Remoteness Criteria in Equity

AuthorSteven B. Elliott
Publication Date01 July 2002
Date01 July 2002
Remoteness Criteria in Equity
Steven B. Elliott*
It is sometimes said that the compensation with which a defaulting trustee may be
charged should not be cut back because the loss is of an unforeseeable type or
because it is properly attributable to an intervening cause.1This position is
advocated by the author of Lewin on Trusts amongst others.2The more moderate
position has also been taken that compensation for breach of trust is not contained
by the rules of remoteness and causation that apply in tort or contract, thereby
inviting the development of tailored equitable rules fulfilling a similar function.3
Lord Browne-Wilkinson’s controversial dictum in Target Holdings Ltd vRedferns
accommodates both of these positions: ‘Even if the immediate cause of the loss is
the dishonesty or failure of a third party, the trustee is liable to make good the loss
to the trust estate if, but for the breach, such loss would not have occurred . .. Thus
the common law rules of remoteness of damage and causation do not apply’.4
Notwithstanding the broad terms in which Lord Browne-Wilkinson expressed
himself, subsequent authorities both in England and elsewhere in the Common-
wealth have signalled a retreat towards recognition that reparative liability for
breach of trust must be limited by remoteness criteria of some sort. The most
notable amongst these is Fisher J’s decision at first instance in Bank of New
Zealand vNew Zealand Guardian Trust Co Ltd.5The contention advanced in this
note is that neither the strong nor the moderate position set out above is defensible,
and that remoteness criteria similar to those conditioning recovery of compensation
at law govern or should govern recovery of compensation for breach of trust and
related equitable obligations. In order to make sense of the topic it is necessary to
ßThe Modern Law Review Limited 2002 (MLR 65:4, July). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA.588
* Barrister, London. I am grateful to Dr James Edelman for his comments on an earlier version of this note.
1Swindle vHarrison [1997] 4 All ER 705 (CA) 733; Re Mulligan [1998] 1 NZLR 481, 509;
O’Halloran vRT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 (CA) 273–278; Maguire v
Makaronis (1997) 188 CLR 449, 470; Permanent Building Society (in liq) vWheeler (1994) 14 ACSR
109 (WASC) 162–167; West vLazard Brothers & Co (Jersey) Limited [1993] JLR 165, 324; Bennett
vMinister of Community Welfare (1992) 176 CLR 408, 426–427; Hill vRose [1990] VLR 129, 144.
2 J. Mowbray et al, Lewin on Trusts (London: Sweet & Maxwell, 17th ed, 2000) Ch 39 para 3: ‘The
compensation is not limited by common law principles of causation, foreseeability or remoteness. If a
trustee has been guilty of misconduct, and loss follows that would not have occurred apart from the
breach, the court does not acquit the trustee because it was more immediately caused by some event
wholly beyond the trustee’s control, even if the immediate cause of the loss is the dishonesty or
failure of a third party. The trustee is liable for the whole loss, however unexpected the result,
however little likely to arise from the course adopted, and however free such conduct may be from
improper motive.’ Similar statements may be found in other prominent texts.
3 See especially McLachlin J’s concurring judgment in Canson Enterprises Ltd vBoughton & Co
[1991] 3 SCR 534.
4Target Holdings Ltd vRedferns [1996] AC 421, 434, referring to Re Dawson [1996] 2 NSWR 211 as
well as D.J. Hayton, Underhill and Hayton, Law Relating to Trusts and Trustees (London:
Butterworths, 14th ed, 1987) 734–736 and Bartlett vBarclays Bank Trust Co Ltd (No 2) [1980] Ch
515. The excerpted statement was not critical to the disposition of the issues before their Lordships.
5Bank of New Zealand vNew Zealand Guardian Trust Co Ltd [1999] 1 NZLR 213; aff’d [1999] 1
NZLR 664 (CA); also Collins vBrebner [2000] Lloyd’s Rep PN 587 (CA).

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