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Breach of fiduciary duty does not have to be deliberate - Mortgage Express v Abensons

Home / Knowledge base / Breach of fiduciary duty does not have to be deliberate - Mortgage Express v Abensons

Posted by Susan Hopcraft on 03 July 2012

Susan Hopcraft - Professional Negligence Lawyer
Susan Hopcraft Partner

If you need to make a claim for breach of fiduciary duty, do not assume that a longer limitation period will apply, such as applies when there has been deliberate concealment of a claim.  

In a recent case where breach of fiduciary duty was added to an existing claim for negligence, but after expiry of normal limitation, the additional claim may be too late. This is a difficult situation, since often sufficiently strong evidence in relation to the fiduciary duty claim may only develop later – and perhaps too late.

On 3 May 2012 Mr Justice Cooke provided his judgment.

Mortgage Express v Abensons (2012)

The borrower purchased a number of new build properties from the freehold owner of a development site (a company in which he was also a director and shareholder). The claimant alleged that had it known that the Borrower was effectively buying the properties from himself, and also known about a number of other features of the transactions i.e. sub-sales/ gifted deposits, then it would not have lent to the Borrower. 

The claimant issued a claim for negligence/breach of retainer within the limitation period. The claimant later applied to amend the claim to include breach of fiduciary duty, but after the relevant limitation date. However, the claimant argued that the amendment should be allowed because the defendant would be barred from bringing a limitation defence in any event. This was because the new cause of action (breach of fiduciary duty) required proof of a deliberate breach by the defendant which would inevitably establish a “deliberate concealment” under s.32 Limitation Act 1980. The provides that where a solicitor deliberately conceals a breach of duty from its client, limitation runs from the date the claimant discovers the concealment (or should have been aware of it).

At first instance, the court allowed the amendment because it would not deny the defendant a limitation defence.  

The defendant then argued that the law was not yet settled on whether a breach of fiduciary duty could only be committed deliberately, or whether it could also include acts/omissions that were not deliberate. The defendant argued that s.32 did not operate where the breach was not deliberate i.e. if the solicitor does not know he has committed a breach he is unable to deliberately conceal that breach. The appeal court agreed with the defendant and confirmed that because it was arguable that a solicitor could be liable for unintentional breach of fiduciary duty, and that s.32(2) Limitation Act 1980 would not operate in those circumstances, it was possible that the defendant would be denied the opportunity to raise a limitation defence. The claimant could not therefore plead breach of fiduciary duty in this case and will have to issue a separate claim, which may be out of time, depending on the specific allegations then raised. 

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About the author

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

Susan Hopcraft

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

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