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Cite as: [2017] CP Rep 3, [2017] 2 WLR 1054, [2017] 1 P &CR DG8, [2017] Ch 273, [2016] WLR(D) 513, [2016] EWCA Civ 1004, [2017] PNLR 4

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		Neutral Citation Number: [2016] EWCA Civ 1004
		Case No: A3/2015/0548

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice David Richards

[2014] EWHC 3080 (Ch)

Royal Courts of Justice
Strand, London, WC2A 2LL

11 October 2016

B e f o r e :

SIR TERENCE ETHERTON, MASTER OF THE ROLLS
LORD JUSTICE PATTEN
and
LORD JUSTICE SALES
____________________

Between:

	STUART CREGGY	Appellant/ Defendant/
	- and -
	(1) JEFFREY BARNETT (2) PETER BARNETT	Respondents/ Claimants

____________________

Christopher Lundie (instructed by Brian Harris & Co) for the Appellant
Steven Thompson QC and Matthew Watson (instructed by DWFM Beckman) for the Respondents
Hearing date : 30 June 2016
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Patten :

This is an appeal by the defendant, Mr Stuart Creggy, against an order of David Richards J dated 29 January 2015. The judge ordered Mr Creggy to pay to the claimants the sum of US$2,305,795.68 including interest as equitable compensation for his breach of fiduciary duty in transferring in 1998 approximately US$1.2m to a Maltese lawyer, Dr Patrick Spiteri. The monies came from the Swiss bank accounts of two Liberian companies, Pound Investments Inc ("Pound") and Glacier Investments Inc ("Glacier"), which, together with other offshore structures, were established by Mr Creggy for the purpose, as the judge found, of tax avoidance.

The claimants are brothers who emigrated to Canada and established there and overseas a number of successful restaurant businesses. Mr Creggy was at the time practising as a solicitor and specialised in setting up and managing offshore companies used for the holding and investment of clients' funds. The claimants were clients of Mr Creggy from sometime in the mid-1970's until about 2002. He incorporated Pound and Glacier on behalf of the claimants (one for each brother) with bank accounts in Switzerland. The directors of the two companies were in Gibraltar and the shares were held in bearer form. There was therefore no visible link between the claimants and the companies although, as the judge found, there was no doubt that they were the beneficial owners of the companies.

Once established, funds were routed from the claimants or their businesses (sometimes through the client account of Mr Creggy's firm, Talbot Creggy) to the Swiss bank accounts. The judge found that, once in these accounts, any further movement of funds was controlled by Mr Creggy until the monies were eventually paid out to the claimants or their order.

The claimants alleged and the judge found that the transfer of the US$1.2m to Dr Spiteri was made without their knowledge or authority and in breach of fiduciary duty. Their pleaded claim was that they came to trust Mr Creggy as a solicitor and a friend in relation to his dealings with the monies in the Swiss accounts.

In January 2012 the claimants issued a claim against Mr Creggy seeking an account and inquiry in relation to his management of the Swiss accounts. In particular, they alleged that the transfer of the monies to Dr Spiteri was unauthorised. David Richards J conducted a detailed analysis of the various transactions under which monies were paid into and out of the Swiss accounts. He rejected the claimants' allegation that they relied upon Mr Creggy to invest the funds on their behalf and found that they continued throughout to take a careful and detailed interest in the funds and their application. Mr Creggy's role was to ensure that the funds were transferred to various investment and other projects in accordance with the claimants' directions and, in the meantime, to hold the funds in the Swiss accounts. But he held that the transfer of the US$1.2m to Dr Spiteri was unauthorised and a breach of Mr Creggy's duties as signatory of the bank accounts of Pound and Glacier.

Most of the monies transferred to the Swiss accounts came from the claimants' trading companies and businesses in Canada and elsewhere. They were not therefore funds in which the claimants had any pre-existing beneficial interest. In the particulars of claim it was pleaded that all sums received by Talbot Creggy for onward transmission to the accounts of Pound and Glacier or which were paid directly into the Swiss accounts were held by Mr Creggy on either an express or resulting trust for the claimants. But that plea was obviously unsustainable and the judge rejected it as an accurate description of the legal relationship between the parties:

"71. Funds provided by or for the claimants were paid, often to the client account of Talbot Creggy, so that they could be paid into and held, pending further application, in the Swiss bank accounts of the off-shore companies. Until the transfer of funds to Dr Spiteri in July 1998, I am satisfied that full effect was given to these arrangements and all sums were paid into accounts of the off-shore companies. The funds were not, save while passing through Talbot Creggy's client account, held by Mr Creggy as trustee for the claimants nor were the funds in the Swiss bank accounts held on trust for Mr Creggy as trustee for the claimants.

72. There was exploration in the course of the oral evidence as to whether, in addition to owning the off-shore companies, the claimants were themselves the beneficial owners of the funds held in the Swiss bank accounts. This was an issue left open on the statements of case and was specifically raised by Mr Lundie in his opening on behalf of Mr Creggy. It is fair to say that the claimants found it difficult to see the difference. Their view was that if they owned the companies, as they did, they also owned the funds. As a broad commercial matter, as opposed to a legal matter, that was no doubt true. The companies had no liabilities and the claimants as the sole owners of the companies could direct the application of the funds as they saw fit. But I am satisfied that the funds were, as was intended, the property of the companies. The funds, and any income or other return on them, did not in law belong to the claimants. There was no evidence, for example the claimants' Canadian tax returns, to show that the income of Pound and Glacier was treated as the income of Jeffrey Barnett and Peter Barnett respectively. It is impossible to see that a pure nominee relationship would achieve anything beyond a simple cloak of deception.

73. Funds held in the bank accounts of Pound, Glacier and other off-shore companies were therefore legally and beneficially held by those companies. They were not held by Mr Creggy. He was not a trustee of those funds. He had a power to control the disbursement of funds by virtue of being an authorised signatory on the accounts. He owed fiduciary duties in respect of the exercise of his powers as a signatory and would be liable for any misuse by him of those powers. He was in a similar position to a director of a company having powers of disposal of the company's funds or other assets."

