is correct there must be two “deemings”: a deeming of holding/vesting; and a deeming of the matters mentioned in the sub-paragraphs. That is an unnecessary complication in the interpretation of the provision. Third, the second parenthesis in Article 2, “(of which he is not the owner in his own right)”, coming as it does after “property”, must relate to both cases in the main part of the Article, namely the actual and the deemed. The words of the parenthesis would be clumsy if applied to the deemed case, because the trustee would not be the owner of the property at all. It is, I think, perfectly straightforward to take the Article as meaning (to simplify a little): there is a trust when a person owns property which he holds for another or is deemed to hold for another. This means that Article 2 and the Trusts Law 1984 do not apply to company directors by virtue of their office; though, of course, they may become trustees of property which they receive from the company.

This construction of Article 2 draws support from obiter dicta of Birt DB in Northwind, where the Royal Court considered the direct application of what was then Article 53 and is now, subject only to some amendments, Article 57:

“30.

In our judgment, Article 53 cannot apply directly to breaches of fiduciary duty by a director. This is because of the particular definition of various terms in the 1984 Law which do not find a parallel in the English statute. Thus:

(i)

The limitation period of three years only applies to an action founded on ‘breach of trust’ brought against a ‘trustee’ by a ‘beneficiary’.

(ii)

The expression ‘trustee’ is defined in Article 2 as follows: [see above].

(iii)

Similarly, breach of trust is defined in Article 1 as meaning ‘a breach of any duty imposed on a trustee by this Law or by the terms of the trust’.

31.

It seems to us that it is very difficult to read these provisions as applying directly to a director of a company. A company’s property is not vested in its directors. The 1984 Law is clearly dealing with conventional trusts as they are commonly understood and not the fiduciary obligations owed by a director to his company.”

I respectfully agree with that reasoning.

The same construction seems to me to be implicit in the judgment of the Jersey Court of Appeal (Smith, Jones and McNeill JJA) in United Capital Corporation Ltd v Bender 2006 JLR 242 (“Bender”). The Court refused to set aside leave to serve proceedings out of the jurisdiction; one of the arguments it rejected in doing so was that the plaintiff did not have a good arguable case based on constructive trusts. At para 57 the Court said:

“In our judgment, that definition [viz. the definition of a trust in Article 2] is wide enough to encompass constructive trusts and we see nothing in its terms to suggest that the legislature intended to exclude such trusts from the provisions of the Law. Indeed, the contrary intention is manifest from the terms of Articles 7 and 33. Article 7 provides that a trust may come into existence in any manner and, in particular, may arise by conduct. A constructive trust is one which may arise by conduct. Article 33 makes express provision for the liability of constructive trustees. In particular, para (1) provides that, where a person (referred to in the article as a ‘constructive trustee’) makes or receives any profit, gain or advantage from a breach of trust, that person ‘shall be deemed to be a trustee of that profit, gain or advantage.’ Paragraph (3) provides that a constructive trustee ‘shall deliver up the property of which the person is a constructive trustee to the person properly entitled to it.’ Since Article 2 provides that a trust exists not only where a person actually holds or has vested in him property for the benefit of any person but also where he is deemed to do so, it is clear, in our view, that a constructive trust is a trust within the meaning of Article 5 [which makes provision in respect of the Royal Court’s jurisdiction over trusts].”

The logic of the passage as a whole, and in particular the final sentence, indicates to me that the Court understood the deeming provision in Article 2 in the same way that Birt DB understood it in Northwind.

I should add that, even if Mr Kelleher’s construction of Article 2 were to be adopted, it would not avail the respondents. As mentioned in my first reason for construing the Article as I do, no evidence was adduced before me that as a matter of Jersey law a company’s property is deemed to be held by the directors or vested in them.

Reference was made at the hearing to the recent decision in CMC Holdings Ltd v Forster [2016] JRC 149. I do not find it to be of assistance. It was the case-management decision of the Master on an application for trial of a preliminary issue. The judgment did not involve any consideration of the construction of Article 2 of the Trusts Law 1984, the manner in which Article 57 might apply to company directors, or the meaning and scope of Article 33 in respect of constructive trusts. Further, the facts of the case as they appear from the judgment indicate that the directors in that case were arguably trustees on a conventional basis by reason of having received assets properly belonging to the company.

For the foregoing reasons I find that, as a matter of Jersey law, no prescription period directly applies to an action based on the duty in Article 74(1)(a).

The opinions of the expert witnesses regarding the prescription period for breach of the duty in Article 74(1)(b) of the Companies Law 1991 may be summarised as follows:

For the reasons set out above, I reject the contention that the three-year period for tort actions applies directly by reason only of the fact that the duty is in statutory form. This leaves the possibility that the three-year period for tort actions applies directly because the duty in Article 74(1)(b) is by nature tortious (i.e. regardless of its statutory form) or because the statutory form of the duty is most properly to be regarded as tortious.

Most of the argument before me focused on the treatment of directors’ duties of care in English law, and in view of the sparse information before me about the pre-statutory position in Jersey law that is a convenient place to begin.

