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England and Wales Court of Appeal (Civil Division) Decisions

You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Companhia De Seguros Imperio v Heath (Rebx) Ltd & Ors [2000] EWCA Civ 219 (20 July 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/219.html
Cite as: [2001] WLR 112, [2000] EWCA Civ 219, [2000] CLC 1543, [2000] Lloyd's Rep PN 795, (2000-01) 3 ITELR 134, [2001] Lloyd's Rep IR 109, [2001] 1 WLR 112, [2000] 2 All ER (Comm) 787
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Case No: A3/1999/1182

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (Commercial Court)
Mr Justice Langley
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 20 July 2000

B e f o r e :
LORD JUSTICE WALLER
LORD JUSTICE CLARKE
and
SIR CHRISTOPHER STAUGHTON
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COMPANHIA DE SEGUROS IMPERIO

Appellant


- and -



HEATH (REBX) Ltd & Ors

Respondents


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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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J Flaux Esq QC, Mr A Fenton (instructed by Barlow Lyde & Gilbert for the Appellant)
P Gross Esq QC, Mr P Edey (instructed by Freshfields for the Respondents)
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Judgment
As Approved by the Court
Crown Copyright ©

LORD JUSTICE WALLER:
Introduction
This is an appeal on one aspect of a judgment of Langley J dated 30 March 1999, now reported at [1999] Lloyd's Rep IR 571. By his judgment Langley J found that all claims brought by the appellant ("Imperio") against the respondents ("Heaths") were statute-barred at the date the writ was issued.
It is possible to take the background directly from the judgment of Langley J.
"By a generally indorsed Writ of Summons issued on September 12 1995 Imperio made the following claims for damages against Heaths:
(1) Damages for breach of four written binding authority agreements made on various dates between May 1977 and April 1979 the breaches alleged being
(i) "the operation" of the binding authorities;
(ii) the failure to act with all reasonable skill and care in their operation;
(iii) the failure to act as authorised or instructed in connection with their operation;
(iv) the failure to protect Imperio's interests or to act in what Heaths honestly believed to be the best interests of Imperio in relation to the operation of the binding authorities;
(v) the failure to provide information relating to the authorities; and
(vi) "the arranging of reinsurance" for Imperio in respect of the risks written under the authorities.
(2) Damages for negligence and/or breaches of duty or duties "including but not limited to fiduciary duty or duties" in connection with the binding authorities, the breaches alleged being in exactly the same terms as the alleged breaches of contract.
(3) Damages for negligent misstatement and/or negligent misrepresentation and/or collateral warranty, relying in each case on statements made in various documents dated between 1976 and 1979 about the binding authorities and their operation.
Thus the claims made by Imperio relate to the operation by Heaths of various binding authorities entered into in the years 1977 to 1979. Imperio was one of a number of approximately 40 companies forming a Pool for each of which Heaths held underwriting authority and on behalf of which Heaths accepted the reinsurance of various long-term US casualty risks. Heaths also acted as brokers on behalf of cedants to broke business to the Pool.
During the years 1976-1979 over 1000 policies were issued in the name of the Pool. Imperio agreed to take a line of between 4% and 5% on any one risk. But Article 15 of the first of the four binding authorities agreed by Imperio provided that:
FRONTING AGREEMENT
It is understood and agreed that in the event of any Company/ies hereto being unable to appear on any document issued by [Heaths] or being precluded therefrom for any reason whatsoever, the remaining Companies hereto agree to assume their increased proportion of liability hereunder subject to [Heaths] arranging 100% reinsurance of such increased liability with those Companies who are not appearing on the document.
On 117 separate risks Imperio was used by Heaths to front for the rest of the members of the Pool (with the exception of one member, which would not agree to front or be fronted) and the fronted line was generally 96.7% of the risk. Imperio was only paid premium on its net line of 4% to 5% and was reinsured by the other members of the Pool. In 53 of the 117 cases Imperio was sent a policy for signature showing the fronted line and/or a cover note recording the reinsurance by the other Pool members of the fronted line.
It is the use of Imperio as a front which lies at the heart of the dispute, albeit it is far from being the only complaint which Imperio makes.
Heaths pleaded that Imperio's claims were statute-barred. The date (the cut-off date) six years prior to the issue of the Writ is September 12 1989."
