Compensatory Remedies for Breach of Trust

AuthorPaul S Davies
PositionAssociate Professor, Faculty of Law, University of Oxford; Fellow, St Catherine's College
(2016) 2(1) CJCCL
Compensatory Remedies
for Breach of Trust
Paul S Davies*
is article considers compensatory remedies for breach of trust. e rst part of analysis
considers the important recent decision of the UK Supreme Court in AIB Group (UK)
v Mark Redler & Co Solicitors, and explores its signicance and potential impact. e
second part examines more closely what is meant by ‘equitable compensation’, and what
remedial rules might develop to govern ‘equitable compensation’ following a breach of
* Associate Professor, Faculty of Law, University of Oxford; Fellow, St
Catherine’s College; Associate Member, Maitland Chambers. An earlier
version of this paper was presented at a conference in July 2015 on
“Modern Studies in the Law of Trusts and Wealth Management: eory
and Practice”, which was held at the Supreme Court of Singapore and
organised by Singapore Management University, the University of York,
and the Singapore Academy of Law. I am grateful to the organisers –
Richard Nolan, Hang Wu Tang and Kelvin Low – and to participants for
their comments. I should also thank Sarah Green, Nick McBride and Peter
Turner for their comments on an earlier draft. e usual disclaimers apply.
Davies, Compensory Remedies for Breach of Trust
I. I
II. T D  F
III. T S  AIB
A. Geographical Scope
B. Commercial Trusts
IV. P  E C
A. Concurrent Liability
V. Q  L
A. Scope of Duty
B. Cost of Cure
C. Presumption of Cheapest Means of Performance
D. Date of Assessment
E. C
F. R
G. M
H. C N
VI. S   THE TRUSTEE ACT 
VII. C
I. Introduction
In the important decision of the United Kingdom Supreme Court
in AIB Group (UK) v Mark Redler & Co Solicitors1 (“AIB”), Lord
Toulson observed that “[t]he debate [that] has followedTarget Holdings
Ltd v Redferns2 (“Target”)is part of a wider debate, or series of debates,
about equitable doctrines and remedies and their inter-relationship
with common law principles and remedies, particularly in a commercial
context”.3 As regards compensatory remedies for breach of trust, the scope
of the debate has eectively been narrowed — at least in England and
Wales — by the decision in AIB: nothing is to be gained by falsifying and
surcharging the account, which is the traditional approach in equity, and
the court can simply award compensation for loss caused by the trustee’s
1. [2014] UKSC 58 [AIB].
2. [1996] AC 421 (Eng) [Target].
3. AIB, supra note 1 at para 47.
(2016) 2(1) CJCCL
breach of duty.4 Lord Toulson thought that “in circumstances such as
those inTarget,the extent of equitable compensation should be the same
as if damages for breach of contract were sought at common law”.5In a
similar vein, in anakharn Kasikhorn ai Chamkat (Mahachon) v Akai
Holdings Ltd (in liquidation)6 (“Akai”), Lord Neuberger, sitting as a non-
permanent judge of the Hong Kong Court of Final Appeal, commented
even if the principles … had suggested that Akai was entitled to equitable
compensation in an amount greater than it should recover by way of common
law damages, I would have been very sympathetic to the notion that the
equitable remedy would have to be refashioned so as to equate the amount of
such compensation with the common law damages.7
is suggests that the common law rules may have some impact upon the
principles of equitable compensation.
e decision in AIB accelerates the need to establish clear principles
that can be employed when awarding equitable compensation for breach
of trust. It is suggested that there are good reasons for equity to adopt
its own particular approach, but the comments of Lord Toulson and
Lord Neuberger are likely to prove to be inuential. It is therefore worth
considering whether the rules of equitable compensation should mirror
those available for breach of contract, or for tort (although if the latter
it would need to be determined whether an analogy should be made
with negligence, deceit, or some other tortious wrong). However, before
examining the principles of equitable compensation in greater depth, the
4. John Heydon, Mark Leeming & Peter Turner, Meagher Gummow
and Lehane’s Equity: Doctrines and Remedies, 5d (London: LexisNexis
Butterworths, 2015), as the editors of Meagher, Gummow and Lehane
have recently observed “[t]he advent of the term “equitable compensation”
in the last two to three decades supplied a name to a form of relief which
derived from the principles of account, but was awarded without the
accounting procedures” at 23-30.
5. AIB, supra note 1 at para 71.
6. [2010] HKCFA 64 [Akai].
7. Ibid at para 155. See also Canson Enterprises Ltd v Boughton & Co, [1991]
3 SCR 534 at 585-87 [Canson].

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