For the second to fifth respondents, Mr Mowschenson QC relied in particular on Base Metal Trading as establishing that a director of a company owes to it a duty of care in tort. The claimant, a company incorporated in Guernsey, sued the defendant, a director and employee of the claimant, for breach of duties of care owed in tort, in contract and in equity; the content of the duty and the facts constituting its breach were alleged to be the same in each cause of action: para 14; also, at first instance, [2003] EWHC 2419 (Comm) at para 19. A central issue was “whether, despite the great similarity between the tort and equity claims, a different choice of law was appropriate for the claim in equity”: para 20. The Court of Appeal, having held that on the facts of the case the applicable tort law was that of Russia (as being the place where any tort was committed) but, in disagreement with the trial judge, that the duty in equity was subject to the law of Guernsey (as being the place where the claimant company was incorporated), upheld the judge’s decision (Arden LJ dissenting on this point alone) to dismiss the claim because no breach of duty had been proved. Guernsey law was taken to be the same as English law in all material respects. At para 28 Tuckey LJ, with whom Newman J agreed entirely and Arden LJ agreed on all matters except proof of breach of duty, distinguished between contractual duties on the one hand and tortious and equitable duties on the other:

“A contractual obligation is by its very nature one which is voluntarily assumed by agreement. Terms may be implied into that agreement, but that is because they are necessary to make what has been agreed work and so this does not undermine the fact that the obligation is consensual. There is nothing consensual about the imposition of a tortious or equitable duty of care. It arises from a voluntary assumption of responsibility, but that is a state of affairs which is not dependent upon agreement.”

However, the discussion at paras 42 to 58 showed that the different conclusions reached as to the applicable law for the tort claim and the equitable claim rested on a difference in the natures of the two duties, as expressed in Tuckey LJ’s conclusion:

“56.

… The equitable duty arises from and only from the director’s relationship with the company. If it does not relate to the constitution of the company, it must I think relate to its internal management. A director’s duties to his company are inextricably bound up with these matters and must therefore be governed by the place of the company’s incorporation. Any other result would create huge uncertainty and hamper the requirement for good corporate governance and proper regulatory control. …

57.

I also agree with Arden LJ’s additional reasons for reaching this conclusion. But, I have reached it reluctantly because I do think it is unfortunate that our choice of law rules enable the existence of what was, for present purposes, precisely the same duty of care to be determined by different laws. … As long as English law permits a choice of choice of law anomalies will occur. The anomaly in this case is perhaps not so great when one considers that the duty of care in tort is not company specific, whereas the equitable duty is. The company provides the context in which the director assumes responsibility but is not crucial to the existence of the common law duty.”

In agreeing with Tuckey LJ regarding the applicable law, Arden LJ said this in respect of a director’s equitable duty of care:

“69.

In my judgment, the law of the place of incorporation applies to the duties inherent in the office of director and it is irrelevant that the alleged breach of duty was committed, or the loss incurred, in some other jurisdiction. Accordingly, these duties can only be modified by contract to the extent that the law of the place of incorporation allows. It is not open to the company and the director to contend that they have contractually varied the liabilities imposed by the law of the place of incorporation by the terms of a contract for the appointment of the director governed by some other law, unless it is also shown that the law of the place of incorporation would allow this. In the matter of directors’ duties - which are essential to good corporate governance and to any effective system of law regulating companies - party autonomy is the exception not the rule, and its scope is always a matter for the law of the place of incorporation.”

Further on, she continued:

“74.

In all the circumstances, I disagree with the judge’s conclusion that to apply the law of the place of incorporation to the equitable duty of care is ‘mechanistic’. ... The equitable duty is not a mere mirror image of the common law duty of care, whose content the parties can control, and thus to be treated, as the judge thought, as of no independent significance. I appreciate that the judge did not have the advantage of having section 310 [of the Companies Act 1985] (Footnote: ¹) drawn to his attention but, insofar as the assumption underlying the judge’s conclusions here is that in this context there is in substance only one stream of law, that assumption would have been in contradiction of the passage from the judgment of Millett LJ in Bristol & Westv Mothew (with which Otton LJ agreed) and the judge may have strayed into the area that has, perhaps somewhat unkindly, been referred to as the ‘fusion fallacy’ (Meagher, Gummow & Lehane, Equity: Doctrines and Remedies, 4 ed (2003), paras 2-100 to 2-320).

…

76.

As a matter of English substantive law, the duties of a director arise as a matter of law and do not depend on the content of any agreement between the company on the one hand and the director on the other hand. The duties would have been imposed even if there had been no contract of employment conferring executive functions on Mr Shamurin. That the duties are imposed as a matter of law is supported by section 310 of the Companies Act 1985, set out above. That section applies to liabilities arising ‘by virtue of any rule of law’ in respect of negligence and other matters. Furthermore, the effect of that section is that it is not open to the company and the director to agree to lower the standards that the law imposes.

77.

My Lord’s conclusion is further supported by the fact that when a person agrees to accept an appointment as a director he does so (in the absence of contrary agreement) on the terms of the articles of association of the company (Re New British Iron [1898] 1 Ch 324; see generally Buckley on the Companies Acts (May 2004 update) para T/A82.3).”