The Issues before Langley J
By an order dated 20 May 1998 Rix J had ordered that the limitation issue should be tried as a preliminary issue on the basis of certain assumptions. Those assumptions included that (1) all the facts and matters pleaded by Imperio in the points of claim were true and correct; and (2) that Heaths deliberately concealed facts relevant to Imperio's claim within the meaning of section 32(1)(b) and/or section 32(2) of the Limitation Act 1980. In relation to those assumptions the judge said this:-
"As the hearing has progressed the two major questions which have emerged have been whether or not any limitation period applies at all to the claim made by Imperio on the basis of breach of fiduciary duty (questions of acquiescence or laches were expressly excluded from the scope of the preliminary issues ordered by Rix J) and whether the facts assumed to have been concealed by Heaths were or could with reasonable diligence have been discovered by Imperio outside the limitation period within the meaning of section 32 of the 1980 Act."
Langley J held that the facts assumed to have been concealed by Heaths could, with reasonable diligence, have been discovered by Imperio outside the limitation period within the meaning of section 32 of the 1980 Act. Thus he decided that such causes of action as Imperio had pleaded in relation to breach of contract and/or tort were statute-barred. In relation to that aspect no permission to appeal was sought. As to the claim for breach of fiduciary duty Langley J held that the six year limitation period applicable to causes of action in contract and tort should be applied by analogy in a like manner under section 36(1) of the Limitation Act 1980 and that that claim too was barred. It is on that aspect that permission to appeal was granted and on that aspect only that an appeal has been pursued.
The Limitation Act 1980
The material provisions of the 1980 Act read as follows:-
" 2. Time limit for actions founded on tort
An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.
5. Time limit for actions founded on simple contract
An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.
21. Time limit for actions in respect of trust property
(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action -
(a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
(b) 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.
(2) . . . .
(3) Subject to the preceding provisions of this section, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued.
For the purposes of this subsection, the right of action shall not be treated as having accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession.
(4) . . .
36. Equitable jurisdiction and remedies
(1) The following time limits under this Act, that is to say --
(a) the time limit under section 2 for actions founded on tort;
(b) the time limit under section 5 for actions founded on simple contract;
(c) . . . .
shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before 1st July 1940.
(2) Nothing in this Act shall affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise."
Submissions of Mr Flaux QC
We have received detailed skeleton arguments but in summary Mr Flaux's submissions can be put as follows.
(1). A claim for compensation for a dishonest breach of fiduciary duty is an equitable claim originally exclusive to the courts of equity.
(2). There is no reference to such a claim in the Limitation Act 1980 and thus there is no period of limitation applicable thereto unless it be by virtue of section 36.
(3). Section 36 did not require a court to engage in a hypothetical enquiry as to whether the court would have applied statutory time limits by analogy to the particular type of equitable relief. The section required an enquiry as to whether the courts of equity had in fact applied a relevant time limit by analogy to a dishonest breach of fiduciary duty.
(4). There was no case where the courts of equity had applied any time limit under the relevant Limitation Acts to a dishonest breach of fiduciary duty. He submitted in particular that Metropolitan Bank v Heiron (1880) 5 Ex.D.319 was not such a case or that if it was it could no longer be relied on in the light of A.-G. for Hong Kong v Reid [1994] 1 AC 324.
(5). If the construction of section 36 allowed the hypothetical enquiry to be made, then the authorities demonstrated that the courts of equity would not have applied the statutory time limits by analogy to a dishonest breach of fiduciary duty. If any analogy was to be found it was with section 21(1)(a) a fraudulent breach of trust to which no period of limitation applied.
(6). Thus the limitation provisions of the 1980 Act had no application to the claim for a dishonest breach of fiduciary duty pleaded in paragraph 14 of the points of claim.
Submissions of Mr Gross QC
Once again I shall seek to summarise the very detailed submissions.
(1). The claim for breach of fiduciary duty was in reality no more than a different way of putting the breach of contract and/or tortious claims and thus sections 2 and 5 applied to bar that cause of action.
(2). In the alternative, if the dishonest breach of fiduciary duty was a separate claim then it was a claim for equitable relief falling within section 36 and a claim to which the courts of equity would have applied by analogy the limitation periods set out in sections 2 and 5.