In these circumstances, the judge refused to order an account against Mr Creggy in respect of payments made before July 1998. He had on the evidence never held the funds himself save to the extent that they passed through the client account of Talbot Creggy en route to the Swiss accounts. But there was in any case no evidence to establish that there were any significant unauthorised payments in that period beyond those made to Dr Spiteri.

The judge, having found that the transfer of the US$1.2m was unauthorised and a breach of fiduciary duty, assessed equitable compensation in that amount. An attempt was made by Mr Lundie, on behalf of Mr Creggy, to raise a defence based on the reflective loss principle given the judge's finding that the monies in the Swiss accounts belonged to Pound and Glacier rather than to the claimants. But the judge held that the reflective loss principle turned on factual issues which had not been explored at the trial and declined to re-open the trial for the purpose of investigating them. He therefore rejected that defence and we are not concerned with the issue as part of this appeal.

Mr Creggy's other defence to the claim for equitable compensation was based on the Limitation Act 1980 ("the 1980 Act"). It was common ground before the judge that Mr Creggy was a trustee within the meaning of s.21 of the 1980 Act. This adopts the definition of "trustee" in s.68(17) of the Trustee Act 1925 which includes implied and constructive trustees. Since Mr Creggy had not misappropriated trust property for his own use or been party to a fraud or fraudulent breach of trust, the claim was therefore subject to the six-year limitation period for breach of trust contained in s.21(3). The cause of action in respect of the US$1.2m transferred to Dr Spiteri accrued in mid-1998 so that the 2012 claim was long out of time. But the claimants rely on a letter written in 2006 as constituting an acknowledgement of the claim for the purposes of s.29(5). This provides:

"Subject to subsection (6) below, where any right of action has accrued to recover—

(a) any debt or other liquidated pecuniary claim; or

(b) any claim to the personal estate of a deceased person or to any share or interest in any such estate;

and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it the right shall be treated as having accrued on and not before the date of the acknowledgment or payment."

The letter of 21 July 2006 was addressed to Jeffrey Barnett and stated:

"I understand [this is a misprint for undertake] in the event of your funds currently held by Dr Patrick Spiteri in Malta, not being returned to you by the end of July 30^th, 2008 to procure that my estate acknowledges a debt to you of $961,416 (US).

This letter is sent to you so that you should have protection in the event of my death prior to that date.

This debt will of course only come into effect on my death and at no time prior and the debt will not bear interest."

No similar letter was sent to Peter Barnett (whose company was Glacier) and it is accepted that his claim is therefore statute-barred. But Mr Creggy disputes the effect of the 21 July letter as an acknowledgement on two grounds. The first is that the letter can only operate as an acknowledgement under s.29(5) if the claim is one to recover a debt or other liquidated pecuniary claim. This does not include, he submits, the present claim for equitable compensation which is unliquidated. The second ground is that the letter, on a fair and proper reading, does not acknowledge the claim. It does no more than to undertake that, in the event that the monies are not returned by Dr Spiteri within the time specified in the letter, he will procure that his estate will acknowledge a debt in that amount to Mr Barnett.

The judge dismissed both arguments almost out of hand. In relation to the first, he said:

"I would certainly accept that where a claim for equitable compensation, like a claim for damages at common law, requires quantification and assessment applying principles of law and equity, it would not fall within these words. But when the claim is for an amount paid out in breach of duty, that amount being known or being capable of straightforward calculation on the evidence, I do not understand why it is not a liquidated pecuniary claim."

But he gave Mr Creggy permission to appeal on the acknowledgement point and Lewison LJ extended that permission to include the further issue of whether the letter could constitute an acknowledgement of the claim when it refers only to a debt of US$961,416. It is common ground that the sum paid to Dr Spiteri out of the Swiss account of Pound (Jeffrey Barnett's company) was US$1,192,836.

"Liquidated pecuniary claim"

The reference in s.29(5) to "a debt or other liquidated pecuniary claim" is of comparatively recent origin. It appeared for the first time in s.23(4) of the Limitation Act 1939 ("the 1939 Act") which for the first time codified the law in relation to the circumstances in which an acknowledgement of the debt or other claim can set time running again for Limitation Act purposes. Statutory limitation periods can be traced back to the 17^th century. The Limitation Act 1623 prescribed limitation periods of six-years for actions founded on a simple contract or tort with the exception of trespass and slander which ceased to be actionable after four and two years respectively. But until the passing of the 1939 Act there was no comprehensive statute governing the limitation of actions or any statutory provisions at all which dealt exhaustively with acknowledgement. The 1623 Act covered the principal common law actions based on contract and tort with the exception of actions in debt on a bond or other specialty which were governed by a 20-year limitation period under the Civil Procedure Act 1833. Other limitation periods were imposed by different statutes. The Real Property Limitation Acts 1833 and 1874 dealt with proceedings relating to land, and claims against trustees were subject to a six-year limitation period under the Trustee Act 1888 except where the claim was based on fraud or was one to recover trust property in the trustee's hands or which had been converted to his use.

Section 8(1) of the Trustee Act 1888 provided:

"(1) In any action or other proceeding against a trustee or any person claiming through him, except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use, the following provisions shall apply: —

(a) All rights and privileges conferred by any statute of limitations shall be enjoyed in the like manner and to the like extent as they would have been enjoyed in such action or other proceeding if the trustee or person claiming through him had not been a trustee or person claiming through him:

(b) If the action or other proceeding is brought to recover money or other property, and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit of and be at liberty to plead the lapse of time as a bar to such action or other proceeding in the like manner and to the like extent as if the claim had been against him in an action of debt for money had and received, but so nevertheless that the statute shall run against a married woman entitled in possession for her separate use, whether with or without a restraint upon anticipation, but shall not begin to run against any beneficiary unless and until the interest of such beneficiary shall be an interest in possession."

