Lloyd's Maritime and Commercial Law Quarterly
A TARGETED DEGREE OF LIABILITY
A TARGETED DEGREE OF LIABILITY
Target Holdings v. Redferns
A firm of solicitors, Redferns, was bare trustee of monies for its client, Target. Target instructed Redferns to release the monies to the vendor of some land when the purchaser granted Target a charge over the land to secure repayment of the monies. Redferns paid away the monies in admitted breach of trust, by releasing them to the vendor before receipt of the charge, though the charge was subsequently received. The purchaser became insolvent; the land proved insufficiently valuable to satisfy the debt due to Target. In Target Holdings Ltd v. Redferns
1 the Court of Appeal, by a majority, held that Redferns’ breach of trust was a cause of Target’s loss, even though negligent valuation of the land could be described as the “real cause” of Target’s loss. The court therefore granted Target’s application for summary judgment against Redferns. Far broader issues were raised by the decision of the House of Lords in the same case,2 which reversed the ruling of the Court of Appeal.
Lord Browne-Wilkinson gave the only reasoned speech. Before he even turned to the question of causation, which vexed the Court of Appeal, Lord Browne-Wilkinson considered the logically prior question of what duties are owed by a trustee to his beneficiary. Lord Browne-Wilkinson drew a distinction between “traditional trusts” for persons by way of succession, and bare trusts, such as the trust in issue. Lord Browne-Wilkinson’s reasoning illustrates two very different ways of looking at trusts: the trust relationship can be seen as primarily concerned with the activities of trustees—the management of a trust fund by trustees for a class of beneficiaries; or the trust can be seen as concerned simply with trustees holding title for a beneficiary. Each of the two ways of looking at a trust has very different implications.
One among several beneficiaries of a “traditional trust” has no right to the fund or a particular part of it.3 Instead, every beneficiary of a “traditional trust” has a right to call on his trustee to maintain, and if necessary restore, the integrity of the trust fund for the benefit of all interested in it. Each beneficiary’s interest is thereby protected: the beneficiary will receive his entitlement from the duly maintained, or restored, fund as the settlement is administered. By contrast, the beneficiary of a bare trust is the only person interested in the trust fund: he is equitable owner of the fund. While he can demand an account of the trust property, he cannot oblige the trustee to reconstitute the trust fund if
1. [1994] 1 W.L.R. 1089; noted [1994] C.L.J. 450.
2. [1995] 3 W.L.R. 352.
3. A different view is sometimes taken in the context of the law of taxation.
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