| Target Holdings Ltd v Redferns | |
|---|---|
 Great Hampton St, Hockley | |
| Court | House of Lords |
| Citation(s) | [1995] UKHL 10, [1996] AC 421 |
| Court membership | |
| Judge(s) sitting | Lord Keith of Kinkel Lord Ackner Lord Jauncey of Tullichettle Lord Browne-Wilkinson Lord Lloyd of Berwick |
| Keywords | |
| Causation, breach of trust, compensation | |
Target Holdings Ltd v Redferns [1995] UKHL 10 is an English trusts law case, concerning the test for causation and the extent of compensation for breaches of trust.
Target Holdings Ltd gave £1,525,000 to Redferns solicitors, ultimately to be loaned to Crowngate Developments Ltd to buy property at 60-64 Great Hampton Street, Hockley. Target Holdings Ltd would get a mortgage over the property that was bought, and Redferns were under instructions to not release the money until the purchase was completed, and the mortgage was executed. Until then, the solicitors were to hold the money on trust for Target Holdings Ltd. Crowngate, however, had orchestrated a scheme to make a fraudulent profit on the property which it was actually buying at £775,000, while reporting the purchase was for £2m. Breaching the terms of the agreement, Redferns in fact released £1,490,000 to a company called Panther Ltd before the purchase was completed. The sale went through, but the venture turned out to be a flop. Crowngate failed to repay the loan, and went into liquidation, meaning that Target Holdings Ltd only ever recovered £500,000 from the sale of the property. Target Holdings Ltd sued Redferns solicitors, arguing that it had a duty to account for the money it had wrongly paid away. Redferns argued that, even though it had breached the trust, this had nothing to do with the loss that Target Holdings Ltd had incurred. The loss was not caused by the breach.
Warner J held that Redferns breached its trust. In the Court of Appeal Hirst LJ and Peter Gibson LJ [1] held that when Redferns misapplied the trust property, this generated an immediate liability as trustees to reconstitute the trust fund. That did not depend on showing that the loss would not have been suffered but for the breach. Ralph Gibson LJ dissented.
The House of Lords held that Redferns did not have to repay the £1,490,000, because the loss to the trust would have been the same. Only losses that were caused by Redfern's breach of the trust terms could be recovered. Although the test in the law of tort might differ, and allow remoteness limits or have dissimilar causation outcomes, some causal connection was needed between the fiduciary's breach of trust and the loss that resulted to the claimant. So because Redfern's payment away of the trust property early had nothing to do with the ultimate losses of Target Holdings Ltd, they were not liable to repay that money.
Lord Browne-Wilkinson gave the leading judgment. [2]
At common law there are two principles fundamental to the award of damages. First, that the defendant's wrongful act must cause the damage complained of. Second, that the plaintiff is to be put "in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation": Livingstone v Rawyards Coal Company (1880) 5 App Cas 25, 39. per Lord Blackburn. Although, as will appear, in many ways equity approaches liability for making good a breach of trust from a different starting point, in my judgment those two principles are applicable as much in equity as at common law. Under both systems liability is fault based: the defendant is only liable for the consequences of the legal wrong he has done to the plaintiff and to make good the damage caused by such wrong. He is not responsible for damage not caused by his wrong or to pay by way of compensation more than the loss suffered from such wrong. The detailed rules of equity as to causation and the quantification of loss differ, at least ostensibly, from those applicable at common law. But the principles underlying both systems are the same.’
[...]
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 LC 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 My. and Cr. 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 and Trustees 14th ed. (1987) pp. 734-736; In re Dawson decd.; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 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.
Delict is a term in civil and mixed law jurisdictions whose exact meaning varies from jurisdiction to jurisdiction but is always centered on the notion of wrongful conduct.
English tort law concerns the compensation for harm to people's rights to health and safety, a clean environment, property, their economic interests, or their reputations. A "tort" is a wrong in civil law, rather than criminal law, that usually requires a payment of money to make up for damage that is caused. Alongside contracts and unjust enrichment, tort law is usually seen as forming one of the three main pillars of the law of obligations.
In common law jurisdictions, a misrepresentation is a false or misleading statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The misled party may normally rescind the contract, and sometimes may be awarded damages as well.
Causation is the "causal relationship between the defendant's conduct and end result". In other words, causation provides a means of connecting conduct with a resulting effect, typically an injury. In criminal law, it is defined as the actus reus from which the specific injury or other effect arose and is combined with mens rea to comprise the elements of guilt. Causation only applies where a result has been achieved and therefore is immaterial with regard to inchoate offenses.
In English law, remoteness between a cause of action and the loss or damage sustained as a result is addressed through a set of rules in both tort and contract, which limit the amount of compensatory damages available for a wrong.