(3). The proper construction of section 36 did involve the court putting itself in the position that a court of equity would have placed itself prior to 1st July 1940. Thus even if authority were unavailable to establish that a court had in fact applied the limitation periods by analogy since they would have done so section 36 applied to bar a remedy.
(4). In fact there was authority for a court having applied by analogy the periods of limitation to a breach of fiduciary duty claim and thus even on the narrower construction of section 36 the claim should be barred. He relied on the Metropolitan Bank v Heiron (supra) and submitted that even if that case in one sense did not survive A.-G. for Hong Kong v Reid (supra) that did not affect the critical proposition for which he cited it i.e. the proposition that the courts of equity did apply statutes of limitation by analogy to claims for compensation for alleged dishonest breaches of fiduciary duty.
Preliminary thoughts
In relation to a pool arrangement, such as existed in this case, I admit that my starting point was that I would have expected the rights and duties to be defined by the contracts entered into or by terms implied as of necessity into the arrangements with each principal or possibly by reference to a duty of care in tort. I would have expected the obligations of fidelity of Heaths to one principal as opposed to another to be defined by those terms, either expressly or by implication. I would have expected that if damages were being claimed because of some failure by Heaths the cause of action to be relied on would be in contract or in tort.
I would also, it is right to say, have expected that if it could be alleged that during the currency of the agency the agent had used his position to make a profit or had obtained property of the principal, equity might have come to the assistance of the principal in supplying a proprietary remedy, but that for any claim to damages or compensation the essential question would be whether a breach of contract had taken place or possibly a breach of a duty of care in tort. I would not have expected in relation to a claim for damages or compensation for misconduct in the course of carrying out the pool arrangements, there would have been any necessity to turn to equity for help.
I am furthermore somewhat comforted in the above initial thoughts by the fact that if one turns to Bowstead & Reynolds on Agency 16th Edition, there are many paragraphs on the fiduciary duties of agents but first, there is no mention anywhere of equitable compensation or equitable damages as a remedy for breach of such duties, and second, in dealing with remedies, the distinction that is drawn is between "proprietary or personal remedies", a proprietary remedy being defined accurately as "an application of equity's main technique, of requiring the legal owner of money or other property to hold it as trustee". Some advantages of a proprietary remedy are also noted, one being that "the doctrine of laches will apply rather than the provisions of the Limitation Acts" [see paragraph 6-042]. Illustrations of circumstances where the statutes of limitation had been held not to apply are limited to circumstances where a proprietary remedy was established; Burdick v Garrick (1870) L.R. 5 Ch. App. 233, and North Atlantic Land and Timber Co v Watkins [1904] 1 Ch 242 [see paragraph 6-055].
If the position were that for breach of fiduciary duty a remedy in equitable compensation or equitable damages was available to which the statute of limitations would not apply, that would certainly have been a matter of great relevance, and one would have expected it to be mentioned. Furthermore, it would be somewhat surprising that if it was right it was not a point which had been established by some authority or another.
Mr Flaux would submit that these first thoughts are misguided. He submitted by reference to the House of Lords decision in Nocton v Lord Ashburton [1914] AC 932 and more recently the Court of Appeal decision in Bristol & West Building Society v Mothew [1998] Ch.1 that there are certain duties that an agent will owe which are fiduciary duties strictly so called, (primarily a duty of fidelity and loyalty) which arise independently of contract. He further submitted by reference to those authorities that equity did, in circumstances where the common law would not have provided a remedy, grant "equitable compensation" or possibly "equitable damages" in relation to breaches of such fiduciary duties.