"Trustee" was defined in s.1(3):

"(3) For the purposes of this Act the expression "trustee" shall be deemed to include an executor or administrator and a trustee whose trust arises by construction or implication of law as well as an express trustee, but not the official trustee of charitable funds."

The 1888 Trustee Act contains no express provisions which deal with acknowledgement. Until the 1939 Act there were no statutory provisions dealing with the acknowledgement of simple contract debts and, largely as a result of judge-made law, an acknowledgement of an existing contract debt had the effect of starting time running again on the basis that it created a new contract and so took the case out of the statute. Statutory intervention in relation to the principle of acknowledgement was limited to s.1 of the Statute of Frauds Amendment Act 1828 which required an acknowledgement to be in writing and signed. The precise juridical basis of an effective acknowledgement was a matter of some dispute throughout the 19^th century. But in the Fifth Interim Report of the Law Revision Committee (Cmd. 5334) (published in December 1936) which led to the passing of the 1939 Act the Committee set out what they considered to be the relevant established law:

"There has been considerable difference of judicial opinion upon the question whether the promise, implied or express, created a new debt giving rise to a new cause of action, or whether it revives the old debt. If the first of these two views were the correct one, the acknowledgement would not, in strictness, take the old debt out of the operation of the Statute at all. The old debt would become irrecoverable after the Statute had run, in spite of the acknowledgement. But there are other and more weighty objections to the first view which are stated by Lord Sumner in his judgment in Spencer v Hemmerde [[1922] 2 AC 507] and need not be repeated here. The conclusion that he came to after examining the authorities was that the new promise revives the old debt but does not create a new one, and this we think must now be regarded as a correct statement of the law.

But whichever of the two views be taken, it is now well settled (1) that a written unconditional promise to pay a debt on request given within six years before action brought is sufficient to defeat a defence based upon the Limitation Act, 1623; (2) that such a promise is implied in a simple acknowledgement of the debt; (3) that if the promise be one to pay at a future time, or subject to the performance of some condition, the Statute will be available as a defence until that time arrives, or the condition is performed, as the case may be; (4) when the acknowledgement is coupled with expressions that negative a promise to pay it is ineffective altogether; and (5) that it is immaterial whether the acknowledgement be given before or after the Statute has run."

Some other limitation statutes did contain provisions on acknowledgement relevant to the types of action with which they were concerned. Section 14 of the Real Property Limitation Act 1835 extended time in the case of an acknowledgement of title and s.5 of the Civil Procedure Act 1833 dealt with written acknowledgements of specialty debts. But in relation to actions against trustees the possibility of time being extended by an acknowledgement of liability turned on the words "in the like manner and to the like extent as if the claim had been against him in an action of debt for money had and received" which are contained in s.8(1)(b).

The effect of these words was considered by this Court in Re Somerset [1894] 1 Ch 231 where the trustees of a settlement had committed an innocent breach of trust by investing trust money in a loan secured by a mortgage on a property of insufficient value. One of the issues was whether the payment of the interest by the trustees to the tenant for life was an acknowledgement which took the claim against the trustee by the tenant for life and the remaindermen outside the six-year limitation period under s.8(1) of the 1888 Act. Both at first instance and in the Court of Appeal this argument failed on the facts. But it was accepted that by analogy to an action for debt an acknowledgement could be an answer in an action against the trustee to a plea that the claim was statute barred. Kekewich J (at page 255) said:

"I suppose that the words "money had and received" were used because in that particular form of action for debt there was more analogy to pleadings and procedure in Chancery than in any other like action, and in truth an action of that character might have been brought, and sometimes was brought, against trustees in what we now call the Queen's Bench Division before the Judicature Acts. The controlling words for the purposes of construction are, I think, "an action of debt," and in such an action a plea that the right accrued six years before writ issued is good, and can only be defeated by acknowledgment or some other act taking the case out of the statute. This apparently was the view of other Judges before whom the section has come, although the precise point either did not arise or was not argued before them. I am referring to In re Bowden, before Lord Justice Fry [45 Ch D 444, 451]; In re Swain, before Mr. Justice Romer [[1891] 3 Ch 233]; In re Page, before Mr. Justice North [[1893] 1 Ch 304]; and Want v. Campain [9 Times L.R. 254], before Mr. Justice Wright. The attempted answer is that there has been what has been equivalent to acknowledgment, namely, that from the date of the investment until some time in 1890 the mortgage was treated as good, and interest at the stipulated rate was paid, and the Plaintiffs call in aid of the argument a passage in the judgment of Lord Justice Fry, in the case above noticed. The language is this: "If this had been an action for debt, for money had and received, and the debt had arisen more than six years ago, and no acknowledgment had taken place in the meanwhile, the lapse of time would have furnished a defence." I desire humbly to express my entire concurrence with the view of Lord Justice Fry, that an acknowledgment suffices to defeat a plea of the statute as much in an action against a trustee, as in any other action for money had and received, but I fail to see how what has occurred here can be regarded as an acknowledgment for this purpose."

In the Court of Appeal Lindley LJ (at page 264) said:

"What is the effect of such a payment with reference to the Statute of Limitations? What does such payment admit? It is not an admission or acknowledgment of any breach of trust, nor of any liability on the part of the trustees that they owe, or are liable to make good, the principal sum to the Plaintiff, or to any other of their cestuis que trust; it is a mere acknowledgment that they have received from the mortgagor so much money in respect of his mortgage. But such an admission will not suffice to deprive the trustees of the protection afforded by the Statute of Limitations. In applying the analogy of an action for money had and received to the use of the Plaintiff we must not shut our eyes to the truth. We must not first of all treat the trustees as debtors of a sum which they do not admit they owe, and then treat the payment of interest as an acknowledgment that they owe that sum and are liable to make it good. We must look at the facts and see what it is that the payment of interest really does admit and acknowledge, and, unless the facts are such as to justify the inference that the trustees admitted their liability to make good the principal, the payment of the interest will not deprive them of the benefit of the statute."