Mr Mowschenson submitted that the case was authority, binding on this court, for the existence of a common law duty of care owed by a director to his company. However, some caution is needed. First, the existence of a tortious duty, as distinct from a different duty with an identical content, was not an issue before the Court of Appeal. Second, the scope of whatever duty of care was owed was before the Court of Appeal; the majority held it had not been breached. Third, the judgments draw a clear distinction between a tortious duty of care and an equitable duty of care. The passages set out above, most clearly those from the judgment of Tuckey LJ, show that the duty of care owed by a director to his company purely by virtue of being a director is an equitable duty, not a tortious one. That does not mean that the director does not owe an equivalent duty in tort; but the tortious duty arises because the conditions for the existence of such a duty are met: “The company provides the context in which the director assumes responsibility but is not crucial to the existence of the common law duty” (para 57).

This distinction explains, if it does not necessarily justify, the existence of similar duties of care arising in different areas of law, namely equity and tort. (Contract, resting on consent, is a different case.) Equity ought not to make provision where the law is sufficient; a specific legal duty is redundant if it merely duplicates an equitable duty. However, the duty of care that is inextricable from the director’s relationship with the company is equitable. The existence of a tortious duty of care does not represent a particular intervention of the law in the case of a specific relationship; rather it represents a specific instance of the general duty of care that arises when a person assumes responsibility, however that assumption occurs.

I was taken to numerous references in the cases and the books where (breach of) the director’s duty of care is described in terms of negligence. In some of these that word appears to be used simply to mean lack of reasonable care and skill; in others it appears to have reference to the tort of that name. In my view the analysis in Base Metal Trading makes it unnecessary to consider the references in any detail. The common-law duty of care will doubtless generally arise by virtue of the assumption of responsibility. However, the duty inherent in the office of director and arising by virtue of the office is an equitable rather than a common-law duty.

The substantive content of the duties of care owed in equity and at common law (tort) is likely to be identical or practically so. That was taken to be the position in Base Metal Trading. It does not follow that the remedies awarded for breaches of the two duties—equitable compensation in the one case, damages in the other—are necessarily awarded on identical principles. In Mothew Millett LJ said at 17:

“Although the remedy which equity makes available for breach of the equitable duty of skill and care is equitable compensation rather than damages, this is merely the product of history and in this context is in my opinion a distinction without a difference. Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for his loss. There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case. It should not be confused with equitable compensation for breach of fiduciary duty, which may be awarded in lieu of rescission or specific restitution.”

The relationship between the two remedies was considered by the Supreme Court in AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503, which concerned an award of equitable compensation for breach of trust by solicitors in paying away a mortgage advance without taking the required first charge. The solicitors admitted that the facts also amounted to negligence at common law, though the equitable claim was not framed with reference to a duty of care and skill. The judgments were given by Toulson and Reed JJSC, with whom the other members of the Supreme Court agreed and who agreed with each other. It is unnecessary to consider at length the discussion, in particular in the speech of Lord Reed, of the interrelationship between the remedies and the qualifications to be made to Millett LJ’s dictum in Mothew. For present purposes the point of importance is that, albeit in a case concerning a trustee rather than a director, the reasoning in AIB emphasised the importance of the distinction between the duties giving rise to the different remedies and the distinct bases of those duties. At para 76 Lord Toulson said:

“Equitable compensation and common law damages are remedies based on separate legal obligations. What has to be identified in each case is the content of any relevant obligation and the consequences of its breach. On the facts of the present case, the cost of restoring what the bank lost as a result of the solicitors’ breach of trust comes to the same as the loss caused by the solicitors’ breach of contract and negligence.”

Lord Reed’s judgment contained detailed and appreciative discussion of McLachlin J’s influential judgment in Canson Enterprises Ltd v Boughton & Co(1991) 85 DLR (4^th) 129, which had focused on equitable principles. At paras 93 and 94 Lord Reed, to similar effect to Lord Toulson, said:

“93.

The rules appropriate to a breach of duty by a trustee similarly have to be determined in the light of the characteristics of the obligation in question. This focus upon the trustee’s obligations is the third and most important point. Putting the matter very broadly, compensation for the breach of an obligation generally seeks to place the claimant in the position he would have been in if the obligation had been performed. Equitable compensation for breach of trust is no different in principle: again putting the matter broadly, it aims to provide the pecuniary equivalent of performance of the trust.

94.

Some of the typical obligations of the trustee of a fund are strict: for example, the duty to distribute the fund in accordance with the purposes of the trust. Others are obligations of reasonable care: for example, the duty to exercise reasonable care and skill in the management of the fund. Since these equitable obligations relate to a fund held for trust purposes, the trustee’s liability for a breach of trust will, again putting the matter broadly, depend upon its effect upon the fund: the measure of compensation will generally be based upon the diminution in the value of the fund caused by the trustee’s default.”

This passage confirms that Lord Reed was considering not only fiduciary duties stricto sensu but the other obligations owed by fiduciaries. At para 119, with reference to Millett LJ’s dictum in Mothew, he said:

“First, Millett LJ was not considering the liability of a trustee. Secondly, as McLachlin J pointed out in Canson Enterprises, the application by analogy of ‘the common law rules’ is complicated by the fact that there is no single set of common law rules. It is necessary to consider the specific characteristics of the obligation in question (such as the duty to exercise care in the management of a trust fund), and the respects in which it resembles or differs from obligations arising in other areas of the law (such as duties of care in contract or in tort), in order for the law governing liability for the breach of these various obligations to be coherent.”