The passages on which Mr Flaux relied in Nocton were in the speech of Viscount Haldane, the first at p.956 where he said
"When, as in the case before us, a solicitor has had financial transactions with his client, and has handled his money to the extent of using it to pay off a mortgage made to himself, or of getting the client to release from his mortgage a property over which the solicitor by such release has obtained further security for a mortgage of his own, a Court of Equity has always assumed jurisdiction to scrutinise his action. It did not matter that the client would have had a remedy in damages for breach of contract. Courts of Equity had jurisdiction to direct accounts to be taken, and in proper cases to order the solicitor to replace property improperly acquired from the client, or to make compensation if he had lost it by acting in breach of a duty which arose out of his confidential relationship to the man who had trusted him. This jurisdiction, which really belonged to the exclusive jurisdiction of the Court of Chancery, had for the client the additional advantage that, as illustrated by the judgment of Lord Hatherley L.C. in Burdick v Garrick (1870) L.R. 5 Ch. 233, the statute of limitations would not apply when the person in a confidential relationship had got the property into his hands." (my emphasis)
Further, at p. 958 Viscount Haldane said:-
"My Lords, the conclusion at which I have arrived is that this action ought properly to have been treated as one in which the plaintiff had made out a claim for compensation either for loss arising from misrepresentation made in breach of fiduciary duty or for breach of contract to exercise due care and skill. The main head of claim, that relating to the mortgage of 1904, is barred in equity by the acquiescence of the plaintiff, and at law by the statute of limitations."
Millett LJ's judgment in Mothew also supports the proposition that fiduciaries may owe duties independent from contract but the following points appear from that judgment:-
1. The expression "fiduciary duty" is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties; (16C-D) breach of duty by a fiduciary is not necessarily a breach of fiduciary duty (16-17);
2. Equitable compensation for a breach of duty of skill and care resembles common law damages, and there is no reason why common law rules of causation, remoteness and measure of damage should not be applied by analogy. It should not be confused with equitable compensation for breach of fiduciary duty which may be awarded in lieu of rescission or restitution, (17G-H);
3. That left those duties which are "special to fiduciaries and which attract those remedies which are peculiar to the equitable jurisdiction and primarily restitutionary or restorative rather than compensatory" (18A);
4. The fiduciary duty arises from the relationship of trust and confidence and its nature is primarily one of loyalty, but, acting for two parties to the knowledge of both does not mean that there is no fiduciary obligation owed. The obligation to act in good faith, not to act intentionally at the expense of one to the benefit of the other and not to be in a position of actual conflict remains (19);
5. No breach of fiduciary duty was established and thus the remedy for such breach was not in issue (24E). The remedy, if any, as I understand it, would have been primarily restitutionary or restorative rather than compensatory.
I accept that fiduciary duties do arise independently of contract and that in situations where an agent is acting for two principals, as in the instant case, one principal has a cause of action for an intentional breach of fiduciary duty independent from causes of action in contract or in tort. I also accept that historically equity might have provided either remedies that were restorative or remedies that were compensatory. Thus I accept that sections 2 and 5 of the 1980 Act are not directly applicable and would reject the first submission of Mr Gross.
I also accept, as did Mr Gross, that there is no reference in the Limitation Act 1980 to breach of fiduciary duty or dishonest breach of fiduciary duty. Thus the answer to this appeal turns on whether by section 36, sections 2 or 5 are to be applied by analogy.
Construction of section 36
A claim to "equitable damages" or "equitable compensation" is a claim to equitable relief as Mr Flaux accepted. Thus section 36 applies to it. Furthermore, in my view, the court is not looking to see whether a limitation period was actually applied to a dishonest breach of fiduciary duty by analogy before 1 July 1940, but looking to see whether it would have been applied. It might, for example, have been so obvious that in a claim for "equitable damages" equity would follow the law and apply the statutes of limitation by analogy that one could not in fact find an authority precisely in point. What the court must do is act "in like manner" to a court sitting prior to 1 July 1940.
Would a court of equity have applied statutes of limitation by analogy?
The question seems to me to be this. Would a court of equity have applied limitation by analogy to a claim for equitable compensation or damages for a dishonest breach of fiduciary duty?
In the House of Lords decision in Knox v Gye (1872) LR 5 HL 656 at 674 Lord Westbury summarised the position in the following way:-
"For where the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the statute of limitations a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation. This is the meaning of the common phrase, that a Court of Equity acts by analogy to the statute of limitations, the meaning being, that where the suit in Equity corresponds with an action at law which is included in the words of the statute, a Court of Equity adopts the enactment of the statute as its own rule of procedure. But if any proceedings in Equity be included within the words of the statute, there a Court of Equity, like a Court of Law, acts in obedience to the statute."