The reason why the 1888 Act used the analogy of an action in debt for money had and received is given in the judgment of Kekewich J. His reference to trustees sometimes being sued in the Queen's Bench Division is, I think, to cases where the trustee had admitted holding money for which he was liable to account to the cestui que trust. In Bullen & Leake's Precedents of Pleadings (2^nd Edition 1863) at page 38 the authors cite an admitted liability to account as one of the circumstances giving rise to a legal liability in debt and therefore to recovery in an action for indebitatus assumpsit:

"A trustee who has received trust money is accountable for it to the cestui que trust in the Court of Chancery, but in the courts of law he is treated for most purposes as the absolute owner, and no action can in general be maintained by the cestui que trust against him to recover trust money. (Pardoe v Price, 16 M.&W. 451; Phillips v Hewston, 25 L.J. Ex. 133; 11 Ex 699). If, however, he admits to the cestui que trust that he holds such money as the money of the cestui que trust to be accounted for to the latter, he is debarred from setting up his character of trustee, and becomes liable at law to the cestui que trust for money received to his use. (Remon v Hayward, 2 A.&E. 666; Roper v Holland, 3 A.&E. 99; per Lord Campbell, C.J., Edwards v Lowndes, 1 E.&B. 89; per Erle J., London and North Western Railway Company v Glyn, 28 L.J.Q.B. 188, 192)."

Absent, however, such an admission of liability, the normal way of proceeding against a trustee would be for the cestui que trust to proceed in the Court of Chancery for an account. This could in appropriate cases take the form of an account on the footing of wilful default but either this or an account in common form would result in the identification of the losses caused to the trust estate by the trustee's breach of duty. An account would not of itself result in a judgment for a recoverable sum against the trustee. After making any necessary allowances it would be necessary to obtain a further judgment for the balance found to be due on the taking of the account. From the 19^th century onwards one finds an increasing use of the Court of Chancery's power to entertain actions based on particular breaches of trust for which compensation would be awarded without going through the cumbersome and often extremely lengthy process of taking an account. The modern term for this is equitable compensation but it has its roots in a much older jurisdiction and practice. The only point which needs to be mentioned at this stage about awards of equitable compensation for breach of trust or breach of fiduciary duty is that they were treated by the Courts of Equity as restitutionary in nature in the sense of being designed to put the claimant beneficiary back into the position in which he would have been but for the breach of trust. This has consequences in terms of the principles of causation and remoteness which apply and requires distinctions to be drawn between a claim for equitable compensation and one for common law damages. In Target Holdings Ltd v Redferns [1996] 1 AC 421 at page 434 Lord Browne-Wilkinson said:

"The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries' rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate: see Nocton v. Lord Ashburton [1914] AC 932, 952, 958, per Viscount Haldane L.C. If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed: Caffrey v. Darby (1801) 6 Ves. 488; Clough v. Bond (1838) 3 M. & C. 490. Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred: see Underhill and Hayton, Law of Trusts & Trustees 14th ed. (1987), pp. 734-736; In re Dawson, decd.; Union Fidelity Trustee Co. Ltd. v. Perpetual Trustee Co. Ltd. [1966] 2 N.S.W.R. 211; Bartlett v. Barclays Bank Trust Co. Ltd. (Nos. 1 and 2) [1980] Ch. 515. Thus the common law rules of remoteness of damage and causation do not apply. However there does have to be some causal connection between the breach of trust and the loss to the trust estate for which compensation is recoverable, viz. the fact that the loss would not have occurred but for the breach: see also In re Miller's Deed Trusts (1978) 75 L.S.G. 454; Nestle v. National Westminster Bank Plc. [1993] 1 WLR 1260."

It is, however, clear that apart from the cases where the trustee admitted a liability to account, it was not possible for a beneficiary before the Judicature Acts to sue at common law and, in particular, by way of an action for money had and received in order to recover compensation for breach of trust or breach of fiduciary duty. In Edwards v Lowndes (1852) 1 E&B 81 Lord Campbell CJ (at page 89) said:

"It may be taken as settled that, where the parties stand to each other in the relation of trustee and cestui que trust, and the trustee is under no other legal liability than that which arises from that relation, no action at law for money had and received can be maintained against him, though he has money in his hands which under the terms of the trust he ought to pay over to the cestui que trust, but which he still holds in the character of trustee only. It is unnecessary to refer upon this proposition to other authorities than that of the well considered judgment delivered by Baron Rolfe in Pardoe v. Price (16 M. & W. 451). If, indeed, the trustee, by appropriating a sum as payable to the cestui que trust, or otherwise, admits that he holds it to be paid to the cestui que trust, and for his use, the character of the relation between the parties is changed; and the trustee does not hold it as a trustee properly so called, but as a receiver for the plaintiff's use, who may maintain an action at law for money had and received, founded upon the approbation to his use and the liability thence arising. There are many cases that are founded upon this principle, from Allen v. Impett (8 Taunt. 263), to Roper v. Holland (3 A. & E. 99); and these have reference to earlier decisions."

A claim against a trustee for breach of trust not involving fraud or the recovery of trust property held by the trustee was therefore statute barred after six-years under s.8(1) of the 1888 Act unless there had been some acknowledgement of the liability that would have been sufficient to create a new liability in debt under the principles described in the passage from the Law Revision Committee's report quoted earlier. The decision in Re Somerset seems to indicate that although the efficacy of the acts relied on as an acknowledgement fell to be tested by reference to the position in a claim in debt for money had and received, an acknowledgement which satisfied those conditions operated to take the case out of the statute and to start time running again in relation to all claims for breach of trust and not simply those where the trustee had admitted liability so as to allow the cause of action to be framed in debt.

