Remedies for Breach of Trust
| Published date | 01 July 2015 |
| DOI | http://doi.org/10.1111/1468-2230.12134 |
| Date | 01 July 2015 |
Remedies for Breach of Trust
Paul S. Davies*
The decision of the Supreme Court in AIB Group (UK) Plc vMark Redler & Co confirms the
approach taken by Lord Browne-Wilkinson in Target Holdings Ltd vRedferns: where a trustee
misapplies trust assets, a beneficiary is limited to a claim for equitable compensation for losses
caused by the trustee’s breach of duty. This seems to be a departure from traditional equitable
doctrine, which held that the beneficiary could falsify the trustee’s unauthorised disbursement and
bring a claim for an ‘equitable debt’. This note considers the impact of the decision of the
Supreme Court, and how the law regarding ‘equitable compensation’ might continue to develop.
INTRODUCTION
‘140 years after the Judicature Act 1873, the stitching together of equity and
the common law continues to cause problems at the seams’.1So said Lord
Toulson at the very start of his judgment in AIB Group (UK) Plc vMark Redler
&Co(AIB).2Even though the Judicature Act 1873 was only concerned with
the ‘fusion’ of the administration of common law and equity, rather than the
‘fusion’ of the substantive rules of each jurisdiction, there has since developed
‘a wider debate, or series of debates, about equitable doctrines and remedies
and their inter-relationship with common law principles and remedies, par-
ticularly in a commercial context’.3The decision in AIB marks an important
and controversial step in this ‘fusion debate’. The Supreme Court held that
where a solicitor holds client monies on a bare trust and pays away that money
in breach of instructions, the client is limited to a claim for compensation for
loss; the remedy for breach of trust is therefore similar to that available under
a common law claim for professional negligence. AIB supports the trouble-
some4decision of the House of Lords in Target Holdings Ltd vRedferns
(Target),5and raises a number of unresolved issues about how compensation is
to be assessed in equity.
*Associate Professor of Law, University of Oxford; Fellow of St Catherine’s College. An earlier version
of this paper was presented at a seminar entitled ‘Reflections on the Decision of the Supreme Court
in AIB v Redler’ which was organised by the Professional Negligence Bar Association at Inner Temple
on 27 January 2015. I am grateful to the organisers, Lord Millett, and participants for the discussion at
the event, and to Graham Virgo, Frederick Wilmot-Smith and the anonymous referee for their
comments.
1AIB Group (UK) Plc vMark Redler & Co [2015] 1 All ER 747; [2014] UKSC 58 at [1] per Lord
Toulson.
2ibid.
3ibid at [47] (Lord Toulson).
4 Lord Toulson recognised (ibid at [20]) that ‘[t]he reasoning in Target Holdings has attracted a
considerable amount of commentary, partly supportive but mostly critical’.
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Paul S. Davies
© 2015 The Author. The Modern Law Review © 2015 The Modern Law Review Limited. 681(2015) 78(4) MLR 672–694
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