Supreme Court decision makes it harder for directors to establish limitation defence where they have benefited from breach of fiduciary duty

For the purposes of limitation, directors of a company are treated as trustees, given that they owe fiduciary duties to the company. There is a six year limitation period for actions by a beneficiary to recover trust property or in respect of any breach of trust (section 21(3) of the Limitation Act 1980). However, there is no limitation period where the trustee was fraudulent, or where the action is to recover trust property or its proceeds in the possession of the trustee or previously received by the trustee and converted to his or her use (section 21(1)(b)).

In a recent case the Supreme Court held that, as directors are fiduciary stewards of the company's property, they are treated as being in possession of that property from the outset. Accordingly, where directors have benefited from the misappropriation of company property, they will not be entitled to a limitation defence in claims by the company – regardless of whether the directors ever had legal or beneficial ownership of the property: Burnden Holdings (UK) Ltd v Fielding [2018] UKSC 14.

For more information see this post on our Private Wealth and Trust Disputes Notes blog.