The potential importance of observing the distinctions between the various duties was emphasised by Lord Reed at the end of his statement of general conclusions:

“136.

It follows that the liability of a trustee for breach of trust, even where the trust arises in the context of a commercial transaction which is otherwise regulated by contract, is not generally the same as a liability in damages for tort or breach of contract. Of course, the aim of equitable compensation is to compensate: that is to say, to provide a monetary equivalent of what has been lost as a result of a breach of duty. At that level of generality, it has the same aim as most awards of damages for tort or breach of contract. Equally, since the concept of loss necessarily involves the concept of causation, and that concept in turn inevitably involves a consideration of the necessary connection between the breach of duty and a postulated consequence (and therefore of such questions as whether a consequence flows ‘directly’ from the breach of duty, and whether loss should be attributed to the conduct of third parties, or to the conduct of the person to whom the duty was owed), there are some structural similarities between the assessment of equitable compensation and the assessment of common law damages.

137.

Those structural similarities do not however entail that the relevant rules are identical: as in mathematics, isomorphism is not the same as equality. As courts around the world have accepted, a trust imposes different obligations from a contractual or tortious relationship, in the setting of a different kind of relationship. The law responds to those differences by allowing a measure of compensation for breach of trust causing loss to the trust fund which reflects the nature of the obligation breached and the relationship between the parties. …

138.

This does not mean that the law is clinging atavistically to differences which are explicable only in terms of the historical origin of the relevant rules. The classification of claims as arising in equity or at common law generally reflects the nature of the relationship between the parties and their respective rights and obligations, and is therefore of more than merely historical significance. As the case law on equitable compensation develops, however, the reasoning supporting the assessment of compensation can be seen more clearly to reflect an analysis of the characteristics of the particular obligation breached. This increase in transparency permits greater scope for developing rules which are coherent with those adopted in the common law. To the extent that the same underlying principles apply, the rules should be consistent. To the extent that the underlying principles are different, the rules should be understandably different.”

These passages, albeit in a context different from the present and concerned with breach of trust in a commercial context, represent confirmation at the highest level that English law maintains a clear distinction, grounded in principle rather than the accidents of history, between equitable duties owed by fiduciaries and any duties that they might also owe at common law.

I turn to consider the position in Jersey law.

It is common ground that the law of negligence in Jersey follows English law.

The evidence before me indicates that there is no Jersey case-law to support the proposition that the duty of care in Article 74(1)(b) is tortious. (I leave aside for present purposes those few cases, discussed above, that might support the wider proposition that any actionable duty contained in a statute is ipso facto tortious.) This fact is itself striking, although I bear in mind Mr Kelleher’s warning that in a small jurisdiction there are many matters that might not be covered by express authority.

No authority was cited to me to show that before the Companies Law 1991 came into force Jersey law treated breach of the director’s duty of care and skill as a tort. In fact, there was no evidence other than the experts’ opinions as to how such breach of duty ought properly to have been treated in customary law.

The question whether breach of the Article 74(1)(b) duty was a tort arose directly in Alhamrani, although the discussion of prescription was obiter dicta and did not follow full argument. Most of the reasoning of Page, Commr, was directed to analogous rather than direct application of prescription periods, but that fact itself and the terms of paras 45 and 46 show clearly that he did not accept that the duty of care in Article 74(1)(b) was tortious:

“45.

The starting point for Mr Speck’s argument was the contention that the limitation period for actions based on breach of a director’s statutory duty to exercise ‘care, diligence and skill’ (Article 74(1)(b)) is three years. He based this on the submission that breach of a duty such as this is essentially tortious in nature, citing observations of Southwell J.A. giving the judgment of the Court of Appeal in Jersey Financial Services Commission v A.P. Black (Jersey) Ltd (2002 JLR 443 at para 20) in which he summarized the essentials of a cause of action in tort as including—

‘… a duty owed to he plaintiff by the defendant otherwise than by virtue of a contract or trust, whether pursuant to Jersey common law or statute, a breach of this duty by the defendant, and actual or threatened damage …’ [Emphasis supplied]

Taking these criteria as the touchstone of what constitutes a tort, and noting in particular the words in italics, it was submitted that the statutory company law duty alleged can only be tortious in nature.

46.

But it is necessary to put Southwell J.A.’s comments in context. The issue before the Court of Appeal in that case was whether the Commission’s right to proceed against the defendants under Article 20(7) of the Collective Investment Funds (Jersey) Law 1988 was subject to any, and if so what, prescription period, and its conclusion was that, having regard to the (exceptional) regulatory nature of the power provided by that article, no specific period was applicable. The passage cited occurred in response to the defendants’ contention that the right of action was one in tort; its purpose was to point up the fact that two of the three essential elements of a tort claim were missing in the case then under consideration …; and there was no cause to consider the particular matter of directors’ statutory duties in company law. To that extent, the passage relied on may be regarded as obiter dicta rather than definitive of the question whether ‘contract or trust’ are the only areas in which the law recognizes non-tortious liability.”

