Jersey Royal Court Declares Limitation Period for Dishonest Assistance Claims

The Jersey Royal Court has finally laid to rest the long-standing debate concerning the jersey limitation period for claims in dishonest assistance.

In the extremely lengthily decision (at 519 paragraph) of Nolan & Ors v Minerva Trust Company Limited and Ors [2014]JRC078A the Royal Court held that the relevant prescription period is 3 years from the date of loss. The relevant section of the judgment for practitioners going forward is from paragraph 482.

The competing arguments before the Court were that:

  1. a claim in dishonest assistance was time barred after 10 years on the basis that such a claim had no analogy with any known cause of action in Jersey for which prescription had alredy been decided by statue or customary law or alternatively that no period was applicable and prescription was indefinite (as would be the case under Art 57(1) in a fraudulent breach of trust claim). (The Plaintiffs’ arguments)
  2. Article 57(1) did not apply and that the analogous limitation period is that applicable to claims for deceit, or knowingly procuring a breach of contract, (i.e. an economic tort claim) namely three years from the date of accrual under Article 2(1) of the Law Reform (Miscellaneous Provisions)(Jersey) Law 1960. (The Defendants’ arguments)

The Court approved the Defendant’s arguments. In doing so the Court has definitively stated that

  • a dishonest assistant is a ‘category 2’ constructive trustee (as defined in the English case of Paragon Finance plc. v Thakerar, with a liability to account personally to the plaintiff.
  • A dishonest assistant is not a true trustee and is therefore not within the scope of Article 57 of the 1984 Trust Law.

Jersey law has not historical had a strict dividing line between equity and the common law as was the case in England.  Accordingly analogies based on that historical divide were, the Court held, unhelpful in the context of the test set down in Esteem that “some other period is, by analogy, clearly more applicable” In particular court rejected the Plaintiff’s 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 the Court what Esteem meant was that, what has to be analogous is the period, not the cause of action. Accordingly Minerva’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 and not ten.

Empêchement

That period is subject to the Jersey doctrine of empêchement de fait whereby prescription will be suspected while it is practically impossible for the plaintiff to bring an action.

This decision is unlikely to be the subject of an appeal given that although the decision went to the Defendants the Plaintiffs were able to establish an empêchement.

In Noland the basis of the dishonest assistance claim was a fraud giving rise to a constructive trust. In what is likely to be a light at the end of the tunnel for practitioners concerned about the shortness of the period in which claims may be brought, the Court was clear that an empêchement is likely to exist until the plaintiff is in a position to plead their claim. In cases base upon fraud the Court was clear that a plaintiff will not be in such a position until they are able to come within the requirements for pleading fraud set out by Lord Millett at paragraphs 184 and 186 in Three Rivers District Council v. Bank of England [2003] 2 AC 1:

184. It is well established that fraud or dishonesty (and the same must go for the present tort) must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised; and that it is not sufficiently particularised if the facts pleaded are consistent with innocence: see Kerr on Fraud and Mistake 7th ed (1952), p 644; Davy v Garrett (1878) 7 Ch D 473, 489; Bullivant v Attorney Genera; for Victoria [1901] AC 196; Armitage v Nurse [1998] Ch 241, 256. This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that facts, matters and circumstances which are consistent with negligence do not do so.

186. The second principle, which is quite distinct, is that an allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.”

If follows that where there is a suspicion of fraud but the Plaintiff is not yet in possession of sufficient documents upon which it can safely plead fraud, time will not run until it is in possession of documents sufficient to be able to plead an allegation of fraud or dishonesty.

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