Target Holdings Ltd v Redferns

JurisdictionUK Non-devolved
JudgeLord Keith of Kinkel,Lord Ackner,Lord Jauncey of Tullichettle,Lord Browne-Wilkinson,Lord Lloyd of Berwick
Judgment Date20 July 1995
Judgment citation (vLex)[1995] UKHL J0720-1
CourtHouse of Lords
Date20 July 1995
Target Holdings Limited
Redferns (a Firm) and Others

[1995] UKHL J0720-1

Lord Keith of Kinkel

Lord Ackner

Lord Jauncey of Tullichettle

Lord Browne-Wilkinson

Lord Lloyd of Berwick

House of Lords



Lord Keith of Kinkel

My Lords,


For the reasons given in the speech to be delivered by my noble and learned friend Lord Browne-Wilkinson, which I have read in draft and with which I agree, I would allow this appeal.

Lord Ackner

My Lords,


I have had the advantage of reading in draft the speech prepared by my noble and learned friend. Lord Browne-Wilkinson. For the reasons which he gives, I too, would allow the appeal, set aside the order of the Court of Appeal and restore the order of Warner J.

Lord Jauncey of Tullichettle

My Lords,


I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Browne-Wilkinson. For the reasons he has given, I too, would allow this appeal.

Lord Browne-Wilkinson

My Lords,


This appeal raises a novel point on the liability of a trustee who commits a breach of trust to compensate beneficiaries for such breach. Is the trustee liable to compensate the beneficiary not only for losses caused by the breach but also for losses which the beneficiary would, in any event, have suffered even if there had been no such breach?


Prior to 15 May 1989 two adjoining plots of freehold land in Birmingham, together known as 60-64 Great Hampton Street, Hockley ("the property") were owned by Mirage Properties Ltd. ("Mirage"). On 15 May 1989 Mirage agreed, subject to contract, to sell the property to Crowngate Developments Ltd. ("Crowngate") at a price of £775,000. A firm of solicitors, the defendants Redferns, acted as Crowngate's solicitors. Draft contracts were sent to Redferns and received on 17 May 1989.


On 9 June 1989 the plaintiff, Target Holdings Ltd. ("Target"), received two completed loan application forms signed by a Mr. Kohli on behalf of Crowngate. The applications were for loans totalling £1,706,000 and stated the purchase price of the property to be £2m. The application gave no particulars of the vendor. Target was never told that Crowngate had agreed to buy the property for £775,000. The application was supported by a professional valuation of the property at £2m. made by the second defendant Alexander Stevens and Co. Ltd.


Unknown to Target, Crowngate's scheme was that Mirage would sell the property to a Jersey company, Panther Ltd. ("Panther"), for £775,000; Panther would then sell it to an English company, Kohli & Co. Ltd. ("Kohli and Co.") for £1,250,000; and Kohli & Co. was then to sell the property on to Crowngate for £2m., being the price at which Target believed Crowngate was purchasing the property. Redferns (the relevant partner in which was Mr. Anthony Bundy) acted for Crowngate, Panther and Kohli & Co. They took their instructions in regard to the purchase of the property from two individuals, Mr. Ajit Kohli and Mr. Baboo Musafir. On their instructions Mr. Bundy caused Panther to be incorporated in Jersey by Reads Ltd., the relevant director of which was Mr. Brian Pierce. The person beneficially interested in Panther was stated by Mr. Kohli and Mr. Musafir to be a U.S. resident, Mrs. Jasdeep Chadha, but it may be that Panther was in fact incorporated for the benefit of those interested in Mirage, Kohli & Co. was a company in which Mr. Kohli and his family were interested. Mr. Musafir was the person who was principally beneficially interested in Crowngate, although Kohli & Co. owned a minority sharehold.


On 15 June 1989 Target, who knew nothing of the original agreement between Mirage and Crowngate or of the proposed sub-sale, approved loans to Crowngate totalling £1,706,000 to be secured by a first mortgage on the property. Of the sum to be advanced, £1,525,000 was to be used for the purchase of the property and the balance used to pay premiums on certain insurance policies. On 23 June 1989 Redferns were instructed by Target to act for them.


On 28 June 1989 Target transferred £1,525,000 to Redferns without giving any express instructions to Redferns as to its release. It is common ground that Redferns had implied authority to pay the money to or to the order of Crowngate when the property had been conveyed to Crowngate and Crowngate had executed charges in Target's favour. On 29 June, without seeking Target's consent, Mr. Bundy transferred £1,250,000 (namely the sum payable on the purchase by Kohli & Co. from Panther) to Panther, the bank account of which was controlled by its directors.


Contracts for the sale of the property to Panther were signed by Mirage on 30 June, on which date Mirage also executed transfers to Panther. Also on that date Mr. Bundy instructed the directors of Reads to pay from Panther's bank account sums totalling £1,072,787.42, of which the sum of £772,787.42 was to be paid to Mirage (being the sum due on completion) and various payments amounting to £300,000 were to be made to others (who may have been those interested in Mirage) pursuant to Mr. Kohli's instructions. Also on 30 June, Mr. Kohli informed Mr. Bundy that the balance of £510,000 of the purchase money payable to Kohli & Co. on the sale to Crowngate and not being borrowed from Target had been paid by Crowngate to Kohli & Co.


A further £240,000 out of the Redferns' client account was paid out by Redferns to Kohli & Co. on 3 July, being the balance of the £2m. payable by Crowngate to Kohli & Co. on the purchase. That left £35,000 in Redferns' client account: that sum was expended on stamp duty, land registry fees and Redferns' fees.


