Limitation of Actions Consultation - Law Commission

of the 1980 Act. Danckwerts J agreed. The action was based on the fraudulent
payment by the trustee (the accountant) to the defendant which was the origin of
the proceedings against the defendant. It was not necessary for the action to be
brought against the trustee for the plaintiff to be able to rely on section 21(1)(a)
provided that the action was "in respect of" the trustee’s fraud. This requirement
is satisfied where the fraud forms the basis of the cause of action.
(b) Section 21(1)(b): Recovering trust property or the proceeds of trust
property
4.17 By section 21(1)(b), no period of limitation is to apply to an action by a
beneficiary “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”.
4.18 It must first be established that the action is to recover “trust property” or its
proceeds. In Re Howlett (deceased) 41
the settlor died intestate. Accordingly, the
property she had held in gavelkind passed absolutely to her son, subject to her
husband’s right to half of the rents and proceeds from the property until he died or
remarried. Her husband remained in occupation of the property until his death,
notwithstanding his remarriage, and in consequence no rents or profits were
received. His estate was sued by the son, and it was held that as the husband had
remained in occupation for his own purposes his estate would not be permitted to
say that he had not received any rents or profits. The estate was liable for the rent
he should have paid as occupier of the trust property, and this notional sum
became part of the “trust property” for limitation purposes.
4.19 In re Sharp 42
the “trust property” consisted of deductions for income tax which the
trustees should have made from annuities paid to the beneficiaries. It was
acknowledged that this breach of trust was an entirely innocent one, and the
trustees therefore had a limitation defence under section 8 of the Trustee Act 1888
(the predecessor of section 21(3) of the 1980 Act) in respect of the overpayments
they had made to beneficiaries other than themselves more than six years before
the proceedings. However, the trustees remained liable for all the overpayments
they had received themselves which were trust property retained by them. In
Wassell v Leggatt 43
money bequeathed to a wife, but taken by her husband against
her will became “trust property”, held by him as trustee for her. An action by the
wife against his estate to recover the money several years later came within the
terms of section 8(1) of the Trustee Act 1888 (the equivalent of s 21(1)(b) of the
1980 Act). 44
4.20 An interesting case on the meaning of recovery of trust property, is Attorney-
General v Manchester City Council. 45
The wording under consideration in that case
41
42
43
[1949] Ch 767.
[1906] 1 Ch 793.
[1896] 1 Ch 554.
44 See also Re Eyre-Williams [1923] 2 Ch 533; Mitchinson v Spencer (1902) 86 LT 618.
45 Unreported, 7 March 1983.
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