Spry Equitable Remedies Fifth Edition p. 419 says:-
". . . a statute of limitations may be raised by analogy in defence to a claim that is brought in the exclusive jurisdiction of a court of equity, such as in proceedings for the enforcement of a trust, rather than in its auxiliary or concurrent jurisdictions. Here there is no question of merely recognising and giving effect to an abrogation of a right at law or of acting in obedience to a statute that relates to rights at law. Hence it must be seen first whether there is a special statutory provision that affects directly, whether expressly or by implication, the particular equitable right that is in question. But if there is no such provision, the court may decide that the material equitable right is so similar to legal rights to which a limitation period is applicable that that limitation period should be applied to it also. In this latter case the limitation period is said to be applied by analogy, and the principles that govern cases of this kind are that if there is a sufficiency close similarity between the exclusive equitable right in question and legal rights to which the statutory provision applies a court of equity will ordinarily act upon it by analogy but that it will so act only if there is nothing in the particular circumstances of the case that renders it unjust to do so. What is regarded by courts of equity as a sufficiently close similarity for this purpose involves a question of degree, and reference must be made to the relevant authorities. The basis of these principles is that, in the absence of special circumstances rendering this position unjust, the relevant equitable rules should accord with comparable legal rules."
Mr Gross referred us to various authorities in which equity had applied the statutes by analogy and some where it had not, and suggested that the dividing line was between those cases where the court was giving remedies against trustees or fiduciaries dissimilar from remedies at law e.g. a proprietary or restorative remedy against someone already a trustee or a fiduciary, and those in which it was providing a remedy analogous to that which would have been available at law. He submitted the distinction had nothing to do with whether equity was exercising its "exclusive" jurisdiction. The authorities included Hovenden v Lord Annesley (1806) 2 Sch & Lef 607; Burdick v Garrick (1870) LR 5 Ch 233; Friend v Young [1897] 2 Ch 421 and North American Land v Watkins [1904] 1 Ch 242 (where many other authorities were reviewed).
In my view the authorities cited by Mr Gross and the broad principles set out in the above quotations support the submission that equity would have taken the view that it should apply the statute by analogy to a claim for damages or compensation for a dishonest breach of fiduciary duty. I say that because what is alleged against Heaths as giving rise to the dishonest breach of fiduciary duty are precisely those facts which are also relied on for alleging breach of contract or breach of duty in tort. It is true that there is an extra allegation of "intention" but that does not detract from the fact that the essential factual allegations are the same. Furthermore, the claim is one for "damages". The prayer for relief has now been amended with our leave to add a claim for "equitable compensation", but the reality of the claim is that it is one for damages, the assessment of which would be no different whether the claim was maintained as a breach of contract claim or continued simply as a dishonest breach of fiduciary duty claim.
Mr Flaux however sought to persuade us that the above conclusion was fallacious. His argument was that the line to be drawn between those cases where equity did apply the statutes of limitation by analogy and those where it did not, was defined by the question whether equity was exercising its "exclusive" jurisdiction or its "concurrent" jurisdiction. In the former case, so Mr Flaux submitted, the court would not apply the statutes by analogy, and in the latter it would. Thus, he submitted, one would find no authority where the court was exercising its exclusive jurisdiction where the statute had been applied by analogy.
This does not seem to accord with the above quotation from Spry, but for this distinction he placed reliance on the following. First he relied on the passage in Viscount Haldane's speech in Nocton already quoted in which he suggested that the main head of claim "is barred in equity by the acquiescence of the plaintiff, and at law by the statute of limitations." He submitted that Viscount Haldane was drawing a distinction between a claim within equity's exclusive jurisdiction and a claim within its concurrent jurisdiction. As Langley J pointed out, the difficulty for Mr Flaux was that limitation was not in issue; limitation by analogy was not under consideration and thus Knox v Gye was not cited; furthermore, previously in his speech Viscount Haldane had referred to the statutes of limitation not applying "when the person in a confidential relationship had got the property in his hands."