On 4 July Mr. Bundy sent a letter dated 30 June 1989 by fax to Target informing Target, quite untruthfully, that the purchase of the property and the charges to Target had been completed on that day. In fact what happened was that on 6 July Reads received various documents sent by Mr. Bundy for execution by Panther including (a) the contract of purchase from Mirage (b) the transfers from Mirage (c) the contract of sale to Kohli & Co. and (d) the transfers to Crowngate. Those documents were signed and executed on behalf of Panther and returned to Redferns by 11 July. The contracts of sale to Kohli & Co. and to Crowngate were probably signed by those companies by 5 July. The legal charge of the property in favour of Target had also probably been executed by Crowngate by 5 July. The contracts and transfers were dated 30 June 1989 and the legal charges 31 July 1989.


The moneys in Panther's bank account were paid out to various individuals and to a numbered Swiss bank account. Panther was subsequently dissolved on Mr. Kohli's instructions on 24 May 1990.


The situation therefore was as follows. Redferns, acting by Mr. Bundy, was fully aware of the transaction involving Mirage, Panther, Kohli & Co. and Crowngate. Although Redferns were also acting for Target as lender, they never informed Target of the facts. In the course of acting as Target's solicitors Redferns had paid away the mortgage money in its client account to a stranger who had no contractual relationship with Crowngate and before completion of the purchase by Crowngate or the mortgages by Crowngate to Target. Such payments out of client account were otherwise than in accordance with Redferns' instructions from Target. It is common ground that the payments constituted a breach of trust by Redferns. On the other hand, Target had obtained exactly what it had originally intended to obtain, that is to say a loan to Crowngate secured by valid charges over the property.


Crowngate was wound up as insolvent on 25 September 1991. Target has sold the property as mortgagee for £500,000.


Target believes itself to have been the victim of a fraud perpetrated by Messrs. Kohli and Musafir. It commenced these proceedings against Redferns and against the valuers, the second defendant, which it alleged had negligently valued the property. Judgment has been obtained in default against the second defendant, which is in insolvent liquidation.


Target's case against Redferns is put in two ways. First, it is alleged that Redferns was in breach of its duty of care as Target's solicitors in failing to alert Target to the suspicious circumstances which indicated a fraud. Secondly, and of direct relevance in the present appeal. Target alleges breach of trust by Redferns in parting with the mortgage moneys without authority. On 3 August 1992 Target issued a summons seeking summary judgment on its claims pursuant to R.S.C., Ord. 14, with an alternative claim for an interim payment under R.S.C., Ord. 29, r. 10.


On 19 November 1992 the summons came before Warner J. It has at all times been common ground that Redferns committed a breach of trust when, on 29 June and 3 July 1989, Redferns paid away Target's money otherwise than in accordance with Target's instructions. Counsel for Target submitted to Warner J. that Redferns came under an immediate duty to restore the whole of the money paid away in breach of trust, that common law principles of causation of damage did not apply to such a claim and that it was irrelevant that Target had received exactly the security that it was intending to obtain. Target further submitted, in the alternative, that if Target's money had not been made wrongly available to pay the purchase price to Mirage on 30 June the whole transaction would have fallen through. If that had happened, even on ordinary principles of causation the loss to Target caused by the breach of trust was the total amount wrongly paid away since, if there had been no breach of trust, the money would never have been paid away at all. Warner J. held that the claim based on breach of trust was "very nearly strong enough" to justify a summary judgment. However he gave leave to defend the breach of...

To continue reading

Request your trial
284 cases
3 firm's commentaries
18 books & journal articles
    • Singapore
    • Singapore Academy of Law Journal No. 2016, December 2016
    • 1 December 2016
    ...5 SAL Ann Rev 260 at 271, para 12.34. 52Cf Andrew Burrows, “We Do This at Common Law and That in Equity”(2002) 22 OxJLS 1 at 10–11. 53[1996] AC 421. 54Target Holdings Ltd v Redferns[1996] AC 421 was referred to in John While Springs (S) Pte Ltd v Goh Sai Chuah Justin[2004] 3 SLR(R) 596 at [......
    • Singapore
    • Singapore Academy of Law Journal No. 2016, December 2016
    • 1 December 2016
    ...5 App Cas 25. 66Livingstone v Rawyards Coal Co(1880) 5 App Cas 25 at 39, per Lord Blackburn. 67Target Holdings v Redferns[1995] UKHL 10; [1996] AC 421 at 439. 68[2014] UKSC 58. 69Dornford v Dornford(1806) 12 Ves Jun 127; Grayburn v Clarkson(1868) 3 LR Ch App 605; Devaynes v Robinson(1857) 2......
  • Table of Cases
    • United Kingdom
    • Wildy Simmonds & Hill Offshore Commercial Law in Bermuda - 2nd Edition Preliminary Sections
    • 30 August 2018
    ...1976: 10, April 13, 1977, unreported, Bermuda CA 1.54 T&N Ltd (No 3), Re [2006] All ER (D) 188 10.19 Target Holdings Ltd v Redfern [1996] 1 AC 421, [1995] 3 WLR 352, [1995] 3 All ER 785, HL 15.85 Telewest Communications Plc (No 1) [2004] EWHC 924 (Ch), [2005] 1 BCLC 752, ChD 10.19, 18.23 Te......
  • Table of Cases
    • Canada
    • Irwin Books Archive The Law of Equitable Remedies. Second Edition
    • 18 June 2013
    ...4 D.L.R. (2d) 177 (H.C.J.) .......................................................378–79, 380, 381 Target Holdings Ltd. v. Redferns, [1995] 3 W.L.R. 352, [1995] 3 All E.R. 785 (H.L.) ......................................................................... 484 Tate & Lyle Industries Ltd. v.......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT