Year 12s: what will be the first way you research your future options? >>

Trusts - Target Holdings v Redferns - confused

suffocation1992

Edit - I now understand this, but in practice how does it work?

If the trustee, in breach of trust, misapplies a a trust property painting worth £10,000 at the date of breach, then there is a stock market collapse three years later meaning people aren't spending money. By the time the beneficiaries discover the breach of trust and the case arrives for judgment, the painting is only now worth £2,000.

Would the courts really assess equitable compensation at the date of judgment (£2,000) or would there clearly be no causal link between the breach of trust and the loss, as required under Target?

Is Target basically telling us
(i) prove that the breach caused the loss (but for the trustee's breach, the loss would not have occurred)
(ii) if you prove the causal connection, equitable compensation is determined at date of judgment

?

(edited 12 years ago)

Reply 1

jacketpotato

Been awhile since I studied this, but my understanding is you could require the trustees to reconstitute the trust (i.e. they are liable for £10,000 but keep the painting, as if they bought it with their own money) or obtain equitable compensation for your loss (in this case the loss would be £8,000 - difference between what the painting was bought for and what it was worth).

Here, there would be a causal link. The trustees put the trust funds at risk by buying the painting, so they caused the loss and are responsible.

The idea of Redfern is that the beneficiaries can't get compensation for loss if they would have suffered the same loss anyway, i.e. they would have lost out even if the trustees complied with their duties. I suggest reading this report of the Court of Appeal decision, http://www.independent.co.uk/news/uk/law-report-solicitors-have-duty-to-replace-money-target-holdings-ltd-v-redferns-and-another--court-of-appeal-lord-justice-ralph-gibson-lord-justice-hirst-and-lord-justice-peter-gibson-8-november-1993-1465057.html, which was overturned by the House of Lords on appeal. Reading the Court of Appeal's view is helpful to understanding the significance of Redfern and why it was overturned by the HoL.