Second, Mr Flaux relied on the judgment of Millett LJ in Paragon Finance v Thakerar & Co [1999] 1 All ER 400, in which Millett LJ explained how the statute of limitations would be applied by analogy so as to bar a proprietary claim against a "constructive trustee" (improperly so called as he would say) alleged to be such by virtue of his conduct where no pre-existing fiduciary relationship existed; whereas it would not be applied in relation to a proprietary claim against a constructive trustee (properly so called as he would say) where the constructive trusteeship flowed from a pre-existing fiduciary or trust relationship. In my view, it is fundamentally to misunderstand the judgment of Millett LJ to suggest that he would have approved the view that a claim for damages brought against a fiduciary, even alleging a dishonest breach of that duty, would be free from limitation altogether. In my view, Millett LJ's treatment of Nelson v Rye [1996] 2 All E.R. 186 demonstrates that point and demonstrates beyond peradventure that the question whether equity was exercising its exclusive as opposed to its concurrent jurisdiction does not supply the definitive answer as to whether equity applied the statute by analogy. In Nelson v Rye Laddie J held that claims to an account in relation to a fiduciary were outside the scope of the Limitation Act 1980. But he did not consider section 36 and whether there should be any application of the statutes of limitations by analogy. Of that decision Millett LJ said this in Paragon at p. 415h:-
"The law on this subject has been settled for more than a hundred years. An action for an account brought by a principal against his agent is barred by the statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he received: see Burdick v Garrick (1870) LR 5 Ch App 233, Knox v Gye (1872) LR 5 HL 656 and Re Sharpe, Re Bennett, Masonic and General Life Assurance Co v Sharpe [1892] 1 Ch 154. A claim for an account in equity, absent any trust, has no equitable element; it is based on legal, not equitable rights: see How v Earl Winterton [1896] 2 Ch 626 at 639 per Lindley LJ. Where the agent's liability to account was contractual equity acted in obedience to the statute: see Hovenden v Lord Annesley (1806) 2 Sch & Lef 607 at 631 per Lord Redesdale. Where, as in Knox v Gye, there was no contractual relationship between the parties, so that the liability was exclusively equitable, the court acted by analogy with the statute. Its power to do so is implicitly preserved by s 36 of the 1980 Act (re-enacting in simpler terms the tortuous provisions of s2(2) and (7) which were subjected to critical analysis by Megarry V-C in Tito v Waddell (No 2), Tito v A.-G. [1977] 3 All ER 129 at 248-250, [1977] Ch 106 at 250-252)."
Thus Millett LJ made clear that even where equity was acting in its exclusive jurisdiction the statute was applied by analogy.
Metropolitan Bank v Heiron
This case in my view presents a further difficulty for Mr Flaux. The case was concerned with the recovery of a bribe paid to somebody in a fiduciary relationship with the plaintiff. The Court of Appeal composed of James, Brett and Cotton LJJ concluded that the fiduciary did not hold the bribe in trust for his principal. The court was of the view that the principal could recover the bribe from the fiduciary but that the action would be one for "equitable debt" (as per James LJ at p. 323) or "a suit founded on breach of duty or fraud" (as per Cotton LJ). The court applied the statutes of limitations by analogy and thus held that the plaintiff's claim was statute-barred.
In A.-G. for Hong Kong v Reid Lord Templeman disapproved Metropolitan Bank v Heiron in so far as it decided that a bribe was not held on trust for the principal. In that context Lord Templeman commented at p. 335F-G as follows:-
"The decision in Metropolitan Bank v Heiron is understandable given the finding that the fraud was made known to the company more than six years before the action was instituted. But the same result could have been achieved by denying an equitable remedy on the grounds of delay or ratification."
That comment may be understandable in the context of holding that a bribe is held on trust, but of greater relevance, nothing in Lord Templeman's speech indicates that there was anything surprising in the Court of Appeal in Metropolitan Bank v Heiron applying by analogy the statutes of limitation to a claim founded on breach of duty for fraud in the context of a fiduciary relationship. In my view, accordingly, Mr Gross' submission is right that this is an example of the court of equity actually applying statutes of limitation by analogy to a dishonest breach of fiduciary duty, where no proprietary remedy is claimed.
Conclusion
I have not dealt with some of the authorities as fully as the judge and no disrespect to the arguments of counsel is intended. But, we have before us both his decision dealing with the authorities in a way on which I could not improve and the decision of Mr Jules Sher QC sitting as a deputy judge of the High Court, Chancery Division in Coulthard v Disco Mix Club Ltd & Ors [1999] 2 All ER 457 where, prior to the decision of Langley J, he had come to the same conclusion, albeit it is fair to say that Nocton was not cited to him. At p. 478 the deputy judge summarised the authorities, including Knox v Gye, in the following propositions:-
"First, where the court of equity was simply exercising a concurrent jurisdiction giving the same relief as was available in the court of law the statute of limitation would be applied. But, secondly, even if the relief afforded by the court of equity was wider than that available at law the court of equity would apply the statute by analogy where there was `correspondence' between the remedies available at law or in equity."