The Law Revision Committee Report in its discussion of acknowledgement makes no reference to Re Somerset or to the position in relation to claims for breach of trust. In relation to acknowledgement, it concentrates on the judge-made law as to the effect of an acknowledgement which is essentially contractual and applied only to simple contract debts. As mentioned earlier, the Civil Procedure Act 1833 contained express provisions enabling time to run again if a specialty debt was acknowledged. The recommendation of the Committee was that the complications involved in spelling out a promise to pay from an acknowledgement should be removed and the position of simple contract debts brought into line with specialty debts:

"It having been established that an acknowledgement of a simple contract debt is ineffective unless it amounts to a promise to pay the debt, questions have frequently arisen, as to whether some particular acknowledgement did or did not amount to a promise to pay. The authorities upon the point are numerous and not always easy to reconcile. For though a simple acknowledgement implies an unconditional promise to pay upon request, debtors are not always so accommodating as to give a simple acknowledgement of the debt and it is frequently a matter of great difficulty to ascertain whether or not a promise to pay can be extracted from the words in which an acknowledgement is couched. How difficult such a question may be is shown by the case of Spencer v Hemmerde already referred to. In that case Bankes and Atkin, L.JJ. thought that the acknowledgement did not amount to a promise to pay. Scrutton, L.J. and the House of Lords thought that it did. All these difficulties would have been avoided had the Limitation Act, 1623, provided in the case of simple contract debts (as was done later in the Civil Procedure Act, 1833, in the case of specialty debts) that time under the Statute should begin running afresh after the giving of an acknowledgement in writing. It was not, of course, possible for the Courts of Law to supply the omission and so, in order to remedy the inconvenience that it caused, they evolved the principle of the implied promise to pay. It appears to us undesirable that this state of affairs should continue and we recommend that in respect of acknowledgement, simple contract debts should be put upon the same footing as specialty debts. "

Section 23(4) of the 1939 Act therefore provided:

"(4) Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment:

Provided that a payment of a part of the rent or interest due at any time shall not extend the period for claiming the remainder then due, but any payment of interest shall be treated as a payment in respect of the principal debt."

The Trustee Act 1888 was repealed by the 1939 Act and s.8 was replaced by s.19 as follows:

"(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 thereof in the possession of the trustee, or previously received by the trustee and converted to his use.

(2) Subject as aforesaid, 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:

Provided that the right of action shall not be deemed to have accrued to any beneficiary entitled to a future interest in the trust property, until the interest fell into possession.

…"

The significant change is the removal of any reference to an action in debt for money had and received. To some extent that can be regarded as a piece of belated tidying up following the Judicature Acts and the abolition of the old forms of action. But it has the consequence that actions against trustees are no longer treated as actions for money had and received for acknowledgement purposes and the provisions of s.23(4) (now s.29(5) of the 1980 Act) have to be applied without reference to that statutory analogy.

In Lagos v Grunwaldt [1910] 1 KB 41 this Court had to consider whether it would grant summary judgment in respect of a claim by a foreign lawyer for professional fees. That depended on whether the claim was one to recover "a debt or liquidated demand in money" within the meaning of RSC Order 3 r. 6. At page 47-8 Farwell LJ said:

"Two preliminary objections are taken. The first is that Order III, r 6, does not apply, because this is not a debt or liquidated demand arising under a contract. It is a claim on contract for quantum meruit. In my opinion that is within the rule. I think the words 'debt or liquidated demand' point to the old division of common law actions to be found in Bullen and Leake, 2nd ed, p 28. The old indebitatus counts 'which have from time to time been rendered more and more concise are designated with little difference of meaning by the terms indebitatus counts, money counts or common counts; the expression common counts or common indebitatus counts being often used to designate those of most frequent recurrence, viz, where the debt is for goods sold and delivered, goods bargained and sold, work done, money lent, money paid, money received, interest, and upon accounts stated; and the expression money counts being sometimes used to particularize those for money lent, money paid, and money received. The most appropriate name seems to be indebitatus counts.' And the learned authors go on to say, 'here were also formerly in use counts known as quantum meruit and quantum valebat counts, which were adopted where there was no fixed price for work done or goods sold etc. These counts, however, have fallen into disuse, and have been superseded by the general application of the indebitatus counts.' In my opinion that is the true view; everything that could be sued for under those counts comes within the description of debt or liquidated demand."

The decision in Lagos v Grunwaldt was referred to by Judge John Davis QC in Amantilla Ltd v Telefusion plc (1987) 9 Con LR 139. He held that a builders' claim for a quantum meruit was a claim for a "debt or other liquidated pecuniary claim" under s.29(5) of the 1980 Act (at page 145):

"If the parties themselves cannot agree on what is a reasonable sum, the contractual obligation to pay such a sum provides a sufficiently certain and definitive datum to enable the court to ascertain its amount by calculation and circumstantial (or 'extrinsic') evidence, in accordance with the terms of the contract and without any further agreement of the parties. Indeed, it would be remarkable for the law to impose such an obligation if it did not have those attributes. A quantum meruit claim for a 'reasonable sum' lies in debt because it is for money due under a contract. It is a liquidated pecuniary claim because 'a reasonable sum' (or a 'reasonable price' or 'reasonable remuneration') is a sufficiently certain contractual description for its amount to be ascertainable in the way I have mentioned … Such a claim is different in kind from its opposite, which is a claim for unliquidated damages. The former is a claim for a specific sum, namely a reasonable sum due under a contract; it is no less specific for being described in words rather than in figures, provided it is sufficiently defined to be ascertainable—which it is, as I have already explained. The task of the court, if it has to assess such a sum, is one of translating the words of the contract into figures in order to effectuate the intention of the parties. The nature of a claim for unliquidated damages is wholly different. The function of the court is not one of interpreting the contract but of deciding, in accordance with legal principles, what compensation, if any, should be paid to redress any harm done by its breach. It is for these elemental reasons that a quantum meruit claim is a liquidated pecuniary claim, whilst conversely a claim for unliquidated damages is not, and cannot be such, even though it be claimed at a definite figure."

