UK: Supreme Court Rules On The Limitation Period In Constructive Trustee Cases

Last Updated: 19 March 2014
Article by Richard Caird and Ami Ndukwe

The Supreme Court1 has recently provided clarity on two questions where there have been inconsistent authorities for much of the 20th century. The first question was whether a third party who dishonestly assists or knowingly receives trust property in breach of trust is a trustee for the purposes of section 21 of the Limitation Act 1980 (the Act). Section 21 provides a six-year limitation period to an action to recover trust property, unless the action is one:

  1. in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
  2. 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.

The second was whether a third-party stranger to a trust can be sued in respect of an action for "fraudulent breach of trust to which the trustee was a party or privy". The Court by a majority of three to two answered both questions in the negative.


The respondent, Dr Williams, brought proceedings against the applicant, the Central Bank of Nigeria (the Central Bank), claiming that the Central Bank had been part of a wider conspiracy to defraud him by the Nigerian Security Services. Dr Williams alleged that, in 1986, he was induced to pay $6,520,190 to a solicitor in England, to be held on trust for him. In breach of trust the solicitor paid out $6,020,190 of the money, keeping the rest for himself. The money paid out was paid into an account held by the Central Bank with Midland Bank in London.

A claim was brought in England against the Central Bank as a constructive trustee. The allegation was that:

  1. the Central Bank knew that the money was trust money and it had dishonestly assisted the trustee solicitor in misapplying the money; and
  2. the Central Bank had knowingly received the portion of the trust money paid into its London bank account.

The Central Bank applied for a declaration that the claim be set aside on the basis that the English courts had no jurisdiction. The Central Bank's application was refused at first instance and by the Court of Appeal. In determining whether English courts had jurisdiction, it had to be established whether there was a real issue to be tried2, and this in turn meant establishing whether Dr Williams' claim was time barred.

On appeal by the Central Bank, the question before the Supreme Court therefore was whether Dr Williams' claim was time barred by virtue of section 21 of the Act and whether the Central Bank was a trustee for the purposes of the Act.

True trustees v. ancillary liability trustees

In determining whether a third-party dishonest assistant or knowing recipient is a trustee for limitation purposes, Lord Sumption emphasises the distinction between "true trustees" and "ancillary liability trustees". The reason for the distinction according to his Lordship is that, because trust assets were lawfully vested in a true trustee, the possession of trust property was entirely consistent with the beneficiary's interest. His Lordship points out that "if a true trustee misapplied the assets, equity would ignore the misapplication and simply hold him to account for the assets as if he had acted in accordance with his trust. There is nothing to make time start running against the beneficiary." Such reasoning cannot be applied to parties who have not assumed the responsibilities of a true trustee. Ancillary liability trustees have a relationship with the beneficiary by virtue of their participation in the misapplication of trust property itself. Their participation is at all times adverse to the interests of the beneficiary. There is no pre-existing trust for equity to compel the ancillary liability trustee to follow. Therefore, unlike a true trustee, equity can only hold an ancillary liability trustee to account as a wrongdoer but not as a true trustee. It follows from this analysis that only a true trustee can be a trustee for the purposes of section 21 of the Act.

In concluding that the Central Bank was not a trustee for the purposes of section 21 of the Act, Lord Sumption further points out, in the context of a knowing recipient that "no trust has been reposed in him. He does not have the powers or duties of a trustee...he may be accountable for any profit that would have been made or loss that would have been avoided...But all this is simply a measure of remedy. It does not make him a trustee or bring him within the provisions of the Limitation Act relating to trustees."

Fraudulent breach of trust to which the trustee was a party or privy

Dr Williams' case in the alternative was that if the Central Bank was not a trustee for the purposes of section 21 of the Act, it was nevertheless a party to a fraudulent breach of trust to which the trustee was a party or privy. Dr Williams' claim was that this enabled his claim to fall within the exception in section 21(1)(a) to the limitation period. Lord Sumption pointed out that the limitation period provided by section 21(3) (subject to section 21(1)) throughout its legislative history was intended to serve as a reprieve to trustees who previously faced harsh consequences of the equitable rule which held them to account without limitation of time. It therefore followed that the "exceptions must apply to the same persons as the rule" and that "the rule never applied to strangers who were subject only to an ancillary liability, and they have therefore never needed to be relieved."

The Court concluded that section 21(1)(a) did not apply to strangers to the trust, as the words "to which the trustee was a party or privy" are there to relieve trustees who had acted in good faith. Such words would have been "unnecessary if the provision applied to actions of strangers to the trust, because any fraudulent breach of trust must necessarily be one to which the trustee is party or privy."


The Supreme Court's decision draws a clear line of distinction between two classes of constructive trustees. The first being a trustee who is not formally appointed, yet lawfully holds and administers trust property, exercises and carries out the duties of a trustee and intends to do so for the benefit of the beneficiary. The second class of constructive trustees are those who have no relationship with the beneficiary before the occurrence of the transaction under which they receive trust property in breach of trust.

Banks are frequently the targets of claims that they were in Lord Sumption's view "ancillary liability trustees" because they received the proceeds of a fraud. As Banks have "deep pockets" they are a tempting target for such claims. This judgment provides Banks with the protection that any such claim must be brought within six years of the alleged breach of trust.


1 Williams v Central Bank of Nigeria [2014] UKSC 10.

2 CPR PD 6B 3.1(3)(a).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
21 Sep 2017, Seminar, London, UK

Is there such a thing as "energy law"? What do "energy lawyers" do? And why should it be of interest to anyone else?

28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.