He continued at p. 478d-f as follows:-
"Mr Bate argues that the court of equity will apply the statute by analogy only where the equitable remedy is being sought in support of a legal right or the court of equity is being asked to decide a purely legal right, and he cites passages from Hicks v Sallit (1854) 3 De G M & G 782, 43 ER 307 and Hovenden v Lord Annesley (1806) 2 Sch & Lef 607. I have no doubt that the principles of application by analogy to the statute (or, in obedience to the statute, as Lord Redesdale LC preferred to describe it in its application to the facts of Hovenden's case), are quite apposite in the situations envisaged by Mr Bate. But, in my judgment, they have a much wider scope than that: one could scarcely imagine a more correspondent set of remedies as damages for fraudulent breach of contract and equitable compensation for breach of fiduciary duty in relation to the same factual situation, namely, the deliberate withholding of money due by a manager to his artist. It would have been a blot on our jurisprudence if those selfsame facts gave rise to a time bar in the common law courts but none in the court of equity."
It seems to me that much the same could be said in relation to the fraudulent breach of contract and equitable claim for breach of fiduciary duty in this case all based on the same facts.
It is true that Nelson v Rye might have been said to have supported Mr Flaux but that decision has been comprehensively demolished by Millett LJ in Paragon and in any event was a decision in which section 36 was not referred to. The decision of Ebsworth J in Kershaw v Whelan (No 2) unreported, January 23 1997, was also a decision in Mr Flaux's favour but he did not feel able to rely on its reasoning to support his argument. In my view the reasoning of the judge in this case and that of Mr Jules Sher QC in Coulthard demonstrate that Kershaw v Whelan (No 2) was wrongly decided and should be overruled.
In my view the appeal should be dismissed.

Sir Christopher Staughton:
I agree that this appeal should be dismissed for the reasons given by Waller LJ. It seems to me unfortunate that the Plaintiffs, an insurance company in Portugal, should have to endure a prolonged and expensive contest as to the rules of equity as they were sixty years ago and more. And all that for the purpose of determining whether claims that arose before September 1989 are time-barred.
It is not obvious to me why it is still necessary to have special rules for the limitation of claims for specific performance, or an injunction, or other equitable relief. And if it is still necessary to do so, I do not see any merit in continuing to define the circumstances where a particular claim will be time-barred by reference to what happened, or might have happened, more than sixty years ago. If a distinction still has to be drawn between common law and equitable claims for limitation purposes, I would hope that a revised statute will enact with some precision where that distinction should be drawn, rather than leave it to the product of researches into cases decided long ago.
LORD JUSTICE CLARKE:
1. I agree that this appeal should be dismissed for the reasons given by Waller LJ. I add some observations of my own because of the curious nature of the exercise. I entirely agree with Sir Christopher Staughton that it should not be necessary in the year 2000 to decide whether a claim is time barred by reference to what a court of equity either did or would have done more than sixty years ago.
2. I agree with Waller LJ that the outcome of the appeal turns on the correct application of section 36(1) of the Limitation Act 1980 to the facts of this case. The time limits in sections 2 and 5 of the Act do not apply directly. The claim with which the appeal is concerned is based on alleged breaches of fiduciary duty on the part of the defendant to act in what it honestly believed to be the best interests of the plaintiff. It was originally described in the prayer to the points of claim as a claim for damages. Detailed analysis of the position has revealed that the basis of the claim is equitable and that the claim is one for compensation. It was, however, no doubt described as a claim for damages because that is what, in truth, it is. As Waller LJ has put it, the reality of the claim is that it is a claim for damages which would be assessed in the same way as a claim for damages at common law. As I see it, it is a claim for equitable compensation, but not the kind of equitable compensation which may be awarded in lieu of rescission or specific restitution.
3. As a claim for equitable relief it falls within the expression "other equitable relief" in section 36(1) of the 1980 Act, which thus provides, so far as relevant, that the time limits in sections 2 and 5 shall not apply
"except in so far as any such time limit may be applied by the court by analogy in like manner as the corresponding time limit under any enactment repealed by the Limitation Act 1939 was applied before 1st July 1940".