By contrast, in Dwr Cymru Cyf v Carmarthenshire County Council [2004] EWHC 2991 (TCC) Jackson J held that a claim in damages for negligence was not a "liquidated pecuniary claim" under s.29(5). At [49] he said:

"2. The phrase 'liquidated claim' connotes a claim for a specific sum or, alternatively, for a sum which can be readily and precisely ascertained. None of the authorities reviewed in part [4] of this judgment is inconsistent with this proposition. A claim for damages in tort is by definition not a liquidated claim. The assessment of damages in tort involves the application of a set of common law rules to the particular circumstances of the case. The application of those rules may be relatively straightforward in some instances, but that does not make the claim a liquidated one.

"3. The global phrase 'any debt or other liquidated pecuniary claim' suggests a sum which is due to be paid pursuant to some contractual or similar obligation. The words on their natural meaning do not connote damages or compensation which the law requires to be paid by someone who has acted in breach of an obligation or duty."

After a review of these decisions, this Court decided in Phillips & Co v Bath Housing Co-operative Ltd [2013] 1 WLR 1479 that a claim by solicitors for their fees did constitute "a liquidated pecuniary claim" within s.29(5) even though the precise amount of the fees required to be assessed. Lloyd LJ said:

"46. As Mr Burns submitted, it seems to me likely that the draftsman of the 1939 Act had in mind the then current rule of court about specially endorsed writs, as considered in Lagos v Grunwaldt [1910] 1 KB 41. That rule, as interpreted and applied by the courts, shows that a "liquidated demand" was not then treated, in that context, as requiring that the amount of the liability should already have been ascertained. It therefore casts a different light on the use of the word "liquidated" in the 1939 Act. This would allow a solicitor's claim for professional fees to be regarded as within the provision. It is also consistent with the proposition that such a claim would have been within the scope of an acknowledgment under Lord Tenterden's Act. It would be odd if the effect of the 1939 Act had been to narrow the range of claims which could be acknowledged.

47. For those reasons, despite the possible oddity of a quantum meruit claim being classified, for this purpose, as a liquidated claim, it seems to me that a claim by solicitors for remuneration, even though not yet fixed by assessment or otherwise, is within the phrase "debt or other liquidated pecuniary claim" in section 29(5)(a). I would hold that Judge Davies QC and Mr Crowley QC were right in their decisions to which I have referred. It seems to me that the better view is that a solicitor's claim for professional fees, even though not yet fixed by agreement or assessment, did fall within section 23(4) of the 1939 Act and still does under section 29(5) of the 1980 Act."

Mr Thompson QC for Mr Barnett submitted that it was unlikely that the draftsman of the 1939 Limitation Act intended to remove from claims by beneficiaries against trustees the benefit of being able to rely upon an acknowledgement which existed under the 1888 Act. This consideration militates in favour of giving to the phrase "liquidated pecuniary claim" a wider meaning than simply the equivalent of a claim in debt or for a quantum meruit. Nor, he said, should those words be limited to common law contractual and restitutionary claims. As mentioned earlier, claims for equitable compensation for breach of trust or breach of fiduciary duty are treated as restitutionary in nature. In this connection, he referred us to the decision of this Court in Ex p Adamson, Re Collie (1878) 8 Ch D 807 where, in the context of a bankruptcy appeal, James LJ (at page 819) said:

"The Court of Chancery never entertained a suit for damages occasioned by fraudulent conduct or for breach of trust. The suit was always for an equitable debt or liability in the nature of debt. It was a suit for the restitution of the actual money or thing, or value of the thing, of which the cheated party had been cheated."

The difficulty, however, about this argument is twofold. First of all, as explained earlier, it is quite clear that claims for equitable compensation could not be brought as actions in indebitatus assumpsit unless it could be shown that, by acknowledging the claim, the trustee had in legal terms become indebted to the beneficiary. The Law Revision Committee's Report indicates that what became s.23(4) of the 1939 Act was intended to sweep away the complicated law relating to simple contract debts and to bring the rules about the acknowledgement of such debts into line with the treatment of specialty debts. There is nothing in this to support giving the phrase "debt or other liquidated pecuniary claim" a wide enough meaning so as to encompass claims for equitable compensation. I can see that the seeming loss of the pre-1939 position under which acknowledgements could prevent claims against trustees becoming statute barred by analogy with claims for money had and received might be thought not to be readily explainable and s.1(2) of the 1980 Act (like s.1 of the 1939 Act) provides that the ordinary time limits in Part I of the Act are subject to extension or exclusion in accordance with the provisions of Part II. Part I includes ss. 21 and 23 which govern claims against trustees and actions for an account but it is clear that not every provision of Part II (which includes the provisions dealing with acknowledgement (s.29), postponement of limitation in cases of fraud or concealment (s.32) and the discretionary exclusion of time limits for actions for personal injuries (s.33)) can apply to each of the provisions of Part I. That depends on whether the conditions for the Part II extension or exclusion are satisfied in the particular case. In my view the language of the 1939 Act and the contents of the Law Revision Committee Report seem to me to point strongly away from any conclusion that "liquidated pecuniary claim" includes one for equitable compensation.

Secondly, even if I am wrong on the last point so that some claims for equitable compensation are included, I am firmly of the view that the present claim does not fall within that category. Although all claims for equitable compensation can be described as restitutionary in terms of the equitable approach to causation and remoteness, they can vary enormously in nature. A trustee or fiduciary can be made liable in equity for the misappropriation of trust property or (in the case of an agent, for example) for making a secret profit at the expense of his principal. In such cases he will be required to account for the property and the principal or beneficiary will have a proprietary claim to the asset. But in other cases, and this I think is one of them, the claim will be more akin to a claim in contract for breach of a duty of skill and care and, although the amount of the loss may be readily assessable, it will not be liquidated.

