Home Information Cases JJ Harrison (Properties) Ltd v James Peter Harrison (2001)

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JJ Harrison (Properties) Ltd v James Peter Harrison (2001)

Summary

Directors who disposed of a company's property in breach of their fiduciary duties were to be treated as having committed a breach of trust, and so were to be treated as constructive trustees of any such property that came into their hands. Pursuant to s.21(1)(b) Limitation Act 1980, there was no limitation period in respect of an action by the company to recover that property or its proceeds.

Facts

Appeal by the defendant ('H') and cross-appeal by the claimant ('the Company') from a decision of Kevin Garnett QC by which he set aside a conveyance by the Company of certain buildings and land ('the property') to H and ordered him to account for the profits that he had made from the sale of the property. The conveyance to H, who was a director of the Company at the material time, was made in 1986 in circumstances in which, as the judge held, H had failed to make proper disclosure to the Company's board of information which was material to the value of the property, namely that it had the benefit of planning permission. H subsequently sold part of the property in 1988 and disposed of the remainder in 1992. By his appeal H contended that: (i) the judge should have held that the claim against him was statute barred under s.21(3) Limitation Act 1980, in that it had been brought in July 1998, more than six years after the Company first became aware of the true facts; and (ii) the judge was wrong to reject his defence of laches. By its cross-appeal the Company contended that H should have been ordered to account for the value of the property in 1988 and not merely the profits that he had made from it.

Held

(1) Directors who disposed of a company's property in breach of their fiduciary duties were to be treated as having committed a breach of trust, and so were to be treated as constructive trustees of any such property which came into their hands, Paragon Finance plc v D B Thakerar & Co (1999) 1 All ER 400 considered. The judge's conclusion to the contrary could not be upheld. (2) The claim by the Company was "an action to recover from the trustee property or the proceeds of property...previously received by the trustee and converted to his use". Consequently, pursuant to s.21(1)(b) Limitation Act 1980, there was no limitation period in respect of that action. (3) There was no basis upon which the alleged defence of laches could succeed. (4) It would not be appropriate to order H to account both for the profits received in 1988 from the sale of part of the property and for the value of the remainder of the property as at that date. His obligation was to account for the profit made on the sales in 1988 and 1992 and any other profits.

Appeal dismissed. Cross-appeal allowed to the extent of varying the order for an account in the terms above.

Court of Appeal
Chadwick LJ, Laws LJ, Sir Anthony Evans
Judgment date
11 October 2001
References

​LTL 11/10/2001 : [2002] 1 BCLC 162