This shows that Page, Commr, regarded a claim for breach of the duty under Article 74(1)(b) as being different from a tort claim. That same view is also implicit in the final sentence of para 33 of Birt DB’s judgment in Northwind (above). The reasoning in Alhamrani is also consistent with what I take to be the settled position, as mentioned above, that even if a right of action would satisfy the basic requirements of a right of action in tort, it will not be such an action if it arises under a different area of law.

One is therefore entitled to ask why Jersey law should commit itself to the position that the duty under Article 74(1)(b) is tortious in nature, when there is no authority for the proposition that the particular duty of care of a company director is anything other than an equitable duty as is the case in England. A statutory provision dealing specifically with the director’s duty of care is sensibly to be taken to refer to the specific duty that a director has qua director rather than to be embodying a particular instance of a general common-law duty.

For reasons already given, it is not a satisfactory answer to say that the statutory duty satisfies the criteria for recognition of a tort; a duty arising from a different legal basis is not tortious. Both for this reason and because the Winfield definition, used in Arya and subsequent cases, is not a statutory definition and ought not to be treated like one, the question whether the statutory duty satisfies the definition is of limited importance and does not determine my decision. However, I am of the view that the duty under Article 74(1)(b) does not satisfy the definition. The first part of the definition (“such duty is towards persons generally”) is not satisfied, because the very essence of the duty lies in the director’s status qua director. For the respondents it was objected that the common law duty of care, which does sound in tort, may be owed only to one person or company, depending on the scope of the assumption of responsibility; as Mr Mowschenson observed, all duties of care exist in the context of a relationship. Again, a degree of caution is required in the analysis. Winfield’s definition was surely not intended to mean that all tortious duties are owed to everyone without regard to context or relationship; the focus is on the nature of the duty, not the necessary extent of its reach. The common-law duty of care is properly described as general, provided that this is understood to mean that each person owes a duty of care to all “persons who are so closely and directly affected by [his] act that [he] ought reasonably to have them in contemplation as being so affected when [he] is directing [his] mind to the acts or omissions which are called in question”; cf. per Lord Atkin in Donoghue v Stevenson [1932] A.C. 562 at 580-581. The acts and omissions in question and the persons to be held in contemplation will depend on the relevant circumstances and relationships. The relevance of assumption of responsibility is not to alter the principle recognised in Donoghue v Stevenson, but rather to bring within it certain risks (notably, the risk of economic loss) in respect of which no duty would lie. (For a recent discussion, see Ripstein, Private Wrongs, chapter 4, esp. at pp. 81 and 99.) The distinction between the general common-law duty of care and the specific equitable duty of care, though a fine one, is identified by Tuckey LJ at the end of para 57 of his judgment in Base Metal Trading and seems to me to be both clear and intelligible.

An argument was made on behalf of the respondents by reference to Article 212(1) of the Companies Law 1991:

“If in proceedings for negligence, default, breach of duty or breach of trust against an officer of a company or a person employed by a company as auditor it appears to the court that that officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that the person has acted honestly and that having regard to all the circumstances of the case (including those connected with his or her appointment) he or she ought fairly to be excused for the negligence, default, breach of duty or breach of trust, the court may relieve the person, either wholly or partly, from his or her liability on such terms as it thinks fit.”

Mr Mowschenson and Lord Goldsmith submitted that the reference to “negligence”, in addition to the other expressions, showed that the tort of negligence was intended. Article 212 was based on section 448 of the UK Companies Act 1948, to which it is in material respects closely similar. This does not mean that it is inapt for application to Jersey law, but it rather weakens the impact of any suggestion that Article 212 embodies statutory recognition of the tortious nature of the director’s duty of care, whether pre-statutory or newly statutory. The Companies Law 1991 does not itself, of course, state that Article 74(1)(b) sounds in negligence; this again weakens the argument that Article 212 explains the taxonomy of the Article 74 duties. In fact, Article 212 appears designed to cover all possible non-contractual duties not only of directors but of other company officers and of auditors. In my view one cannot use it to draw inferences as to the classification of the duty in Article 74(1)(b).

Mr Kelleher’s opinion, if I understood it, seemed to be that the duty must be regarded as tortious because all obligations must be brought within one of Pothier’s four categories, namely contract, quasi-contract, delit and quasi-delit. I do not accept that. Pothier himself recognised residual categories of obligation arising from “the mere authority of the law, or the mere force of natural equity”; and the influence of English law post-dates Pothier’s writings. Although Jersey does not have the historical divide between law and equity that England has, it has drawn its law relating both to companies and to fiduciaries from English law. It also recognises the full panoply of equitable remedies as such. Similarly its law relating to the tort of negligence and to trusts is based on and follows English law. Significantly, all three expert witnesses, including Mr Kelleher, accepted that Jersey law recognises fiduciary duties that arise in equity rather than sounding in tort. Indeed, the fact that the distinction does not arise from differing historical streams, as it does in England, tends if anything to confirm the different legal natures of the duties.