It was common ground before the judge that Mr Creggy should be treated as a trustee within the meaning of s.21 of the 1980 Act and we have not heard any argument on the point. But it is of some interest and relevance to the point we have to decide that in cases where s.21 is not directly applicable but has been applied by analogy to the breaches of fiduciary duty by the defendant, a claim for compensation based on a deliberate breach of fiduciary duty by a broker was held to be analogous to a claim for damages for breach of duty in contract or in tort: see Cia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 WLR 112.

Mr Thompson accepted that the claim in the present case was not restitutionary in the sense of being a proprietary claim against specific assets in Mr Creggy's hands. It could not be such a claim because, as explained earlier, the claimants had no beneficial interest in the monies in the Swiss accounts. It is therefore a claim against Mr Creggy for compensation for his unauthorised release of the Swiss monies to Dr Spiteri which has caused the claimants financial loss. Mr Thompson said the claim was analogous to one for specific restitution against a trustee. But it is not. As explained earlier, it is equivalent to a claim for damages and is not, as Jackson J explained in Dwr Cymru Cyf, a liquidated pecuniary claim. I would therefore allow Mr Creggy's appeal on this issue. In the circumstances, I do not propose to deal with the subsidiary issues as to whether the letter was an acknowledgement of the claim. The point does not arise.

Lord Justice Sales :

I agree that the appeal should be allowed. I base my view on the second reason given by Patten LJ, namely that on the assumption that a claim by a beneficiary against a trustee for breach of trust could at least in some cases be classified as a right of action to recover a liquidated pecuniary claim, it cannot properly be so regarded in this case.

The law of limitation in relation to claims against trustees has historically drawn upon analogies with the position in relation to causes of action at common law. Before statutes of limitation became applicable to claims in equity the issue of delay was governed by the doctrine of laches, in relation to which equity would, where appropriate, seek to follow statutory limitation provisions in respect of actions at common law by analogy. A similar approach was used in s. 8 of the Trustee Act 1888, set out above.

Patten LJ's view is that the analogical link with the position at common law was broken by the enactment of the 1939 Act. I respectfully disagree.

The 1939 Act was an Act to consolidate with amendments certain enactments relating to the limitation of actions. In interpreting a consolidation Act one should start by looking at the ordinary meaning of the provision as it appears in that Act, but if the provision is ambiguous or there is real doubt about its meaning a subordinate presumption comes into play, namely that there was no intention to change the previous law in a substantive way: Farrell v Alexander [1977] AC 59 at 73B-C (Lord Wilberforce), 82B-D, 83D-H and 84D-H (Lord Simon of Glaisdale) and 97B-E (Lord Edmund-Davies). As the present case shows, there is real doubt about the meaning of the phrase, "Where any right of action has accrued to recover any debt or other liquidated pecuniary claim …", as used in s. 23(4) in the 1939 Act, the substance of which is repeated in s. 29(5)(a) of the 1980 Act. Reference back to the preceding law in the 1880 Act indicates that an analogy was to be drawn with a common law action for debt and In re Somerset [1893] 1 Ch 231 showed that the analogy extended to the application of the law in respect of acknowledgement of a debt.

No reason was given in the report of the Law Revision Committee of 1936 which preceded the enactment of the 1939 Act to suggest any policy intention to change that analogical approach in respect of the law of acknowledgement for the future. It was not suggested that all claims for equitable compensation should be removed from its ambit. It would be surprising against this background for Parliament to make such a major substantive change in the law and I do not think it can be inferred that it intended to do so.

On the contrary, I think the proper inference is that this was an aspect of the law which Parliament intended to consolidate rather than amend in the 1939 Act. In my view the scheme of the 1939 Act indicates that Parliament intended to preserve an analogical approach for the purposes of the law of limitation with respect to acknowledgement of debts as it applied in relation to claims in equity. The 1939 Act codified the law of limitation by setting out particular limitation periods for particular claims in Part I (including s. 19 in relation to trust claims), all of which were subject to general rules in Part II (including s. 23(4) in relation to acknowledgement of debts). Section 1 of the 1939 Act provided that the provisions in Part I "shall have effect subject to the provisions of Part II of this Act which provide for the extension of the periods of limitation in the case of disability, acknowledgement, part payment, fraud and mistake." The same scheme is used in the 1980 Act. The phrase, "any debt or other liquidated pecuniary claim", in s. 29(5)(a) of the 1980 Act (formerly in s. 23(4) of the 1939 Act) appears to use language drawn from the common law, but by s. 1(2) of the 1980 Act (as formerly under s. 1 of the 1939 Act) the provision is made applicable to extend time in respect of claims in equity as well, which would otherwise be time-barred under provisions in Part I of the Act. In my opinion, this means that in relation to the potential application of s. 29(5)(a) to equitable claims it is necessary to ask whether the equitable claim in question is for limitation purposes sufficiently analogous to an action at law falling within that provision. The requirement for an approach based on analogy with the common law has been preserved in this form.

I emphasise that the present case is not a case involving breach of trust in the classic sense. In a trust case, where a beneficiary has a claim against his trustee to require the trustee to restore trust property improperly disposed of by him, "the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss" (Target Holdings Ltd v Redferns [1996] 1 AC 421, 434C per Lord Browne-Wilkinson, and also see p. 437C), but subject to the compensation payable being referable to loss actually suffered by the trust estate (ibid., pp. 432E-433A and 437C-E). This basic rule means that "in many ways equity approaches liability for making good a breach of trust from a different starting point" than the common law (p. 432F).

