Limitation of Actions Consultation - Law Commission

qualifications, it would appear that, wherever property is held by a fiduciary for a
beneficiary, section 21 applies. 6
4.3 Two important concepts for the interpretation of section 21 are “trust” and
“breach of trust”. It is also important to draw attention at the outset to some of
the difficulties for limitation periods that have arisen, and continue to arise, in
respect of the distinction between express and constructive trusts.
(a) “Trust”
4.4 There is no single definition of the conditions which are necessary and sufficient
for the existence of a trust. A trust will be characterised by the fact that the legal
and beneficial title to the trust property are held in different hands. However, as
Westdeutsche Landesbank Girozentrale v Islington London Borough Council 7
makes
clear, a trust will not arise in all cases where the legal and beneficial title to
property are held separately. Lord Browne-Wilkinson notes in that case that in
addition the legal owner, or trustee, must be obliged to carry out the purposes for
which he holds the property in the case of an express or implied trust, or which are
imposed on him by law because of his unconscionable conduct in the case of a
constructive trust. 8
Further the trustee must be aware either that he is intended to
hold the property for the benefit of others, or, in the case of a constructive trust, of
the factors which would lead to the imposition of the trust. And the trust property
must be identifiable.
4.5 In addition, a trust may be imposed by statute. Examples of this are existing strict
settlements under the Settled Land Act 1925, 9
the trusts implied by the Law of
resulting trusts. But cf the wording “resulting, implied or constructive trusts” in Law of
Property Act 1925, s 53(2).
6 See, eg, Burdick v Garrick (1870) LR 5 Ch App 233 (fiduciary agents treated as trustees for
the purposes of the Limitation Act). See also North American Land and Timber Co v Watkins
[1904] 1 Ch 242 (an agent entrusted with funds to buy property treated as trustee of that
property). It has been said that where the fiduciary relationship arises as a result of the
relevant property coming into the hands of the fiduciary, rather than before, and
independently of, the receipt of the property, s 21 does not apply: see A McGee, Limitation
Periods (2nd ed 1994), pp 257 - 258; T Prime and G Scanlan, The Modern Law of Limitation
(1993), p 218. The authority generally given for this proposition is Clarkson v Davies [1923]
AC 100 (PC). But it appears that the view taken by the Privy Council in this case depended
on the exclusion of constructive trusts from the pre-1939 equivalent of s 21 (as to which see
paras 4.8 - 4.10 below): [1923] AC 101, 110 - 111. Where the receipt of the property brings
about a constructive trust, and thereby a fiduciary relationship, it would seem that s 21 will
apply: see also para 4.13 below.
7 [1996] AC 699.
8 Ibid, 765, per Lord Browne-Wilkinson.
9 It is not possible to create new strict settlements: Trusts of Land and Appointment of
Trustees Act 1996, s 2(1).
72