Mr Harvey-Hills expressed the opinion that the director’s duty of care was best considered as sui generis, arising out of the interaction of a set of interlinking duties under the company’s constitution and by common law and, more recently, by statute. (Black, of course, is an example of the recognition of a sui generis statutory duty.) This seems to me to be materially no different from saying that the duty ought to be considered a particular equitable duty, now placed on a statutory footing, though the analytical distinction might be that the sui generis statutory duty encompasses all previous non-consensual obligations.

Mr Harvey-Hills also expressed the opinion that, if (contrary to his view) it were necessary to bring the director’s duty of care within Pothier’s four categories, the most suitable category was not tort but quasi-contract. It is convenient to consider this matter at this stage, rather than in connection with analogical application of prescription periods, not least because it reveals what I consider to be a problem with Mr Kelleher’s understanding of the scope of tort in Jersey law, a matter already touched on in an earlier context.

The Jersey Court of Appeal considered the enduring vitality of quasi-contract in Rockhampton. The plaintiffs sued the defendants, neighbouring landowners, for causing damage to their properties in the course of construction works. The claim in negligence was prescribed, but another claim was pursued in voisinage, a quasi-contractual obligation not to use one’s property in such a manner as to damage neighbouring property. The Court confirmed that voisinage survived in Jersey law and was not supplanted by the tort of negligence; as a quasi-contractual claim it was subject to a 10-year prescription period. The existence of quasi-contract in Jersey law was not in issue:

“155.

Before us, Miss Lawrence [the Advocate for the appellants] did not seek to challenge that part of the judgment below where the learned Bailiff indicated that quasi-contract was part of the law of Jersey (paragraphs 15 and 16).  As he had indicated, the customary law of Normandy appears to be silent or brief on the meaning and extent of the term quasi-contract but Houard, 4 Dictionnaire de Droit Normand, 1^st edition, at 3 (1782) contained the following (in translation):

‘The name [quasi-contract] is given to the obligation which arises from equity, without the need for any agreement between the parties.  Thus, for instance, a quasi-contract is formed between an absent person and one who, during his absence, does some necessary thing for him; for the absent person, by reason only of equity, will be bound to reimburse any necessary and appropriate expenditure made on his behalf.’”

However, the appellants contended that the scope of quasi-contract in modern law was significantly restricted, with much of what it had formerly encompassed now being treated as matters of tortious or fiduciary duty. The Court rejected that approach:

“160.

In my view, these submissions are not well founded.  On the material available to this Court, I do not see how we could take the view that, so far as the present law of Jersey was concerned, quasi-contract was an outmoded concept.  Starting with Golder v. Société des Magasins 1967 J.J. 721, cited above, it seems clear that the concept was treated as part of the law of Jersey and the principles as stated by Pothier (as set out in that judgment) considered to be the principles of the law of this Island.  The references are to Pothier, Traite des Obligations, Chapter I (Tome I); Section II of Article 8, Section 3 of the same Article and Part 4, Chapter III, Article III: see pages 729 – 730.  This can only be considered as a very strong indication, as at 1967 – and again from the then Bailiff, Sir Robert Le Masurier – that Pothier’s description of the principles of quasi-contract are part of the law of Jersey.”

I was not referred to Golder v. Société des Magasins, but I was provided with extracts from the English translation of Pothier’s Traite des Obligations (A Treatise on the Law of Obligations, or Contracts, translated by William David Evans, London, 1806). The following extracts must suffice, both to demonstrate the concept of quasi-contract in Jersey law and to show how it resembles and differs from the English law of unjust enrichment:

“[2] … The causes of Obligations are, 1. Contracts.—2. Engagements in the nature of contracts [quasi-contracts].—3. Injuries [delits].—4. Acts in the nature of injuries [quasi-delits].—Sometimes the mere authority of the law, or the mere force of natural equity.”

“Of Quasi-Contracts

[113] A Quasi contract is the act of a person permitted by the law which obliges him in favour of another, without any agreement intervening between them.

For instance, the heir’s acceptance of the succession is a quasi contract in favour of the legatees; for it is a fact permitted by the law, which obliges the heir to the payment of the legacies without the intervention of any agreement between him and the legatees.

Another instance of a quasi contract is, when a person pays by mistake what he does not owe. The payment is a fact which obliges the other party to restore what he has received, although there cannot be said to be any agreement for such restitution.

The undertaking the business of a person who is absent, without a previous direction, is also a quasi contract, which obliges us to render an account of it, and obliges the absent person in certain circumstances to indemnify us from the expences [sic].

There are many other instances of quasi contracts which we pass over in silence. (Footnote: ²)

[115] All persons, even infants, and persons destitute of reason, who are consequently incapable of consent, may be obliged by the quasi contract, which results from the act of another, and may also oblige others in their favour; for it is not consent which forms these obligations; they are contracted by the act of another, without any act on our part. The use of reason is indeed required in the person whose act forms a quasi contract, but it is not required in the person by whom, or in whose favour the obligations which result from it are contracted.

For instance, if a person undertakes the business of an infant, or a lunatic, this is a quasi contract, which obliges the infant or the lunatic to account to the person undertaking his affairs, for what he has beneficially expended, and reciprocally obliges that person to give an account of his transactions.