In my opinion, the basic rule in a trust case where trust monies have been improperly paid away by the trustee is sufficiently analogous to a claim at common law for a fixed sum of money as to be capable of being described as a "liquidated pecuniary claim" for the purposes of s. 29(5)(a). It is a claim which is restitutionary in nature (in the sense of being designed to restore the trust fund), albeit capable of being defeated if the defendant trustee can show that no loss was caused. In a similar way, a restitutionary claim for a certain sum of money as money had and received arising under the common law of unjust enrichment on the grounds that it was paid by mistake or pursuant to an unjustified claim for tax can properly be described as a claim for a "liquidated pecuniary claim" within s. 29(5)(a), even though a defence of change of position as recognised in Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 may be available to reduce the sum claimed below that determinate sum. I agree with Henderson J's view in F.J. Chalke Ltd v Revenue and Customs Commissioners [2009] EWHC 952 (Ch); [2009] STC 2027, at [146]-[158], that a claim of this kind under the law of unjust enrichment falls within s. 29(5)(a) of the 1980 Act. I find it difficult to think of a policy reason for differentiating in this context between a claim in the classic trust case, a claim in unjust enrichment, a claim for a quantum meruit and a claim for a set contractual amount. None was identified in the report of the Law Revision Committee in 1936 which preceded the enactment of the predecessor provision in the 1939 Act.

In this case, however, Mr Creggy was not a trustee of property for Jeffrey Barnett as beneficiary. Mr Creggy was a solicitor who, within the scope of his retainer as such, assumed a fiduciary duty to Mr Barnett in respect of his powers as a signatory to disburse funds from the company accounts: see para. [75] of the judgment ("Mr Creggy and the claimants were in a relationship of solicitor and client and he held his powers as signatory by virtue of his position as solicitor to the claimants. If he misused the power so as to cause them loss, he could be liable to them, subject to appropriate protection against double recovery against him"). Had Mr Creggy been sued in a straightforward way for compensation for breach of duty under his retainer, the compensation payable would not have been a liquidated sum, even if it was capable of easy assessment. I can see no reason to reach any different conclusion just because it is possible also to categorise what is in substance the same duty leading to the same result (payment of compensation for loss suffered) as fiduciary in character. Applying the analogical approach I have referred to above, the claim for equitable compensation against Mr Creggy was not a claim falling within the scope of s. 29(5)(a) of the 1980 Act.

Sir Terence Etherton, MR :

I also agree that the appeal should be allowed. Like Sales LJ, I would allow the appeal on the alternative ground discussed by Patten LJ in paragraphs [35] to [37] of his judgment.

In respectful disagreement with Patten LJ's conclusion in paragraph [34] of his judgment, I consider that the expression "liquidated pecuniary claim" in section 29(5)(a) of the Limitation Act 1980 includes claims against trustees for the recovery of trust money which was wrongly paid away or for compensation in respect of other trust assets wrongly misapplied.

Such claims reflect those trust claims which were previously specified in section 8(1)(b) of the Trustee Act 1888, and which, by virtue of that sub-section, were subject to the same provisions extending the limitation period in a case of acknowledgment as were then applicable to actions in debt for money had and received: see Re Somerset [1984] 1 Ch 231.

Section 8(1)(b) of the 1888 Act applied to actions or other proceedings against a trustee "brought to recover money or other property". The sub-section provided that, in respect of such actions or other proceedings, the trustee was entitled to the benefit of and be at liberty to plead the lapse of time as a bar to any such action or other proceedings "in the like manner and to the like extent as if the claim had been against him in an action for debt for money had and received". I do not consider that this meant that section 8(1)(b) was limited to those actions or other proceedings against a trustee which could have been brought in debt in the Queen's Bench Division because, for example, the trustee had acknowledged his liability to account to the beneficiary.

The plain and literal meaning of section 8(1)(b) was that, in all actions or other proceedings against trustees to recover money or other property, the same limitation rules should apply as in an action for debt for money had and received. I do not consider that anything to the contrary was said in Re Somerset. In particular, it seems to me that, in the passage in Kekewich J's judgment, quoted in paragraph [19] of Patten LJ's judgment, Kekewich J was doing no more than explaining the probable reason why the analogy of an action for money had and received was used in the sub-section. He was not saying that the analogy itself had the effect of confining the species of "action or other proceeding … brought to recover money or other property" to which section 8(1)(b) applied.

The 1888 Act was repealed by the 1939 Act. The 1939 Act does not contain anything similar to the wording of section 8(1)(b) of the 1888 Act. Section 23 of the 1939 Act did, however, contain general provisions for the fresh accrual of a right of action on acknowledgment or part payment. Section 23(4) of the 1939 Act made provision for such fresh accrual in the case of a right of action "to recover any debt or other liquidated pecuniary claim". The 1939 Act followed the Law Revision Committee's Fifth Interim Report on the Statutes of Limitation, which was published in December 1936. The Report addressed in some detail and at some length the issue of acknowledgment. It contained no suggestion that the law as to acknowledgment previously applicable to claims against trustees to recover money or other property should completely cease. Counsel before us have not found any contemporaneous material, whether in Hansard or otherwise, evidencing such an intention on the part of Government or Parliament.

The long title to the 1939 Act stated that it was an Act "to consolidate with amendments" certain enactments relating to the limitation of actions. The expression "liquidated pecuniary claim" is capable of being fairly interpreted to include claims for recovery of trust money wrongly paid away and compensation in respect of other trust assets wrongly misapplied, and, if so interpreted, that would continue the substantive effect of section 8(1)(b) of the 1888 Act in relation to acknowledgment. In the absence of any contemporaneous indication that it was the intention of Government or Parliament to make so substantial an alteration of the law as to abolish entirely the previous law of acknowledgment in relation to claims against trustees to recover money or other property, I consider that the expression "liquidated pecuniary claim" in section 23(4) of the 1939 Act ought to be so interpreted.

The acknowledgment provisions in section 29(5) of the 1980 Act, and in particular the expression "liquidated pecuniary claim" in section 29(5)(a), derive from section 23(4) of the 1939 Act. It is not in dispute that the expression bears the same meaning in both provisions.

As Patten LJ has pointed out, such claims must be distinguished from claims, as in the present case, analogous to those for breach of contract for failure to exercise due skill and care.