Solicitors had allowed the claimants’ cause of action against their original solicitors to become time barred. One issue now was whether the trial judge was right to find that the original solicitors had improperly paid out monies held on client account for completion of an investment in shares of a private company and were in consequence liable to reconstitute the trust fund. The instructions given to the original solicitors were only to pay over the monies held against completion of both the issue of shares to the investors and the assignment to them of the benefit of a trade name, which they required as security for their investment. In fact the funds were released at the completion meeting when the shares were issued but the assignment of the trade name was not executed. If it had been, it would probably have been valueless in any event, as matters transpired, and it was argued that the investors had therefore suffered no loss.
Held: Aldous LJ said: ‘The second ground upon which the defendants sought permission to appeal was that the judge had wrongly concluded that the breach of trust had caused the applicants loss. They submitted upon the basis of the speech of Lord Browne-Wilkinson in Target Holdings Ltd v Redferns [1996] AC 421, that the remedy for the breach of this trust was not reconstitution of the trust fund, but to put the claimants in the position that they would have been in but for the breach. In the present case the breach had been the failure to obtain the assignment. To remedy that breach Linnells needed to compensate the claimants for the loss of that assignment. In the present case that loss was negligible in that the trade mark had proved to be valueless or there was no evidence to prove that it was of substantial value.
I reject that submission for two reasons. First, in the present case the breach was the release of the money. The trust required the money to be held against provision of both the shares and the assignment. As there had been no assignment, the money should not have been paid out. Second, the principle in Target only applies where the underlying transaction covered by the trust had been completed . .
In the present case there was a trust fund made up of money supplied by Mr Knight, Mr Hodgkinson, Mr McIntosh and subsequently Mr Keay. The transaction had not been completed. The breach was the payment and the remedy for that breach is reconstitution of the trust fund. The judge was right to reject this submission and there are in my view no grounds for giving permission to appeal.’
Judges:
Aldous LJ
Citations:
[2003] EWCA Civ 223
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – UCB Loans v Grace and others 2011
The solicitors paid out the mortgage advance without having received a mortgage document executed by the borrower at all. It was conceded that such payment was made without authority.
Held: The solicitors had acted in breach of trust. No . .
Lists of cited by and citing cases may be incomplete.
Company, Professional Negligence
Updated: 07 June 2022; Ref: scu.181131
