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I reproduce below a note of a recent case concerning a strike-out claim in which it was held that Nelson v Rye is wrong in every respect, and in which the plaintiff's breach of confidence claim was struck out because it was analysed as a restitutionary claim for which a 6 year limitation period applied from the date the confidential information was given (1982) even though the main payment derived from the information was received only in 1997. Comments anyone?

Contract - Limitation - Breach of fiduciary duty - Whether claims for breach of fiduciary duty time-barred - Limitation Act 1980 ss 5, 21, 23, 36 - Coulthard v Disco Mix Club Ltd - Chancery Division - Mr J Sher QC (sitting as a Deputy High Court Judge) - 01.03.99

FACTS
The plaintiff worked as a disc jockey and produced so-called mega-mixes of recordings by original artists. He became involved in the 1980s with the second and third defendants and a company set up by them, the first defendant, "DMC". The plaintiff claimed that under various agreements he was entitled to ten per cent of the gross income of the company's business and ten per cent of the proceeds of sale of a magazine which was an integral part of the business. He further claimed an account in respect of the exploitation of his mega-mixes under alleged agreements with the defendants on the basis of breach of contract and deliberate and dishonest breach of fiduciary duty giving rise to liability as constructive trustees. The defendants applied to strike out the writ and statement of claim. They argued that most of the claims were time barred.

ISSUES
(1) Whether the plaintiff's claims should be struck out.
(2) Whether the claims for breach of fiduciary duty were time barred.

HELD

(1) The claim for ten per cent of the proceeds of sale of the magazine could not be struck out without a trial. The case was not incredible and it was for the trial judge to decide the existence and terms of the alleged agreement. It would be wrong to try to evaluate the evidence and dispose of the issue on a striking-out application. However, the claim for ten per cent of the company's income in the circumstances bordered on the absurd and would be struck out. Other claims that there was a partnership and for breach of confidence were hopeless and would also be time-barred. They would be struck out. The plaintiff's claims in respect of infringement of copyright by the release of certain back catalogue compilations should not be struck out.

(2) The claims for breach of fiduciary duty in respect of under-accounting arose under the various alleged management and agency agreements and were contractual claims barred by s 5 and 23 of the Limitation Act 1980 after six years from accrual of the cause of action. The defendants' duty to account was not a fiduciary duty (Nelson v Rye [1996] 1 WLR 1378 not followed) and the effect of the statute could not be sidestepped by describing contract claims as claims for breach of fiduciary duty. Some of the claims were for deliberate and dishonest breach of fiduciary duty which involved allegations of breach of loyalty and thus represented true breaches of fiduciary duty. However those claims were subject to the Limitation Act 1980 because under s 36 the court would apply the six year time limit for contract claims by analogy (Nelson v Rye [1996] 1 WLR 1378 not followed) because of the correspondence between the claims at law and in equity (Knox v Gye (1872) 5 App Cas 656). The allegations of dishonest under-accounting which were true breaches of fiduciary duty were based on the same factual allegations as the common law claims in fraud and the statute would have been applied to them by a court of equity (Paragon Finance plc v DB Thakerar & Co (NLC 2980712102) applied). Paragon also showed that the plaintiff's claim was not one to which s 21 of the Limitation Act 1980 applied because the defendants were not true trustees and the claim to a constructive trust was only a description of the relief sought in equity. The claims should be struck out as statute-barred. The plaintiff was, however, entitled to accounts in relation to the most recent alleged agreement and in relation to certain actual receipts within the last six years before the proceedings.

Stephen Barbour, Barrister

________________________
Dr Charles Mitchell
Lecturer in Law
School of Law
King's College London
Strand
LONDON WC2R 2LS

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