It is the same with respect to women who are under the power of their husbands; they may in this way be obliged towards others, or oblige others towards them, without being authorized by their husbands; for the law which prohibits their obliging themselves or doing any thing independently of their husbands, and without their authority, only annuls what is done without such authority, and not the obligations, which are formed without any act on their part.”

These passages indicate the element of reciprocity in the quasi-contractual relationship. It was this that formed the basis of the view of the Master in Neal that a curator’s duties towards the interdict had lain in quasi-contract at customary law, albeit that he thought they were now tortious duties as being contained in statute: see paras 47-55 of the judgment. In Neal, the Master accepted the argument advanced on behalf of Mr Kelleher, namely that the curator’s duties were tortious by reason of being statutory. It was not contended that the breaches of duty would have been tortious at customary law: see paras 28, 45-6 and 52 of the judgment. The breaches complained of against Mr Kelleher were in respect of his alleged failure to preserve and protect the interdict’s estate: see para 24 of the judgment.

Before me, however, Mr Kelleher did not accept that at customary law an action against a curator for negligently causing loss would have lain in quasi-contract. He said that it would rather have been viewed as a matter of quasi-delit under Pothier’s classification, as shown by paras [116] and [117] of A Treatise on the Law of Obligations, or Contracts:

“Of Injuries and Negligencies

[116] Injuries (delicta) are the third cause which produces obligations, and quasi delicta (or negligence) the fourth.

Injury (delictum) is when a person by fraud or malignity causes any damage or wrong to another.

Quasi delicta are facts by which a person causes damages to another, without malignity, but by some inexcusable imprudence.

[117] These differ from quasi contracts, inasmuch as the fact, which is the subject of a quasi contract, is permitted by the law, whereas the fact which forms a delictum or quasi delictum is something reprehensible.”

Mr Kelleher was asked to comment on an entry on administration de tutelle in Ferriere, Dictionaire de Droit et de Pratique (1769) at p. 52; in English translation it reads:

“Administration de tutelle is a quasi-contract which creates obligations owed by the tutor to the pupil and by the pupil to the tutor without there being any contract between them. From this quasi-contract there comes into existence a reciprocal obligation and an action called actio tutelae, which is direct or contrary.

The direct claim is afforded to the pupil against the tutor, which results in the tutor being required to render an account of his administration and to make good any wrong that he may have caused, even by minor fault

The contrary claim is afforded to the tutor against his pupil; and in this action it results in the pupil being required to reimburse the expenses incurred by the tutor in managing his affairs and to indemnify him against all damage that he has suffered in relation to that and to pay him the costs of the administration, by order of the judge.”

Mr Kelleher accepted that Ferriere would be regarded as an authoritative guide to Jersey law, provided only that the entry were not speaking of some statutory amendment of the French common law before the Code Civile (there is no evidence that it is speaking of a statutory amendment). But he was of the opinion that, if indeed “minor fault” were being used to include negligence, the Jersey courts would prefer Pothier’s classification and regard the cause of action as lying in quasi-delict and, therefore, now in tort.

Curiously, however, Mr Kelleher accepted that at customary law a deliberate breach of duty by a curator would have sounded in quasi-contract rather than delit (tort). If that is right, it is unclear why he should refuse to accept that a non-deliberate but negligent breach of duty would also have sounded in quasi-contract but insist that it would have sounded in quasi-delit (tort). Once it is accepted that some breaches of duty can sound in quasi-contract—and not only did Mr Kelleher accept this but Rockhampton is clear authority for it—Mr Kelleher’s argument that quasi-contract deals with only permitted, not with unpermitted, acts falls away. The argument rests on para [113] in Pothier. The text however means only that the quasi-contractual relationship that gives rise to obligations is constituted by permitted acts, not that the (ex hypothesi unpermitted) breaches of those obligations does not sound in quasi-contract, which would be contrary both to Rockhampton and to Neal. In short, it is both unnecessary and in my view plainly wrong to read Pothier as meaning that delit and quasi-delit encompass all intentional and negligent injuries and so render tortious all breaches of quasi-contractual obligations.

In my view, and in essential agreement with Mr Harvey-Hills, the director’s duty of care and skill is best seen as an equitable duty or, if one prefers, as a sui generis duty arising out of the relationship of a director to his company. If the duty had to be brought within any of Pothier’s four categories, it would most naturally be brought within quasi-contract, on the basis that it arises from a particular relationship, brought about by lawfully permitted acts, which generates mutual rights and obligations quasi ex contractu though not in fact by contract. However, I regard the quasi-contractual analysis as being more properly an analogy than a strictly correct description.

Although the two duties in Article 74(1) are distinct and raise some different considerations, it is preferable to hold together, so far as possible, the exercise of considering the analogous application of some prescription period other than the default 10-year period. This is because all three expert witnesses agreed that the Jersey courts would look to apply the same prescription period to (a) both of the duties under Article 74(1) and (b) both statutory and non-statutory breaches of directors’ fiduciary duties. I too agree, although this does not mean that such an outcome must be achieved at any cost. The goal of coherence and consistency in the law serves to confirm that the application of the test in Esteem does not rest solely on the mere comparison of similarities between different causes of action.

The approach to analogous application of prescription periods has already been set out, as have most of the relevant statutory provisions and references to authority. In the circumstances, and having regard to the proper respective roles of the judge and the expert witnesses (see paragraphs 15 and 16 above), I shall discuss this issue quite shortly.