It is not in dispute that the Limitation Act 1939 repealed statutes which contained similar provisions to sections 2 and 5 of the 1980 Act. It follows, as I see it, that those time limits may be applied by analogy "in like manner" as those time limits were applied.
4. I agree with Waller LJ that that cannot mean that it is necessary to find an identical case decided before 1940 in which a court of equity in fact applied a previous statute by analogy. The section cannot, to my mind, have been intended to be read so narrowly. It must mean that the court is to have power to apply sections 2 and 5 by analogy in the kind of case in which equity would have done the same. In such a case the court will be applying the provision by analogy "in like manner as the corresponding time limit ... was applied before 1st July 1940". The correct approach is to identify if possible the principle which the courts of equity adopted and to apply a similar principle now.
5. I would certainly have expected a court of equity to apply the common law time limits by analogy on the facts of this case. As Waller LJ has pointed out, and as the judge demonstrated by a detailed analysis of the points of claim, the essential nature of the pleaded case is the same whether it is put as damages for breach of contract, damages for breach of duty or damages (or compensation) for breach of fiduciary duty. The only additional element is the defendant's alleged intention, which on the facts here adds nothing of substance to the claim for damages. Indeed it would be quite unnecessary to include this claim if it were not thought necessary to do so in order to advance the time bar argument.
6. In Coulthard v Disco Mix Club Ltd [1999] 2 All ER 457 at 478 Mr Jules Sher QC said this (in a passage already quoted by Waller LJ):
"... one could scarcely imagine a more correspondent set of remedies as damages for fraudulent breach of contract and equitable compensation for breach of fiduciary duty in relation to the same factual situation, namely the deliberate withholding of money due by a manager to his artist. It would have been a blot on our jurisprudence if those selfsame facts gave rise to a time bar in the common law courts but none in the court of equity".
In my opinion precisely the same is true on the facts of this case. If the claims for damages for breach of contract and duty are time barred, as it is agreed that they are, no rational system of law should permit the plaintiff to proceed with a claim for damages which is essentially based on the same facts, merely because it is strictly a claim for compensation in equity.
7. As I listened to the argument, it seemed to me that there is a danger of over-analysing questions of this kind. To my mind the position is put succinctly and correctly in the passage from the fifth edition of Spry on Equitable Remedies which Waller LJ has quoted. Spry said (at p 419):
"... it must be seen first whether there is a special statutory provision that affects directly, whether expressly or by implication, the particular equitable right in question. But if there is no such provision, the court may decide that the material equitable right is so similar to legal rights to which a limitation provision is applicable that that limitation period should be applied to it also. In this latter case the limitation period is said to be applied by analogy, and the principles that govern cases of this kind are that if there is a similarity between the exclusive equitable right in question and legal rights to which the statutory provision applies a court of equity will ordinarily act upon it by analogy but that it will so act only if there is nothing in the particular circumstances of the case that renders it unjust to do so. What is regarded by the courts of equity as a sufficiently close similarity for this purpose involves a question of degree, and reference must be made to the relevant authorities. The basis of these principles is that, in the absence of special circumstances rendering this position unjust, the relevant equitable rules should accord with comparable legal rules.
8. The authorities to which we were referred and which have been considered in detail by Waller LJ seem to me to support the approach set out in that passage. The application of that approach to the facts of this case leads to only one conclusion. To adopt the words of Spry, there is a sufficiently close similarity between the exclusive equitable right in question, namely the claim for compensation for breach of fiduciary duty, and the legal rights to which the statute applies, namely the claim for damages for breach of contract founded on simple contract and the claim in tort for damages for breach of duty, that a court of equity would (and will) ordinarily act on the statute of limitation by analogy. There is nothing in the particular circumstances of the case to make it unjust to do so. On the contrary, it is just to do so because there is no reason why, if the claims for damages for breach of contract and tort are time barred, the claim for damages for breach of fiduciary duty should not be time barred also. As Spry put it, the relevant equitable rules should accord with the comparable legal rules.
9. For these reasons and those given by Waller LJ, I too would dismiss the appeal.

Order: No costs ordered; consent order to be made up by counsel and submitted to the associate.
(Order does not form part of approved judgment.)

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