English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trusts were a creation of the English law of property and obligations, and share a subsequent history with countries across the Commonwealth and the United States. Trusts developed when claimants in property disputes were dissatisfied with the common law courts and petitioned the King for a just and equitable result. On the King's behalf, the Lord Chancellor developed a parallel justice system in the Court of Chancery, commonly referred as equity. Historically, trusts have mostly been used where people have left money in a will, or created family settlements, charities, or some types of business venture. After the Judicature Act 1873, England's courts of equity and common law were merged, and equitable principles took precedence. Today, trusts play an important role in financial investment, especially in unit trusts and in pension trusts. Although people are generally free to set the terms of trusts in any way they like, there is a growing body of legislation to protect beneficiaries or regulate the trust relationship, including the Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and Charities Act 2011.
Bristol and West Building Society v Mothew [1996] EWCA Civ 533 is a leading English fiduciary law and professional negligence case, concerning a solicitor's duty of care and skill, and the nature of fiduciary duties. The case is globally cited for its definition of a fiduciary and the circumstances in which a fiduciary relationship arises.
Baker v Willoughby (1969) was a Judicial Committee of the House of Lords case decision on causation in the law of torts, notable for its idiosyncratic facts. The case is concerned with the question of "breaking the chain of causation", or novus actus interveniens.
Boardman v Phipps [1966] UKHL 2 is a landmark English trusts law case concerning the duty of loyalty and the duty to avoid conflicts of interest.
South Australia Asset Management Corporation v York Montague Ltd and Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1996] UKHL 10 is a joined English contract law case on causation and remoteness of damage. It arose out of the property crash in the early 1990s, whereby banks were suing valuers for overpricing houses in order to recover the lost market value. Owners themselves often had little or no money, since they had fallen victim to negative equity, so mortgage lenders would pursue a valuer instead to recover some losses. The legal principle arising from the case is often referred to as the "SAAMCO principle".
The Liability of trustees inter se in English law governs in what circumstances and to what extent a trustee in English trust law is liable for the acts and defaults of their co-trustees under English Law. In general trustees are under a duty to act jointly and have authority to act individually only if the trust instrument so provides. In principle therefore each trustee has an equal say in the management of the trust property and therefore in the event of a breach the trustees are jointly and severally liable for their actions.
Dishonest assistance, or knowing assistance, is a type of third party liability under English trust law. It is usually seen as one of two liabilities established in Barnes v Addy, the other one being knowing receipt. To be liable for dishonest assistance, there must be a breach of trust or fiduciary duty by someone other than the defendant, the defendant must have helped that person in the breach, and the defendant must have a dishonest state of mind. The liability itself is well established, but the mental element of dishonesty is subject to considerable controversy which sprang from the House of Lords case Twinsectra Ltd v Yardley.
Twinsectra Ltd v Yardley[2002] UKHL 12 is a leading case in English trusts law. It provides authoritative rulings in the areas of Quistclose trusts and dishonest assistance.
Constructive trusts in English law are a form of trust created by the English law courts primarily where the defendant has dealt with property in an "unconscionable manner"—but also in other circumstances. The property is held in "constructive trust" for the harmed party, obliging the defendant to look after it. The main factors that lead to a constructive trust are unconscionable dealings with property, profits from unlawful acts, and unauthorised profits by a fiduciary. Where the owner of a property deals with it in a way that denies or impedes the rights of some other person over that property, the courts may order that owner to hold it in constructive trust. Where someone profits from unlawful acts, such as murder, fraud, or bribery, these profits may also be held in constructive trust. The most common of these is bribery, which requires that the person be in a fiduciary office. Certain offices, such as those of trustee and company director, are always fiduciary offices. Courts may recognise others where the circumstances demand it. Where someone in a fiduciary office makes profits from their duties without the authorisation of that office's beneficiaries, a constructive trust may be imposed on those profits; there is a defence where the beneficiaries have authorised such profits. The justification here is that a person in such an office must avoid conflicts of interest, and be held to account should he fail to do so.
Knowing receipt is an English trusts law doctrine for imposing liability on a person who has received property that belongs to a trust, or which was held by a fiduciary, having known that the property was given to them in breach of trust. To be liable for knowing receipt, the claimant must show, first, a disposal of his trust assets in breach of fiduciary duty; second, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the claimant; and third, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.
Swindle v Harrison [1997] 4 All ER 705 is an English trusts law case, concerning remedies for breach of trust.
Barnes v Addy (1874) LR 9 Ch App 244 was a decision of the Court of Appeal in Chancery. It established that, in English trusts law, third parties could be liable for a breach of trust in two circumstances, referred to as the two 'limbs' of Barnes v Addy: knowing receipt and knowing assistance.
Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48 is an English vicarious liability case, concerning also breach of trust and dishonest assistance.
FHR European Ventures LLP v Cedar Capital Partners LLC[2014] UKSC 45 is a landmark decision of the United Kingdom Supreme Court which holds that a bribe or secret commission accepted by an agent is held on trust for his principal. In so ruling, the Court partially overruled Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd in favour of The Attorney General for Hong Kong v Reid (UKPC), a ruling from the Judicial Committee of the Privy Council on appeal from New Zealand.
AIB Group (UK) plc v Mark Redler & Co Solicitors [2014] UKSC 58 is an English trust law case, concerning the applicable principles of causation for a breach of trust. It held that a "but for" test of causation applies for equitable compensation.