Three particular matters have to be considered when deciding whether the prescription period for breach of trust ought to apply by analogy: first, whether the period can indeed be applied without serious distortion; second, the other cases with which a breach of fiduciary duty needs to be compared; third, the position under Article 74(1)(b).

In the absence of any directly applicable prescription period for Article 74(1)(a), the most obvious candidate for analogous application under the test in Esteem is the 3-year period for breach of trust. (I mention, as a matter of completeness, that the discussion set out above in respect of Mr Kelleher’s argument in favour of direct application of the 3-year period applying to torts sufficiently indicates that there is little attraction in seeking to apply that period by analogy.) The close similarities between directors and trustees were acknowledged by Mr Harvey-Hills, who described the trustee as a director’s “nearest living relative”. These similarities have led English law to treat a director’s breach of duty in respect of the company’s assets as equivalent to a breach of trust for limitation purposes.

The period for breach of trust is set out in Article 57 of the Trusts Law 1984; see paragraph 73 above.

For the applicants, Mr Zacaroli QC, while accepting that directors and trustees owed duties that were substantially similar, submitted that Article 57 could not properly be applied by analogy to the case of directors because it contained a suite of interlocking provisions, only some of which could be applied to directors. The argument was not that it was necessarily wrong in principle to disregard inapplicable provisions; rather it was that to apply some of the provisions but not others would not have the intended effect of making trustees and directors subject to the same prescriptive period in any true sense. Mr Zacaroli submitted that it was misleading to focus on the words “3 years” as though they referred to a single period: the words have meaning only in relation to defined starting- and end-points; Article 57 deals separately with different situations and provides for various starting-points, with the result that the length of time in which an action for breach of trust might be brought was very much greater than might appear. The argument can be explained as follows.

In my judgment these objections, raised by Mr Zacaroli in argument and by Mr Harvey-Hills in evidence, are powerful, resting as they do not on mere verbal difficulties but on the substantive effect of Article 57 in the context in which it directly applies.

The second matter to be considered under the Esteem test is the alternatives to a 3-year period. In the present case that means the 10-year period that applies in three relevant cases. First, it applies to actions for breach of contract; this is relevant for the reasons succinctly expressed by Birt DB in Northwind (paragraph 35 above). Second, it applies to actions in quasi-contract; the analogy with the position of company directors appears from the discussion at paragraphs 107 to 113 above. Third, it is the default period for actions personnelles mobilières. The 10-year period is accordingly not merely the consequence of declining to apply a different period but it is the starting-point from which one needs a clear reason, by application of the Esteem test, to depart.

The third matter to be considered, by reason of the concern for consistency and coherence, is the case of Article 74(1)(b), to which I turn.

If any period other than the 10-year period is to be applied by analogy in the case of Article 74(1)(b), it must be the 3-year period for claims in tort.

The similarities between the statutory duty and the duty in the tort of negligence are obvious. In most if not all cases the content of the duty will be identical, although the financial remedies will not necessarily be so.

However, the statutory duty is likely to be similar also to a contractual duty of care, in any case where the director is engaged under a contract. There is no evidence before me that the law as to implied terms is any different in Jersey from that in England; that being so, it is to be supposed that an implied contractual duty of care will be no different in substance from a tortious duty. Further, as already explained, the duty has an analogy with, if it is not strictly identical to, the duty of care that can arise as a matter of quasi-contract. Again, as mentioned above, it is not to be forgotten that an action for breach of fiduciary duty is an action personnelle immobilière; the default period for such claims is 10 years, from which, in the absence of a period made directly applicable by statute or case-law, one should depart only if some other period is by analogy clearly more applicable.

The purpose of the analogical reasoning is to decide whether some other period is clearly more applicable than the 10-year default period. Looking at Article 74(1)(b) alone, I should be firmly of the opinion that there was no good reason to apply a period other than that normally applying to actions personnelles immobilières. In the case of Article 74(1)(a) there are clear analogies to be drawn between the causes of action for breach of directors’ fiduciary duties and for breach of trust. However, for reasons explained by Mr Zacaroli and Mr Harvey-Hills the attractions of applying the headline 3-year period under the Trusts Law 1984 are largely specious. And there are good reasons, relating both to consistency in the periods applying to Article 74(1)(a) and other causes of action and to coherence between Article 74(1)(a) and (b), for concluding that the Jersey courts would not displace the default 10-year period. That conclusion gains added force from the fact that it accords with the view reached, albeit not by way of authoritative decision, by Birt DB, whose opinion on the matter is entitled to considerable respect and would not be departed from lightly.

Accordingly I find as a fact of Jersey law that the prescriptive period for both causes of action under Article 74 is 10 years.

I intend to hand this judgment down in the absence of the parties. If the parties are able to agree all consequential matters arising and the form of order, they should please provide to me a draft order in advance of hand-down. If they are not able to agree, I shall adjourn consequential matters, including any application for permission to appeal intimated to me before hand-down, to a further hearing; and in that case I should be grateful if counsel would seek to agree a suitable form of order and give thought to the appropriate form of any further hearing.____________